Government Falls Short in Subsidizing Job Creation

“Incomplete, misleading, and unreliable”—that is how an Auditor General report described Department of Community and Economic Development (DCED) efforts to ensure transparency and accountability in the use of your tax dollars.

The criticisms did not end there.

The report, released on Wednesday, analyzed five “job creation” programs under the purview of DCED. Here are the five major findings:

  • DCED did not set any performance goals or measurements of success for its programs.
  • DCED penalized businesses that didn’t create the promised jobs.
  • The DCED did not verify if businesses that were awarded taxpayer-financed loans actually created or retained jobs.
  • DCED’s annual reports on these programs proved to be inaccurate, misleading and unreliable.
  • While the DCED has improved its monitoring in some areas, it does not have adequate monitoring procedures for all of its programs.

According to the Auditor General’s analysis, 44 percent of businesses that were awarded taxpayer funds did not reach their goal in new job creation. As Pennsylvania Independent points out, this cost taxpayers more than $93 million.

These disappointing findings should spark a debate about “job creation” policies. Government should not pick winners and losers in the economy and decide what businesses receive direct taxpayer support. This is neither an equitable nor an effective way to create job growth.

By eliminating corporate welfare and lowering the overall tax burden on all businesses, Pennsylvania can become more competitive.

It’s also one way to solve our state’s budget woes. As lawmakers look to balance a deficit of nearly $2 billion this upcoming fiscal year, eliminating the more than $440 million in grant and loan programs is a great place to start.

Corporate Welfare Grant & Loan Programs 2014-15 Budget (Thousands)
General Fund
Agricultural Research $787
Agricultural Promotion, Education and Exports $250
Ben Franklin Tech Development Authority Transfer $14,500
Commonwealth Financing Authority Transfer $77,755
Council on the Arts $898
Discovered in PA Developed in PA $5,000
Food and Marketing Research $494
Grants to the Arts $8,590
Hardwoods Research and Promotion $350
Industry Partnerships $1,813
Infrastructure and Facilities Improvement Grants $19,000
Keystone Communities $6,150
Keystone Works $100
Livestock Show $177
Marketing to Attract Business $2,008
Marketing to Attract Tourists $7,264
Municipalities Financial Recovery Revolving Fund Transfer $4,000
New Choices/New Options $500
Open Dairy Show $177
Partnerships for Regional Economic Performance $11,880
Pennsylvania First $20,000
Pennsylvania Race Horse Development Fund $252,583
Tourism-Accredited Zoos $550
World Trade PA $5,824
Youth Shows $140
Total $440,790

Previously, we calculated that by eliminating economic development subsidies, including targeted tax breaks, Pennsylvania could lower the Corporate Income Tax rate from 9.99 to 7.08 percent.

Instead of having the second-highest rate in the nation, we would suddenly be lower than 21 other states, which would certainly make the Keystone State a more attractive place to move or expand a business—and be a more effective way to create jobs.