Model Legislation for Subsidy Reforms

Good Jobs First staff started collecting the best state and local legislation to make economic development subsidies accountable in the late 1980s, a decade before Good Jobs First was founded, and first published it in Greg LeRoy’s 1994 book No More Candy Store.

Most recently, we have analyzed almost 250 state subsidy programs for three 50-state “report card” studies, grading the programs on about three dozen accountability metrics. In other words, we have very informed opinions about job-subsidy safeguards. Linked below are four model bills based upon our findings, as well as a bill that combines all four basic elements:

Disclosure and Unified Reporting of Property Tax Abatements and Reductions: Subsidy disclosure allows taxpayers to see the costs and benefits of every job deal, every year. That means company-specific reporting on each deal as it was originally granted, and then annual reporting on its actual outcomes: jobs created, wages and benefits paid, capital invested, and/or other public benefits. Sunshine offers something for everyone: competing companies looking at each other’s deals; small businesses seeking fairness versus big businesses; taxpayers asking if a deal cost too much; journalists looking for conflicts or favors; neighborhood groups looking for regional fairness; and anti-poverty advocates looking for living wage jobs. Unified Reporting of Property Tax Abatements and Reductions is critical because they are sometimes the most lucrative subsidy a company receives (and the costliest to schools).

Clawbacks and Rescissions, or money-back guarantees if deals don’t pan out, are the true test of whether public officials are serious about accountability. If taxpayers subsidize a company to create 100 jobs, but the company creates only 50, shouldn’t the cost of the deal shrink to match the benefits? And in these times of fiscal austerity, shouldn’t governments closely shepherd their economic development dollars to make sure every investment pays off, or else the money is redeployed to other deals that really do benefit taxpayers?

Job Creation and Job Quality Standards: The idea that “any job is a good job” has come and gone—especially when the job is taxpayer-subsidized. Job quality standards require subsidized companies to create jobs that meet certain criteria, including wage levels, availability of health insurance, and full-time hours. Absent such safeguards, history has shown that many companies will pay poverty wages that create hidden taxpayer costs for Medicaid, Children’s Health Insurance, food stamps, etc. Job creation standards ensure that taxpayers get a bang for the buck and that the cost per job is not too high.

Unified Economic Development Budget: An (UEDB) provides policymakers and taxpayers with a comprehensive accounting of all economic development spending—all in one place. This is critical for two reasons. First, because different agencies handle different programs, the records are not combined, and they may be reported in non-uniform ways that make comparisons difficult.  Second, some kinds of tax breaks—especially corporate income tax credits—have historically been far less transparent in some states than other kinds of tax breaks (such as property tax abatements visible at county tax assessors’ offices).

Our Economic Development Accountability Model Legislation combines disclosure, clawbacks, job creation and job quality standards, and unified economic development budgets.

While the laws featured on this site are among the best practices in the country, keep in mind that they are in many cases not perfect, and may need to be tweaked for your particular state or city—to fit the needs of your area, cover additional programs, require a particular method of reporting, etc. If your organization writes a bill that could be used as a model by others, we’d like to hear from you.