Watchdog: Follow the Money

State watchdogs: Iowa pays companies $50,000 and more in incentives per new job

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DES MOINES — Iowa officials handed out more than $274 million in incentives to land 163 new companies or the expansion of others in the past two years, according to an Iowa Watchdog analysis of state figures.

In exchange, the companies have agreed to add 5,386 jobs and retain another existing 2,835 that would have otherwise been eliminated. That equates to the state paying nearly $50,000 for each new position. It's estimated those jobs will carry an average wage of $16.79 an hour, or roughly $35,000 annual salaries.

Those figures don't include recent record-breaking deals with tech giants like Google and Microsoft, which will cost the state an additional $30.3 million in exchange for 149 jobs. That's a per-job bottom-line tally for Iowa taxpayers of more than $203,000.

Some have criticized state officials for the deals, which pay big bucks — all taxpayer dollars — for a small amount of largely low-paying jobs. The companies that receive the incentives most likely would have come to the state regardless of the incentives, some researchers say.

"The only social good we should be able to get from government is employment; not just decent jobs but decent employment," said Dave Swenson, an economist with Iowa State University.

"The trick is for the government to give the least amount of money to get the most social good. We have allocated a lot of public tax forgiveness in the name of very few jobs. It's how many jobs and the money they make that matters," Swenson said.

Since taking office in 2011, Gov. Terry Branstad has said his goal is to create more than 100,000 new jobs. His administration pushed for the creation of the Iowa Economic Development Authority, which replaced the Iowa Department of Economic Development.

The authority is a public-private partnership that has landed record-breaking deals with technology giants and fertilizer companies that plan to invest hundreds of millions of dollars in new plants in the state.

The companies, however, have promised only a handful of jobs in return.

While some criticize the deals, others say mega-deals were necessary to land companies in an economic recession in which states have upped the ante to attract companies and the expansion of existing employers.

The number of jobs might be low, but the state will ultimately gain income from capital investments that top $6.6 billion and feed the economy through the additional work they provide for current employers like mail shippers, electricians, construction workers, and others.

Most of the incentives also come in the form of tax incentives, which means the companies must earn taxable income in Iowa to cash in on the benefits, some say.

"These are big facilities that tend to involve a lot of ongoing infrastructure maintenance," said David Bernstein, chairman of the authority's board. "We approve projects like this because of the amount of money they spend and the amount of money they continue to spend year in and year out. They spend a lot of money year in and year out."

Sheena Dooley is a reporter for Iowa Watchdog, which is affiliated with the Franklin Center for Government and Public Integrity.

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