Economic incentives need accountability

The idea of offering economic incentives for companies to move to or grow in Connecticut has usually been viewed as a necessary evil. Even supporters of programs like former Gov. Dannel P. Malloy’s First Five, which lavished millions of dollars on companies that may have had no intention of leaving, acknowledged that such tactics were necessary mainly because other states were going to offer something similar, and Connecticut needed to be competitive.

This remains true. No matter how distasteful, if Connecticut were to exit the business of luring companies with government largess, no one would expect competitors to follow suit. That’s called unilateral disarmament, and it would be a death knell for the state economy.

Still, it’s not wrong to think there ought to be a better way.

David Lehman, who has been quiet as Gov. Ned Lamont’s director of economic development since his controversial appointment earlier this year, says he wants to change the dynamic, introducing the “Earn As You Go” program that would require companies to create jobs first in order to receive incentives. Under the plan, companies would receive a percentage of the “net new income tax” from each job, rather than an agreedupon lump sum in advance of job creation or retention.

The idea has some support in the Legislature, and looks like it would solve one of the most persistent problems in previous incentive systems — a lack of accountability. While there are cases of companies returning their financial windfall if they move out of state or cut staff before the terms of their agreement are up, more common is a situation where the deal simply fades into the background, and details about whether a company reached its planned expansion or not become difficult to discern as years pass.

Still, there’s reason to question whether companies would view such a system as favorably as legislators. As Lehman told CTNewsJunkie, “You need to have an incentive these days,” and it’s likely companies could view other states’ nostringsattached models as a better fit. While everyone wants a system with accountability, no one wants to see a Connecticut mainstay — say, Subway or ESPN — move to Westchester over an incentive plan.

So there needs to be a balance, which state officials appear to understand. But the issue is part of a larger concern about bonding in the Lamont administration, which the governor has said he wants to limit. Lamont has yet to announce a bond package for 2020, and has insisted that transportation take top priority even as he has looked for other ways to pay for it. To date, efforts to pass tolls have not generated enough support in the Legislature, leaving the state at a standstill.

It’s good for Lamont to look closely at bonding, and economic incentives need more scrutiny, as well. But the administration has yet to reveal a coherent overall plan when it comes to borrowing and investing, with transportation troubles holding up everything else. Until an agreement is reached on how to pay for transit investment the state insists it needs, everyone is stuck in neutral.

No matter how distasteful, if Connecticut were to exit the business of luring businesses with government largess, no one would expect competitors to follow suit.