Florida’s state economic development efforts are “underperforming,” according to a new legislative report.
An undesirable label by any standard, critics and lawmakers already skeptical of providing taxpayer support for private businesses are likely to seize on the bureaucratic euphemism and underlying findings to bolster their anti-incentives position ahead of the March state legislative session.
The Office of Program Policy Analysis and Government Accountability, a nonpartisan legislative research office, conducted a comprehensive review of Enterprise Florida Inc. and the Department of Economic Opportunity —the state’s two most prominent development organizations— and found the results of their economic development activities wanting when compared with other states.
The analysis spans 10 years and focuses on job creation in targeted industries as well as economic growth. These two areas are the main justifications for awarding taxpayer-funded subsidies to selected businesses, and for their proponents’ significant annual funding requests.
In the report, auditors compared Florida to seven competitor states with tax-incentive agencies and programs: Alabama, California, Georgia, New York, North Carolina, Tennessee and Texas.
Overall, from 2006 to 2015, Florida experienced job growth in only two of six targeted industry sectors, management of companies and enterprises, and professional, scientific and technical services. The state ranked third and seventh in the job categories, respectively, when compared with the other states.
Additionally, Florida ranked fourth out of the eight for high-wage job creation in manufacturing, sixth in both wholesale trade and finance and insurance, and seventh in information services.
“Further analyses showed little or no employment growth in these industries relative to the nation,” the report said.
Texas, a state often compared with Florida because of their comparable size and rapid growth, received first place rankings for employment in five of the six tax-incentive targeted industries.
The report also compares Florida with its competitor states according to several economic indicators commonly used in studies that examine state economic outlooks and business climates — gross domestic product, GDP per capita, unemployment rate, and personal income.
Florida fared best in the area of unemployment, with the third-lowest rate in 2015. However, among large states in the competitor group, New York and Texas outperformed Florida on all four measures, and California outperformed Florida on three measures, auditors determined.
On the whole, Florida ranked fourth out of eight states in economic terms, besting North Carolina, Georgia, Tennessee and Alabama.
‘Lack of marketing’
Beyond jobs and economic growth, the review highlighted a major flaw with respect to Enterprise Florida’s financing, and noted the stark lack of incentive assistance directed toward small, minority and rural businesses.
According to the report, private-sector cash investments “represent a very small portion of Enterprise Florida’s overall budget.”
However, state law requires that the public-private partnership obtain private-sector financing in the amount equal to its taxpayer appropriations, but it never has — and it’s not even close.
Established in 1996, Enterprise Florida was supposed to achieve public-private match funding by fiscal year 2000-01. It didn’t, and it hasn’t grown its private funding resources over the past decade.
“Private sector cash contributions during OPPAGA’s review period rarely exceeded $2 million, while state appropriations averaged about $20 million per year,” the report says.
Auditors added that by investing $122 million of incentive funding — money committed but not yet spent — in a state trust fund instead of a commercial escrow account, the state could double that return, adding another $2 million to the pot.
Whatever its source, very little of the money is going to small businesses.
Although 96 percent of state businesses employ fewer than 50 employees, auditors found that most state-level economic development programs, particularly business incentives, benefit large companies.
The report says a “lack of marketing may affect participation.”
More glaring is the low rate of participation in the state’s Black Business Loan program, which made only 12 active loans in fiscal 2015.
Participation in the Rural Community Development program has been even lower. Since 1996, the program has made only 17 loans, or just one loan every two years.
Gov. Rick Scott and House Speaker Richard Corcoran, both Republicans, are currently at odds over the future of Enterprise Florida. Scott wants a new $85 million appropriation. Corcoran helped block a $250 million funding attempt in 2016.
Corcoran is on record saying that if he could, he’d abolish the quasi-state agency.
Last year alone, state officials appropriated $1.08 billion to Enterprise Florida and the Department of Economic Opportunity. All but $25 million went to DEO.
Enterprise Florida coordinates its economic development partnerships with the department, which in turn collaborates on development contracts and acts as the contract manager for Enterprise Florida incentive agreements.
A House legislative discussion is scheduled for Wednesday at the Capitol, where lawmakers will “review the return on investment” for Florida’s economic incentive programs.