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Don’t Hamstring Development Incentives

May 30, 2015 Tim Cook, JD
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This editorial piece by Tim Cook ran in the May 30, 2015, issue of the Indianapolis Business Journal.

With each passing biennium budget, the Legislature has tough choices to make. This challenge includes funding economic development programs.

As reported May 18 by IBJ, a change made during the 2015 session will allow the Indiana Economic Development Corp. to convert its Hoosier Business Investment tax credit into approximately $17 million in cash to entice Rolls-Royce to make an estimated $500 million investment in the state—a project with no new jobs.

Meanwhile, the Legislature held the line at $12.5 million per year for its widely used Skills Enhancement Fund. The fund, also an IEDC program, reimburses companies 50 percent of their out-of-pocket training expenses.

And for the first time, the Legislature has capped IEDC’s most powerful job recruitment tool, Economic Development for a Growing Economy, a program that provides tax credits to businesses for job creation.

The point of placing these budgetary decisions side by side is not to criticize the Rolls-Royce carve-out, but to ask a broader question: Is the Legislature doing enough to fund SEF and EDGE? The answer, in big bold letters, is no.

What’s so great about SEF? It addresses Indiana’s biggest economic development need: workforce readiness. Manufacturing, life sciences, technology and logistics represent Indiana’s strongest industry clusters. And the No. 1 problem facing each is lack of qualified job candidates.

Take tech, for example. My firm has consulted with more than 30 Indiana-based tech companies in the past 18 months. Without SEF to equip new hires with the skills they need, businesses would be forced to burn through cash to recruit employees 2,000 miles away, or leave Indiana entirely and locate their businesses there.

A fully funded SEF program mitigates this workforce blind spot. But with SEF funding strained, the program can’t keep up with demand. Dollars for job-creation projects are dwindling and help for retention-only projects is almost non-existent.

SEF hasn’t always been the shining star it is today. It used to be like a lot of government-run training grants—excessively bureaucratic and underused.

Thanks to IEDC’s overhauling in recent years, SEF might now be the best economic development program of its kind in the country. Eligible training programs have been expanded and documentation requirements simplified. And IEDC has implemented these user-friendly reforms while instituting an audit program to verify reimbursements to enhance the program’s integrity.

For critics of incentives, EDGE and SEF both have the added protection of IEDC’s talented business development team ensuring efficient use of these tools by giving earnest consideration to each request, stringently requiring applicants to make a strong business case for incentives to be considered.

Even incentive skeptics embrace SEF’s obvious attributes and the fact that its matching requirement mandates that companies share in the cost. Plus, its focus on portable, transferable skills provides lasting value to trainees.

And with EDGE tax credits funded solely by payroll withholdings of jobs created by qualified companies, criticism of its perceived budgetary impact is effectively neutered. This fact makes the recently passed legislative cap on EDGE even more bewildering.

Yes, the state needs versatile tools that have the ability to create jobs and retain them. But rather than under-funding SEF and capping EDGE, legislators who advocated for a single employer to receive $17 million in economic incentives should just as aggressively fund programs that support businesses and their employees throughout the state.

SEF and EDGE are critical to Indiana’s future. It’s time they had the funding they deserve.


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