Economic Development & Job Growth

WHAT'S HAPPENING IN CONNECTICUT

Standards for Economic Development

Founded in 1995 to challenge the business friendly and worker un-friendly practices of large corporate mega mergers, CEO and its members also established themselves early on as the group willing to uncover the costs to the state's taxpayers of economic development subsidies being handed out like candy to some of Connecticut's largest employers without a job creation standard in sight.

Economic Development Agencies in Connecticut

There are currently 3 state agencies that provide economic development subsidies in the form of loans, grants and tax and other credits  to private businesses.  They are The Department of Economic and Community Development (DECD), The CT Development Authority (CDA), and CT Innovations, Inc. (CII).

CII is charged with "growing Connecticut's entrepreneurial, technology economy by making venture and other investments." DECD's mission is to "develop and implement strategies to attract and retain businesses and jobs, revitalize neighborhoods and communities, ensure quality housing and foster appropriate development in Connecticut's towns and cities".  And CDA "offers business assistance including direct & guaranteed loans that enable and encourage companies to expand and succeed."

Around the Country and In Connecticut

According to Good Jobs First (GJF), a Washington based research and advocacy organization, the number of economic development subsidies with job quality standards is continuing to rise sharply across the nation.  Additionally, such standards are becoming a common tool for targeting development subsidies to businesses that create high-quality jobs.

Connecticut continues to lag behind despite years of advocacy by CEO and its members for job creation standards for economic development subsidies. In fact, as of 2003, GJF indicates that 43 states, 41 cities, and 5 counties attach job quality standards to at least one development subsidy. This is a net increase of 6 states, 16 cities, and 1 county since 2000.

Currently, in Connecticut, companies that receive economic development subsidies from the state have no standards for job creation, wages or benefits, however, since 1992, the agencies have been required to annually report company-specific data on actual jobs created, projected jobs created, number of jobs at initial application and amount of assistance of companies receiving subsidies.  While a step in the right direction, disclosure is a minimalist approach to accountability and because each of the 3 development agencies collects and reports data separately and differently, to get a big picture of what is happening with economic development subsidies in CT is extremely challenging and time consuming. 

For 2004 report to the General Assembly from DECD click here.

In a report prepared by Northeast Action and authored by Marc Breslow in February of 2001 entitled "Economic Development Subsidies in CT: HIgh Costs and Inadequate Job Growth", it was found that of the 1,073 companies that received economic development subsidies 64% (683 firms) fell short of their initial employment gain projections.  In fact, as of June 1999, 391 or 36% of firms actually lost jobs between their first application for assistance and June of 2000. 

For a copy of this report call the office.

Another important aspect of analyzing the impact of economic development subsidies is the cost per job gained or created.  Federal guidelines created by the Department of Housing and Urban Development and Small Business Administration set a limit for the subsidy cost per job gained or retained in economic development programs at $35,000.  Yet in CT, in 2000, the cost per job created was $69,304, almost double the federally recognized limit!

In 2002, CEO and its members passed P.A. 02-86 An Act Concerning Terms and Conditions of State Economic Development Assistance.  This bill establishes a procedure to ensure that for-profit businesses receiving state subsidies in excess of $1 million comply with terms and conditions of their assistance agreements.  It enhances compliance capability by DECD, CDA and CII, allows for goal setting by companies around job creation and retention and puts in place a procedure for penalizing those companies that do not comply with the assistance agreement.  Considering the lack of standards up to this point, this legislation is very important because it requires the economic development agencies to create goals and objectives for the projects they fund which presumably are measurable and can be used to enhance the accountability of subsidized corporations.

Economic Development Subsidies in Connecticut - 2004

In 2004, research conducted by CEO found the following: (click here).

Best Practices for Standards and Disclosure

Public policies created to establish standards for economic development subsidies should include the following: (click here)