BROKEN TAX BREAKS

Maine disperses more than $600 million in economic development funds but doesn’t know what it is getting for its money, according to a review of 46 state-run programs by a non-partisan legislative review agency. Fortunately, the Office of Program Evaluation and Government Accountability suggest simple and immediate fixes that should top the legislative agenda next year.

The OPEGA report begins with this simple statement: “Maine’s policy-makers need accurate and reliable information about these programs to make informed decisions.” This should be an obvious standard for any government program, but when at least $600 million is at stake, it is essential. So, too is prioritizing limited state resources. Funds shouldn’t be devoted to or taxes deferred from projects and industries that have limited benefit to Maine at the expense of those that can provide a big boost.

According to OPEGA, however, the state is too willing to waive taxes, make loans and provide business assistance without knowing if the help is effective. At the request of the Legislature’s Appropriations Committee, it reviewed 46 programs aimed at economic development, ranging from the Business Equipment Tax Reimbursement to the tax exemption on fuel and electricity used at manufacturing facilities to agricultural grants. The programs are run by a variety of state and local agencies, with no coordinated oversight.

It found that a quarter of the programs had no clearly stated public purpose, a quarter do not have specific and measurable goals and objectives and a third do not regularly report their performance. In addition, funding for more than a third of the programs is not regularly reviewed. Although some of the programs and the state departments that oversee them do report to the Legislature, they often count the same jobs and same revenue growth, therefore double (or more) counting the benefits. As a result, OPEGA concluded, the state could be investing in programs that are ineffective or no longer necessary, spending more than is necessary or missing opportunities to provide incentives to some businesses while oversubsidizing others.

To begin to correct the situation, OPEGA recommends that the Department of Economic and Community Development oversee and coordinate all these economic development efforts. Having one agency in charge, while also being a clearinghouse for businesses in search of assistance, is overdue.

Jack Cashman, the outgoing DECD commissioner, said the review and coordination OPEGA calls for will be costly and would require additional staff at the department or the hiring out to an outside group. Spending hundreds of thousands of dollars to ensure hundreds of millions is spent well is a good investment.

So too is developing standards for these programs. OPEGA acknowledged the difficulty of measuring the return on investment for tax breaks and loans, but notes that the National State Auditors Association has developed the best practices for planning, providing and reviewing economic development assistance. They could be the basis of Maine’s standards.

The new head of DECD, with or without a push from the Legislature, should begin the job by committing to review and coordinate these economic development programs. Those that aren’t working should be axed and the money shifted to programs that are working, including the state’s funding of research and development, which is known to pay large returns.