A state audit has found millions of dollars worth of state grants and loans to businesses that promised to build or expand operations in Iowa have so far yielded a fraction of the jobs that were promised.
The audit covered an 11-year period. State officials signed almost a thousand contracts with businesses, awarding nearly $310 million to companies during that time frame. The businesses promised to create or retain more than 57,000 jobs in return. The audit found about 80 percent of the promised jobs have not materialized yet.
Plus, the audit noted state officials need to do a better job verifying whether businesses are actually creating new jobs.
“We do recognize that the Iowa Economic Development Authority is continuing to improve its tracking and verification procedures,” State Auditor Mary Mosiman told Radio Iowa. “But it is important that they verify that these jobs — that they are reporting — are actual jobs either being created or retained and are not jobs being shifted within a company, particularly for a large corporation with multiple geographic locations.”
Tina Hoffman, a spokeswoman for the Iowa Economic Development Authority, points out the 11-year period covered by the audit includes the years of “the great recesssion,” three different governors and six different agency directors.
State officials have been handing out taxpayer-funded grants and loans to businesses for decades. The audit released today is a follow-up to a 2007 audit evaluating the job-creation promises linked to state economic incentive programs. Mosiman is recommending that the Iowa Economic Development Authority consult with the legislature to improve the tracking and vertification of its grants and loans.
“For purposes of transparency, accountability and to be able to effectively evaluate the program, it is important that they include totals,” Mosiman said, “…and make sure there’s no errors, so that the report matches their database.”
For example, the audit raises questions about whether the Iowa Economic Development Authority is getting state grant money back when businesses fail to fulfill job-creation promises. The audit reviewed more than two dozen cases. It found the department reported that about $10 million had been “recaptured” by the state in those cases, but the department also reported that same $10 million had been written off as “uncollectible.”
The audit covered a period that started on July 1, 2003 and ended June 30, 2014. That means it spans the administrations of former Iowa Governors Tom Vilsack and Chet Culver as well as current Governor Terry Branstad. Fewer than 12,000 jobs have actually been created or retained by the companies that got state grants and loans over that 11 year period.
Hoffman said “a lot of individual projects have been successes and others “in the building phase” will account for more jobs. The contract deadlines for the creation of about 25,000 other jobs haven’t expired, so the companies still have time to fulfill their obligations.
Mosiman said policymakers — not auditors like her — are the ones who’ll decide whether these economic incentive programs are effective.
“I think that’s not something that our office would attempt to gauge whatsoever,” Mosiman said.
The audit concluded the nearly $310 million worth of state grants and loans had helped finance business construction worth more than $26 billion. Hoffman, the spokeswoman for the Iowa Economic Development Authority, said the agency is constantly looking for ways to make state incentive programs more effective. And she noted the agency has been using state tax credits more recently as part of its incentive portfolio.
The audit did not include state tax credits awarded to businesses.
(This post was updated at 3 p.m. with additional information.)