PA 17-226—sHB 7316

Finance, Revenue and Bonding Committee

AN ACT CONCERNING EVALUATION OF BUSINESS ASSISTANCE AND INCENTIVE PROGRAMS

SUMMARY: This act requires certain legislative committees to hold public hearings on economic development programs periodically. The hearings are triggered when the Department of Economic and Community Development (DECD) and the state auditors submit certain reports to the Appropriations; Commerce; and Finance, Revenue and Bonding committees (i.e., the review committees).

The reports are (1) DECD's statutorily required annual report to the legislature, which, under the act, must include an economic impact analysis of all state economic development programs, not just those DECD administers, and (2) a new report assessing this analysis that the auditors must prepare each time they audit DECD.

The act also 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, to the governor, the Office of Policy and Management (OPM) secretary, and the review committees (CGS 32-1r). Under the act, DECD must include information about all of these programs in its expanded annual report.

EFFECTIVE DATE: Upon passage

DECD ANNUAL REPORT

The act expands the kind of information DECD must include in its annual report, requires DECD to submit the report to the auditors and review committees (as well as the governor), and makes the report the basis for required legislative public hearings.

Content

Under the act, DECD must include in the report an economic impact analysis of each state economic development program that provides financial assistance or tax incentives, including other agencies' programs that had 10 or more recipients or awarded over $1 million in assistance during the previous fiscal year. (Examples of such programs include the Labor Department's Subsidized Training and Employment Program and Connecticut Innovations' Angel Investor Tax Credit.)

The scope of the economic impact analysis varies depending on whether DECD or another agency administers the program. The analyses for all programs must include:

1. an assessment of whether the programs are meeting their statutory and programmatic goals and, if possible, any 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 recommendations about whether these programs should be continued, modified, or repealed and the reasons for each recommendation;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.

For the analyses of its programs, DECD must also include, if available, the number of new jobs the program created, how much it cost the state to borrow funds to finance the program, and the estimated impact the program had on the state's annual revenues.

Prior law required an economic impact analysis in the annual report but limited it to DECD's programs. It also specified the variables DECD had to use to determine the impact. PA 17-219 eliminates several of those variables and makes other changes to the annual report's content (see BACKGROUND).

Distribution

Under prior law, DECD had to submit the report to the governor and the legislature by February 1 annually. The act requires DECD to submit it by that date to the governor, the auditors, and the review committees, but not the entire legislature.

Legislative Hearings

The act requires the review committees, by March 1 annually, to hold at least one separate or joint public hearing on the economic impact analyses included in the annual report.

AUDITORS

Under the act, the auditors must audit the financial assistance and tax incentive programs' performance (i.e., conduct performance audits) and the annual report's accuracy each time they audit DECD.

Performance Audits

The performance audits must examine the extent to which the tax incentive programs are achieving their statutory purposes. The auditors must conduct these 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

As part of each regular audit, the auditors must also evaluate the accuracy of the annual reports DECD completed since their last DECD audit and the economic impact analyses included in them. The evaluation must:

1. determine if there is evidence to support the accuracy of the data in the report,

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 act requires the review committees to hold at least one separate or joint public hearing on each of these audit reports.

BACKGROUND

Related Act

Among other things, PA 17-219 requires the same economic impact analyses and legislative hearings that this act requires and eliminates report requirements that existed under prior law.