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December 31, 2019; VTDigger

Doug Hoffer is Vermont’s state auditor of accounts. He has held his elected office since 2012, and once worked in Burlington’s Community and Economic Development Office under then-mayor Bernie Sanders. Anne Wallace Allen, writing for VTDigger, notes that Hoffer and 14 other staff audit the state’s financial statements “for compliance with the rules, and issues reports on the outcome of state programs in all areas of government, looking for ways to reduce waste and fraud.”

In 2018, Hoffer’s office released a 73-page report, “Making Economic Development Policy: Anecdotes or Peer-Reviewed Literature,” which found it impossible to substantiate claims that Vermont’s economic development incentive programs create jobs. Today, in 2020, Allen writes that “as lawmakers prepare to convene for the 2020 session, Hoffer’s gearing up for another year of conversations about moving away from those subsidies.”

In a wide-ranging interview with Allen, Hoffer outlines his concerns. One is a lack of transparency. Award amounts to specific companies, Hoffer notes, are confidential. Moreover, “Four or five of their biggest economic development programs can’t be audited to answer the question of how effective they are.”

Hoffer adds that the state’s flagship economic development incentive program, the Vermont Employment Growth Incentive (VEGI), typically subsidizes firms that were planning to invest in the state anyhow. Hoffer estimates “at least 75 percent of the economic activity supposedly incentivized by these programs would have occurred anyway. It might be as much as 98 percent.”

Hoffer adds:

Michael Bloomberg said many years ago that any company that bases its future and current decisions on business incentives won’t be in business very long. Smart businesspeople make decisions for the right reasons. They’re not stupid. They know a program exists and they’re likely to get some money, so they’re going to take advantage of it. I don’t blame the companies.

I don’t blame businesses for taking advantage of the program. The point is, we could have spent the money on other things that have a demonstrable return…

What are alternatives that offer a greater demonstrable return? The report Hoffer’s office issued last year lists some:

  • Workforce development: In the United States, less than 0.05 percent of gross domestic product (GDP) is spent on workforce development programs. By contrast, Denmark spends 0.6 percent of GDP. The Vermont report notes, “While the effectiveness and efficiency of such programs vary according to their specific attributes, empirical evidence indicates that workforce development programs can generate positive impacts for participants and businesses.”
  • Early childhood education: The Vermont report notes that “a recent analysis of two types of early childhood programs—universal prekindergarten and home visits to disadvantaged parents—found that they would increase earnings in a state by two to five times the cost, depending on program type and intensity.”
  • Small business technical assistance: The Vermont report cites work by WE Upjohn Institute for Employment Research’s Timothy Bartik that finds that, “Recent national-level research estimates indicate that business assistance programs, such as job training and manufacturing extension programs, may provide benefits up to 10 times as much per dollar as tax incentives.”

Hoffer notes that a bill to require greater reporting from the Vermont Economic Progress Council, an independent body that falls under the state Department of Commerce and Community Development, which runs the VEGI program, is likely to be introduced in the 2020 state legislative session, a bill that promises to increase accountability. The real issue, Hoffer notes, however, is not transparency, but effectiveness. As Hoffer puts it, “What are we getting for the money? Tracking the money is the beginning of the conversation, not the end.”—Steve Dubb