Report gives N.J. mixed grades on overseeing subsidized programs

TRENTON – A new report gives New Jersey mixed grades on how it oversees taxpayer-backed economic development programs.

A Washington, D.C.-based, non-profit agency, Good Jobs First, says in a report released today that the state is inconsistent in how it monitors subsidy programs that cost millions of dollars annually.

“While New Jersey is doing better than most states when it comes to enforcing subsidy performance standards, it should work to ensure those standards are consistently enforced across the board,” New Jersey Policy Perspective president Deborah Howlett said in a release.

“The investment of public funds in private enterprise demands full accountability and transparency.”

In the study, “Money-Back Guarantees for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs,” New Jersey received a letter grade of ‘C,’ but it ranked among the top half of the 50 states.

On a scale of 0 to 100 – the closer to 100 the better the score – its major subsidy programs received an average score of 53, putting the state in 17th place.

The program scores covered a wide range, from 42 for the Economic Redevelopment Growth  Grant Program to 69 for the Business Employment Incentive Program. If all of New Jersey’s programs had the same standards as the BEIP, the state would be ranked in the top 5 in the country, according to Good Jobs First.

“Strong standards and strong enforcement are inseparable in making sure subsidy programs are not mere corporate giveaways,” said Philip Mattera, research director of Good Jobs First and principal author of the report.

Among some of the findings in the report that rated 238 subsidy programs in the 50 states and the District of Columbia:

·      Ninety percent (215 of 238) of the programs require companies receiving subsidies to report to state government agencies on job creation or other outcomes. Yet in 67 (or 31 percent) of those 215 programs, including New Jersey’s ERG program, an agency does not independently verify the reported data.

·      About three-quarters (178) of the programs, including all of New Jersey’s major initiatives, contain a penalty provision of some kind, including recapture of benefits already provided and the recalibration or termination of future subsidies. 

·      Disclosure of enforcement data is a prime indicator of whether an agency is serious about dealing with non-compliance. But only 21 programs publish aggregate enforcement data; only 38 programs disclose the names of companies deemed to be out of compliance; and only 14 disclose the names of companies which have been penalized (and the dollar amounts). None of New Jersey’s programs do any of the above.

·       While every state engages in at least minimal enforcement, practices vary greatly even within many states. Clearly, states know very well how to apply rigorous enforcement techniques but they often fail to do so consistently across their entire portfolio of subsidy programs. 

To best protect taxpayers, the study recommends:

·      All recipients in all programs should be required to report to agencies on job creation, wages, benefits and other performance benchmarks—and those reports should be verified by agencies using techniques including cross-checking of company claims against separate reliable data sources such as unemployment insurance records. 

·      Agencies should penalize recipients found to be out of compliance, employing techniques such as recapture (clawbacks), recalibration of future benefits and rescission/termination of subsidy agreements. Programs that are performance-based should operate without penalties only if recipients are required to fulfill all programs requirements before receiving any subsidies. 

·      Penalty systems should be straightforward and consistent and not weakened by subjective exceptions or official discretion on whether to implement them. Agencies should publish detailed online data on their enforcement activities.

Report gives N.J. mixed grades on overseeing subsidized programs