Balancing economic development costs with their benefits is something we should be talking about

Last week the Indiana Economic Development Corporation asked for and received permission from the State Budget Committee for $120 million in incentive funds for an advanced manufacturing project planning to invest $3.2 billion in a new facility which should create 1,400 high wage jobs.

This request comes out of a new $500 million “Deal Closing Fund” that was created in the budget passed in April.

This is the second time that the IEDC has come forward to ask for significant funding since the budget was finalized. In June, IEDC asked for and was granted a release of $122 million for a $50 billion semiconductor investment in Boone County’s LEAP district. IEDC should be commended for their capacity to move swiftly when such advantageous opportunities arise.

From my perspective, it is also commendable that IEDC must run requests of this type past the State Budget Agency, providing some measure of transparency around its work. The reality, however, is that the public will still not ever hear many of the details about these deals, or what the downstream impacts of the investments are.

The IEDC was created as a quasi-governmental body, which is different from a typical government agency. The thought was that the organization needs to maintain the confidentiality of the businesses that it works with, and will ensure, on the public’s behalf, that the companies create high wage jobs that benefit Indiana.

Public in the dark

No publicly available comprehensive evaluation of their work has been released, to date.

This arrangement means that the public doesn’t have information on how these investments are benefiting Hoosiers and communities, even though IEDC’s work is done with taxpayer dollars. The IEDC announces each year in their annual reports about how they impact the amount of private investment and new jobs secured for the future. But is this what we need to know? And are we measuring the right thing?

One may reasonably argue that the metrics of success of economic development are not, in fact, only capital investment and job creation, but rather how these investments positively impact Indiana communities. Are the promised high wage jobs being realized? How is the investment impacting GDP in the communities in which these companies are a part? Which IEDC investments realize better outcomes for communities?

Are local governments near the investment (who often lay their own economic development funds on the table to lure new companies) realizing additional tax revenue from these deals to provide additional services and enhance quality of life improvements? How is new business attraction impacting existing Indiana businesses, our perilously tight labor market, and shortage of housing?

This question arises during a time when the state has granted unprecedented funding and authority to IEDC. In the last budget, in addition to the deal closing fund, Indiana set aside $500 million for a third wave of regional quality of place investments (that have yet to be evaluated or results reported) and $150 million for IEDC to use for site acquisition.

In fact, appropriations in the most recent budget for the IEDC topped out at over $1.3 billion, or roughly 3% of the total $44.6 billion budget. This is more than twice as much funding provided for IEDC from the previous budget. In 2022, the state gave IEDC the authority to create Innovation Development Districts – the first of which is LEAP district in Boone County.

What’s next

These actions have enabled IEDC to realize their vision and lean into their 5E strategy – all without a thorough public understanding of how this will impact Hoosier taxpayers and communities on the ground. The funding dedicated to Innovation Development Districts, in particular, makes the need for transparency more important than ever to the public.

The Indiana Fiscal Policy Institute is focused on a strong business climate and the economic health of the state. IFPI supports the mission of the IEDC, but it is time for a public evaluation and discussion about how the organization’s strategies serve Hoosiers. The Indiana Fiscal Policy Institute would be pleased to partner with the state in measuring the impact of IEDC investments to date.

As we transition to the innovation economy, we need to level set what our economic development policy is and what it seeks to achieve – a state in which it is a good place to do business of course, but also a good place to work and live.

It is possible, given a proper public discussion around these issues, that IEDC should be given even more tools to help Indiana realize its full potential — but first we need more information.