From the Good Ideas File: Better data on incentive programs

Economic development incentives got a good deal of attention in the book, in part because they’ve been in my craw and in part because they turned out to be a good example of a lot of the factors that get in the way of building a Wise Economy, such as not thinking through potential consequences or over-simplifying how communities work.  If you’re interested in that topic, and you’re not already following Ellen Harpel’s SmartIncentives.org blog, you should.  She is becoming a leading voice in curating information and articulating the debate over incentives.

As Ellen recently pointed out, the issue of economic development incentives in not going away, and the concerns are gaining stronger voices.  She recently summed up a pretty scathing report from a pretty significant source:

The 2013 Chairman’s Report: State Business Incentives from the Council of State Governments sums it up nicely: “We simply don’t have the information we need to make good decisions about incentives.”

This report adds to the drumbeat of calls for better data and greater transparency in incentive programs.

Among its conclusions:

  • State policymakers don’t have an accurate accounting of the most basic of information about their state’s incentive programs – the cost.
  • Solid evaluation of existing programs is lacking.

These blunt statements are true, if discouraging, and demonstrate that current practices in evaluating incentive programs are unsustainable.  Increasingly, public officials will be looking to economic development professionals for better quality information on incentive use.

This lack of basic understanding is a tremendous problem for the economic development field.  The CSG working group members behind the report recommend convening regular conversations across the legislative and executive branches to help both practitioners and legislators work together more effectively to accomplish their economic development objectives.

As Ellen notes,

Economic development organizations need to prepare to work with their elected officials on incentive policies and programs, report more thoroughly on incentive use, and — this will be the real challenge — explain both their cost and effectiveness in achieving intended goals.

There’s a refrain that I hear myself saying more and more: Look What You Can’t Get Away With Anymore.  We have to stop pretending that we can stick our heads in the ground and hoping this uncomfortable issue will go away.  It isn’t, and it won’t.  It’s time to be honest, and do the math.

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