15457117-evaluations-are-essential-to-smart-incentives

State legislators and senior legislative staff recently gathered at the NCSL Jobs Summit to discuss several economic development topics, including generating better returns with smart incentives. Participants explored how data collection, reporting and evaluation can help states understand which incentives work best within their economic development programs.

As part of the Business Incentives Initiative, we collaborated with the Pew Charitable Trusts on a panel discussion and workshop on incentives at the Jobs Summit. We presented the Smart Incentives 4 x 4 framework (see below), stressing that effective incentive use involves a process that is oriented toward achieving state policy and community goals – incentives are not just about completing a transaction.

 Some takeaways from these sessions are:

• There is widespread agreement that states and individual communities need better data and analysis throughout the incentives process to identify what works and to enable sound decisions when awarding incentives.
• Technical, political, administrative and methodological challenges exist that make true evaluations for better decision-making difficult. The Business Incentives Initiative is addressing these challenges.
• Three steps that legislators and other policymakers can take to improve data and analysis related to incentives use are:

1. Set clear goals for each incentive program
2. Request and fund regular program performance evaluation
3. Work with – not against – the executive office and economic development organization to review evaluation findings and implement changes to improve program performance

• Evaluations should yield clear conclusions based on measurable goals. Policymakers who are setting metrics for incentives evaluations should consider the goals of the incentive, data availability, data definitions, opportunities for comparison among programs, and rigorous measures for understanding economic impact.
• Meaningful evaluations are data-driven, transparent and future-looking – not designed to punish past decisions but to improve future decisions.

The Smart Incentives presentation can be accessed here. The Business Incentives Initiative is led by the Center for Regional Economic Competitiveness (CREC) and the Pew Charitable Trusts. Smart Incentives is pleased to be part of the CREC team working on this valuable effort. More information on the Business Incentives Initiative is available here.