Viewpoint

Sketchy incentives use

From an editorial in the (Greensboro) News & Record Thursday:

North Carolina needs to be smarter about spending money to attract new businesses. An analysis of the state’s primary economic incentives program shows a high failure rate and grossly unbalanced distribution of funds.

The report was prepared by the North Carolina Justice Center, a left-learning public policy group. Its findings may confirm suspicions of conservative legislators who last year resisted Republican Gov. Pat McCrory’s request for more economic incentive money.

When it comes to picking business winners and losers, the state has had a poor track record since the inception in 2002 of its Job Development Investment Grant program. Sixty percent of firms receiving awards have failed to meet targets for jobs created, money invested or wages paid.

When that happens, the state can rescind awards and recover money granted. However, when state officials make poor choices in the first place, that ties up money that could have been put to more productive use. Furthermore, the governor wouldn’t be as worried about running out of JDIG funds if awards were handed out more selectively.

McCrory wants North Carolina to be a bigger player.

There’s reason to be wary, as the Justice Center’s Allan Freyer showed in exposing JDIG’s flaws. State officials don’t sufficiently evaluate prospects to determine how well they’re really likely to perform. A basic question is whether the recipient is in an industry in decline or one that’s on the way up. Seventy percent of the companies in declining industries failed to meet their performance goals. For firms in growth industries, the failure rate has been 48 percent – not great, but better.

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