Archive for Tuesday, February 26, 2008

Lawmakers to take hard look at audit

February 26, 2008


Audit's results

Estimated cost of providing economic development for fiscal years 2003 through 2007 (in millions).

Agency or economic development program

¢ Kansas Department of Commerce $543.1

¢ Kansas Technology Enterprise Corp. (KTEC) $70

¢ Kansas Small Business Development Center $8.7

¢ Kansas Bioscience Authority $5.8

¢ Kansas Inc. $1.8

Subtotal $629

Forgone revenues

¢ Industrial Revenue Bond exemptions $349.7

¢ Sales income tax credits $137.6

¢ Sales tax and revenue (STAR) bonds $131.2

¢ Property tax abatements $113.7

¢ Pay-as-you-go projects $43.2

¢ Neighborhood Revitalization Act $38.7

¢ General obligation and special revenue bonds $21.6

¢ State bond and rebate projects $20.1

¢ Transportation Development District Act $4.5

Subtotal $860

Total $1.489 billion

Source: Legislative Division of Post-Audit

— Lawmakers said Monday a recent audit that says Kansas has spent $1.5 billion over the past five years on economic development has gotten their attention.

Startled by the magnitude of the figure, which may even be much higher, they now want the Legislative Division of Post-Audit to quantify what - if anything - the state has gotten for these expenditures.

"The follow-up question that we have yet to determine from the auditors is what do we get for this," said state Rep. Steve Brunk, R-Bel Aire, who is chairman of the House Commerce and Labor Committee. "Is there a bang for the buck? Do we get a sufficient return on the money?" he asked.

That calculation will have to wait until the completion of the second part of the audit in May, but the preliminary answer isn't hopeful.

The first part of the audit additionally reviewed literature and studies on the effectiveness of economic development initiatives.

The audit found that most studies showed few achieved results from economic development assistance.

"The literature we reviewed concluded that, thus far, negative and inconclusive findings are far more numerous than positive findings," the audit said.

Promised jobs weren't created, return on investment was low or negative, or the incentives offered weren't a determining factor, the audit said.

But the audit stated that almost every state in the nation offers economic incentives to businesses because the states feel they are necessary to remain competitive with one another.

"Because so many states offer economic development assistance, many business officials have come to view these incentives as an entitlement - they expect to be offered an incentive package," the audit states.

State Rep. Kenny Wilk, R-Lansing, who is chairman of the House Tax Committee, said that part of the audit troubled him.

The fact that other states offer incentives is not reason enough for Kansas to do so because Kansas has fewer people and fewer resources than most states to offer, he said.

"I don't think that Kansas can play that game and win," Wilk said.

Wilk said Kansas must develop more strategic economic incentives, such as the Kansas Bioscience Authority, which tries to enhance the bioscience industry.

The audit already is generating some push-back.

In a letter to auditors, Kansas Commerce Secretary David Kerr disagreed with some of the report's conclusions.

The nearly $1.5 billion in economic incentives includes state, federal and local monies. Auditors broke that into two components - $630 million in direct assistance and $860 million in "forgone revenue" - taxes that governmental entities waived, which were intended to help economic development.

In his letter, Kerr states, "Commerce believes that revenues which didn't previously exist can't be 'forgone.' "

And he argued that without tax development assistance, many projects, such as the Kansas Speedway-Village West, wouldn't have happened. Sales taxes collected in Wyandotte County for the Speedway and Village West project are used exclusively to retire debt on bonds issued for the project.

And the Kansas Technology Enterprise Corp. defended the use of state funds to invest in technology-based economic development.

But lawmakers say they are eagerly awaiting more solid data.

"We want to be accountable," said Brunk, whose committee will discuss the audit next week or the week after.

Wilk added, "We are spending a lot of taxpayer money on this effort. So, now we move on to the second component: What are we getting for it?"


LogicMan 10 years, 3 months ago

Infrastructure and targeted education for workers -- that's where the money should be going.

toefungus 10 years, 3 months ago

Such a waste of money. HIgher taxes always preceeds waste. Starve government or deal with the obesity.

jayhawklawrence 10 years, 3 months ago

How do we know it is not just an election year ploy?

That is the problem with the way our political parties have been operating. We can't trust either one.

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