McCall, agency spar over accountability

March 6, 2000. William Tuthill reports in the Capital District Business Review:

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.”

 

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