INCENTIVE REVIEW

An independent review of the state’s many economic development programs, to begin soon, is long overdue. While the study is under way, lawmakers should use the time to fortify themselves to make the difficult decisions that must follow. If lawmakers aren’t prepared to eliminate some programs and devote more resources to others, the study will be worthless.

The state now spends more than $200 million a year in business incentives and tax credits without knowing whether this investment is paying off, an unacceptable situation at any time, but especially when funding for programs and departments was recently cut to balance the state budget.

In 2006, the Office of Program Evaluation and Government Accountability reviewed 46 state economic development programs, ranging from tax exemptions on fuel and electricity used at manufacturing facilities to agricultural grants. OPEGA found that a quarter of the programs had no clearly stated public purpose, a quarter did not have specific objectives, and a third did not regularly report their performance.

OPEGA also reported that any efforts to monitor or oversee these programs as an investment portfolio would be hampered by a lack of essential information because 94 percent of the programs do not collect or maintain sufficient data to allow analysis of overlap and gaps between programs. More than half the programs did not provide information on administrative costs. “Without such data, there may be missed opportunities to streamline programs and reduce administrative costs within and among programs,” OPEGA said. “It is also difficult to determine whether some businesses or business sectors are receiving more assistance than needed while others are not receiving enough.”

The OPEGA report did not conclude that Maine was spending its tax money badly, but that it didn’t have enough information to know or to determine whether shifting the money it did spend could produce a better result.

At a time when money is short – and will continue to be – getting a better result should be a top priority. In general terms, lawmakers know what works. Investment in R&D, for example, pays huge returns while the data on corporate tax breaks is less clear.

An assessment of these programs should begin by looking at whether they are meeting their intended purpose. Those that are not – or that have no measurable goals – should be tagged for immediate elimination. Next, the benefits of the remaining programs and incentives should be compared against their costs. Those with high price tags and little benefit should also be recommended for elimination.

If the report follows this model and lawmakers can stick to its recommendations, the state could have a more effective economic development program, in terms of jobs and revenue created and state expenses saved.