Revealing Tax Subsidies 2013

OSPIRG Foundation

EXECUTIVE SUMMARY

The ability of the public to see how their government uses the public purse is fundamental to democracy. Transparency in government spending checks corruption, bolsters public confidence in government and promotes greater effectiveness and fiscal responsibility. When public subsidies are given to private companies to advance goals related to economic growth, the public should see a timely and full accounting of the results of its investment.

In 2011 and 2012, through a bipartisan effort, the Oregon State Legislature adopted new measures (ORS 184.484) intended to shine the spotlight of transparency on eighteen economic development tax expenditure programs estimated to cost Oregon taxpayers over $665 million in the 2013-15 biennium.

The purpose of the law is to allow taxpayers and policymakers alike to adequately evaluate the effectiveness and efficiency of these programs on Oregon’s Transparency Website. If implemented properly, lawmakers and the public would be able to see the recipients of economic development tax expenditures, what recipients of these subsidies are expected to deliver in exchange for public dollars, and whether or not recipients fulfill their requirements.

This study examines the first two years of annual reports made available by the law on the Oregon Transparency Website. It evaluates how well the law is being followed, and the degree to which the new information helps the public determine the value of these programs.

Summary: Available information remains insufficient to evaluate economic development tax subsidies.

1. Only six of the eighteen programs covered by the law reported any information, and only one provided all the information needed to do meaningful evaluation.

o Only one of the six programs provided a comparison of requirements and actual outcomes.
o Only four programs fully disclosed the amount of tax subsidies to each recipient.

2. Some agencies appear to be misinterpreting the flexibility in the transparency law and fail to provide existing information.

3. Some agencies appear to be incorrectly using the trade secrets provision of Oregon’s public records law to justify not disclosing information.

4. At least three programs have no information available because the state lacks any tracking and accountability systems for these programs.

5. Four programs are not required to submit the first report until the end of 2013, meaning that the overdue process of public scrutiny and accountability could not begin until 2014.

Recommendations

Governor John Kitzhaber has the authority to address these deficiencies, and he should exercise that power to give Oregonians the full picture for how tax subsidy dollars are spent.

Specifically, Governor Kitzhaber should issue a clarifying directive to all state agencies that administer corporate tax subsidies that includes the following:

1. As stewards of taxpayer dollars, state employees should prioritize transparency and accountability as a way to demonstrate that public dollars are used appropriately. Transparency should be the first order of business when administering a subsidy program, not an afterthought.

2. State agencies charged with administering economic development subsidies should provide the public with key information, including: the list of recipients of economic development tax expenditures, the value of subsidies received by each recipient, the economic output required of recipients in exchange for tax incentives, and proof that each recipient is fulfilling its requirement.

3. While it should be a goal to make information as user-friendly as possible over the long run, state agencies should presently disclose all available information in whatever format it exists, such as spreadsheet, PDF document, and scanned image files. This includes:
o All approved/certified applications for every economic development program that requires certification.
o All annual reports for every economic development program that requires one.
o All contracts between the state and a company regarding a subsidy, where appropriate.

4. Economic development programs that currently lack an annual reporting requirement should institute one immediately.

5. The details of all future economic development subsidy programs should be disclosed, not just the ones listed in the current transparency law. This would hardwire transparency and accountability into the State of Oregon’s approach to tax subsidies and ensure the public is never kept in the dark again.