By Mark Garrity
On February 3, Governor Rauner went ahead and signed an executive order creating a privately funded and run economic development agency that he says will “jump-start” job growth.
Needless to say job growth would be good. It’s apparently stalled out here in Illinois since last May. Some say it’s because of the cratering of the coal industry in Southern Illinois. But whatever the cause, after five straight years of pretty decent employment growth in the state we regressed in 2015 and lost about 3,000 jobs. The Bureau of Labor Statistics Illinois job growth numbers: (2010 = 60,700; 2011 = 57,900; 2012 = 79,700; 2013 =57,000; 2014 = 66,800) You’ll notice that those job creation numbers coincide with the temporary income tax increase and Pat Quinn’s leadership. The job losses since then match up with the drop of the income tax back down to 3.75 percent and the beginning of Bruce Rauner’s seige of Springfield, er term in office. But I digress.
The new non profit group Rauner created is called the Illinois Business and Economic Development Corporation, or BEDC. It is supposed to work as sort of an outside sales force for the state to lure businesses and jobs with the existing state Department of Commerce and Economic Opportunity serving as a sort of home office to approve any incentives or deals the corporation wants to offer to companies. The BEDC is supposed to operate with private donations but the tax incentives and any deals it makes will still be paid for by state taxes and the DCEO will have final say and hold all the responsibility.
When Rauner first proposed this new arrangement last spring Democrats questioned the transparency of such a public-private partnership. Speaker of the House Mike Madigan wanted a three-year sunset review of the new agency to see how well it worked. If the autopsy looked good they could bring the agency back to life. Governor Rauner objected to that provision so the bill stalled in the Assembly.
There’s good reasons to question this new public private economic development authority. Let’s back up a little because it’s not a new idea. Republican governors and legislators have embraced private state economic development authorities with little oversight so passionately for over a decade you’d think millionaires from ALEC were spoon feeding the concept to them.
John Kasich of Ohio featured killing his state’s Department of Development and replacing it with a private corporation called “JobsOhio”in his 2010 campaign. After winning his race he did just that in 2011 and since then JobsOhio has come under fire for excessive pay, loans and lack of transparency. It has a convoluted funding formula involving liquor sale taxes paying for state bonds Illinois couldn’t emulate if we wanted to and we don’t.
In Wisconsin Governor Scott Walker and his allies in the state legislature wasted no time after he won in 2010 restructuring the Department of Commerce and transferring it’s economic development functions to a new privatized entity called the Wisconsin Economic Development Corporation (WEDC). Walker said the WEDC would be instrumental in creating the 250,000 new private sector jobs he promised by the end of his first term. That promise turned out about as well as his presidential campaign. The state didn’t create even half that many private sector jobs in his first term.
Sadly the WEDC has been scandal fest from the start. Mismanaging public money, questionable subsidies, inadequate transparency, little accountability, conflicts of interest, doling out huge management paychecks, and overstating job creation are some of the lowlights.
Indiana’s Economic Development Corporation, a public/private partnership which has been around longer than most, has faced a lot of criticism over its inflated job creation claims. An Indianapolis TV station, WTHR, did such a thorough expose it forced the state into an audit that found that more than 40 percent of the jobs the IEDC took credit for creating had never materialized. There were also bribery allegations because every sundae ought to have a cherry on top I guess.
In 2012, a New York Times investigation found that altogether, state and local governments spend approximately $80 billion annually on business-incentive programs. That’s about 10 percent of all state revenues spent on corporate welfare trying to lure businesses.
In those years after the financial collapse when job growth wasn’t any better than Bush’s jobless recovery during most of the 2000s it’s understandable that governors and state legislators wanted to try something, anything, to get their economies moving again.
But now we have the results. There’s no good reason to pile a privately funded and run entity on top on the state Illinois DCEO. Especially when the governor refuses any oversight, relying instead on the DCEO to take all the blame if the deals Rauner’s BEDC boys bring them turn bad like so many of the ones in these other states. I only touched briefly on some of the problems in three of the neighboring states, believe me there are all kinds of stories about waste, fraud and abuse in these public/private partnership agencies all over the country.
If he doesn’t like the way the DCEO works then Rauner should have cleaned house and brought in some of his guys to run it. But they would have to live on government pay which isn’t as lavish as it is in the private sector and they’d have to abide by government oversight.
According to a study by the Pew Charitable Trusts, seventeen states have passed laws since 2012 requiring a formal evaluation of individual incentive programs to figure out if they are worth it. In light of all the cronyism and abuse these type of programs invite it seems asking “are they worth it” is being kind.
That’s why it’s good to see that on February 24th Speaker Madigan announced in a press release that the house is forming a special committee, chaired by Rep. Lou Lang, D-Skokie, to review Rauner’s decision to establish the BEDC. In his press release Madigan said “The formation of a public-private partnership could produce lasting benefits, but our obligation to taxpayers includes working to ensure transparency within the program,” pointing to Wisconsin and some other states with public-private group fiascoes. He also made clear that Rauner doesn’t want the BEDC to be subject to Illinois’ Freedom of Information Act. “That must change to permit greater transparency of how taxpayer dollars are being expended,” the Madigan statement said.
Both sides say they are not looking for a fight over this. Madigan’s camp said he wants to appoint Republicans to the oversight committee too and is willing to go along with the project if there’s transparency. Rauner’s spokesperson said they “welcome discussion to improve the integrity of the (corporation)”.
Illinois lost jobs in 2015 for the first time since 2009. Undoubtedly Rauner doesn’t want more years like that on his resume. Passing a budget (or two) and raising enough revenue to keep our bridges, universities and the social safety net from collapsing would do much more to encourage job growth in Illinois than simply farming out business development corporate welfare to Rauner’s friends. But at least with some oversight Rauner’s buddies aren’t as likely to embarrass us like Walker’s did in Wisconsin.
Downers Grove IL, 60516
Downers Grove IL, 60516