Read the original op-ed here.

New York state and its localities have long been national leaders in economic development spending, totaling around $10 billion annually. Despite the extreme paucity of rigorous evidence demonstrating that many of these dollars have driven substantial job or economic growth, the state has regularly expanded these programs, and this year appears to be no exception.

The executive budget proposes to increase the film tax credit to a possible lifetime cost of $14.6 billion, up from $9.6 billion now; extend four city tax incentives that cost $44 million annually; and double down on the state’s propping up the horse racing industry with a $455 million facility renovation. For the most part the state Legislature supports the governor’s proposals, with some modifications to make them even more generous.

This is one area in which New York should stop following its motto—“Excelsior”! Not only are these evidence-baseless programs likely inefficient investments; they perpetuate the interstate competitive race to the bottom and governments’ habit of allocating huge sums without real evidence of impact.

Let's break this down further. 

The budget proposes to extend and expand the Empire State Film Tax Credit despite New York’s already granting $6.5 billion in credits without performing a rigorous analysis to demonstrate whether the program was needed to attract productions or whether the foregone tax revenue exceeded the additional economic activity catalyzed. The proposal would increase the annual credit cap from $420 million to $700 million, extend the sunset from 2029 to 2034 and increase the credit’s value for beneficiaries.

Both legislative houses accept the expansion, and the Assembly wants even more.

The Legislature also accepts the executive’s proposal to extend four city tax incentives that cost $44 million a year in foregone revenue. The effectiveness of two of these decades-old programs has never been evaluated, and the city Independent Budget Office found that the others—the Commercial Revitalization Program and Commercial Expansion Program—did not significantly improve office vacancy rates or employment in Lower Manhattan compared to nonparticipating areas, such as Midtown.

Then there is the proposal to provide cash or support borrowing totaling $455 million to renovate and expand Belmont Park—essentially doubling down to support the downstate horse racing industry that likely could not exist without state subsidies. This proposal has one potential upside: returning the Aqueduct Raceway land to the state sooner. The Legislature generally agrees with the Belmont subsidy, but the Senate wants an affordable housing component at Aqueduct—perhaps that’s OK—while the Assembly actually wants to remove the requirement to return Aqueduct to the state. Not for nothing, both parcels are in transit-rich areas, which these days make many think about housing.

Nobody should ignore that New York needs to focus on smart investments and management to grow its economy. But there also is a nearly click-bait, addictive quality to many so-called economic development programs for public officials who receive substantial local accolades for each announcement.

Yet the essential question is rarely asked and more rarely well answered: Is this spending effective? Well-designed and implemented programs increase employment and spur economic growth that otherwise would not have happened in a cost-effective manner. A thorough, rigorous evaluation would identify whether a given incentive program had induced additional economic activity. It would compare that benefit to the cost, as well as to what we might gain if we used those resources in another manner—what economists refer to as the opportunity cost.

To be fair, there has been improvement, and some real hope is on the horizon. The state finally published a database of many of its economic development deals and standardized the definition of a job—both actions are critical to answering the essential question. Furthermore, a state-contracted evaluation of the efficacy of New York’s economic development incentives is underway. If appropriately rigorous, it should help direct spending to cost-effective programs that grow the economy.

To compete for businesses, jobs and residents, New York should focus on developing human capital—both educating and training New Yorkers and attracting great talent, providing high-quality, essential public services, and maintaining its infrastructure so that goods and people can move easily and safely.

Ensuring that New York is an affordable, attractive—and yes, fiscally stable—place to live and operate a business will help grow jobs and increase the quality and vitality of all New Yorkers’ lives. Depleting precious resources for unproven and unproductive programs diverts money that should either be in the taxpayers’ pockets or deployed to higher-impact uses.

Ana Champeny is vice president for research for the Citizens Budget Commission.