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Oregon spends about $350 million per biennium on programs designed to promote economic development, mostly by providing tax breaks to companies that create new jobs.
Oregonians need a clear picture of what they’re getting from these programs, both because of their big price tag and because it’s essential that the expenditures yield actual results. The state Legislature will consider a bill in its 2011 session that would give people a better view of economic development programs’ cost and effectiveness.
The bill will be sponsored by state Reps. Phil Barnhart, D-Eugene, and Kim Thatcher, R-Salem, and is supported by the Oregon State Public Interest Research Group. It would build upon a 2009 law requiring that information about state programs’ cost, sources of revenue and other financial details be posted on a single website, www.oregon.gov /transparency. The lawmakers propose similar transparency standards for economic development programs.
The bill would require that four types of information be posted: the names of people or companies receiving benefits from economic development programs; the value of those benefits; what sorts of gains such as new jobs were promised in return for the benefits; and whether the promised gains have materialized.
All of this information is supposed to be collected already, but it’s not always easy for average Oregonians to gain access to it. An OSPIRG intern conducted a test by requesting data about the costs and results of economic development programs, and the response was patchy at best; some agencies responded promptly and in full, while others demanded exorbitant copying fees or waited for months before releasing incomplete information.
Even legislators and state officials sometimes have trouble finding out how much economic development programs cost and how well they’re working. Exhibit A is the Business Energy Tax Credit, from which the cost to the state soared to hundreds of millions of dollars after claimants, including some with tenuous connections to Oregon, figured out ways to obtain benefits. The Legislature tightened the rules for the tax credit after The (Portland) Oregonian exposed abuses. Barnhart’s and Thatcher’s proposal would protect against abuses by making it easier for citizens and legislators alike to keep track of such programs.
In addition to the Business Energy Tax Credit, the economic development programs targeted by Barnhart’s and Thatcher’s proposal include four types of enterprise zones; tax credits for film production companies; a tax cap for capital-intensive manufacturers such as computer chip makers; and tax breaks for small businesses, food processors and research firms.
Oregon desperately needs the jobs these programs are intended to create. The state also needs to know which of these programs works best, so that it can set its funding priorities accordingly. Making such information more readily accessible would allow easier and more reliable evaluations of economic development efforts.
Most other states already post some or all of this information online. Oregon is among 13 states that do not, according to a recent survey by Good Jobs First, a national group that aims to ensure that economic development subsidies are effective. The group gave Oregon a grade of F for its current level of online disclosure.
In addition to improving the accountability of economic development programs, Barnhart has a larger goal in mind: subjecting all tax credits and deductions to the same level of scrutiny as is given to state spending. The aggregate value of state tax credits and deductions exceeds the amount of money in the state budget. Barnhart believes all credits and deductions should be examined to ensure that they’re achieving their intended purposes at a cost the state can afford.
The Legislature has moved in this direction already by requiring the periodic review and renewal of tax breaks. Posting information about the costs and benefits of economic development programs would be a further step; others could follow as more types of tax breaks become subject to electronic disclosure requirements. The public and the Legislature need to be able to find out what they’re spending on tax breaks, and what they’re getting in return.
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