Florida

Tax incentive evaluation ratings

Tax Incentive Evaluation Ratings: Florida

Rating: Leading

Key points:

  • Florida is leading other states because it has a well-designed plan to regularly evaluate tax incentives, experience producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.
  • Two legislative offices with complementary skill sets provide valuable information on the results of incentives.
  • Lawmakers allowed the Enterprise Zone Program to expire in 2015, a decision that was consistent with the findings of evaluations and will save the state tens of millions of dollars in coming years.

Florida evaluation law

Year enacted: 2013.a

Who evaluates: Office of Economic and Demographic Research and Office of Program Policy Analysis and Government Accountability.

Length of review cycle: Three years.

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In 2013, the Florida Legislature adopted a law tasking two legislative staff offices with evaluating economic development incentives on a three-year cycle, an approach that has made the state a national leader in tax incentive evaluation.b One reason for the success is that these two—the Office of Economic and Demographic Research (EDR) and the Office of Program Policy Analysis and Government Accountability (OPPAGA)—have complementary skill sets. EDR provides sophisticated economic analysis to lawmakers, and OPPAGA conducts program performance evaluations.

Under the law, EDR uses economic modeling to study the impact of incentives, analysis that takes into account key considerations. In a 2014 evaluation, for example, EDR studied the net results of incentives, considering both their economic benefits and the economic losses of having fewer state dollars available for other purposes.c The evaluations have also analyzed whether incentives are likely to influence employer decisions. For example, a 2015 evaluation of incentives for the defense industry questioned the effectiveness of the programs, arguing that federal decisions are likely more important for determining where military bases and defense contractors locate.d

OPPAGA’s qualitative research work complements EDR’s quantitative analysis. The office describes how the programs function in detail. OPPAGA’s staffers also often interview program participants and discuss their experiences with the incentives. In some instances, the office provides recommendations for improving administration of the programs.e

The offices present their findings to lawmakers at committee hearings, offering legislators opportunities to consider whether changes to incentives are warranted. The analysis proved useful to policymakers when they were considering renewing Florida’s Enterprise Zone Program, which was set to expire at the end of 2015. EDR showed that the program provided a weaker return on investment than other incentives. One reason was that the program was mostly moving economic activity from place to place within Florida, rather than growing the state economy.f OPPAGA’s analysis also showed that the program overall was not meeting its goals.g Ultimately, lawmakers allowed the program to expire—a decision that will save Florida tens of millions of dollars in coming years.h

Endnotes

  1. Florida Stat. Ann. § 288.0001, http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0200-0299/0288/Sections/0288.0001.html.
  2. Ibid.
  3. Florida Office of Economic and Demographic Research, “Return-on-Investment for Select State Economic Development Incentive Programs” (Jan. 1, 2014), 25, http://edr.state.fl.us/Content/returnoninvestment/EDR_ROI.pdf.
  4. Florida Office of Economic and Demographic Research, “Analysis of Defense and Space Incentives” (December 2015), 1–4, http://edr.state.fl.us/Content/returnoninvestment/ AnalysisofDefenseSpaceIncentives.pdf.
  5. Florida Office of Program Policy Analysis and Government Accountability, “Florida Economic Development Program Evaluations—Year 2” (Jan. 1, 2015), 1, http://www.oppaga.state.fl.us/MonitorDocs/Reports/pdf/1501rpt.pdf.
  6. Florida Office of Economic and Demographic Research, “Return-on-Investment,” 62.
  7. Florida Office of Program Policy Analysis and Government Accountability, “Florida Economic Development Program Evaluations—Year 1” (Jan. 1, 2014), 50, http://www.oppaga.state.fl.us/MonitorDocs/Reports/pdf/1401rpt.pdf.
  8. Mary Shanklin, “Developer Incentive Program Ends After Three Decades,” Orlando Sentinel, June 7, 2015, http://www.orlandosentinel.com/business/os-cfb-enterprise-zones-20150607-story.html.
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Improving Tax Incentives for Jobs and Growth

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Tax incentives—including credits, exemptions, and deductions—are one of the primary tools that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states billions of dollars a year. Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives.