OLR Bill Analysis
AN ACT CONCERNING EVALUATION OF BUSINESS ASSISTANCE AND INCENTIVE PROGRAMS.
This bill expands legislative review of economic development programs, including certain programs administered by agencies other than the Department of Economic and Community Development (DECD). It does this by requiring DECD to include information about the economic development programs in its annual report and making it the basis for the review. DECD must submit the expanded report to the Auditors of Public Accounts (i.e., the auditors) and the Appropriations; Commerce; and Finance, Revenue and Bonding committees (i.e., review committees).
The bill requires the auditors to assess the programs' performance, evaluate the annual report's accuracy, and submit a report on their findings to the review committees each time they audit DECD. Upon receiving this report, the committees must hold one or more separate or joint hearings on its findings.
The bill eliminates the requirement that DECD submit a separate, triennial report on state programs that provide tax incentives to businesses, including those administered by other agencies. Under the bill, DECD must include information about all of these programs in its expanded annual report.
EFFECTIVE DATE: Upon passage
DECD ANNUAL REPORT
The bill makes DECD's annual report the trigger for legislative program review. To facilitate that review, the bill expands the report's content and requires DECD to submit the report to the auditors and the review committees.
The bill adds to the information DECD must include in the annual report. Under current law, the report must include an assessment of the state's economy; information about the businesses, municipalities and other entities that received DECD loans, grants, and other financial assistance; and the assistance's economic impact. The bill requires DECD to also include separate analyses of its programs and those of other agencies that provide financial assistance and tax incentive to businesses (e.g., Labor Department's Subsidized Training and Employment Program and Connecticut Innovations' Angel Investor Tax Credit).
Under the bill, DECD must include, if available, data on the number of new jobs these programs created, how much it cost the state to borrow funds to finance the programs, and the estimated impact the programs had on the state's annual revenues.
DECD must also include:
1. an assessment of whether the programs are meeting their statutory and programmatic goals and, if possible, the obstacles preventing them from meeting those goals;
2. recommendations about whether these programs should be continued, modified, or repealed and the reasons for each recommendation;
3. recommendations for additional data that must be collected to improve evaluations; and
4. a description of the methodologies used and the assumptions made to analyze the programs.
The bill requires DECD to provide the same information and analyses about programs other agencies administer, but only for those programs that had 10 or more recipients or awarded over $1 million in assistance during the prior fiscal year.
Under current law, DECD must submit the report to the governor and the legislature by February 1 annually. The bill requires DECD to submit it by that date to the governor, the auditors, and the review committees, but not the entire legislature.
Three-Year Tax Credit Report
The bill eliminates the requirement that DECD evaluate, every three years, the state's economic development tax incentive programs and report the results to the governor, the Office of Policy and Management (OPM) secretary, and the Appropriations and Finance, Revenue and Bonding committees (CGS § 32-1r). The law specifies the kind of information DECD must provide in this report (see BACKGROUND).
Under the bill, the auditors must audit the financial assistance and tax incentive programs' performance (i.e., performance audits) and the annual report's accuracy each time they audit DECD.
The performance audits must examine the extent to which the programs are achieving their statutory purposes. The auditors must conduct these performance audits as part of a regular audit, but they may also conduct them at their discretion as a separate audit. They must conduct them according to generally accepted government auditing standards or other methods they deem appropriate.
DECD Annual Report Evaluation
Each time the auditors audit DECD, they must evaluate the accuracy of the annual reports DECD completed since their last DECD audit. The evaluation must:
1. determine if there is evidence to support the accuracy of the report's data,
2. evaluate whether the tax incentive programs are being managed and operated so as to make it easy for taxpayers to comply with their requirements,
3. recommend how the agencies can improve their programs' administrative efficiency and effectiveness, and
4. evaluate whether the reports provide all the information the statute requires (CGS § 32-1m).
Auditor Reports and Legislative Hearings
The auditors must submit a report on each performance audit and annual report evaluation to the governor, OPM secretary, and review committees. They may submit these reports separately or as part of a statutorily required audit report.
The bill requires the review committees to hold at least one separate or joint hearing on these reports.
Triennial Evaluation of Economic Development Tax Credits
Current law requires DECD to prepare a three-year report on the state's economic development tax incentive programs and specifies the kind of information DECD must include in it.
HB 7231 (File 360) reduces the kind of information DECD must include in its annual report (and four-year strategic economic development plan). Current law specifies the topics and issues DECD must cover in the report and the type of data and analyses it must include. The bill continues to require DECD to address these topics and issues, but eliminates many requirements that it do so by providing specified data and analyses.
Finance, Revenue and Bonding Committee
Joint Favorable Substitute