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Job Impact Statements: Can They Work?

On Tuesday the Senate passed SB 187  that would require the Commerce Department to create a jobs impact statement or study on proposed legislation that could impact the state’s economy.  The price tag from the commerce department is $262,000 per year, enough to add two additional staff to its Research Unit to prepare these statements. (The price tag could increase since an amendment was added to allow the governor or three-member panels of either the House and Senate to request a jobs impact study.)

While the debate surrounding the legislation focused on who can request the analysis, it sidesteps the more important question of whether or not somewhat definitive estimates of the jobs impact of bills can actually be done. If legislation like this were to be enacted, the resultant impact analyses would be somewhat official and thus deserving of some deference by legislators. To me, that sounds like a very risky situation, especially when the head of the Commerce Department says  publicly that none of his researchers have the expertise to do such analyses.

As Jared Hunt emphasized in an business column last month, if the state’s track record at producing accurate fiscal notes is any indication of how accurate the jobs impact analysis from the Commerce Department will be then we might be better to just use a Magic 8 ball.

A jobs impact statement has been championed by WV Chamber of Commerce for years. while environmental groups think its a back-door way to kill regulations. One reason why environmental groups may be skeptical about the legislation stems from a Marshall University analysis conducted by CEBR done over a decade ago on the economic impact of changes to surface mine permitting. The CEBR report was politically motivated and it was heavily questioned by a competing economic impact analysis conducted by the EPA. 

While many states conduct economic impact analysis of legislation, very few look specifically at whether legislation creates or destroys jobs. While a jobs impact analysis could be good tool for deciphering the impact of legislation on the state’s economy, it could be greatly improved if it expanded the scope of analysis to include other impacts and that there are assurances that the analysis is objective and evidence driven.  For example, a jobs impact statement should not just show the number of jobs created by tax credits, but also the strain it would put on state and local government services by the forgone revenue.

Beyond expanding the scope of analysis, it would be much better if the analysis was conducted by a respected and objective agency that does not benefit from the implications of the legislation (e.g. the Commerce Department uses tax credits and EDA loans to attract business and it not a source of objective interpretation of these programs). For example,  the state could join the other 40 states that have a independent legislative fiscal office and they could conduct the jobs impact statements.  That way, the public and the legislature could be reassured that the jobs impact analysis is unbiased and objective and it could also improve the fiscal notes that are the cause of so much frustration at the Capitol.

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