It's foolish to kill a program with outsized returns

This is a return-on-investment question for those interested in how their taxpayer dollars in Vermont are being spent: Would you support spending $34 million for an economic development program that created 8,812 jobs, $1.1 billion in capital investments and $515 million in payroll?

For most Vermonters, it’s a laughably easy question to answer. Most would ask where they could sign up. Most would be stunned there is ANY state-run program with a return of that magnitude.

Yet, we have legislators who doubt the need for the program. 

The program is VEGI, the Vermont Employment Growth Incentive program. Its mission is to provide incentives to companies that create new jobs. The incentives are payments paid out over a number of years to companies that fulfill their part of the bargain, which is to hire people for the jobs they have created.

Not complicated. 

Some of the most successful companies in Vermont have used the program.

Skeptical legislators have raised questions: First, Is there a need for such a program when the unemployment rate is so low, shouldn’t it just be for times of high unemployment? Second, doesn’t the program just encourage workers to move from one company to another? Third, considering the fact that neighboring states have more substantial incentives, why bother to compete in an arena not to our advantage? And fourth, wouldn’t companies create the jobs without the incentive?

Let’s consider each of the questions:

• First, it’s impossible to time a macro environment. Just because our unemployment rate is 2.5 percent now doesn’t mean it will be at the same level six months from now.  Luring businesses into the state is a lengthy process whereas unemployment rates fluctuate often and significantly. The state needs to be working each and every day to ensure that the growth continues, that when one company closes another is ready to take its place. Additionally, pausing such a program would be a major disservice to those parts of Vermont that do not have robust economies and are being left behind regardless of a low unemployment level.

• Second, does the program rob from one company and benefit another, does it create unwelcome competition between companies? If workers elect to work for another company it’s because it’s to their benefit, either through location, higher pay, better benefits or a change in environment. That workers have this option is a good thing, something to be championed. It’s how Vermont’s workforce gains strength and how the state’s economy improves. The surest way to economic stagnation is to do nothing, to pretend that inertia is all that’s necessary, that what we have is good enough. That sort of thinking is shamefully anti-worker.

• Third, it’s also nuts to think that because we are small our incentives are meaningless. As one legislator reportedly said: “We’re never going to beat these other states at that game. We need to play our own game.” And what “game” would that be, and how does this legislator’s doubt square with the 8.812 jobs created and the half billion dollar increase in payroll? If not VEGI, then what? Nothing?

• Fourth, would companies have created the jobs regardless? This is the “but for” question raised, which, of course, is unanswerable any way it’s asked. It can’t be proven that companies would have gone ahead with the jobs, or that they would have gone elsewhere. But given the outsized return of the state’s investment why would anyone think it’s okay to take that risk?

If there is a valid criticism of the economic development program it’s its complexity. It’s difficult to understand and to operate. That is where the work should be done. Find ways to simplify the funding formula so that it’s more easily understood. Make the program more transparent. Figure out ways for legislators to have access to the information necessary to soothe their doubts, without divulging privileged information to the public.

As with any government program, there are always ways to improve how it functions. But you don’t kill a program just because you don’t understand it. When a program like VEGI provides such an enormous return on investment, you work to make it better.

This is an argument almost every Vermonter understands.

By Emerson Lynn