Corporate subsidies in Louisiana: few strings attached

Corporate subsidies in Louisiana: few strings attached

Posted by: Tim Mathis

While Gov. Bobby Jindal has sought to make government transparency a hallmark of his administration, a new report finds that Louisiana asks for little in return when it comes to corporations receiving multi-million dollar subsidies.

The report by the non-partisan research center Good Jobs First gave Louisiana a D+, finding that the costliest tax credits, exemptions, and cash rebates don’t include the kind of strict performance standards needed to ensure that quality jobs are being created for the money that taxpayers spend. Louisiana Economic Development is the state agency responsible for overseeing and administering economic development subsidies.

The study evaluated five programs that cost Louisiana taxpayers more than $1.1 billion annually in a state report card:

  • Three of five programs do not prohibit job-shifting. States receive zero economic benefit from subsidizing companies that create jobs by simply moving from one part of the state to another.
  • Four of five programs lack wage requirements. Simply creating jobs will not lead to a stronger economy. Those jobs must pay enough to support a decent standard of living, and create economic ripple effects. Without wage requirements, the subsidies can result in jobs that pay workers so little that they must rely on social safety net programs such as Medicaid, food stamps, or the Earned Income Tax Credit.
  • Four of five programs have no health-care requirement. Although most people get health insurance from their employer, that percentage is declining. Subsidized workers unable to afford their own health insurance may fall onto the rolls of Medicaid, thus negating any positive economic benefits.

The programs with the fewest strings attached include Motion Picture Investor Tax Credits and Purchases of Manufacturing Machinery and Equipment Exemptions. Neither program has wage or health care requirements. Neither program requires a minimum duration for the jobs they create. This is especially problematic for film tax credits, which subsidize employment episodes with productions that average 4 to 6 months in length.

Fortunately, Louisiana policy makers already have a good model on which they can base future reforms. The Quality Jobs Program lives up to its name (receiving a 93 a maximum possible score of 125), providing cash rebates and investment tax credits to industries such as bioscience, manufacturing, information technology, environmental technology, exporters, or businesses located in low-income areas. Qualifying companies must create at least five new full-time jobs, provide health insurance and pay their employees living wages. However, even programs that require job creation and other quality standards can set the bar too low. Louisiana needs to hold every dollar accountable, to ensure subsidies promote good jobs that lead to a stronger economy over the long term.

Fewer than half of the programs required job creation and other standards for workers at subsidized companies such as competitive wages or health care coverage.

“If a company can simply move an existing job and call it ‘new,’ that’s not job creation,” the report said. “If the workers at a subsidized company get such low pay and benefits that they must rely on Medicaid and food stamps, few would consider that ‘economic development.’”