Lembo renews push for outside review of business incentives

State Comptroller Kevin P. Lembo has renewed his push to require an independent analysis of the hundreds of millions of dollars in economic incentives Connecticut provides annually to businesses.

And while a bill based on that proposal won legislative approval last year only to be vetoed by Gov. Dannel P. Malloy, the leader of a key legislative committee said this week he expects his panel will endorse a similar measure this year.

“Rule number one is to let data drive our decisions – especially concerning our state economy,” Lembo said. “When hundreds of millions of dollars and resources are at stake, the state must have the ability to best evaluate whether these investments are actually promoting economic development and growing the kind of jobs essential to our state. To conform to best practices, Connecticut must change the way we evaluate and conduct economic development.”

The comptroller’s proposal would authorize the state auditors of public accounts to establish a professional advisory committee. This panel would evaluate tax credits and abatements, loans, grants and any other business incentive programs provided by the state.

The goal, the comptroller said, is to provide every legislator with an up-to-date analysis of each program, its cost, how well it has been administered, and the progress it has made toward its economic goals.

The state Department of Economic Development, which administers most economic incentive programs, currently provides an assessment of these incentives every three years.

DECD Commissioner Catherine Smith said Wednesday that the administration still believes the idea of an outside assessment is unnecessary.

“We want to opine on what we find,” she said. “We’ve been quite diligent in our reporting.”

Smith said her department has not shrunk from any difficult findings. Previous reports have identified incentives that are not working or program requirements that need revision.

If anything, she added, the department has been “overly conservative” in its economic models. “”We think we’ve done a fair job,” Smith said. “We’re doing what needs to be done.”

It is the legislature’s prerogative whether to act on these reports, Smith said, but a better way to enhance Connecticut’s business incentives might be to implement more of the department’s recommendations. “I feel like we don’t need more reporting,” she said. “The issue is whether we are acting on the findings,”

But Lembo said his proposal would not stop the department from sharing any assessments with the legislature, but would complement those reports with an independent assessment.

“DECD has done an admirable job analyzing the programs it oversees, but it can be challenging for an agency to fairly evaluate the programs it promotes and administers,” Lembo said. “An unbiased assessment of the performance and administration of tax credit and abatement programs has in other states resulted in opportunities for savings.”

According to the Pew Charitable Trusts, nearly 20 states regularly assess economic incentive programs, but Connecticut is one of just two that allows its economic development department to lead the assessment.

“This is not meant to be critical of DECD,” Lembo added. “But at the same time, I don’t think any of us can be the best judge of our own effectiveness.”

The comptroller also said he believes those reviews should occur annually, rather than once every three years, and should require a public hearing before legislators during the early stage of each General Assembly session.

The legislature’s Finance, Revenue and Bonding Committee has raised a bill to establish an independent analysis of such programs. And Sen. John Fonfara of Hartford, the Senate Democratic chair of the finance panel, said he expects the committee to approve the bill this spring.

“Having more transparency, as long as it is not revealing information that is proprietary, is always healthy,” he said.