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Can States Afford to Fund Green Jobs Instead of Schools?

April 13, 2012

The State Budget Solutions (SBS) describes itself as a "non-partisan, positive, pro-reform, proactive" project whose mission is to "engage political journalists and bloggers, state officials and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency and accountability." To that end, it's produced a report titled Green Jobs Don't Grow On Trees, which takes a cool, dispassionate look at how "green jobs" fit in with the overall economy, primarily at the state level.

As the report says, done correctly, "energy-saving programs can actually help states' budgets." That's obviously the ideal both green jobs advocates and state governments are aiming for, to say nothing of what most citizens would want. "Public schools, administrative buildings, and transportation services all require energy, making energy efficiency measures attractive to state governments," the report notes, adding that many states hope for federal assistance with green jobs projects. The report looks at how certain key green jobs efforts are faring at the state level, and draws some general observations as to how the tradeoff of combining public subsidies with increased government regulation intended to promote green jobs is affecting states' economic health.

The First Issue: What Is A Green Job?

Defining "green jobs" turns out to be trickier than one might suspect. Politicians and state agencies have a vested interest in keeping the definition as nebulous as possible, of course, since this increases the pool of activity and public funds expenditure they can crow about being "green," to impress taxpaying voters.

As the study notes, however, this makes it exceedingly difficult to measure the actual effectiveness of green jobs subsidies and programs. In fact, as the report records, the state of Washington defines "green jobs" as any job that can "promote environmental protection and energy security." Using this broad definition, SBS officials point out, "green jobs could include anything from a windmill technician to a city sanitation worker."

And when you consider that self-reporting is the sole official means of collecting green jobs information in many states, you can see the difficulty of reaching a solid conclusion one way or the other over the effectiveness of the tax money being spent.

Greenwashing Current Jobs

Sometimes, for example, a state will report X-number of "new green jobs" created, which were "created" by adding "green" duties to existing jobs, with a nice little bump in statistics and talking points, but in reality a net gain of zero jobs. And if a worker leaves a traditional job to take a green job, is that a jobs gain?

One particularly favored method for funding green jobs at the state level is the tax break. This means states don't have to actually appropriate funds, but they lose tax revenue. They do tend to add up quickly since they're easy to hand out and don't count as actual "expenses" on the budget, but as the report says, in the final analysis they're probably the most costly method of promoting green jobs a state can devise, in large part due to their ease.

Some states guarantee loans to politically-connected green companies. The problem here is that government is ill-suited to determining which companies have the best chance of succeeding and weaning itself off government subsidies, with the result being that millions of taxpayer dollars are dished out with little more than vague hopes. Examples given in the report include Evergreen Solar, which got $58 million in public subsidies and ended up laying off 800 workers, and of course, the Obama Administration's pet project, Solyndra, which cost $527 million in federal taxpayer funds.

The basic calculus behind tax breaks, government-guaranteed loans, or the use of public funds for any purpose, is that a dollar spent here cannot be spent there. When government appropriates money from its citizens and puts it in Solyndra, it not only wastes that money, it costs the economy what that money could have done -- a company operating in the private sector that actually succeeded and created lasting jobs, for instance.

This is known as "opportunity cost," and it's a devilishly difficult figure to conjure with since it's always a theoretical. It's just the gut feeling that doing something with $527 million other than flushing it down a toilet is a better use of that money, but you can't demonstrate what that would have been.

Green Jobs Funding Or Schools? Oregon Picks Green Job Funding.

Sometimes the argument is rendered fairly clearly, however. The report notes that from 2009-2011, the state of Oregon granted over $160 million through its Business Energy Tax Credit, a program geared towards promoting green jobs in the state, "even as cuts to K-12 education forced school districts in the state to lay off teachers, eliminate classes, and shorten the school year."

Then there's the accounting that's been done on such bellwether green jobs public funding projects as the state of Florida's. Between 2006-2010, the report says, Florida allocated $67 million for its grant and rebate programs to be spent on specific projects. All of the money is either spent or committed to specific projects.

How effective was it? The Florida Energy Systems Consortium for the Florida Energy and Climate Commission reviewed the results, and concluded that the state of Florida's various renewable energy programs "have created 494 jobs to date, at an average cost of $81,947 per job across the various programs, excluding federal stimulus money."

Grants include such obviously useless projects as $2 million for, as the SBS report describes it, "a firm to link motivated, educated businesses and consumers with market-ready technologies and certified installers, though why this linkage is needed if the technology is market-ready is unclear."

It pays to be politically connected in Florida when money for "green jobs" is being shoveled out.

Think Florida's Bad? Try Oregon.

Still, Florida's is almost a success story compared to Oregon. The Business Energy Tax Credit (BETC), in operation since 1979, is both revered and detested by Oregonians depending on if you're giving or getting money from what the report called "the mother of all spending boondoggles" for the state.

So far, it's cost Oregon taxpayers over $1 billion, and has benefited companies claiming to be using or developing various renewable and clean energy technologies. It's handed out $583 million since 2000 alone, and "may be as high as $290 million in the current two-year budget cycle," the report says.

Fine, a billion dollars, equal to four Alex Rodriguez contracts with the New York Yankees, but what have Oregon taxpayers got in return for their money other than warm fuzzy feelings about how wonderful they are to be supporting green technology?

The short answer is "Not much." The program relies on Oregon Department of Energy officials to "decide which projects deserve tax credits and which do not, with no clear qualifications for the task," the SBS report notes.

And their incompetence shows, costing Oregonians. Cascade Grains got $12 million in tax credits under BETC just before going bankrupt. The Clatskanie ethanol plant got $12 million in tax credits and a $20 million dollar loan from the state, according to the report, and it too promptly went bankrupt, deciding to add insult to injury: "It is now suing the state for an additional $10 million in subsidies it claims it is owed."

Hey, Let's Only Fund Really Bad Companies.

Part of the problem is the basic mindset at work here, unfortunately endemic to government. As the SBS report notes, BETC administrators want to fund "only those projects that would not survive without the tax credit." In other words, those companies committed to producing such fantastically unmarketable products that they would never be able to meet payroll or expenses unless money fell out of the sky. So the Oregon government makes the explicit, considered decision, as a matter of conscious policy, to try to commit millions and millions of dollars only to companies that will die as soon as they stop receiving subsidies.

And it's not like the state's even getting its fair share of green jobs in exchange for playing sugar daddy. The Shepherd's Flat wind farm got over $1.2 billion in state, local, and federal subsidies, $30 million from the state itself, for which it provides 35 full-time jobs. Compared to that, Horizon Wind Energy creating 36 full-time jobs for $11 million in tax credits looks like a model of efficiency.

Government competence reaches it zenith in such decisions as BETC giving Mesilla Valley Transportation a total of $4.5 million in tax credits, even though the company is based in El Paso, Texas, and Las Cruces, New Mexico, "and logs less than 0.8 percent of their vehicle miles on Oregon roads."

As the SBS report concludes, when it comes to green jobs, "States should let the market find and reward the winning ideas, rather than trying to do so themselves."

They should, but of course they won't until citizens demand fair returns and clear accounting for "green jobs" programs touted by government.



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