Connecticut’s legislators acted Wednesday for the second time in two years to require independent oversight of the millions of dollars in grants, loans, tax credits and other economic incentives extended to business, often a political flashpoint as states compete to attract and keep jobs.
With support ranging from organized labor to a conservative think tank, the House of Representatives voted unanimously to approve and send to the Senate an updated version of a measure Gov. Dannel P. Malloy vetoed last year as “unnecessary and unwarranted.”
Malloy, a Democrat who has tried to attract and keep jobs with “First Five” and “First Five Plus” programs for major employers and other aid for small businesses, is supportive of the latest effort to bring greater transparency to what is praised as smart investments and derided as corporate welfare
“The First Five initiative continues to be an important tool in growing our economy – creating over 3,500 jobs in Connecticut to date,” said Meg Green, spokeswoman for Malloy. “The stewardship of taxpayer dollars is a responsibility we take very seriously, and we are supportive of the proposal’s efforts to promote the appropriate transparency and accountability of the state’s economic development investments, tools, and programs.”
Rep. Jason Rojas, D-East Hartford, the co-chair of the Finance, Revenue and Bonding Committee, said the bill requires the legislature’s Auditors of Public Accounts to examine the Department of Economic and Community Development’s entire portfolio of aid programs and report to the legislature.
Their findings will be the subject of a public hearing every year.
“This is very, very long time in coming,” said Rep. Gail Lavielle, R-Wilton.
The legislation addresses policy and political concerns of legislators. Questions over economic aid, especially when some of the recipients made headlines by subsequently laying off employees, had posed a political liability for some and, perhaps, an opportunity for others.
“I think having a third-party validation of policy that we do here in Connecticut is important for the public, but also for legislators,” Rojas said.
The exploratory campaign committee of Comptroller Kevin P. Lembo, a Democrat who is exploring a run for governor in 2018, used the House vote to promote his candidacy and his support for the legislation.
“I’ve fought tirelessly for this proposal, and here’s why: State government gives nearly half a billion dollars a year to businesses around the state, but we don’t have an independent agency to evaluate if we’re using your taxpayer dollars wisely,” Lembo said in a campaign appeal.
Lembo, whose office gives him a seat on the Bond Commission, has voted against borrowing for some of the economic deals struck by the Malloy administration.
“Without an independent review of state spending, it’s just going to be business as usual in Hartford, and the special interests will continue to control the agenda – at the expense of working families across the state.”
Last year, Malloy gave an upbeat assessment of what Connecticut was getting for the $256.6 million in direct state assistance he’s given to some of the world’s biggest and richest corporations, investments often made knowing another governor may be waiting with a competing offer.
He stood outside the new downtown New Haven headquarters of Alexion, the pharmaceutical company that promised to retain 368 jobs and create at least hundreds more in return for up to $51 million: $25 million in tax credits payable over 10 years, a $6 million grant and a $20 million loan, totally forgivable with growth of 300 jobs. Malloy said then the company has added 510 jobs — and was growing.
But Alexion became emblematic of the political blowback that comes with such programs when it announced layoffs of 210 workers, none at its New Haven headquarters.
Overall, according to a 2016 report by the Department of Economic and Community Development, the state’s First Five Plus program for corporations able to promise a minimum of 200 new jobs has helped attract private investments of nearly $1.3 billion, retain 13,349 jobs and create 3,759 jobs.
Of the 13 companies to get the aid, five are short of the 200-jobs threshold, but the others have each produced between 243 and 618 jobs. One of the laggards, EDAC Technologies of Cheshire, received $48 million in direct aid, including a $10 million grant. It has produced four net new jobs.
Rojas said the bill approved Wednesday is not a criticism of the DECD, but reflects a desire by legislators for “a broader level of analysis.”
Last year’s bill would have had the professional analysts and researchers on the legislature’s Program Review and Investigations Committee do the reviews. The committee has been disbanded and much of its staff reassigned to the auditors.