The Cost of Arkansas’s QACF

By Jacob Bundrick

Since its creation in 2007, state officials have allocated more than $185.7 million to the Quick Action Closing Fund (QACF). The program, which allows the state to provide discretionary cash grants to select companies, is intended to attract and retain businesses in Arkansas. But have these millions actually increased economic activity?

Research says “no.” In a 2018 study published in The Review of Regional Studies titled “Do Business Subsidies Lead to Increased Economic Activity? Evidence from Arkansas’s Quick Action Closing Fund,” UCA Associate Professor of Economics and ACRE Scholar Thomas Snyder and I found no evidence to suggest that QACF subsidies lead to increased employment or business establishments in Arkansas’s counties.

Our results suggest that providing targeted subsidies through the QACF is not an effective use of Arkansas’s tax dollars.

What else could Arkansas officials have done with $185.7 million?

  1. Provide every taxpayer a one-time income tax refund of $124.[i]
  2. Construct 55 miles of new 2 lane arterial road.[ii]
  3. Establish a $185.7 million rainy day fund.
  4. Provide a one-time bonus of $5,562 to every certified K-12 teacher.[iii]
  5. Hire and employ 100 parole/probation officers for 46 years.[iv]
  6. Hire and employ 100 public defenders for nearly 30 years.[v]

This list is by no means exhaustive. There are probably other equally worthy policies that Arkansas officials could prioritize.

The bottom line is that spending Arkansas’s limited tax revenue in unproductive ways is costly to the state and its residents. The evidence is clear: there are better uses of public money than providing subsidies to firms through the QACF.

[i] One-time income tax refund per taxpayer is calculated using the total number of Arkansas taxpayers based on calendar year 2016 income tax returns. Taxpayer data was collected from the Arkansas Department of Finance and Administration’s April 26, 2018 presentation to the Arkansas Tax Reform and Relief Legislative Task Force titled “Individual & Corporate Income Tax Revenue Impact of Exemptions.”

[ii] Miles of new 2 lane arterial road is calculated using the Arkansas Department of Transportation’s July 2016 estimated cost per mile for a new 2 lane arterial road in an urban area.

[iii] One-time bonus for teachers is calculated using the number of certified teachers in Arkansas school districts during the 2018-2019 school year. Teacher data was collected from the Arkansas Department of Education’s Arkansas K-12 Profile: 2018-2019.

[iv] The employment period of 100 parole/probation officers is calculated using the 2017-2018 GS07 minimum pay rate. Salary grade information for parole/probation officers was collected from Act 252 of 2018. GS07 pay rate data was collected from the Arkansas Department of Finance and Administration’s fiscal year 2018 pay plans.

[v] The employment period of 100 public defenders is calculated using the 2017-2018 GS11 minimum pay rate. Salary grade information for public defender I’s was collected from Act 87 of 2018. GS11 pay rate data was collected from the Arkansas Department of Finance and Administration’s fiscal year 2018 pay plans.