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N.J. should demand accountability from economic incentive programs | Editorial

Stimulating the economy is an important goal, but throwing money at corporations without asking for results like New Jersey did is self-defeating.

Phil Murphy, governor of New Jersey, speaks during a budget press conference in Newark, N.J.
Phil Murphy, governor of New Jersey, speaks during a budget press conference in Newark, N.J.Read moreAlex Flynn / Bloomberg

Since 2005, New Jersey has doled out $11 billion in tax incentives to companies hoping to get them to provide and keep 241,000 jobs. But in an audit last week, the state comptroller’s office couldn’t find evidence of 20 percent of the promised jobs from the sample of companies it examined. If the sampling is accurate, that’s 48,000 jobs.

The program has long been criticized by New Jersey Policy Perspective, a think tank whose senior policy analyst, Sheila Reynertson, reacted to the audit, saying in a statement, “Every New Jersey taxpayer should be furious knowing that the state has handed out billions of dollars in corporate tax breaks — with no strings attached — while simultaneously cutting funds for public schools, NJ Transit, and state colleges and universities.”

She’s right. Every one of those starving programs — schools, mass transit, and higher education — are the purest forms of economic development because good educational programs are an investment in people, and mass transit gets people to and from their jobs.

Gov. Phil Murphy says he’s going to reevaluate the Economic Development Authority’s generous tax break programs and insist on better accounting. He should also consider clawing back some of the money from companies that can’t prove they’ve provided a benefit in exchange for their breaks. But his words ring a little hollow considering he was willing to give $7 billion in incentives to Amazon, the retail giant, if it located its new headquarters in Newark. A number of cities, including Philadelphia, fell prey to the Amazon shuffle frenzy; Philadelphia was willing to offer $1 billion in incentives with the state offering up $4.6 billion more. The frenzy was so pronounced that by the time Amazon made its decision to locate in New York and Virginia, people began questioning the wisdom of political leaders giving away so much public money in the form of breaks and incentives.

Stimulating the economy is an important goal, but throwing money at corporations without holding them accountable for the promises they’ve made is self-defeating.

Several states, including California, Oklahoma, and Maryland, impose strict caps on how much in incentives they’ll pay for every job a company creates. The average incentive package, according to NJPP, costs those states less than $10,000 per job. But it found that New Jersey paid a shocking average of $85,000 per job. The quality of those jobs also is unknown because the state Treasury Department hasn’t yet produced a legislatively-mandated report showing whether the jobs are full-time or part-time and include health coverage. Any new program should insist jobs pay a living wage and include health benefits.

Fortunately, the EDA, which runs the programs, says it’s reigning them in. But ultimately, the governor and Legislature are responsible for cleaning up the state’s entire array of economic incentive programs, which have given companies tax breaks that last from 10 years to 35 years. As they rewrite the rules, they should keep in mind that when a company doesn’t pay taxes, taxpayers shoulder the burden and should get something in return. Otherwise, it’s corporate welfare — and that’s a luxury no one can afford.