by Sarah Curry
Director of Fiscal Policy Studies
There is a bill in the NC House to raise the cap on the amount NC can spend on incentive programs. In addition to raising the cap, Governor McCrory also wants to create a closing fund, so he can offer more money to a company to ‘seal the deal’. While these are two bad ideas, the Justice Center did a study on the success of the JDIG program and their findings should all but persuade lawmakers to stop any forward motion on expanding this program. At minimum, lawmakers should study the JDIG program and either stop the program or find a new way to evaluate how the state spends its money. It isn’t a normal occurrence when the John Locke Foundation and the NC Justice Center agree on something…but regarding the state’s Job Development Investment Grant (JDIG) program we agree on a lot. Today the NC Justice Center published a report, “Picking Losers: Why the Majority of NC’s Incentive Programs End in Failure“.
Here are some of the findings from the report:
“In the years between the creation of the JDIG program in 2002 and 2013 (the last year for which the program’s performance data is available), North Carolina gave incentive awards to many more losers than winners. Under JDIG’s accountability requirements, project failure occurs when a company receiving a JDIG doesn’t live up to its promises of job creation, investment, or wages, and the Department of Commerce cancels the grant. Over this 12-year period, the Department of Commerce was forced to cancel 62 out of the 102 JDIG awards due to companies’ failures to fulfi ll their promises6—a 60 percent failure rate for all JDIG projects across the state.
Governor McCrory often talks about JDIG as an essential tool in recruiting new businesses from outside North Carolina to locate here, yet almost 60 percent of the 58 recruitment projects that received JDIG awards failed to generate the benefits promised by the recipient firms and were cancelled. This suggests that while JDIG may be a useful tool in securing the promises of new jobs, it falls short in securing the reality of new jobs.
The state’s incentive programs are not meaningfully benefiting rural North Carolina. Rural counties have received a fraction of the JDIG awards urban counties have received, while experiencing significantly worse project failure rates. Since 2002, only 9 percent of all JDIG dollars have gone to rural counties, while more than 90 percent have gone to urban counties. Meanwhile, even those dollars haven’t translated into the reality of more jobs in rural North Carolina—more than 77 percent of JDIG projects in rural counties have failed,compared to just 56 percent of urban county projects (see Figure 3).
In perhaps the most troubling trend in the state’s targeting mismatch, just three counties account for almost 60 percent of the total JDIG dollars granted statewide since 2002—Durham, Wake, and Mecklenburg. These are the counties with the fastest employment growth in the state—more than 70 percent of the state’s job creation since the end of the Great Recession has occurred in these urban, prosperous counties.9 In other words, the state is investing the majority of its incentives resources in the counties that need it least. JDIG projects in urban counties experience a 55-percent failure rate, much lower than the rates of project failure in rural counties.”