From Capital District Business Review, March 6, 2000
William TuthillBusiness Review Reporter
New York state's array of economic development programs, in which millions of dollars are annually loaned or given to spur businesses and create jobs, lack adequate means of measuring their own effectiveness, according to a report by State Comptroller H. Carl McCall.
There are not enough tools in place to show whether funded projects have resulted in the increase or retention of jobs, the report said. It is an argument McCall has made before since taking office in 1993, as did his predecessor, former Comptroller Edward Regan.
The Empire State Development Corp. is the state's economic development agency and overseer of business subsidy programs. Its mission is to attract business to the state, and to help the state retain the business it already has, by providing technical and financial assistance to companies that might otherwise not settle here.
In a Feb. 10 report, McCall called on the ESD to do a better job tracking employment at companies receiving grants or loans.
"Taxpayers have a right to know if their multimillion-dollar investment in job-creation programs is working, and lawmakers need solid information to determine what programs are the best investments," McCall said in a statement accompanying the report.
Empire State Development spokesman Eric Mangan called the report "a blatantly partisan political attack, long on political rhetoric and short on facts." He said officials in the comptroller's office ignored information the ESD gave them that would have given a more complete picture of the state's job-tracking efforts.
In a written response included in the comptroller's report, ESD said the success of its programs cannot necessarily be measured by numbers of jobs because of economic factors beyond the ESD's control.
"New York's economic performance is primarily the result of national- and regional-level economic forces," the agency wrote. "We do not believe that in a private-sector economy, intervention by ESD or other government agencies offering assistance programs is the primary determinant of economic growth."
Still, figures released last year by ESD show that in the three years up to 1999, companies receiving state assistance exceeded targeted employment goals by 10 percent, said Mangan, the agency spokesman.
Empire State Development consists of four major economic development entities: the Job Development Authority, The Department of Economic Development, the Urban Development Corp., and the Science and Technology Foundation.
The first, the Job Development Authority, is financed mainly through bond financing. The other three are funded by the Legislature. From 1994 to 1998, those three entities received a total of more than $1 billion for a variety of grant and loan programs.
The Comptroller set out to determine whether Empire State Development has sufficient program indicators for measuring the costs and benefits of its job-creation and -retention programs. The Comptroller looked at job development programs from April 1, 1993, through July 31, 1998.
The report itself was prepared on an "exception basis," i.e. it highlights areas needing improvement and does not address areas that may be functioning properly.
The Comptroller's Office found there is no integrated system for combining the data of the ESD's four agencies. To assess the results of the agencies' programs, the auditors had to gather and summarize data from separate databases.
Between 1993 and 1998, ESD gave assistance to 193 projects that had set goals for employment. But the agency's job-tracking system had employment data for only 143 projects at the time of the review. ESD officials responded that 47 of the 50 unaccounted-for projects did not have to be on the job-tracking system for various reasons.
Only a handful of the projects had contractual obligations to attain prescribed employment levels; most only established a target employment level, and state aid was not contingent on reaching that target.
ESD has made progress in developing performance measures to assess the cost-effectiveness of its programs, the Comptroller's report said, but needs to do more. The auditors reported problems with the reliability of data ESD uses to track projects' employment levels.
It is a sentiment echoed by Frank Mauro, a longtime government watchdog.
"What they're doing is a step forward, but it is still inadequate compared to other states," said Mauro, executive director of the Fiscal Policy Institute, a Latham-based think tank. "There is progress, but it needs improvement."
For example, Mauro said, Empire State Development's data does not include information about tax breaks and other subsidies state businesses receive from other sources, such as local governments and industrial development agencies.
"Most of these projects are getting other incentives," Mauro said. "There is no comprehensive accounting of all the incentives and subsidies from all sources." Such an accounting, Mauro said, would give a more accurate measure of whether public assistance to business is paying off.
Other observers argue that not only must ESD improve its job-tracking system on projects that receive grants or loans, but also must be held accountable if target employment levels are not reached.
Brian Backstrom, vice president of CHANGE-NY, a conservative think tank in Clifton Park, said his group has for years promoted stronger accountability.
"If a company does not follow through and fulfill promises, it should payback the money," Backstrom said. "It's logical, reasonable and perfectly contractual."