Raise a glass, boys, to Janet Ancel, hardworking chair of the House Ways and Means Committee. For it was she who ignored the express wishes of the Shumlin administration and added some oversight to a program that sorely needs it.
I’m talking Vermont Employment Growth Incentive (VEGI), the
slush fund economic development program that gives public funds to private employers promising to grow their workforce. VEGI was up for renewal this year, and the administration wanted a permanent extension (or at least five years) with no strings attached.
What it got instead, thanks largely to Rep. Ancel, was a three-year extension with legislative oversight added. She also inserted a mandated “cost-benefit analysis” to determine whether VEGI is actually accomplishing what it’s supposed to. And yesterday, the full House approved an omnibus economic-development bill including her VEGI provisions. A noteworthy accomplishment, given the administration’s active resistance.
After the jump: the unprovable merit of VEGI.
Patricia Moulton, chief of the cabinet’s Rotten Borough — the Agency of Commerce and Community Development — had resisted Ancel’s reforms, claiming that VEGI is “a proven program… that’s working well,” and doesn’t need any more oversight, thank you very much:
“The program’s been audited four times already in its seven-year history,” Moulton said.
Yeah, well, about that. I don’t know when those audits happened or who did them, but here’s what State Auditor Doug Hoffer had to say about VEGI less than one year ago
The very heart of the program is a subjective assertion by applicants that cannot be independently confirmed (the “but for”). Therefore, when called upon to audit the program, it is impossible for us to say whether it is performing well or not. VEGI is characterized by some as having no fiscal costs, but that assumes a foolproof “but for” which cannot be verified. With this in mind, I would urge caution in expanding the program.
“But for” is the evanescent claim that an employer’s expansion would never have happened “but for” the VEGI grant. That’s the fundamental justification for VEGI’s existence, and here’s our Auditor saying it “cannot be verified.”
The “audits” claimed by Moulton, I think, focused on whether VEGI was operating within its statutory authority. Those audits prove nothing about the quality of the law itself, and even less about the efficacy of VEGI.
For instance: the leading recipient of VEGI, by far, is Keurig Green Mountain. It’s received four VEGI grants in the past seven years. Now, KGM has enjoyed rapid growth — but that’s because of its single-brew technology, not because of a state tax incentive. I can’t prove anything, but I seriously doubt that KGM wouldn’t have grown to a dominant position “but for” the VEGI funds.
And its future prospects, clouded by encroaching competitors and managerial missteps, will have nothing to do with VEGI.
This isn’t a KGM-specific issue. There are legitimate, serious doubts about VEGI-style programs. University of Massachusetts economist Jeffrey Thompson did a study of such programs across New England, and determined that…
“… their impacts are modest at best. As much as 96% of the jobs and most of the investments used to claim these tax credits would have been created without the incentives.”
“The real harm,” Thompson says, is that the incentives divert money from “real public investments.”
“For example, one analysis finds that a long-term $875 million annual incentive program in New England would produce just 9,000 jobs, compared to over 130,000 jobs if that same amount of money was invested instead in high-quality universal preschool in the region.”
VEGI is a sugar pill. Tastes good, gives you a shot of energy. Makes a nice headline, lets the governor look like a job creator. But its actual effects are unproven at best. Legitimate, direct public investments, on the other hand, are proven economic stimulators.
Thanks to Janet Ancel, the House has strengthened the VEGI program. That’s a good thing. Given the political climate around VEGI, it’s the best we could hope for.
Now it goes to the Senate, where Shumlin will prevail on his former colleagues to strip away Ancel’s reforms.
Which is to say nothing of the fundamental reality: VEGI is a distraction, and a detraction, from real economic reforms that do good for business and for the people.