At least 34 states make outright monetary grants of some sort to companies that locate or expand within these states’ borders. The most common type of grant reimburses companies for expenses incurred in training employees. Another type of grant, usually based on a formula, compensates companies when they meet employment-related criteria, such as employing a minimum number of individuals or paying a certain wage. This type of direct grant program is much less popular with business, however, partly because the benefit for meeting such criteria is usually handed out in the form of ex-post tax credits and exemptions instead of up-front payments.
An increasingly popular form of a grant, both for business and government, and perhaps the most wasteful, is the discretionary deal-closing fund. Discretion is usually exercised by a state’s governor or an individual or committee appointed by the governor. These funds are often handed out using an undefined and nontransparent process, and for often undisclosed purposes, to large corporations to induce them to locate facilities within a state. Twenty-two states have deal-closing funds. The aforementioned Texas Enterprise Fund is one example of these types of programs.
Deal-closing funds are especially damaging because of the likelihood that grants will be handed out purely on the basis of political influence rather than on any objective criteria, even when seemingly objective criteria are specified in law. All grants, like any corporate welfare, are potentially economically distortive, but discretionary grants are especially so as they substitute arbitrary and political decision-making for market forces, enriching a few at the expense of many. The costs of these economic distortions exceed the apparent taxpayer expense of these grants. States’ grant programs vary in their eligibility requirements, but when the supply of funding is exceeded by demand, discretion must be exercised; it is not likely to be entirely objective, nor are the requirements that might be written into law.
Professional sports are also often singled out for subsidy, more often at the local level. The subsidies are largely aimed at stadiums, which are often financed in part by bonds that are partly paid by local taxes. The share of financing varies from project to project and examples are too numerous to list here, but most professional sports forums have at least some share of public funding, which amounts to an outright grant of wealth to the owners of professional sports franchises.
There are other corporate welfare grant funds that are often overlooked, such as by the New York Times in its catalog of these programs. For example, Arizona has a Biomedical Research Commission, with its own dedicated revenue source. It funds research by private corporations in addition to that by academic and nonprofit institutions. Maine and Florida have similar funds. Oklahoma directs some tobacco settlement funds to health research through its Tobacco Settlement Endowment Trust. Texas funds cancer research through the Cancer Prevention & Research Institute.
Michigan operated a number of business plan competitions that handed out grants and loans to winners. These examples are in addition to the many millions states spend indirectly on research that benefits various industries and specific companies by funding universities.