Flushing money down the drain

Flushing money down the drain

The way Illinois has run its EDGE program is enough to make taxpayers consider jumping off a ledge.

Gov. Bruce Rauner recently took another positive step in his effort to clean up the state's problem-ridden EDGE tax subsidy program.

But he has a ways to go in terms of opening it up to full public examination. Still, it's better to have some progress than none at all.

EDGE — Economic Development for a Growing Economy — is a process by which the state is supposed to encourage job growth by providing financial assistance to companies that make new investments that create jobs.

Unfortunately, it's been a fiasco. After conducting an in-depth study of EDGE's 16-year history under both Democratic and Republican governors, the Chicago Tribune recently reported that it has "mushroomed into a billion-dollar giveaway rife with failure."

The basic problem is that it doesn't achieve the promised results.

Here are a couple of examples of companies promising one thing and doing another.

In 2011, Illinois gave Mitsubishi a $29 million tax credit in exchange for its promise to keep its Normal car-building plant in operation. A couple months ago, Mitsubishi announced it's closing the plant where 1,200 employees work.

Mitsubishi may have meant what it said. But it clearly was promising more than it could deliver. So why were taxpayers put on the hook for a sum of that size?

Here's another clunker.

Abbott picked up $14.5 million in tax breaks when it invested $36 million in a Des Plaines division and eventually added more than 100 new employees. But since 2011, the company laid off 1,000 employees working elsewhere in the state.

Rauner, an EDGE skeptic, announced earlier this year that tax incentives will no longer be provided unless new jobs are created. Companies sometimes collected benefits if they promised to retain existing jobs.

Now he's halting the practice of providing tax breaks for companies that add jobs in one place while cutting them in another. Rauner also is no longer permitting the same companies to repeatedly pursue tax benefits.

The EDGE program has been suspended during the current budget impasse. When it's reopened state officials need to be much more astute in measuring company compliance with their promises and whether the results are worth the cost.

Perhaps the most infuriating finding in the Tribune investigation is that state officials never followed up on their investments.

The newspaper found that two of every three recipients of EDGE grants failed to follow through on its promises.

More than $1 billion has been earmarked for subsidies since 1999. That's why it borders on the unbelievable that there was no method for measuring results until the Tribune put together its own computer database.

The newspaper's role in the Rauner administration efforts to put EDGE on the right track cannot be underestimated. That's why it's disappointing that Rauner did not act on two transparency issues.

Companies are required to file reports with the state on their compliance progress, but only reports from the first five years are public. Final reports need to be available for public inspection.

Also not available for public examination are the actual amounts of taxpayer subsidies companies accept. The spending of public dollars must be publicly disclosed.

If companies are reluctant to comply with those rules, they don't have to seek the subsidies.

State Rep. Jack Franks, a Democrat from Marengo, has long been critical of the EDGE program. He's said that he doubts "the EDGE credit programs works," and he may well be correct.

That's why it's so important the state officials do in the future what they couldn't summon the will to do in the past — conduct meaningful oversight to assure taxpayers get what they were promised.

Critics of programs like this have long insisted that companies make investments and create jobs based on factors independent of the tax subsidies public officials throw their way. Tax incentives may provide an additional incentive if two, three or more competing sites are equal. But that's a rare occurrence.

But if subsidies are to be employed, they must be employed carefully. Illinois has been indefensibly sloppy in its oversight of the EDGE program. It's way past time for a complete fix, perhaps even its elimination.

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