MPR: Do State Subsidies Work?

Do State Subsidies Work?
By Laura McCallum
June 3, 1999

State officials say Minnesota businesses getting government subsidies are creating more jobs than anticipated, and they're paying higher wages. A new report from the Department of Trade and Economic Development comes less than four months after a public policy group said state taxpayers are paying a high price to subsidize low-wage jobs.

FOUR YEARS AGO, MINNESOTA BECAME THE FIRST STATE to require local and state agencies to track corporate subsidies - the amount of assistance, number of jobs created, and wage levels. The Department of Trade and Economic Development's latest report finds about 40 percent of the nearly 500 businesses getting subsidies have met or surpassed their wage and job goals, exceeding projections by more than 2,000 jobs. DTED Research Director Bob Isaakson says 45 percent of the new jobs pay at least $12 an hour, up slightly from the year before.

"Businesses are not only creating more jobs, but they're actually paying more in those jobs as well," Isaakson said.

Only six businesses failed to create at least one new job within two years, as the state requires. But one subsidy expert questions whether the report is anything to brag about. Greg LeRoy directs Good Jobs First, a Washington, D.C. project tied to the labor-backed Citizens for Tax Justice. He analyzed more than 500 Minnesota economic development deals in a report released in February, concluding taxpayers weren't getting their money's worth. He says the latest DTED report still raises concerns.

"The fact that the companies surpassed their goals doesn't necessarily mean anything because as we showed in our report, some cities are low-balling their hurdles, that is, they're setting very low wage and job creation goals for companies and therefore the fact that some companies have surpassed the goals doesn't mean anything, said LeRoy."

LeRoy says the pay increases are encouraging, and he hopes to see even higher wages in the future, now that lawmakers have toughened the state's corporate subsidy reporting requirements. Those provisions, which were signed into law as part of this year's tax bill, require businesses to describe how their project serves the public interest. State and local agencies must hold public hearings for large projects, and must have a policy on wages and job creation.

	More Information
	See the Department of Trade and Economic Development Web site. See the Good Jobs First report on Minnesota subsidies. See MPR Online's Economic War Between the States Web site.

The legislation's author, DFL Senator John Hottinger of Mankato, says the bill is designed to improve accountability and public awareness of business subsidies. The legislation does not define a minimum wage rate to be paid by companies receiving assistance, something Hottinger had advocated. But it does expand the acceptable use of subsidies to include job retention, which DTED's Bob Isaakson says is often a bigger priority in rural communities.

Isaakson says the new reporting requirements are a good way to hold agencies accountable for the dollars they distribute, but the tracking is time-consuming. His office is asking the Legislature for more research staff to monitor corporate subsidies.

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