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October 23rd, 2013 By German Lopez | News | Posted In: News, Privatization, Economy

National Report Criticizes JobsOhio, Other Privatized Agencies

Good Jobs First says privatized agencies create scandals, not jobs

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JobsOhio and other privatized development agencies have created scandals and potential conflicts of interests instead of jobs, claims an Oct. 23 report from Good Jobs First, a research center founded in 1998 that scrutinizes deals between businesses and governments.

The report looked at privatized development agencies in seven states, including Ohio, and found that many of the same problems and scandals appear from state to state.

“These experiments in privatization have, by and large, become costly failures,” the report found. “Privatized development corporations have issued grossly exaggerated job-creation claims. They have created ‘pay to play’ appearances of insider dealing and conflicts of interest. They have paid executives larger salaries than governors. They have resisted basic oversight.”

The report focuses much of its findings on JobsOhio, a privatized development agency that Gov. John Kasich and Republican legislators established in 2011 to replace the Ohio Department of Development. The agency uses tax subsidies and other financial incentives to attract companies to Ohio with the intention of creating jobs.

But the report states JobsOhio “assembled a board of directors whose members included some of (Kasich’s) major campaign contributors and executives from companies that were recipients of large state development subsidies. It received a large transfer of state monies about which the legislature was not informed, intermingled public and private monies, refused to name its private donors, and then won legal exemption (advocated by Gov. Kasich) from review of its finances by the state auditor.”

It found similar issues in privatized development agencies in Wisconsin, Arizona, Indiana, Florida, Rhode Island and Michigan.

In some cases, the scandals have cost states millions of dollars with little job creation to show for it, according to the report.

The latest report concurred many of the findings in a similar 2011 report from Good Jobs First, which sought to warn states, including Ohio, about the potential risks of privatized development agencies.

For JobsOhio, a major cause for concern in the report is how difficult it is to hold the agency accountable. State legislators have approved multiple measures that shield JobsOhio from public scrutiny, including exemptions that exclude the agency from public records laws, open meeting rules and the possibility of a full public audit.

Some of the controversy also focuses on how the state funds JobsOhio.

“The proposal called for ‘leasing’ the state liquor profits ($228 million the year prior) for up to 25 years to JobsOhio, which would eventually issue $1.4 billion in bonds to pay for the use of the funds,” according to the report. “Critics charged that this was not a fair market price for profits that could potentially amount to $6 billion over the term of the agreement.”

The report laments that the privatized and secretive agency represents a shift for Ohio, which the report claims “was an early practitioner of online subsidy disclosure.”

Good Jobs First concludes privatized development agencies perpetuate an economic environment in which big companies already have too much say.

“The privatization structures we describe here, including the increasing use of corporate seats for sale on governing or advisory boards, absolutely favor large businesses that have the money and executive staff time to pay and play at such levels,” the report concluded. “But small businesses already get short shrift in economic development resource allocation, and they are still suffering the most in the Great Recession’s aftermath.”

The organization also takes issue with the idea that public agencies aren’t “nimble”: “In all of our years tracking development deals, we have yet to hear of a state agency that lost an important deal because it failed to provide labor market or real estate or incentive data in a timely manner.”

Asked about the report, Kasich spokesperson Rob Nichols responded in an email, “We don't pay much attention to politically-motivated opponents whose mission is to combat job creation.”

Kasich and other Republicans claim JobsOhio’s privatized, secretive nature is necessary to secure job-creating development deals with private companies in an economic environment that, through the Internet and globalization, moves more quickly than ever before.

Democrats, including gubernatorial candidate Ed FitzGerald, claim the agency is ripe for abuse, difficult to hold accountable and unclear in its results.

State Auditor Dave Yost plans to release an audit of JobsOhio soon, but no specific date or time frame is set for the release. The audit was granted prior to state legislation that barred the state auditor from doing a full sweep of JobsOhio’s financial details.

The full report:


 
 
 
 
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