Pennsylvania lawmakers hope to restrict corporate incentives from the state

The bill would require companies that get money from the state to create higher-wage jobs and provide health care to employees, among other changes.

A group of lawmakers is hoping to put stricter requirements on companies that get money from the state, as well as the agency that monitors them.

Each year, the state gives companies hundreds of millions of dollars to create jobs and spur economic development. “We want to know how much is being spent and what it’s being spent on, and then we want to impose accountability for the jobs that are being created,” said Senator Rob Teplitz (D-Dauphin/York), who introduced the legislation Monday.

The bill would require companies to:

Tell the state whether the subsidy has reduced headcount anywhere else in the company, in Pennsylvania or not
Pay employees at least 85 percent of the “average wage,” defined by federal standards for each industry in the state 
Provide health care coverage to employees or pay at least the full average wage
Fulfill their job creation requirements within two years
Maintain wages and benefits for the workers throughout the contract or for five years, whichever is longer

In response, the Department of Community and Economic Development says it typically doesn’t give money to companies that are cutting jobs elsewhere in the state. DCED also requires certain companies to pay 150 percent of the minimum wage and to provide some type of paid benefits, whether that’s healthcare, paid time off, or a retirement plan. The state gives companies three years to meet their job numbers and requires firms to remain at their project sites for five years.

The bill would also require DCED to produce a report including:

Names, addresses of business grant recipients, and dollar amounts of grants
Health care provided to employees, including any cost to workers
Jobs required, created, and lost, itemized by full-time, part-time, and temporary employees and separated by wage groups

DCED says it provides a lot of this information in various locations. The bill calls for the department to report it in one comprehensive document.

The bill also says the state can’t pay a company more than $35,000 per full-time job promised. That includes grants, loans, loan guarantees, and other assistance. DCED says it limits how much it will pay a company per job, depending on the program. 

A look at some examples shows the cost per job can vary significantly. In 2013, DCED gave Carlisle Construction Materials $222,500 to build a new facility and create 50 new jobs. That’s a cost of less than $4,500 per job, considerably under the limit the new law would impose. (The cost is even lower if you include the 537 jobs the company said it would retain.)

But last year, the department awarded $14 million in cash grants and other financial assistance to Dietz & Watson, a deli meat manufacturer. In exchange, the company will build a distribution facility in Philadelphia and create about 48 jobs. That’s about $291,600 per new job. If you add in 110 jobs the company has promised to retain, the cost per job is still more than $88,000.

Incentives under the microscope

DCED’s monitoring of corporate incentives came under scrutiny this December when the Auditor General’s office released an audit of the department’s job creation programs. The audit looked at how DCED monitored nearly $213 million it gave out in five of its programs from 2007 to 2010.

The audit found that 44 percent of the companies given state assistance under these five programs didn’t meet the job creation requirements in their contracts. It also found that DCED relies on companies to submit signed statements saying whether they’re meeting their job creation requirements, but requests detailed records from only one out of every 10 companies, and only in some programs.

During his campaign, Governor Tom Wolf promised that he would work with the legislature to get rid of any incentives that don’t create jobs in the state. He also said he’d call for a new program in which companies that get state money must provide health care to employees and pay at least the average wage, based on their county.

In response to the new legislation, the governor’s press office said Governor Wolf appreciates Sen. Teplitz’s interest and will work with DCED’s new secretary to assess the state’s incentive programs.

The bill is co-sponsored largely by democratic lawmakers, with two exceptions: Senator Pat Browne (R–Lehigh), and Senator John Rafferty, Jr. (R–Berks/Chester/Montgomery). It’s modeled on legislation introduced in the Senate last year.