State Auditor Doug Hoffer, whose work is more honored in the breach than in the observance, has released a report that’s critical of the Vermont Economic Growth Initiative.
(Before he sends me a correction, please note that this report is not a formal “audit,” my whimsical headline notwithstanding.)
The report came out one week ago today. You might well have missed it, because it was pretty much ignored by the Vermont media. As far as I can tell, it wasn’t covered by Seven Days or VTDigger or any of our sadly diminished dailies. (The Vermont Business Journal did post Hoffer’s press release on its website without any actual reportage, but that’s about it.)
Which is kind of sad. Hoffer is the chief watchdog of state government, after all. His reports ought to be newsworthy. But the media ecosystem is so diminished that a lot of stuff falls through the cracks.
I also suspect that Hoffer has gotten a reputation as The Auditor Who Cries Wolf, especially when it comes to economic incentive programs. His skepticism runs counter to the conventional wisdom, which is that these incentives are a valuable tool in the box. And that if the state doesn’t offer incentives, it might lose out to all the other jurisdictions that offer incentives.
That conventional wisdom is treated as gospel by the executive branch and the Legislature. Hoffer always gets a polite hearing before the appropriate House and Senate committees, who then proceed to ignore whatever he has to say. And that’s a shame, because Hoffer is a smart fellow with a real dedication to making government run as efficiently as possible. His work should be taken seriously.
This report is actually parts 2 and 3 of a series on the VEGI program. Part 1 was released in August, and did get a story at VTDigger. Taken together, they depict VEGI as a poorly-administered program with zero oversight or transparency and a track record that can’t be evaluated.
VEGI, in the words of its website, is meant to provide “incentives from the State of Vermont to encourage prospective economic activity in Vermont that is beyond a business’s organic growth—growth that would not occur, would not occur in Vermont, or would occur in a significantly less desirable manner without the incentive.”
Problem is, it’s very hard to tease out “growth that would not occur” without the incentive, or what activity is “beyond a business’s organic growth.” Changes in the marketplace can easily overwhelm the value of the incentive. Just look at Keurig Green Mountain, or whatever it’s called these days. KGM has been a frequent beneficiary of state incentives, but its growth was largely a product of its patent-protected single-cup brewing system. And its prospects have fallen since the patent protection expired, incentives or no.
Hoffer’s latest report indicates that the Vermont Economic Progress Council, which oversees VEGI, basically takes a business’s word for it that an incentive will result in actual growth. More troubling is a flaw (well, I see it as a flaw) in the enabling legislation: VEPC’s decisions cannot be appealed. There is no independent oversight or review of the incentives. From Hoffer’s press release:
“There is no transparency to how VEPC makes VEGI awards, and the program’s supposed safeguards are nonexistent or flawed,” Hoffer said. “My examination of confidential records found that VEPC made virtually no effort to verify ‘but for’ statements by applicants. This is in stark contrast to what is required of low-income families seeking public assistance.”
… “According to statute, decisions by VEPC are not subject to administrative or judicial review,” the report noted. “This is very unusual. The idea that a group of appointed officials can make costly decisions about the use of public dollars with absolutely no accountability is antithetical to Vermont’s representative form of government and to the expectations of Vermonters.”
True dat. I especially like the contrast with public assistance. We’re happy to give millions to businesses without any evidence of need, but we’ll put a poor person through the wringer to get a few bucks to keep a roof over their head.
There’s more to Hoffer’s findings; feel free to peruse the full report, available as a pdf through his official website. If you agree with his informed view, maybe you can let your lawmakers know. They don’t seem all that interested otherwise.