*Finance, Revenue and Bonding Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-7316

Title:

AN ACT CONCERNING EVALUATION OF BUSINESS ASSISTANCE AND INCENTIVE PROGRAMS.

Vote Date:

4/27/2017

Vote Action:

Joint Favorable Substitute

PH Date:

4/11/2017

File No.:

SPONSORS OF BILL:

Introduced by:

Finance, Revenue and Bonding Committee

REASONS FOR BILL:

In an effort to increase legislative oversight of economic development programs in the state this proposal seeks to use DECD's annual report to the legislature and the auditors' regular and stand-alone audits to trigger legislative program reviews. The result of this legislation is aimed at providing a more in-depth and regulated auditory process of economic development programs in CT as well as increased transparency of financial assistance and tax incentives state agencies award to CT businesses.

RESPONSE FROM ADMINISTRATION/AGENCY:

Catherine Smith, Commissioner, Department of Economic & Community Development:

Commissioner Smith submitted testimony in support of HB 7316 on behalf of the Department of Economic & Community Development noting that this bill would include an evaluation of business assistance and tax incentive programs under DECD's purview, eliminate the duplicative triennial tax credit study DECD currently performs, and direct the Auditors of Public Accounts to conduct a performance audit of the evaluated programs and the report itself. She states that the mission of the DECD is to develop and implement strategies to increase the state's economic competitiveness. Their department will continue to make recommendations on whether the programs being evaluated should be continued, modified, or eliminated while providing the Auditor of Public Accounts an opportunity to review DECD's performance and the implementation of its programs under this bill. Because it builds upon the department's efforts to promote transparency and accountability of the state's economic development investments, tools and programs, DECD supports this legislation.

Kevin Lembo, Connecticut State Comptroller:

Comptroller Lembo testified in support of HB 7316 as he claims the changes proposed in this legislation will help our state make data-driven decisions about tax credit and abatement programs, ensuring that we are focusing state resources toward their highest and best use. He also notes that the state owes it to businesses and all taxpayers to fully analyze the return on investments that the state provides. The Comptroller also insists that removing unnecessary data requirements in the report will reduce the burden of producing the report while placing specific emphasis on the most relevant data for policy makers to make informed decisions about the future of business assistance and incentive programs.

NATURE AND SOURCES OF SUPPORT:

William Buhler:

Mr. Buhler submitted testimony in support of HB 7316 as he believes evaluating the effectiveness of business tax incentives is a matter of common sense.

Joe Horvath, Assistant Policy Director, Yankee Institute for Public Policy:

Mr. Horvath submitted testimony in support of HB 7316 noting that this bill would provide state officials with the tools necessary for determining the effectiveness of state programs while increasing accountability and efficiency which will allow state government to operate based on results rather than assumptions.

Geralynn McGee, Statewide Legal Services Network:

On behalf of the statewide Legal Services Network, Ms. McGee submitted testimony in support of HB 7316, claiming the state misses opportunities to discover whether the economic incentives are productive or not due to the absence of an unbiased review of the program. It is her organizations belief that the state's policy priorities should reflect an awareness of the burden to low-income residents in Connecticut and willingness to invest in transitioning families out of poverty. She believes this bill will help the efficiency of the state's economic development programs so that more investments can be made to help those in poverty.

Lori Pelletier, President, Connecticut AFL-CIO:

Ms. Pelletier supports HB 7316 as she believes it is beneficial to the taxpayers to have transparency of economic development programs. She states that only big, profitable corporations have benefited from Governor Malloy's “First Five Plus” program while taxpayers do not have any independently verified data about how these investments have benefited our state and economy. By passing this bill the taxpayers will have a voice in the oversight process via the DECD's detailed reports, which in her opinion will help deter bad investments and biased reports.

Tom Swan, Executive Director, Connecticut Citizen Action Group:

Mr. Swan submitted testimony supporting HB 7316 on behalf of CCAG's thousands of member families stating that this bill will help provide the legislature with the necessary tools needed to determine the efficacy of economic development programs going forward. It is Mr. Swan's belief that having auditors conduct performance audits will lead to better results from our business assistance and incentive programs which will lessen the possibility of the programs being corrupted.

Derek Thomas, Connecticut Voices for Children:

Mr. Thomas submitted testimony on behalf of Connecticut Voices for Children supporting HB 7316 claiming that, like all states, CT employs two primary tools to develop its economy; strategic investments and financial incentives. He states that currently only general fund spending is fully transparent to taxpayers while financial incentives are not. According to his organization, a more efficient, transparent, and fair budget process would include regular reviews of all economic development incentives which would reduce revenue that could otherwise be used to invest in education, transportation, and other building blocks to a healthier economy. His testimony also notes that over the last two fiscal years spending on the Children's Budget decreased by $81.2 million while the cost of business tax breaks increased by $12 million. The transparency this bill would create would ensure that tax expenditures are yielding the promised economic development benefits.

Robert Zahradnik, Policy Director, State Fiscal Health-The Pew Charitable Trusts:

Mr. Zahradnik submitted testimony representing PEW in support of HB 7316. PEW's research shows that studying the results of incentives is a vital step for states to create jobs, raise wages, help businesses to grow, and to maintain a balanced budget. They support this bill because this legislation would ensure that lawmakers have the resources to determine which incentives are working, which are not, and how to make improvements. PEW claims this bill will also improve the DECD evaluation process by broadening the scope of the evaluation process, adding important requirements to include recommendations for additional data collection by the state, requiring the Auditors of Public Accounts to supplement the analysis provided by DECD, and ensuring that the Finance, Revenue, and Bonding Committee, Appropriations Committee, and Commerce Committee will hold hearings on the evaluations after they are published.

NATURE AND SOURCES OF OPPOSITION:

None expressed

Reported by: Brian Cohan

Date: 5/11/2017