Idaho taxpayers are out nearly $1 million after a state-backed silicon plant set for construction went belly up and some state lawmakers say the Legislature needs to re-examine how incentive funds are spent.
Hoku Corp. planned to build a massive silicone manufacturing plant in Pocatello, a facility the company said would create more than 200 permanent jobs and bring millions of dollars in economic activity to the region. When the company came to town, officials jumped at the opportunity to give Hoku what it wanted.
According to Megan Ronk with the Idaho Department of Commerce, Idaho taxpayer ponied up more than $870,000 for the project, including more than $650,000 out of the Workforce Development Fund. That account reimburses employers for worker training costs with certain strings attached—companies must pay $12 an hour or more, provide some health benefits and hire new employees or retrain other workers to avoid layoffs.
Midway through the process, though, some things went awry. Construction costs boomed while polysilicone prices plunged. Earlier this year, the company declared bankruptcy, owing creditors more than $1 billion
While some creditors will see pennies on the dollar in return, one investor—the state of Idaho—will see nothing back for its efforts.
And that has some lawmakers asking for a review of how the state and the commerce department spend money on financial incentives.
Senate Assistant Majority Leader Chuck Winder, R-Boise, told IdahoReporter.com he supports a thorough review of the Workforce Development Fund program.
“It does need to looked at and evaluated,” Winder said. “We can evaluate it to see if it’s a program that has met its final chapter.”
Lawmakers already have some findings on which they can rely, though. An October 2012 reporter revealed “mixed” results for the program. Training was highly effective in some industries—like information technology, and lagged in others—like construction.
The report also revealed that the program’s effectiveness was about 40 percent.
State Sen. Cliff Bayer, R-Boise, echoed Winder’s call for scrutiny of the program. “Does this need policy review?” he asked.
Bayer says that throwing money at a problem—in this case, creating jobs—isn’t acceptable and that lawmakers must give their best efforts to ensure that good policy drives spending decisions. The Hoku debacle, he said, provides a finite and tangible example of a failure of a government program. Now, lawmakers must dive in to examine what went wrong.
“I want to see accountability for the tax dollar expenditure,” Bayer said.
A theme for some is that there are governments that should run like a business. Accountability means winning ideas enjoy wide implementation and companies toss poor ideas by the wayside, often taking their creators with them.
But unlike at a business, it’s very likely that no one will be fired for the Hoku mess, even though taxpayers are out more than $870,000.
The Department of Commerce did not respond to an email asking if anyone would lose a job over the failed investment.
And while some lawmakers, including Bayer, accept that the state must provide some sort of training to better its workforce, others wonder if the programs are effective or just feel-good spending.
Idaho Freedom Foundation President Wayne Hoffman, for example, wrote last year that the training fund is little more than “a vehicle for wealth redistribution and government-driven economic engineering.”
“Nothing compares to the free market when it comes to business and workforce training incentives,” Hoffman wrote. “But lawmakers prefer to institute programs, at taxpayers’ expense, rather than rely on the free markets.”
For some, the program vexes simply because the businesses don’t have to repay taxpayers at any stage. Companies like Hoku and XL Four Star Beef, a Nampa meat processing business that shut its doors in 2011, take the money, train workers, go broke and never repay Idaho taxpayers.
According to a 2012 report, the state has given more than $5 million since 1996 to companies that have either gone out of businesses or no longer operate in Idaho. The program has spent at least $62 million since its 1996 inception.
State Rep. John Vande Woude, R-Nampa, told IdahoReporter.com that he, too, would like a little more oversight on the program.
“There are risks involved, so we need to take a closer look,” he said. “Are we getting the returns we were promised?”
Note: The Idaho Freedom Foundation publishes IdahoReporter.com.