CREC and Smart Incentives worked with SEDE Network members to develop a guide with principles and framing questions to help states determine possible adjustments to existing incentive performance agreements in response to the COVID-19 economic crisis. This document addresses issues to consider when adjusting the terms of existing incentive agreements for discretionary incentives that have already been provided to companies. See also the Smart Incentives blog article that summarizes the Guide.

Small businesses have been severely affected by the COVID-19 economic downturn. The smallest businesses are struggling the most yet have had the greatest difficulty accessing the major programs intended to assist them. Economic development organizations are stepping into the gap and are being asked to craft responses to provide help. On August 3rd, in collaboration with the SEDE Network, CREC and Smart Incentives published a white paper, “Guidance on Adjusting Discretionary Incentive Programs to Support Small Business Recovery” to help leaders assess their options. A related blog article summarizes the guidance.

State economic development organizations (EDOs) have adjusted incentive agreements, programs, and operations to address the economic threats posed by the COVID-19 downturn. The growing demand for incentive project accountability combined with the legislative push for more formal incentive program evaluations means that EDOs will likely be called on to explain why changes were made and what those changes accomplished. Unfortunately, incentive adjustments will complicate established project reporting and program evaluation procedures. Leaders can take some basic steps now to document incentive changes and lay the groundwork for quality reporting and assessment down the road.

Assessing the importance of incentives in influencing corporate investments is fraught with uncertainty. Since incentives are just one factor among many influencing investment decisions, there are good reasons to re-think how we have come to use the term “but for” when we talk about incentives. This paper by Smart Incentives and CREC suggests that, instead of an all-or-nothing binary approach, the effect of incentives on investment decisions should be considered as a probability between 0 and 100% and offers a methodology for estimation.

As remote work became a more important part of the economic landscape in 2020, state economic development leaders considered adjustments to incentive programs to acknowledge this shift. Several states are addressing remote work in existing incentive performance agreements as companies strive to remain compliant with the terms of their contracts. Others are making permanent changes to their incentive policies as a strategic response to the expectation that remote work will become more widespread. Many more states are still sorting through the implications of remote work for their companies and communities. This paper address the issues state economic development organizations should consider as they determine whether or how to adjust their incentive programs to accommodate remote work. See also the Smart Incentives blog on the topic.

State economic development executives face unique challenges in developing business incentive programs in the post-COVID era. This paper aims to inform the policy discussion so that new business incentive programs will be both effective and responsible in serving each state’s economic needs. The paper has three sections: Incentive Goals and Guardrails, Using Incentives to Address Immediate Priorities, and Enhancing State Competitiveness with Incentives. The guidance provided draws on lessons learned from past recessions, our own work on incentive best practices, recent research examining incentive effectiveness, and responses to economic priorities that have come to the forefront over the last year. The questions in each section provide a framework for considering the critical issues and trade-offs that will help state leaders assess their incentive options in 2021. Click here for a related blog article.

This infographic illustrates how states can manage incentives for transparency and accountability, providing assistance on determining and reporting on results. This tool breaks down each of the steps economic development organizations can take to collect and manage incentive data, monitor, assess and evaluate program activities, and report results to elected leaders and citizens.

A tool for comparing incentive programs across states.