State offered $24M in incentives to companies offshoring jobs

August 28, 2016

Since Indiana Gov. Mike Pence took office in 2013, the state's economic development agency has approved $24 million in potential incentives to 10 companies that sent work to foreign countries, according to a newspaper report Sunday.

The Indiana Economic Development Corp. has offered conditional incentives to companies that offshored production, including to Mexico and China, to cut costs, the report said. About $8.7 million in incentives has been paid out so far. In the same time frame, the companies either announced layoffs or fired more than 3,800 Indiana workers.

Indiana makes hundreds of incentive deals with companies each year and has done so for decades under various governors, but the Star report mentioned only 10 deals reached during Pence's administration involving companies that offshored work.

Pence is the chairman of the IEDC, but isn't actively involved in daily operations. The analysis of the Republican vice presidential nominee's jobs record by the Indianapolis Star comes as his running mate, Donald Trump, has pledged to penalize companies for shipping jobs overseas.

The IEDC, which was founded by former Gov. Mitch Daniels, has a policy of offering tax savings to companies only when the businesses reach certain job-creation goals.

In Indiana, job creation and retention requirements for incentive agreements are usually applied to a single site, but workers at a company's other facilities can remain susceptible to offshoring.

An example is handbag maker Vera Bradley, which was approved in 2014 for a $1.75 million, 10-year tax break to assist with a $26.6 million expansion of its headquarters and distribution center in Roanoke. The company agreed to keep 567 employees and add 128 more jobs by the end of 2017. However, in 2015, the company closed a design center in New Haven, factories were moved to Asia, and 250 Indiana jobs were lost.

IEDC officials say the company remains in compliance with its incentive agreement.

The state has fought back or held incentives in four of the 10 cases, returning $746,000 in taxpayer subsidies. But in six other cases the companies haven't faced consequences.

Pence did not return requests for interviews. His commerce secretary, Victor Smith, defended the state's economic development record and said 150,000 jobs have been added since Pence became governor. Smith said economic development incentives are "performance-based," meaning a company must create jobs to get incentives.

"Unforeseen circumstances can affect business plans, and, in those times, we offer our support and counsel to job creators," Smith said. "However, if a company chooses to neglect its commitment to the state and to its Hoosier employees, we aggressively seek to claw back any incentives the company has received."

Experts say many other states have economic development incentive policies to Indiana's and offer incentives to companies that offshore. They also say that similar deals took place in Indiana long before Pence came into office.

But they said Indiana is likely more vulnerable to offshoring than other states because it is manufacturing-heavy and that it could do more to avoid such situations.

The executive director of Good Jobs First, a Washington D.C.-based advocacy group that tracks corporate subsidies, said Indiana could make companies meet statewide job requirements instead of specifying a single site. Some other states, including Ohio and Michigan, have enacted such policies.

"It is common sense," Greg LeRoy told the newspaper. "You really think companies should be allowed to get a big tax break at Plant A and ship jobs overseas at Plant B? Come on."


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