On June 10, the Public Policy Institute of California issued a report that was highly critical of California's "enterprise zone" program that gives tax breaks and other economic incentives for employers to establish new facilities in areas of high unemployment.
The 42 zones, established by local governments with state permission, cost local and state governments about a half-billion dollars a year in lost revenues but have "no statistically significant effect on employment," the PPIC study concluded.
"The state can ill-afford to continue the enterprise zone program without clearer evidence of its benefits or a well-defined plan to make it more effective," said Jed Kolko, co-author of the PPIC study.
A few hours later, the University of Southern California's Marshall School of Business re-released a study it had originally issued in February, declaring that California's enterprise zones had "statistically significant" positive impacts on employment and incomes of affected households.
"For California, we found that enterprise zones increased employment by 2.2 percent and increased the fraction of houses with wage and salary income by 2.1 percent," USC researcher Charles Swenson said, adding that California's positive results mirrored those of other states.
The juxtaposition of these obviously disparate evaluations of the state's largest economic development effort was scarcely a coincidence. And they illustrate how difficult it is to evaluate the efficacy of costly economic development programs.
If equally well-qualified academics can look at essentially the same data and come to such conflicting conclusions, how can the public, the media and, most importantly, the politicians who control the purse strings ever judge enterprise zones and myriad other efforts at economic stimulation?
It's a particularly vexing question because California's economy is in obvious crisis, with nothing in sight to jump-start recovery, and because if that half-billion dollar subsidy is not effective, it should be recaptured and spent on something else, given the state's chronic budget deficits.
Scarcely a year passes without Capitol politicians enacting some new program they claim will generate economic returns. In fact, even as they were imposing heavy new taxes on Californians as part of a budget deal in February, Gov. Arnold Schwarzenegger and lawmakers enacted a couple of new corporate tax breaks, including a big one for the governor's old chums in the movie industry.
One might think that those we elect to office would be willing, even eager, to re-examine their handiwork from time to time to learn whether the oft-promised public benefits come to pass. But the "economic development" programs soon develop political constituencies that resist any evaluation, much less modification. So the easiest path, politically, is to continue adding such programs, which is why they stack up in ever-growing layers.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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