[L]awmakers want to know if giving companies cash handouts is the best way to create jobs.
The Shumlin administration has proposed loosening the rules for the Vermont Employment Growth Incentive and members of the House question whether the changes are necessary. The Senate has already approved some of the changes in S.138.
Fred Kenney, executive director of the Vermont Economic Progress Council, explained that the administration would like to see a provision in S.138 that would allow the council to file a request with the Emergency Board to raise the $1 million cap on VEGI incentives for individual companies. Until now, companies could not exceed that amount.
The total cap is $10 million a year for all qualifying companies. VEPC must ask the Emergency Board for approval to exceed the limit.
The current caps for individual companies, Kenney said, limit “the potential for economic development.”
Under S.138, the new VEGI rules would also allow some companies to pay employees $12.81 per hour in high-unemployment areas instead of the current $14.64 an hour threshold.
Because of Senate concerns about the lower wage threshold, the Vermont Economic Progress Council would change its mathematical modeling to reduce the total incentive for low-paying jobs.
The calculation is meant to account for public assistance, such as food stamps, Medicaid for children, or housing assistance vouchers, that a worker might qualify for if she makes $12.81 an hour.
Pat Moulton, secretary of the Agency of Commerce and Community Development, told lawmakers in the House Ways and Means Committee that the lower rate per hour threshhold is “about creating job opportunities.”
“I hear your concern, which is that are we opening up the opportunity for more people to access state benefits,” Moulton said. “People who are currently receiving state benefits, this might also help their ability to get into a job, which would also reduce their state benefits.”
Cost-benefit analysis of VEGI
According to data going back to 2007, 52 percent of employers who got preliminary approval for VEGI funding didn’t receive cash incentives.
Kenney said Vermont still benefitted from those companies, because they created the jobs, and the state didn’t have to pay them. He said not making more companies eligible for a program that gives those benefits whether or not the state pays them has a high opportunity cost.
Legislative economist Tom Kavet told lawmakers the existence of that “opportunity” in the first place remains in question.
“If we let every program that comes before you create a cost-benefit model, you’d have a fiscal train wreck,” he said.
Kavet said the council historically has given companies less than $500,000 in incentives, and approved all requests from companies for extra money from an emergency fund.
“Not even 50 percent of [the current $1 million cap] has been used, but they want to raise the cap,” Kavet said. “It kind of begs the question, ‘What’s up?’”
Kavet said there are many ways to promote rural development — and that Vermont should not bother competing with New York to give companies cash handouts. “Realistically, we don’t compete with other states going toe-to-toe with incentives,” Kavet said.
Rep. Jim Masland, D-Thetford Center, asked Kavet if it was possible for a group of people to sit down together and come up with ways to spur rural development without giving cash handouts.
“It’s sort of a whole different topic, is, what else can be done with economic development?” Kavet said. “And I think it’s an important topic, but quite often we see the same types of ideas recycled year after year.”
The ‘Good Jobs’ factor
According to a commentary from Gov. Peter Shumlin, the VEGI program was identified by the nonprofit organization Good Jobs First as one of the “best in the nation” programs for encouraging job growth.
But the researcher for the left-leaning organization who gave Vermont the high ranking told VTDigger on Friday that the proposed changes from the Shumlin administration included in S.138 raise concerns over the quality of the program.
Thomas Cafcas, research analyst at Good Jobs First, said the organization follows 50 state capitals and analyzes their economic development strategies.
He said the state got the high rating in part because most deals made under VEGI were with companies that provided high-paying jobs.
“To me, the lowering the standard sets off a red flag, as if the state is about to pivot on its economic development strategy,” Cafcas said. “If I were re-doing that report today, we would be more stringent because states are more and more getting better on this policy.”
Kenney, from the Vermont Economic Progress Council, told House Ways and Means on Wednesday that he has “five or six” companies that “would not come to Vermont” without the proposed changes.
“We’re not trying to get companies to reduce their wages,” Kenney said. “We’re trying to get more jobs into Vermont.”
He and Moulton declined to provide the names of those companies on April 10. VTDigger then filed a formal public records request on Thursday for companies that have applied for VEGI since Jan. 1, 2015, and companies in contact with VEPC.
John Kessler, general counsel for the Agency of Commerce and Community Development, gave a link to a list of two companies on the agency’s website. Revision Ballistics, a military contractor qualified for up to $130,131, and Triad Design Services qualified for up to $968,657.
Kessler said the agency would confer with the Attorney General’s office to see if the names of other companies in contact with VEPC are protected as trade secrets.
CORRECTION: The original story incorrectly stated that the Shumlin administration wanted to give companies unlimited amounts of money under VEGI. The incentives will not defray property taxes.
