For a long time, New Jersey’s economic development strategy was to give lavish subsidies to large companies through programs such as the Business Employment Incentive Program and the Economic Development and Growth Program. Eventually, the drawbacks of this system became clear.
Two audits in the late 2010s documented serious mismanagement by the New Jersey Economic Development Authority (NJEDA), and a task force on incentives found signs of corruption, subsidy overpayments, and companies lying on subsidy applications.
Despite promises of reform, the state legislature at the end of 2020 quickly passed a package of new subsidy programs that will cost state taxpayers $14.3 billion (this amount included pandemic relief funds). Two new programs only, Emerge and Aspire, will cost $1.1 billion a year for the next six years. One of the first deals approved under the new system was a $110 million megadeal to simply retain a company, Fiserv Solutions. A report by the State Comptroller found that the NJEDA still has more work to do to improve subsidy oversight and safeguards to protect public money from going to companies that fail to deliver.
The NJEDA board approves subsidy applications for major programs and the agency manages those programs. The Department of Revenue administers the remaining tax-based subsidies.
New Jersey has adequate disclosure of major programs, including the legacy programs. The NJEDA discloses company names, approved and dispersed subsidy amounts, and job promises and outcomes. Two days before its board meetings, the NJEDA posts to its website the names of companies applying for subsidies. On the downside, there is no good clawback transparency.
The state lists seven programs under the GASB 77 rule. About one-fifth of all school districts report foregone revenue under the rule. The remaining school districts mention the rule but do not report the amounts; instead, they refer to tax-rate changes in identical, boilerplate statements (municipalities must adjust taxes to make up for any foregone revenue school districts experience).
- See who is responsible for the implementation of GASB 77 on our New Jersey State Road Map.