Yesterday Good Jobs First (GJF), a non-profit, non-partisan research center focusing on economic development accountability, released new reports showing how states give away millions of dollars in corporate tax breaks and subsidies each year and comparing that with the cost of fully funding their pension systems.
The five states highlighted include Arizona, Connecticut, Kentucky, Oklahoma, and Wyoming. In each of these states, the annual cost of these corporate tax breaks and subsidies could pay for the entirety of the state’s yearly pension system contributions, which provides retirement security for millions of state public employees.
For some of these states, the disparity between the tax breaks and subsidies and the pension systems are particularly alarming. In Oklahoma, for example, the state gave away $707 million in corporate tax breaks and subsidies two years ago. The cost of the state’s public employee pension obligation that same year was $299 million.
In other words, Oklahoma could’ve filled its public employee pension obligation twice instead of giving away millions of dollars to major corporations.
According to GJF, state and local governments are required to list “how much revenue the government body loses yearly to ‘tax abatements’ – corporate tax breaks granted in the name of economic development.” These are usually reported under Statement No. 77 from the Governmental Accounting Standards Board (GASB).
However, many states have no way to ensure that these corporate tax breaks and subsidies go towards creating jobs in the state.
In Kentucky, according to GJF’s report on the state, “for the programs reported under GASB Statement No. 77 on tax abatement disclosures , there are no provisions for recapturing any of the abated taxes, which means that firms that fail to honor the agreements (to produce new jobs or make new investment, for example) do not have to pay back their awards.”
Pension spending, on the other hand, has a real and measurable impact on local communities. In Oklahoma, according to the National Institute on Retirement Security (NIRS), expenditures from state and local pensions supported $3.5 billion in economic output. In Kentucky, according to NIRS, expenditures from state and local pensions supported $5.1 billion in economic output.
We hope that state lawmakers put their priorities in order, stop the giveaways, and protect their employees’ retirements in 2020 and beyond.