(Continuing the policy of promoting diaries from officeholders and officeseekers – promoted by odum)
It’s only the second week and already there are no shortages of topics of intense debate. I want to talk about VEGI incentives and the request to the Emergency Board to raise the cap on these incentives. If VEGI, the Emergency Board and raising the cap mean nothing to you, I would say you are with at least 95% of the rest of Vermont, but it is an important issue and it does have advocates and naysayers.
VEGI stands for Vermont Employment Growth Incentive and is a program that was started several years ago to encourage job growth in Vermont through cash incentives to employers. The Emergency Board is the group that officially accepts the revenue projections, sets the levels of bonding and can approve emergency spending. The Board is made up of the governor, the chairs of the two appropriations committees and the chairs of the tax committees.
Each of the incentive programs that we have in Vermont has a “cap”. That is the dollar amount that the program may spend or commit. VEGI had a cap of $10 million and they have asked to have the cap raised to $25 million.
More after the jump
Here’s how the VEGI program works. A business comes to the group in charge of these incentives and files an application for a VEGI credit. The business has to fill out a lengthy application and has to swear that the job growth would not happen without this incentive. There is a complex formula that determines if this would be a good investment of state dollars.
These are performance based incentives. In other words, until the company has created the jobs, the jobs have been filled and folks have been working for a specific time period, the incentive is not paid.
If the company never creates the jobs, or only creates some of the jobs, the incentive is adjusted accordingly. These incentives are also paid out over a period of years. The idea is that these new jobs create more revenues for the state, so these incentives don’t “cost” the state money, they just share some of the new revenues with the company that creates these new revenues.
The VEGI program currently has the authority to commit up to $10 million in incentives and has most of that money committed. They have so far only paid out under $1 million, but the potential liability is still there for the other $9 million.
Three companies have suddenly come forward with very good applications and are looking at the creation of over 800 jobs in a several year period.
One company is a large Vermont company who is looking for a major expansion and another is a company that to be built in Vermont and would manufacture solar panels. The cap on the VEGI programs needs to be raised to cover these potential new, high paying jobs.
It is important to understand that these caps are the state’s liability and never have we come close to actually paying out the full amount of the caps. The business community feels that these types of incentives are very important to job creation. Many others feel that most of the jobs grown in Vermont happen without these incentives and that there is no proof that these incentives are helpful.
I’m happy to encourage 800 good paying jobs with VEGI, what a great thing to be talking about! 800 good jobs!
Thanks for reading,
Susan
PS: I’m happy to hear from you about the issues we face in Vermont and read your posts here. If you want to contact me, I’m easy to find through www.bartlettforgovernor.com
It would be helpful if you could refer us to a source where the performance of previous and existing incentives beneficiaries has been independently evaluated for their specific economic impact (cost-to-return); and the time-frame for that impact or return.
Hypocritical businesspeople, who who scream “Socialism” at every idea for government, have no qualms about having their pockets lined by government handouts in the form of “incentives” (a pretty word…makes you think of giving your kid a video game for report card improvements…the real term is “Government Charity”).
If the government wants to invest in companies (a really bad idea) we should at least get stock in return…and a seat on the board…and a guarantee that if the jobs are moved (ever), the money is paid back with interest.
But why do we need to pay a profit making organization to “create” jobs when A) they’ll do it anyway and B) we could create more jobs, using the same money, in not-for-profit and direct government expenditures?
Of course, we know the answer…in today’s world, sending “incentives” to corporations creates a direct return to the politicians who send the money, in the form of (now) unlimited campaign expenditures on that politician’s behalf…and that this reason will trump any actual facts about the merit of the “incentives”. I could just hurl.
Sue is correct. Sorry Susan, you and the other candidates need to clearly document the success of the many different business give-aways before asking for more. Just because the business community asks for hand-outs does not mean they are really needed. Why is it that the families who need help are told to tough it out and the businesses are told, sure just ask for more. Where is the Democratic candidate that is going to tell it like it really is.
It appears that you do not accept the many well documented problems with this program (or you are – inexplicably – ignoring them). I refer you to several excellent reports by three different (Democratic) State Auditors. A few brief comments (which I will copy to your site):
1. “Swearing” that the incentives are necessary for the new jobs is totally subjective and cannot be audited. In my view (and that of your own legislative economist), the assertion that this protects us is naive.
2. The “complex formula” used to determine the amount of the award is deeply flawed. As I’m sure you know, the background growth rate methodology is inappropriate and has unquestionably cost the state millions for jobs that would have been created anyway. The fact that the Joint Fiscal Committee and the full Leg. has not corrected this problem is disturbing, especially when everyone is all hyped up about making government more efficient and effective. [And the fact that VEPC continues to fight for it tells us a great deal about how they view their mission.]
3. The incentives can only be net positive if none of the jobs would have been created without the incentives (see #1 above).
4. It is no surprise that “The business community feels that these types of incentives are very important”. The literature is very clear about this. Why would a business say otherwise publicly if it would result in the end of a program offering free money? It’s called “strategic answering”. Let me ask you this: VT had better than average growth in the `90s before we had VEPC. How did we possibly create so many jobs without such “incentives”?
5. The real test is whether this program represents a long-term investment. Since many recipients of VEPC awards from the earlier program (EATI) have cut jobs during the recession, the supposed benefits are gone. Moreover, some may reapply as they recreate the same jobs as the economy improves. That means we will pay for the same jobs twice. Can you honestly say that is a prudent investment? [Note that overall VEPC “incentives” have cost the state over $60 million with more in the wings.]
I understand that you want good jobs – we all do. But leadership means not being afraid to challenge assumptions and change course when the evidence warrants.
There is nothing wrong with telling it like it is. This issue offers a classic teachable moment. That wouldn’t make you any less supportive of the VT economy. Unless and until the legislature shifts resources from tired old Trickle Down policies, we will continue to waste money and opportunities. [and if you look beyond the Chamber and GBIC you will find many many VT businesses that agree]
Yes, I am one of the “naysayers”. But I happen to be well informed about this program and the facts are on my (our) side. I encourage you to reconsider your position.
to, oh I don’t know, actually name the companies that are slated to get this increased largesse in this age of austerity? Maybe then it would be a bit easier to determine if this rises to the level of “Emergency”
In his op-ed piece in the Free Press yesterday, Douglas supporter and GBIC director Frank Cioffi said:
.
In the diary, Sen. Bartlett states:
This seems to suggest that the employers would get credit for partial performance.
Does anyone know which is correct?
This is Senator Bartlett’s attempt to show she’s a moderate and can cowtail to the business community with the best of them. Wish she demonstrated this kind of emergency mentality when it came to slicing and dicing state government into oblivion. Wonder if she’ll advocate for the new Vermont business jobs to be good union jobs. Not holding my breath.