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State to businesses that get grants: Follow through or pay up

By , - Last modified: December 1, 2017 at 9:41 AM
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State officials are moving forward with plans to make sure businesses that receive economic development grants follow through on promises to create and keep jobs in Pennsylvania.

The move comes as the Department of Economic and Community Development looks to launch a grant program to help businesses and other organizations fund apprenticeship and pre-apprenticeship job training. The department announced yesterday that it is now accepting applications for those grants.

The state plans to fund the apprenticeship initiative through money it expects to bring in over the next several years under new clawback provisions and tightened eligibility requirements for grants awarded through DCED's job-creation programs.

State officials first aired plans for cracking down on grant recipients in early 2017 as part of Gov. Tom Wolf's 2017-2018 budget proposal.

DCED awarded nearly $1.1 billion in grants and other incentives for job-creation programs in 2016, and "already collects millions of dollars annually" from companies that do not follow through with the requirements attached to those funds, DCED said at the time.

Those already-collected funds will jumpstart the new apprenticeship program. Specifically, DCED plans to use $2.3 million it clawed back over the years from entities that received grants through Pennsylvania's former Infrastructure Development and Customized Job Training programs. The two programs, which helped companies fund projects like expansions and employee education, have since been consolidated into a DCED program called Pennsylvania First.

The new, strengthened claw-back provisions will not go into effect for another three years, when grant recipients that receive funds in 2017-2018 will have to show that they used state money in ways they said they would. Any money the state brings in then will fund future years of the apprenticeship program.

Pennsylvania Auditor General Eugene DePasquale is taking partial credit for the program, saying a 2014 audit of DCED's job-creation programs paved the way for the strengthened claw-back provisions. That audit found that only 56 percent of businesses that received state assistance created and retained the number of jobs promised in their grant contracts.

Specific changes

In an emailed statement Thursday, DCED described the following planned changes to its grant-awarding and claw-back procedures:

  • Strengthening jobs requirements for a company receiving state funds: If a company commits to creating jobs in Pennsylvania, and fails to make progress toward creating those jobs, the state will require full repayment of the grant amount. Exact benchmarks for measuring job-creation progress are still in the works. Officials have also increased the weight of job creation in the program applications' scoring matrices.
  • Enhancing enforcement when a company receives state assistance and subsequently leaves the state: If a company receives a grant from the state and subsequently moves operations out of Pennsylvania, DCED will require full repayment of the grant, as well as a 10 percent penalty.
  • Extending operational presence requirements: Companies that receive state economic development grants will be required to maintain any job created for no less than five years after the grant was received. In addition, companies will be required to maintain operations within the commonwealth for no less than eight years.

Apprenticeship program specifics

The application process is now open for DCED's new apprenticeship and pre-apprenticeship grants.

Businesses, community development groups and other organizations are eligible to apply for these funds, which they can use toward expenses like instructor salaries and educational materials.

Applicants can receive up to $3,000 per apprentice per year through the program for a period of up to three years. An applicant can seek funds for up to five apprentices per year.

DCED plans to award the grants on a rolling basis for as long as it has the funds to do so.

More information is available on DCED's website.

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Jennifer Wentz

Jennifer Wentz

Jennifer Wentz covers Lancaster County, York County, financial services, taxation and legal services. Have a tip or question for her? Email her at jwentz@cpbj.com. Follow her on Twitter, @jenni_wentz.

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