Senate Bill No. 657
(By Senators McCabe, Unger, Plymale, McKenzie, Anderson, Fanning,
Helmick, Jackson, Kessler and Wooton)
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[Originating in the Select Committee on Economic Development;
reported February 18, 2002.]
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A BILL to amend and reenact section three, article two, chapter
five-b of the code of West Virginia, one thousand nine hundred
thirty-one, as amended; to further amend said chapter by
adding thereto a new article, designated article four, all
relating to the powers and duties of the council for community
and economic development; performance measures and indicators;
economic development report; accountability for new and
existing programs; elements of an effective incentive
evaluation system; and unified development report.
Be it enacted by the Legislature of West Virginia:
That section three, article two, chapter five-b of the code of
West Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted; and that said chapter be further amended by
adding thereto a new article, designated article four, all to read
as follows:
ARTICLE 2. WEST VIRGINIA DEVELOPMENT OFFICE.
§5B-2-3. Powers and duties of council for community and economic
development.
(a) The council for community and economic development shall
enhance economic growth and development through the development of
a comprehensive economic development strategy for West Virginia.
"Comprehensive economic development strategy" means a plan that
outlines strategies and activities designed to continue, diversify
or expand the economic base of the state as a whole; create jobs;
develop a highly skilled work force; facilitate business access to
capital, including venture capital; advertise and market the
resources offered by the state with respect to the needs of
business and industry; facilitate cooperation among local, regional
and private economic development enterprises; improve
infrastructure on a state, regional and community level; improve
the business climate generally; and leverage funding from sources
other than the state, including federal and private sources.
(b) The council shall update the comprehensive economic
development strategy every four years starting in the year two
thousand five and establish goals and track performance measures
for the effectiveness of each investment made for the purposes of
economic development in this state. The strategy shall be a guide
to state economic development policy and that the council, in
matters coming before it, take the strategy into consideration. The council may disseminate the strategy to local governments,
regional councils and development authorities and encourage them to
use the suggested standards to improve efficient allocation and use
of economic development resources.
(c) The council shall develop a certified development
community program and provide funding assistance to the
participating economic development corporations or authorities
through a matching grant program. The council shall establish
criteria for awarding matching grants to the corporations or
authorities within the limits of funds appropriated by the
Legislature for the program. The matching grants to corporations or
authorities eligible under the criteria shall be in the amount of
thirty thousand dollars for each fiscal year, if sufficient funds
are appropriated by the Legislature. The West Virginia development
office shall recognize existing county, regional or multicounty
corporations or authorities where appropriate.
In developing its plan, the West Virginia development office
shall consider resources and technical support available through
other agencies, both public and private, including, but not limited
to, the state college and university systems; the West Virginia
housing development fund; the West Virginia economic development
authority; the West Virginia parkways, economic development and
tourism authority; the West Virginia round table; the West Virginia
chamber of commerce; regional planning and development councils; regional partnership for progress councils; and state
appropriations.
(d) The council shall promulgate rules to carry out the
purposes and programs of the West Virginia development office to
include generally the programs available and the procedure and
eligibility of applications relating to assistance under the
programs. These rules are not subject to the provisions of chapter
twenty-nine-a of this code, but shall be filed with the secretary
of state. Any new rules promulgated by the council shall be
promptly submitted to the joint commission on economic development
created in article three of this chapter. The current rules shall
be submitted to the joint commission on economic development within
thirty days of the effective date of this section.
(e) The council shall require accountability and provide for
oversight of public funds spent in furtherance of economic
development. Economic development performance based accountability
shall be established for every program and an annual economic
development report of on-budget and off-budget economic development
expenditures shall be presented to the governor and the joint
commission on economic development, including performance measures
and indicators to provide the public with an accounting of all
existing programs.
ARTICLE 4. ECONOMIC DEVELOPMENT PERFORMANCE-BASED ACCOUNTABILITY.
§5B-4-1. Performance measures and indicators.
(a) Each state agency that has a direct effect on the goals
set forth in article three of this chapter or has information
relating to the indicators listed in this section shall cooperate
with the council on community and economic development, established
in section three, article two of this chapter, department of tax
and revenue, established in section two, article one, chapter five-
f of this code, and the development office, established pursuant to
section one, article two of this chapter by providing any
information necessary or beneficial in developing a statewide
economic development report. It is the ultimate responsibility of
the department of tax and revenue, the development office and the
council on community and economic development to:
(1) Coordinate with the governmental entities in collecting
the data;
(2) Consolidate the data into one report that sets forth in a
clear and understandable format the status of the state with
respect to the goals set forth in article three of this chapter.
