HF 1694

as introduced - 89th Legislature (2015 - 2016) Posted on 03/10/2015 03:21pm

A bill for an act
relating to state government; requiring the legislative auditor to evaluate
economic development incentive programs; appropriating money; proposing
coding for new law in Minnesota Statutes, chapter 3.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [3.9755] EVALUATION OF ECONOMIC DEVELOPMENT
INCENTIVE PROGRAMS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of sections 3.9755 to 3.9759, the terms
defined in this section have the meaning given them.
new text end

new text begin Subd. 2. new text end

new text begin Exclusive incentive. new text end

new text begin "Exclusive incentive" means a state program,
statutory provision, tax expenditure, or section of a general incentive, including tax
credits, tax exemptions, tax deductions, grants, or loans, that is intended to encourage a
single specific entity, project, or associated projects to locate, expand, invest, or remain in
Minnesota or to hire or retain employees in Minnesota.
new text end

new text begin Subd. 3. new text end

new text begin General incentive. new text end

new text begin "General incentive" means a state program, statutory
provision, or tax expenditure, including tax credits, tax exemptions, tax deductions, grants,
or loans, that is intended to encourage businesses to locate, expand, invest, or remain in
Minnesota or to hire or retain employees in Minnesota. To be a general incentive, a state
program, statutory provision, or tax expenditure must be available to multiple entities,
projects, or associated projects or include eligibility criteria with the intent that it will be
available to multiple entities, projects, or associated projects.
new text end

Sec. 2.

new text begin [3.9756] REVIEW SCHEDULE.
new text end

new text begin Subdivision 1. new text end

new text begin Review cycle. new text end

new text begin By January 1 of each year, the legislative auditor shall
develop a four-year schedule for evaluating economic development incentive programs.
new text end

new text begin Subd. 2. new text end

new text begin Identification of general incentives. new text end

new text begin Each schedule shall include a list of
all general incentives in the state. In determining whether a program is a general incentive,
the legislative auditor may consider legislative intent and may also consider whether a tax
incentive is promoted as a business incentive by any state agency.
new text end

new text begin Subd. 3. new text end

new text begin General incentive schedule criteria. new text end

new text begin Except as exempted in subdivision
4, the legislative auditor shall ensure that each general incentive is evaluated at least once
every four years, and is prioritized for evaluation based on what the incentive will cost
state and local governments in actual spending and forgone revenue currently or projected
into the future. For general incentives with statutory expiration dates, the auditor shall,
to the extent practicable, schedule the incentives to be evaluated prior to their expiration
date to allow the legislature to consider the evaluations when deciding whether to extend,
modify, or end the incentives.
new text end

new text begin Subd. 4. new text end

new text begin General incentive exemption from evaluation. new text end

new text begin The legislative auditor
may exempt from evaluation a general incentive that is otherwise statutorily required to be
evaluated if an alternative evaluation is deemed to be substantially similar to the required
evaluation under this section. The legislative auditor may exempt lower priority general
incentive evaluations from the regular four-year schedule if the Office of the Legislative
Auditor has inadequate staffing to evaluate all general incentives on a four-year schedule.
new text end

new text begin Subd. 5. new text end

new text begin Exclusive incentive schedule. new text end

new text begin The legislative auditor's schedule shall
ensure that at least once every four years the legislative auditor will complete an analysis
of best practices for exclusive incentives as described in section 3.9757, subdivision 3.
new text end

new text begin Subd. 6. new text end

new text begin Commission input. new text end

new text begin The legislative auditor shall provide the schedule to
the Legislative Audit Commission, including a list of general incentives exempted from
evaluation. The Legislative Audit Commission may provide input on how to adjust the
schedule and which incentives should be exempt from evaluation.
new text end

Sec. 3.

new text begin [3.9757] EVALUATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Evaluation and report. new text end

new text begin By November 15 of each year beginning in
2016, the legislative auditor shall evaluate all incentives scheduled for review that year
and shall provide the results to the Legislative Audit Commission in a written report.
new text end

new text begin Subd. 2. new text end

new text begin Analysis of general incentives. new text end

new text begin Evaluation of a general incentive shall
include the following:
new text end

new text begin (1) a statement of the goals of the incentive;
new text end

new text begin (2) an assessment of whether the incentive is being administered effectively; and
new text end

new text begin (3) an estimate of the economic and fiscal impact of the incentive, which shall take
into account the following considerations in addition to other relevant factors:
new text end

