Auditor: So-called Phantom Jobs from NJ Tax Breaks Might Exist
Contrary to the interpretation of Gov. Phil Murphy, state Comptroller Philip Degnan says the recent audit of state tax incentive programs did not conclude that nearly 3,000 jobs supposedly created jobs hadn't actually been created.
Rather, Degnan told lawmakers at a Monday hearing, auditors found that the state lacked the paperwork to prove the status of those jobs.
“We never drew that conclusion,” Degnan said. “That was a conclusion that was reported, and there were some statements made to that effect.”
The Jan. 9 performance audit, conducted at Murphy’s request, concluded that the state Economic Development Authority failed to properly analyze performance data to determine whether promised jobs were actually created or retained. It said 2,993 reported jobs, of 15,000 studies, had not been substantiated.
Murphy took it a step further the day the audit came out and extrapolated that number against all promised jobs from all $11 billion in incentives awarded, asserting that as many as 48,000 jobs may not have been created as intended.
“We can assume, therefore, the shortfall in job creation was of an enormous scale,” Murphy said at the time.
Degnan said that is not what the report was trying to say and that auditors did not contact the businesses involved to follow up on the discrepancies.
“Those jobs may exist. They may not exist,” Degnan said. “What I’m explaining is that that determination is beyond the scope of the work that we did.”
Murphy has used the audit to renew calls for the revamped tax incentive proposals included in the economic plan he announced in October. The current incentives expire at the end of June. He devoted the first third of his State of the State to the topic and the comptroller’s audit.
The existing system has vocal supporters in the Legislature, particularly among lawmakers with an interest in Camden and Newark, as was evident at Monday’s hearing
Assemblywoman Eliana Pintor Marin, D-Essex, asked more than once if the message to take from the report and its reception is a negative tone that New Jersey isn’t open for business.
“Watch out because all of these are going on, and they’re doing investigations and they’re hiring attorneys,” Pintor Marin said.
Economic Development Authority chief executive officer Tim Sullivan said the state is ready to support businesses. He said companies that take public incentives expect a level of accountability and obligation – which is why some choose not to take them.
“Having the right reporting and the right transparency and accountability is incredibly important for these programs because the taxpayers deserve and have every right to expect an understanding of what investments are being made on their behalf,” Sullivan said.
Degnan and Sullivan declined to identify the 48 incentive recipients studied for the audit. They said the companies involved don’t even know they were the ones whose state records were scrutinized.
The January report from the comptroller wasn’t the first critical of how the state administers its tax incentive programs. Timothy Bush, manager of a 2017 audit done by the State Auditor’s Office, said both reports show the EDA processed information for the incentives but wasn’t acting as a responsible, interested partner.
“Going forward, this cannot be an acceptable means of project management. These programs require an entity that is vested in making and ensuring that all incentive grants are meaningful and appropriate for all involved,” Bush said.
Bush said that based on Sullivan’s testimony Monday, he’s encouraged that the EDA intends to do a better job going forward managing the $11 billion in awards.
On Tuesday, the EDA and state Department of Labor and Workforce Development plan to formalize an agreement through which the EDA can access data that it can use to check the job figures reported to it by recipients of tax incentives.