At a minimum, the indicators set forth in this section shall be
used in reporting the progress toward achieving the goals;
(3) Report to the joint commission on economic development by
the first day of October of each year the progress toward achieving
the goals outlined in this article; and
(4) Make the report available to the public free of charge
electronically, including through the internet, and by hard copy for no more than the cost of printing or copying the report.
(b) With respect to intellectual infrastructure in the twenty-
first century, the performance indicators shall be determined by
the council on community and economic development and may include
the following:
(1) High school graduation rate;
(2) Educational attainment;
(3) GED attainment rate;
(4) Improvement in primary and secondary education test
scores;
(5) College enrollment rate; and
(6) College completion rate;
(c) With respect to "the new economy: new challenges and new
solutions", the performance indicators shall be determined by the
council on community and economic development and may include the
following:
(1) Per capita income increases;
(2) Exports by state-based firms;
(3) Small business creation rate;
(4) Existing business investments;
(5) Tourism visitation and expenditures;
(6) Reduction in poverty rate;
(7) Unemployment rate;
(8) Research/commercialization;
(9) Growth in GSP;
(10) Growth in employment; and
(11) Growth in availability of venture capital.
(d) With respect to "results-based government: planning for
the future", the performance indicators shall be determined by the
council on community and economic development and may include the
following:
(1) Business tax reform;
(2) Changes in workers' compensation ratings;
(3) Reduction in medical costs;
(4) Investment in local/regional infrastructure development;
(5) Per capita tax burden;
(6) Availability of telecommunications service; and
(7) Fiscal stability and balanced revenue.
(e) With respect to "building bridges and empowering
citizens", the performance indicators shall be determined by the
council on community and economic development and may include the
following:
(1) Increase in nonprofits statewide effectiveness in economy;
(2) Creation of regional economic development groups;
(3) Number of main street communities;
(4) Consolidation of area governments/services/school
districts;
(5) Increase in number of public/private collaborations statewide;
(6) Changes in national livability ratings; and
(7) Improved internal/external image of the state.
§5B-4-2. Policy and program evaluations.
The council shall perform policy and economic development
incentive program evaluations. The evaluations shall consider both
on-budget and off-budget expenditures. Direct on-budget programs
include grants, loans, customized training, and infrastructure
improvements. Off-budget activities shall include, but are not
limited to, tax expenditures in the form of tax relief, credits and
incentives. The council shall review, assess and evaluate the
appropriateness, effectiveness and efficiency of programs and the
administration thereof.
(a) Appropriateness. -- The council shall perform an
evaluation of the program appropriateness and goal achievement and
make a determination as to the development problems, opportunities
and trends that led to the creation of the incentive program.
Factors to be considered regarding any new or existing incentive
program include:
(1) The effectiveness and relevancy of any incentive program
in helping to achieve the objectives of high quality jobs, high-
performance enterprises and widely shared prosperity;
(2) The specific objectives of economic development incentive
programs;
(3) The measurement of incentive outcomes;
(4) The relationship and effect of other program initiatives;
(5) The other economic development tools potentially more
relevant as priority actions; and
(6) The continued appropriateness of such programs and any
suggested modifications necessary to adapt to state priorities.
(b) Effectiveness. -- Any evaluation must include a thorough
calculation of the relative costs and benefits of the program or
policy in question and to determine whether incentives affect
economic decisions. Factors to be reviewed may include:
(1) The actual number of jobs and capital investment compared
with projections;
(2) The public costs per job;
(3) Whether the incentive programs actually triggered the
investment;
(4) The impact of the multiplier effect on secondary job
creation;
(5) The employment distribution and the demographic of such
employees;
(6) The quality of jobs created or retained; and
(7) The fiscal impact of such incentives or programs.
(c) Efficiency. -- Any evaluation must include a measurement
of the efficiency with which program outcomes have been achieved,
including, but not limited to, an examination of the costs of program inputs and the efficiency of the administrative processes,
as well as a review of the administrative and related design issues
that affected the use of incentives by private firms.
§5B-4-3. Accountability for new programs.
Any legislative proposals for economic development shall
include provisions outlining outcome-based and performance-based
accountability. Additionally, the legislation or rules shall
include a description of the benchmark indicators that will be
utilized to gauge the progression of productivity against the
performance measurements. These indicators shall compare
effectiveness to national and state data when available to provide
a comparison of progress by which the state may measure the
attainment of the goals listed above.
§5B-4-4. Accountability recommendations for existing programs.