new text begin (i) the extent to which the incentive changes business behavior;
new text end

new text begin (ii) the results of the incentive for the economy of Minnesota as a whole, including
both positive direct and indirect impacts and any negative effects on other Minnesota
businesses;
new text end

new text begin (iii) a comparison to the results of other general incentive evaluations or other
economic development strategies with similar goals;
new text end

new text begin (iv) an assessment of whether adequate protections are in place to ensure the cost of
the incentive does not increase substantially beyond the state's expectations in future years;
new text end

new text begin (v) an assessment of the fiscal impact of the incentive on the budgets of local
governments, if applicable;
new text end

new text begin (vi) an assessment of whether the incentive is achieving its goals;
new text end

new text begin (vii) recommendations for how Minnesota can most effectively achieve the
incentive's goals, including recommendations for whether the incentive should be
continued or modified, or whether the state would be better served by using other
incentives or strategies to achieve the incentive's goals; and
new text end

new text begin (viii) recommendations for any changes to state policy, rule, or statute that would
allow the legislative auditor to more easily or conclusively evaluate the incentive in the
future, including any changes to data collection, reporting, and sharing, and clarifications
to the goal of the incentive.
new text end

new text begin Subd. 3. new text end

new text begin Analysis of best practices for exclusive incentives. new text end

new text begin (a) Each analysis of
best practices for exclusive incentives shall include:
new text end

new text begin (1) aggregate information and a description of trends related to Minnesota's
previous exclusive incentives, which may include analysis of their structure, performance
standards, and economic and fiscal impact;
new text end

new text begin (2) recommendations for how exclusive incentives should be structured or in what
circumstances they should be offered to ensure they change business behavior in a
beneficial way;
new text end

new text begin (3) recommendations for how exclusive incentives should be structured or in what
circumstances they should be offered to maximize positive direct and indirect impacts on
Minnesota's economy and minimize negative effects on other Minnesota businesses;
new text end

new text begin (4) recommendations for how exclusive incentives should be structured or in what
circumstances they should be offered to ensure that they represent a cost-effective
approach compared to other economic development incentive programs or other economic
development strategies;
new text end

new text begin (5) recommendations for what protections exclusive incentives should include to
ensure their costs do not substantially exceed the state's expectations;
new text end

new text begin (6) recommendations for how exclusive incentives should be structured or in what
circumstances they should be offered to avoid adverse impacts on the fiscal stability of
local governments; and
new text end

new text begin (7) recommendations for the types of performance standards that should be included
in exclusive incentives, how these standards should be structured, and how they should
be monitored.
new text end

new text begin (b) To complete best practices analysis, the legislative auditor may consult experts
on economic development, consult Minnesota businesses and state and local officials,
review best practices identified by other states or organizations, and engage in other
appropriate research techniques.
new text end

Sec. 4.

new text begin [3.9758] CONSIDERATION BY THE GOVERNOR.
new text end

new text begin Subdivision 1. new text end

new text begin Consideration of general incentives. new text end

new text begin The governor's budget
submission as required under section 16A.11, shall identify each general incentive for
which an evaluation was completed in accordance with sections 3.9755 to 3.9759 since
the governor's previous budget submission. For each evaluated incentive, the governor's
budget submission shall include a recommendation for whether the incentive should
be continued or modified, or whether the state would be better served by using other
incentives or strategies to achieve the incentive's goals. The budget submission must
include the rationale for each recommendation.
new text end

new text begin Subd. 2. new text end

new text begin Consideration of best practices for exclusive incentives. new text end

new text begin If a new
analysis of best practices for exclusive incentives has been completed since the governor's
previous budget submission, the governor's budget submission as required under section
16A.11 shall include recommendations for when and how Minnesota should offer and
manage exclusive incentives in the future and how they should be structured. The budget
submission must include the rationale for each recommendation.
new text end

Sec. 5.

new text begin [3.9759] DATA SHARING.
new text end

new text begin At the request of the legislative auditor, state agencies must provide any records,
information, data, or data analysis necessary for the legislative auditor to fulfill
responsibilities under sections 3.9755 to 3.9759. The legislative auditor may not disclose
or release any data received from other state agencies, except as permitted under law.
new text end

Sec. 6. new text begin APPROPRIATION.
new text end

new text begin $....... in fiscal year 2016 and $....... in fiscal year 2017 are appropriated from the
general fund to the Office of the Legislative Auditor for purposes of sections 1 to 5.
new text end