INCENTIVE REVIEW

Maine disburses about $200 million a year in economic-development funds but doesn’t know what it is getting for its money, according to a review of 46 state-run programs done last year by the Office of Program Evaluation & Government Accountability. To begin to fix this, Sen. Richard Rosen has introduced legislation to require better oversight and coordination of these programs. This is a good start.

The OPEGA report began 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 $200 million annually is at stake, it is essential. 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.

LD 1163 would begin to address this by requiring an assessment of the dozens of programs that, through tax breaks, grants and other incentives, are meant to stimulate business growth. It suggests that the Taxation Committee recommend to the Government Oversight Committee on the necessity of a performance evaluation of state economic development and tax incentive programs. Rather than this roundabout way to an audit, the Department of Economic and Community Development should initiate an independent review itself.

In the past, DECD has said such a review would be costly and require additional staff. Spending hundreds of thousands of dollars to ensure hundreds of millions is spent well is a good investment.

A good place to start would be to review the programs that OPEGA ranked high risk, especially those without audit provisions and those that overlap with other programs.

State officials should want to know whether the millions of dollars allocated to business development are well spent so that scarce state revenue can be directed to the most effective programs. Reviewing the programs is the only way to find out.