(a) The department of tax and revenue, established in section
two, article one, chapter five-f of this code, and the development
office, established pursuant to section one, article two of this
chapter, shall report to the joint commission on economic
development by the first day of December, two thousand two, on
recommendations on developing performance-based, accountability
evaluation of all present economic development programs. This
evaluation shall include a description of the benchmark indicators
that will be utilized to gauge the progression of productivity
against the performance measurements. These indicators shall compare effectiveness to national and state data when available to
provide a comparison of progress by which the State may measure the
attainment of the goals listed above.
(b) All agencies implementing economic development programs
shall cooperate with the department of tax and revenue and the
development office, by providing the information needed to
accomplish the objective set forth in subsection (a) of this
section.
§5B-4-5. Elements of an effective incentive evaluation system.
(a) A well-constructed incentive evaluation system shall be
integrated into the planning, operation, monitoring and improvement
of a program. Economic development agencies, as defined by the
joint commission on economic development, should develop an
operational plan that defines how the incentive program will be
organized, staffed and conducted on an operational basis. That
plan should incorporate a well-defined process for monitoring and
evaluation as a key component of the program's ongoing activities.
The monitoring and evaluation component of the operating plan
should:
(1) Identify programs or activities to be evaluated;
(2) Articulate reasons for conducting the evaluation;
(3) Develop goals to be achieved by the evaluation;
(4) Identify participants and their respective roles in the
evaluation;
(5) Identify planned uses of the evaluation results;
(6) Establish decision rules for judging program performance;
(7) Describe resource constraints;
(8) Identify data needs and sources;
(9) Determine analytic tools to be used; and
(10) Designate the performance time period to be assessed.
(b) Monitoring and evaluation tools may include:
(1) Collecting outcome data that are directly related to the
policy goals that programs aim to achieve; and
(2) Developing data collection and analysis techniques that
look beyond job creation to wages of jobs, the impacts of
development on quality of life and the availability of jobs to
unemployed or underemployed individuals in different ethnic groups
and geographic areas. The data collection and analysis techniques
may include the following:
(A) Define clearly the basic purpose and policy goals of
incentives;
(B) Develop better program planning, designing and
implementing effective performance monitoring and evaluation;
(C) Set realistic expectations and benchmarks against which
program outcomes may be measured;
(D) Ensure that sufficient management attention and resources
are allocated to monitoring and evaluation responsibilities;
(E) Design monitoring systems to allow for simultaneous assessment of individual project impacts, program evaluation and
portfolio (or agencywide) reviews; and
(F) Invest in training for economic development practitioners
to enhance their skills in the design of performance monitoring and
evaluation.
§5B-4-6. Unified economic development report.
(a) In West Virginia, there is not a comprehensive
understanding of how much is spent on economic development. The
reason for this is that investments in economic development include
both on-budget expenditures and off-budget tax incentives, as well
as a range of interest subsidies, public agency commitments,
financing by quasi-public corporations and other activities. One
strategy for addressing this knowledge gap is the creation of a
unified (or integrated) economic development report. Such a report
allows the governor, Legislature, state agencies and citizenry to
better see what is presently being spent on economic development.
The unified economic development report provides key data including
investment on economic development, priorities for economic
development and the types of firms, industries and communities
assisted by incentive programs.
(b) The department of tax and revenue, established in section
two, article one, chapter five-f of this code, and the development
office, established pursuant to section one, article two of this
chapter, in cooperation with all other agencies involved in economic development programs, shall establish an unified economic
development report for inclusion in a separate section, entitled
"economic development", of the executive budget operating detail.
The unified economic development report shall include both on-
budget expenditures and off-budget tax incentives specifically
aimed at retaining or expanding existing businesses or attracting
new businesses to the state. All other state agencies shall
cooperate with the department of tax and revenue and the
development office by providing all information requested for the
purpose of completing the unified economic development report.
(c) The unified economic development report should include
information compiled from the data defined in sections three and
four of this article.
§5B-4-7. Study of decreasing required number of reports.
The department of tax and revenue, established in section two,
article one, chapter five-f of this code, and the development
office, established pursuant to section one, article two of this
chapter, shall perform a study of any economic development reports
that are required of any state governmental agency by any law or
rule. Prior to the first day of December, two thousand two, the
department shall report back to the commission on the findings of
the study and recommendations for the elimination of any required
reports due to duplication, obsolescence or for any other reason.
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FINANCE COMMITTEE AMENDMENT
On page two, section three, line twenty-one, by striking out
the word "five" and inserting in lieu thereof the word "six".