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Study proposes reforms aimed at NJ job expansion | Smith/Pennacchio

Sen. Bob Smith & Sen. Joe Pennacchio | February 20, 2020 | North Jersey Record |

Any time the government is spending tax dollars, those in public service have an obligation to ensure that every penny is spent responsibly.  The taxpayers should have an equal level of trust in public officials. The state’s tax incentive programs are too important to the economy for the public to have any distrust in how the incentives are awarded and how they are monitored.

We also know that New Jersey is competing with other states that have been extremely aggressive in their offerings to attract both investment and job growth in the private sector. There is consensus among both Republicans and Democrats that we cannot be the only state in the nation that fails to make an effort to attract new opportunities for our residents.

That is why we created the bipartisan Senate Select Committee on Economic Growth Strategies to fully evaluate our past tax incentive programs and make recommendations to make them better. We want to have a full understanding of both the effectiveness of the incentives and any failings in how they were implemented to ensure that the Garden State remains competitive.

The committee gathered input from state and regional leaders in the business community, academics specializing in economic development, and qualified experts to identify a strategic approach to maximize private investment and job growth, especially for distressed communities. The panel also sought a true accounting of the costs and the return on investments, including total capital investments by those participating in the programs.

We completed a report with a broad array of proposed reforms to bring greater transparency and oversight to the Economic Development Authority and to improve the effectiveness of the practices used to create jobs, attract investments to distressed communities and generate long-term economic growth in New Jersey. It follows eight months of work, which included a comprehensive review of past programs and a series of public hearings that focused on best practices and policies for economic expansion. These recommendations touch upon a number of issues including the size, design and structure of future incentive programs, as well as reforms addressing transparency, accountability, and oversight of the EDA and the programs under its stewardship.

The reforms include the creation of an independent inspector general to oversee the EDA, a chief compliance officer within the authority, and the annual recertification of awards with additional penalties for violations. The IG would operate independently of the CEO and staff of the EDA, giving it the authority and autonomy to investigate any violations and to monitor the implementation of any reforms.

Modeled after the federal offices of Inspector General that have proven their effectiveness, the IG would be a retired member of the Judiciary, appointed to four-year terms. The IG would also have the authority to identify any deficiencies in the programs themselves and have the compliance officer develop and implement corrective reforms.  The compliance officer will make sure applicants and recipients comply with the requirements, conduct systematic audits and maintain a central database of information to improve accountability.

The recommendations also include a strict cap on individual awards, but no annual limit on the total program; new tests requiring a greater return on our taxpayers’ investment; and a reduction in the “but for” test that forces companies to prove they plan to relocate to other states by pursuing out-of-state options.

We believe the cap on individual awards will provide strict controls without capping the entire program in an arbitrary and counterproductive manner that could prevent the EDA from making decisions that could attract job-producing opportunities. The EDA, which is under the control of the governor, would continue to have the ability to limit the number and amount of awards it approves through its approval process, while retaining the ability to be flexible when needed. Current economic conditions have produced a heightened competition with other states and our inability to use incentives as part of an economic arsenal is like going to war without weapons.

New Jersey has many advantages over our competitors for business investment and job creation, including a highly educated workforce, a superb system of public education, some of the top research universities in the country, an improving infrastructure, a diverse business community and a premiere location at the heart of the Northeast Corridor. However, to capitalize on our assets we must utilize a full toolbox of programs and policies, including tax incentives.

We cannot forget that these programs are for the benefit of jobholders, job seekers and the state’s economy.


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