Fixing Corporate Welfare in Arkansas

Can corporate welfare (or, if you prefer, “economic development”) be improved in Arkansas?

The answer is clearly “yes,” but what would this improvement entail? For some, it would mean ending the Quick Action Closing Fund (QACF). As discussed yesterday on TAP, the QACF is extremely expensive and an analysis indicates that it doesn’t do much – if anything – to create jobs. But let’s say that you want to keep the program intact. A report from the Arkansas Center for Research in Economics gives some good suggestions to fix some of the QACF’s glaring flaws.

What does Jacob Bundrick, the report’s author, recommend?

  • Improved reporting standards so the public can have a better idea of which companies committed to creating jobs, how much these jobs may pay, and how the companies are doing in terms of their job-creation commitment, among other things.
  • Making “clawback” provisions public and ending re-negotiation of these provisions would help stop companies from gaming the QACF. Currently the QACF requires some companies to pay back a portion of their payment from the state if the company does not live up to its commitments. These agreements are not public, however, and are often re-negotiated. This limits their effectiveness at protecting taxpayer dollars.
  • Limiting how much money can be given on a per-job basis will help stop the state from engaging in bidding wars using taxpayer dollars. This tendency to throw ever-increasing amounts of money at companies to attract them to Arkansas can result in the incentives outweighing the benefit to the state.
  • Providing subsidies as targets are met would give companies an incentive to live up to their job-creation and wage commitments. It would also prevent money from going to companies that are not succeeding.
  • Capping the number of QACF projects on a yearly basis would help the state prioritize funds to the most worthwhile companies. With only a limited number of projects to approve, there is an incentive to pick the best projects.

These are all good suggestions. If the goal of the QACF is truly to help the state’s economy, it is difficult to see why any of them would be controversial. They are aimed at both increasing the accountability of the QACF to the public (after all, the program is using tax dollars, so the people should know how the money is being spent) as well as prioritizing funding for the best uses. If you believe that the state has a role in fostering economic development, then the state should be focusing on the projects that create the most jobs at the lowest cost. These recommendations will help focus the QACF on this goal.

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