Hey, remember in January, when the state Emergency Board approved two grants from the Vermont Enterprise Fund? GlobalFoundries was given $1 million, and $200,000 went to BHS Composites. Well, turns out those will be the last VEF grants ever awarded. During its recently concluded session, the Legislature rejected Governor Shumlin’s bid to add new money to the Fund — and decided not to extend the program.
The Fund is empty, and in the absence of legislative action, the program will sunset at the end of the fiscal year.
“It’s disappointing,” says Shumlin spox Scott Coriell*. “The Enterprise Fund has been a useful tool, but we do have other tools at our disposal.”
*Say that five times fast.
There was some funny business around those January grants that may have sealed the fate of the two-year-old program.
On January 7, Governor Shumlin gave his State of the State address. In it, he introduced top executives from the two firms and boasted of his administration’s job creation efforts.
Late that afternoon, the administration released the agenda for a meeting of the Emergency Board at 8:30 a.m. on the following day. The top item: Board approval of the $1.2 million in grants. With less than one day’s notice.
The timing may have been designed to minimize public input — or it may have simply been a way to give Shumlin a big surprise announcement for his final State of the State.
It worked, but it may have been the last straw. The Enterprise Fund had the enthusiastic backing of the Governor, but lawmakers were skeptical. As was Auditor Doug Hoffer, who has a generally dim view of the Fund and called the $1 million GF grant “a thank-you card to GlobalFoundries.”
At the time, I reported that the Emergency Board had received a letter signed by 50 lawmakers, asking for a delay in the grants’ approval. They didn’t get it; I doubt their feelings toward the Fund were improved by the administration’s maneuverings.
“A slush-fund feel”
State Rep. Mitzi Johnson, chair of the House Appropriations Committee, was the only “No” vote at that January 8 meeting. Her committee was one of several House panels to consider extending the Enterprise Fund, but in the end they all rejected it.
“There are a number of different tools out there,” she notes. “This one didn’t have the same level of rigor as the others. It has a little more of a slush-fund feel than programs with more defined processes and goals.”
In a very tight budget year, cutting a program surrounded in controversy was kind of an easy call.
Coriell pointed to Shumlin’s overall jobs record as indirect evidence for the impact of the Fund and other business incentives.
Since January 2011, we’ve created almost 16,900 jobs. The Douglas administration’s net job creation was 800. Part of that was due to the 2008 recession, but just look at the math.
… The Governor has been aggressive about job creation. It’s a big accomplishment, especially when the Republicans are attacking us on jobs and the economy.
The problem, as Coriell himself acknowledges, is that no one can prove that the Enterprise Fund was a deciding factor in any business decisions. As Hoffer says, verification was not written into the program’s structure.
A thorough review in the works
In the wake of the EB-5 scandal, I’ve called for a thorough review of all Vermont’s business incentive programs, some of which have structural issues similar to EB-5’s. And so has Hoffer, as a matter of fact. In a newly-written opinion piece distributed to Vermont media outlets, he indicated problems with the state’s job training programs, the Vermont Economic Growth Initiative (VEGI), the Enterprise Fund, and EB-5; called for a performance review of government tourism promotion efforts; and noted “the inherent conflict of interest between promotion and regulation” in many of these programs. He concluded:
Clearly, the state has an important role to play in creating and enhancing conditions for job creation. As the legislature and the new governor consider their options as to how best to allocate scarce resources, I hope they will insist that all programs are designed to provide the evidence necessary to measure their effectiveness. Without that critical information, how can Vermonters know whether we are getting a fair return on our investment? If we can’t measure a program’s performance, we’re left with faith, which I can’t audit.
Almost like reading a more articulate version of myself.
When I asked Johnson if it was time for a thorough review of all the business incentive programs, she responded with an emphatic “Yes,” and went on:
The Commerce Committee started reviewing all the business grant programs. One proposal that came out of that was to look at workforce training that’s taking place in several different agencies. There’s been more digging into the VEGI program.
There’s quite a lot of long-term documentation needed to show that you’ve created and sustained the jobs you promised.
She also mentioned another potential trouble spot with business incentive programs: there seems to be a bias toward larger firms, when most job growth happens in the small-business sector. It’s my belief that big companies are better able to comply with application and review processes because they have more staff and resources. Smaller outfits may decide it’s not worth the time and trouble.
It remains to be seen if incentive programs can be geared toward small firms that are more likely to actually grow. But it sounds like our lawmakers are taking some positive steps toward better job-creation strategies and programs. If they complete their work, we may be in a better and more competitive position.
The Governor also requested $500,000 for GW Plastics and the E Board agreed (Oct. 19, 2015; vote was 3 – 1 with Sen. Ashe voting no). Note also that the GW Plastics and the Canadian firm were also approved for substantial VEGI awards, as well as generous training grants that may not be in compliance with statute.
If the state was doing the basics to support private economic activity really well it would not be necessary to go in and provide incentives to certain favored few companies in the name of creating jobs — incentives that may need even work. If we did comprehensive tax reform so that tax rates are low and stable, including property tax rates, if we invested further in developing telecommunications and transportation infrastructure, if we reduced the policy uncertainty around health insurance obligations, we would be creating the conditions that favor economic development, especially from small businesses. I tend to believe that most of the incentive programs and the special tax provisions may not be worth it from the perspective of a Vermont taxpayer. I believe that Auditor Hoffer is correct in his assessments, and I thank you for calling attention to his piece. Rep. Cynthia Browning, Arlington