Lawmakers seek more oversight of business incentives
Topeka ? Kansas currently has no mechanism to monitor how effective its many business development incentives have been, but that could soon change if one group of lawmakers gets its way.
The interim Special Committee on Commerce voted Wednesday to recommend that the Legislature set up a permanent, joint subcommittee whose job would be to keep track of how much the state spends, or how much tax revenue it forgoes, in order to attract or retain businesses, and what kind of return the state gets on that investment.
Mirielle Burgoyne, a senior associate with the Washington-based Pew Charitable Trusts, told an interim legislative committee that more and more states have begun adopting programs to monitor their incentives.
“One example of things we suggest states look at is what would have happened but for the incentive,” she told the committee. “What would the companies’ behavior have been if the incentives hadn’t been there versus if it had, and can you really attribute what ultimately happened to the incentive?”
Pew Charitable Trusts is a nonprofit organization that provides research and consulting services for governments at the federal, state and local level.
Kansas is currently one of only 22 states that have no formal review process for incentive programs, Burgoyne said. But many of the states that do have such review mechanisms adopted them just within the last four years.
Kansas currently has several programs aimed at attracting businesses to the state and helping them get established.
Among those is the Promoting Employment Across Kansas, or PEAK program, which allows qualifying companies to keep up to 95 percent of the Kansas withholding tax generated from jobs they create that pay at or above the median wage in the county where the business is located.
Another program, the High Performance Incentive Program, or H-PIP, offers various tax credits and sales tax exemptions for companies that make major capital investments and create jobs that pay above-average wages.
The state also offers Industrial Revenue Bonds, or IRBs, a tax-exempt form of loan issued by the state to finance development of manufacturing facilities and equipment, as well as Sales Tax and Revenue bonds, also known as STAR bonds, another form of borrowing from the investment market in which the debt is repaid with the new sales tax revenues generated by a retail or tourism-related development.
Both IRBs and STAR bonds are issued by the state or local governments, but they are the debt obligation of the private business.
But Sen. Julia Lynn, R-Olathe, who chaired the interim committee, said there has been political resistance in the past to imposing accountability standards on those programs.
“Of course there’s resistance, because business as usual in Kansas has been lacking, I think, accountability and the ability to bring data to the table to sell us on why incentives and exemptions are needed,” she told reporters during a break in the meeting.
The committee voted to recommend that the state work with Pew Charitable Trusts to design a method of reviewing its incentive programs. The Legislative Post Audit Division would then be placed in charge of gathering data about the incentive programs and making regular reports to the new joint committee, and that committee would then recommend to the full Legislature which programs should be ended, kept or modified.