Everything you wanted to know about the new JDIG incentives legislation

From the bill summary released in House Finance and Appropriations on March 3, 2015.

CURRENT LAW: JDIG is a discretionary program of the State that provides funds to incentivize new or expanding business to create jobs in the State. The amount of the JDIG incentive to a company is equal to between 10% to 75% of the personal income tax withholdings generated by the eligible created positions. If the business is in a tier 2 or 3 area, the incentive paid to the business is automatically reduced by 15% or 25%, respectively, and that portion is diverted into the Utility Account. The JDIG agreement can be for a term of up to 12 years. The amount that can be committed in JDIG grants has generally been capped at $15M per calendar year; however, the current cap is based on the 2013-15 biennium and is $22.5M, and the cap for 7/1/15 through 12/31/15 is $7.5M. Presuming a use of $1M of the allowed cap for a period and a term of 12 years, a $1M commitment would be paid each year of the 12-year term if the company met all required metrics, for a total commitment of $12M. The authority to enter new JDIG agreements is currently set to expire 1/1/16.

BILL ANALYSIS: The bill modifies JDIG in the following ways:

  1. It increases the maximum JDIG commitment for the current period in two ways: (i) it changes the current period from being a 2013-2015 biennium to being a period lasting from 7/1/13 through 12/31/15, effectively making the $7.5M available for 7/1/15 to 12/31/15 immediately available for commitment and (ii) it adds $15M of additional capacity that may be committed in JDIG awards in the period ending 12/31/15. Collectively, these changes increase the cap for the current period from $22.5M to $45M, with the latter change potentially increasing the State’s JDIG commitment by $180M ($15M per year over 12 years for the current period.

  2. It extends the authority to make new JDIG commitments until 1/1/20. This change potentially increases the State’s JDIG commitment by $720M ($15M per year over 12 years multiplied by each year of the 4-year extension).

  3. It renames the program from the Job Development Investment Grant (JDIG) to the Job Growth Reimbursement Opportunities – People Program (Job GRO People).

  4. It adds to findings that the Committee is required to make prior to entering into a JDIG agreement a finding that affected local governments have participated in recruitment and offered appropriate incentives.

  5. It eliminates priority for JDIG projects due to being located in an Eco-Industrial Park.

  6. It increases the minimum number of jobs a business must create in a tier 3 area in order to participate in JDIG from 20 jobs to 50 jobs.

  7. Regarding the health care coverage requirement, it eliminates an obsolete reference to minimum health care coverage recommendations by the Small Employer Carrier Committee for purposes of meeting the health insurance requirement for JDIG participants.

  8. It increases the diversion from JDIG to the Utility Account for tier 3 projects from 25% to 30%.

  9. It modifies the recapture provision applicable to EIC recaptures of JDIG amounts to a participating business if the business fails to maintain operations at the project for at least 150% of the grant term. Under current law, the recapture is in the discretion of the EIC. The bill would require the EIC to recapture an appropriate portion of the grant.

  10. It modifies the relevant time period against which increases in employment are measured. Under current law, the business must maintain employment levels at the level of the year immediately preceding the base period. The bill would change the relevant comparison point for employment levels from immediately preceding the base period to the greater of the employment levels at the date of application or date of award.

Sarah Curry

Sarah Curry is Director of Fiscal Policy Studies at the John Locke Foundation.