The second step in developing a state budget wrapped up last week with the Legislature holding its final hearings on the governor’s proposed fiscal plans (that was the first step). Lawmakers held four hearings with two big ones related to the state’s future economy: higher education and economic development.

New York spends billions on its economic development programs, more than virtually every other state. Nearly two-thirds of those costs are tax incentives given to private businesses, which reduce the amount of revenue that state and local governments otherwise would have collected. 

Those programs have been subject to ongoing criticisms, in particular for the state’s failure to conduct a comprehensive review that evaluates whether these programs actually work. The state support for such programs hinges on the promise that they will generate jobs and stimulate economic activity. There are few mechanisms for real-time evaluation, in particular to answer the “but-for” question: Would companies have hired workers or made investments at the same level they did but-for the tax incentives? In other words, was the tax incentive necessary to induce the companies’ investments or would they have happened anyway?

According to some analyses, the answer to that question is “no.”

In addition, some tax incentives make little sense. For example, New York law allows for tax benefits for the use of fossil fuels, usually to protect consumers from some taxes, like buying home heating products.

In the age of climate catastrophe – and possibly shrinking federal support – tax incentives for oil, gas or coal products should be examined carefully. Advocates urged that the Fossil Fuel Subsidy Elimination Act, which will end $336 million in oil and gas subsidies that benefit corporations, be included in the budget.

Yet, these incentive programs are continued, developed, and often heralded year after year – despite failures.

That debate about tax breaks raged loudly during the hearing on economic development.

The higher education hearing focused, not surprisingly, on the governor’s plans for funding those institutions. But there was a big element of economic development there too.

As some advocates testified, higher education remains one of the smartest investments both the state and individuals can make in creating economic mobility and breaking cycles of poverty. Study after study makes it unequivocally clear that college graduates are better positioned to land higher paying jobs, earn more over the course of their lives, have more in savings, and contribute more in taxes.  Moreover, the state’s colleges generate significant economic activity, with $8 in economic activity for every $1 of state investment.

There was one proposal advanced by the governor that did get a largely positive reaction from lawmakers. The governor advanced a free community college program. However, the governor’s free tuition plan comes with a twist: It would be available to community college students ages 25-55 choosing classes that result in high-demand jobs, particularly in the upstate region. 

While most lawmakers admitted that the proposal was a good first step on which to build, questions were raised. One criticism was that academic disciplines disfavored by particular employers should not be a luxury for those who can afford it. So, instead of tipping the scales in favor of specific fields and further squeezing the humanities, some lawmakers urged that the final budget agreement offer this program to students regardless of which major they choose.

Free tuition to public colleges is of course hardly a new idea. The limitations proposed by the governor are likely the result of trying to minimize the financial cost to the state. If lawmakers choose to add more money, that probably means a more expansive program.

One thing for sure, the final budget will likely spend billions on economic development. Whether higher education – and free community college – gets the funding it needs, only time will tell.

It’s beyond argument that the governor and state lawmakers should focus resources on programs that work. Less ribbon cutting and press releases and more investments in higher education will not only help the state, but concentrate on an important sector that, year in and year out, delivers on its promises.