Report: Development programs lack accountability

AUGUSTA – Maine’s economic development programs lack accountability and appear to be inefficient, according to a watchdog organization charged by the Legislature to scrutinize and evaluate state programs.

But the state’s economic development commissioner countered that the report lacks understanding of the complexities of economic development and that it oversimplifies the problems.

The report released Monday by the Legislature’s Office of Program Evaluation and Government Accountability concluded that “20 percent of the [economic development] programs reviewed have no clearly stated public purpose, 24 percent lack specific and measurable goals and objectives, 26 percent do not have adequate performance measures and 33 percent do not report their performance regularly or in a manner that provides for reasonable legislative and public review.”

The office, known as OPEGA, was created by the Legislature to do in-depth reviews of state spending. In this report, OPEGA staff reviewed 46 economic development programs and found more than $200 million – from tax breaks to loans and business assistance programs – is “spent” each year on economic development programs.

“One of the problems we had was there was no real definition of what economic development is,” said OPEGA Director Beth Ashcroft. “We came up with a definition that we found applied to 46 programs and those are the ones we reviewed as part of this report.”

The largest group, with 15 programs, involves some sort of tax break. Several are loan programs and some are specialized such as the Farms for Maine’s Future program. The study recommended lawmakers review all of the programs to see if there are areas where programs can be merged to save on administrative costs and whether all are still needed.

“We found some programs that are decades old,” OPEGA analyst Susan Reynolds told the Legislature’s OPEGA oversight committee Monday. “We think there should be a review to see if programs are still needed or duplicate another program.”

Economic Development Commissioner Jack Cashman disagreed with parts of the report.

“It’s a difficult process and I don’t think that report fully explains the complexities involved,” he said. “To try and to come up with a TABOR-like formula that you can run on automatic pilot to judge these programs, that isn’t going to happen.”

Cashman said many of the programs are administered by Maine Revenue Services because the agency has the ability to see confidential information filed by companies to make sure they are meeting program requirements. He said if companies were forced to publicly disclose tax information in order to get a tax break, they would likely say “no way” and look at locating elsewhere.

“We don’t have the staff or the budget to do some of the reviews they are talking about to see if a program is effective,” he said. “We probably would have to hire outside auditors to look at some of these.”

Cashman suggested trying to assess each individual program for its effectiveness shows a misunderstanding of how economic development works. He said a better way is to look at the programs “in their totality” and see if the overall job attraction strategy is working.

“I think if you look over the last four years you will see our strategy has worked and jobs have been created,” he said.

But state Rep. David Trahan, R-Waldoboro, a member of the oversight committee, said there is value in reviewing the programs. He pointed to the staff analysis of how the state is spending its tax subsidies.

“Forty-three percent of the funding goes to manufacturing, yet in the last five years we have lost what, 20,000 manufacturing jobs,” he said. “Every year we hear the same thing from folks that advocate for these programs that they bring good jobs to the state, but when you look at the data, it’s not true.”

What to do about the report and its recommendations, however, will be left up to a new OPEGA oversight committee, and a new economic development commissioner. Cashman is stepping down as commissioner to join the governor’s staff.

As for the committee, new lawmakers are being sworn in Wednesday and traditionally the Senate president and the speaker of the house name members to all of the legislative committees in late December.