Environmental Health News

What's Working

  • Garden Mosaics projects promote science education while connecting young and old people as they work together in local gardens.
  • Hope Meadows is a planned inter-generational community containing foster and adoptive parents, children, and senior citizens
  • In August 2002, the Los Angeles Unified School District (LAUSD) Board voted to ban soft drinks from all of the district’s schools

Subsidy Disclosure Laws

In our state budget allocations processes, we hold social programs accountable for making good on their promises before we give them additional money. Are students’ test scores improving due to public funding? Has the incidence of childhood immunization improved through a publicly funded education campaign? We would never provide additional funding to a social program without first asking whether or not that program is meeting its goals, yet this is exactly what we do with the money we offer to corporations.

In order to promote local economic development, states often provide incentives (sales tax exemptions, tax abatements, tax credits, or reduced interest bonds) to corporations to encourage corporate relocation. In exchange for these publicly funded perks, corporations promise to bring a region benefits such as new jobs or an increased tax base. However, states seldom follow up and check to see if corporations make good on their promises. Is there some way we can hold corporations accountable for the benefits they promise in exchange for public subsidies? There is, through the passage of subsidy disclosure laws.

According to Good Jobs First, a comprehensive disclosure law will cover all state, regional, and local development agencies and will give the public access to information both before and after a subsidy deal is negotiated. Such laws should call for annual, company-specific, subsidy-specific reports that summarize the terms of the original deal and the tangible outcomes that have resulted from that deal. The measure of outcomes should be ongoing until the subsidized company has made good on its promises. Outcomes might also be measured on a geographic basis in order to ensure that the economic benefits derived through a subsidy agreement do not come at the expense of a nearby region; this can occur when corporations relocate intrastate as opposed to interstate.

In 1999 three states, Minnesota, Maine, and Texas, passed subsidy reform laws. Minnesota’s law was the most thorough of the three. Under this law, every recipient of an economic subsidy or tax break must file a public annual report that states the amount of the tax break, the public purpose to be served, the number and quality of jobs that the corporation will create, and any other benefits received. Minnesota’s law requires that the subsidy agreement set measurable two-year goals and that the corporation’s progress in meeting these goals be monitored. Should the corporation fail to meet its goals, it might be required to repay the tax break with interest.

This final requirement of the Minnesota Subsidy Reform Law is known as a “clawback.” Clawbacks are an effective way to ensure corporate follow-through on subsidy agreements. Clawbacks might require a corporation to repay a subsidy in full or in part or might bar a corporation from receiving future subsidies. Clawbacks are often linked to the goals of new job creation, specific wage levels, or the length of time a company promises to stay in a subsidized location.

Contact Group: Good Jobs First
Address:    1311 L Street NW
                Washington, DC 20005
Phone: 202-626-3780
Fax: 202-638-3486
Email: info@goodjobsfirst.org
Web site: www.goodjobsfirst.org