Thus, Massachusetts has been a high government-debt state for at least 15 years, with state debt increasing dramatically during the late 1980s and early 1990s. Total Massachusetts state debt-servicing cost was about 8.5 percent of the state budget in 1995. Most state and local government economic development programs fit easily into one or both of two categories. First are packages of benefits intended to attract or retain specific businesses, in most cases actual or potential large employers in the state. Typical components of such packages are abatements of state corporate income or local property taxes.
States also finance new technology in state universities and technology development programs.
State governments are poorly placed to finance new technology, because state officials lack the expertise needed to make such highly technical allocation decisions and because much of the benefit of new technology spills over the boundaries of individual firms and states. Invariably, multiplier effects are calculated. The accuracy of the calculation is very important because, in the absence of a technology effect, only a substantial multiplier effect justifies government subsidy. The absence of technology or multiplier effects means that unsubsidized private investments generate the same benefits as subsidized investments. All the economic impact studies I have read exaggerate the size of the multiplier effect.