Idaho Reporter: Coldwater closing another setback for Workforce Development Fund
media mentionPosted on April 21, 2014 by Dustin Hurst
The losses continue to pile up for Idaho’s embattled Workforce Development Fund.
This time it’s the closure of clothier Coldwater Creek that’s leaving a black mark on the state program’s record.
As Sandpoint-based Coldwater Creek enters bankruptcy and planned liquidation, Idaho taxpayers are losing out on thousands of dollars that subsidized worker training for some of the company’s staffers. The Workforce Development Fund, a corporate taxpayer-supported program, is used by state departments to lure handout-hungry corporations to the Gem State. It contracted with Coldwater for $62,000 in training funds.
The state pays out training funds to encourage companies to train workers for new jobs or retrain employees to avoid layoffs. Companies participating in the program must meet certain guidelines, including paying workers $12 per hour and offering health benefits.
Bob Fick, spokesman for the Idaho Department of Labor, told IdahoReporter.com that the company used $44,000 of the contracted amount.
Because the state has no method to recoup the money, taxpayers are out the cash.
Coldwater’s failure is just another smudge on the program’s record and the losses continue to pile up as key state lawmakers continue to call for a comprehensive review of the program.
The press office for Gov. Butch Otter, who has praised the state program, did not take a position on conducting a thorough legislative review. The program was founded in 1996 and has paid out more than $62 million in subsidies.
Jon Hanian, the governor’s press secretary, did tell IdahoReporter.com that Ken Edmunds, the new director at the Idaho Department of Labor, is conducting a review of the program.
An audit is timely, given the recent failures of businesses associated with the fund. Within the last 12 months, at least three companies that received cash from the program have closed their doors: Coldwater Creek, food processor H.J. Heinz and polysilicone manufacturer Hoku.
The losses in taxpayer dollars from those three businesses alone exceed $1 million.
The overall hit to taxpayers is likely greater, though. A 2012 audit conducted by the Idaho Department of Labor concluded that only 40 percent of the program’s contracts were effective and the rest were either ineffective or their impact was unknown.
In all, the ineffective and unknown contracts checked in at more than $10 million in subsidy spending.
Several lawmakers, including state Reps. Steve Hartgen, R-Twin Falls, and Tom Loertscher, R-Iona, and state Sens. Cliff Bayer, R-Boise, and Chuck Winder, R-Boise, have called for the Legislature to review the Workforce Development Fund.
“We’re short on the impact of whether it’s negative or positive,” Loertscher, the chair of the powerful House State Affairs Committee, told IdahoReporter.com. “That’s why we need to have a thorough look at it.”
Besides the obvious waste involved in the ineffective contracts and companies closing their doors after receiving subsidies, some critics worry that such incentives might actually hurt the economy policymakers are trying to boost.
Peter Crabb, an economist with Northwest Nazarene University in Nampa and a member of the board of scholars for the Idaho Freedom Foundation, recently called into question economic incentives states use to draw businesses.
“According to the Institute on Taxation and Economic Policy in Washington, D.C., local governments devote about $50 billion of their annual budgets to tax incentives with little to show for it,” Crabb wrote in an Idaho Statesman column. “Even further, the programs create ‘a drag on national economic growth’ because of the additional borrowing or other taxes needed to cover the programs.”
Note: IdahoReporter.com is published by the Idaho Freedom Foundation.