- Kansas is trailing other states because it has not adopted a plan for regular evaluation of tax incentives.
- The Legislative Division of Post Audit has conducted ad hoc evaluations in recent years and could potentially study incentives regularly.
- Evaluations could help inform the public resources invested in attracting companies to move into Kansas from just over the border with Missouri.
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The professional staff of the Legislative Division of Post Audit (LPA) has often evaluated tax incentives in recent years. However, these studies have been the result of ad hoc requests from lawmakers. There is no structure in place to ensure regular and rigorous evaluations of the state’s incentives.a
The most recent LPA evaluations were a series of three studies published in 2013 and 2014 that centered on analyzing which of the state’s economic development programs are most effective.b These studies have helped inform legislative action. For example, a 2013 evaluation argued that the state Department of Commerce had provided more incentives under the Promoting Employment Across Kansas (PEAK) program than were permitted by statute.c In response, Commerce said it had interpreted PEAK’s incentive cap differently.d In 2014, the lawmakers passed legislation to clarify the amount of incentives Commerce was allowed to provide under the program.e
Given the LPA’s experience evaluating incentives, the office would be well-suited to studying the programs regularly should lawmakers create a process to do so. The LPA has a record of carefully studying whether government programs are operating efficiently and identifying potential improvements. Many legislative audit offices lack experience measuring economic impact, but the LPA worked with an outside consultant to perform analysis of the economic results of incentives in 2014—a model that could prove effective for future evaluations.f
In Kansas, discussions of incentive policy often focus on the Kansas City “border war.” Both Kansas and Missouri have used incentives to lure companies across the state line—sometimes offering millions of dollars in incentives to persuade businesses to move just a few miles. Many policymakers and business leaders in both states view this competition as counterproductive and have tried to negotiate a truce, but so far they have not succeeded.g While evaluations may not be able to end the border war on their own, they could help inform lawmakers’ consideration of the issue. A 2014 LPA evaluation showed that even if Kansas had not lured Missouri companies across the border, Kansas still would have received some tax revenue and economic benefits from these businesses’ activities.h
- Scott Frank (post auditor, Kansas Legislative Division of Post Audit), interview with The Pew Charitable Trusts, June 24, 2016.
- Kansas Legislative Division of Post Audit, “Economic Development: Determining Which Economic Development Tools Are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas, Part 1” (September 2013), http://www.kslpa.org/assets/files/reports/R-13-010.pdf; Kansas Legislative Division of Post Audit, “Economic Development: Determining Which Economic Development Tools Are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas, Part 2” (February 2014), http://www.kslpa.org/assets/files/reports/R-14-003.pdf; Kansas Legislative Division of Post Audit, “Economic Development: Determining Which Economic Development Tools are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas, Part 3” (December 2014), http://www.kslpa.org/assets/files/reports/r-14-011.pdf.
- Kansas Legislative Division of Post Audit, “Economic Development: Part 1,” 22–24.
- Ibid., 59.
- Kansas H.B. 2430 (2014), http://www.kslegislature.org/li_2014/b2013_14/measures/hb2430.
- Kansas Legislative Division of Post Audit, “Economic Development: Part 3,” 2.
- Editorial, The Kansas City Star, Aug. 26, 2016, http://www.kansascity.com/opinion/editorials/article98128057.html.
- Kansas Legislative Division of Post Audit, “Economic Development: Part 3,” 35.