I'm not one to invoke Higher Powers, but for those of us watchdogging corporate welfare, the early departures of candidates Rick Perry and Scott Walker are enough to suggest Divine Intervention. Two of the most outrageous subsidy sinners are gone. If Somebody Up There is meting out economic development justice, who's next to drop?
To recap the vanquished: Rick Perry (who switched parties early in his political career) did what no governor in U.S. history has ever done: make interstate job piracy a partisan sport. With his high-profile 2013 trips to six states with D governors (California, Illinois, Missouri, New York, Connecticut and Maryland), Perry even used television and radio ads featuring himself. The partisan piracy was funded with a mix that included taxpayer dollars, despite his misleading disclaimers. Even conservatives criticized Perry's signature subsidy programs with their pay-to-play appearance, prompting a Wall Street Journal columnist to opine on Perry's "Crony Capitalism Problem" during his 2012 run.
Scott Walker created the privatized Wisconsin Economic Development Corporation soon after taking office and it has been the source of recurring scandals ever since. State audits and investigative journalism found sloppy vetting of deals; failure to monitor job-creation outcomes; appearance of pay-to-play; political interference on deals to companies whose executives were campaign donors; lack of internal spending controls; mishandling of federal funds; lax record keeping; and high leadership turnover.
Who's next? It's a target-rich environment:
Chris Christie has granted more nine-figure subsidy packages than any governor in U.S. history--thirteen--and seven of those are $200 million or more. As New Jersey Policy Perspective details, Christie has given away five times more in five years than his predecessors spent in the prior decade. One deal--Revel Casino in Atlantic City--is bankrupt, and others are controversial for reasons such as paying a high price for short-distance relocations (Panasonic USA moved 14 miles at $409,000 per job). There has also been documented an appearance of "pay to play" among 21 of Christie's 30 largest subsidy beneficiaries.
Bobby Jindal has presided over a doubling of state spending on economic development subsidies (from about half a billion dollars to more than $1 billion), including massive increases in fracking tax breaks and film production cash rebates. Combined with various tax cuts backed by Jindal, the state has grown a deep structural deficit and made drastic cuts in public services, even cutting spending on higher education by half. The tension between tax breaks and public service came to a head in the 2015 legislative session, with some tax breaks reduced or capped.
John Kasich--who had a nationally prominent role against "corporate welfare" as then-chairman of the U.S. House of Representatives Budget Committee in the mid-1990s--has been inconsistent as governor. At first, he eagerly paid large "job blackmail" packages to three firms that threatened to leave the state; then he became stingier; then he offered Sears Holding Co. $400 million to leave Illinois. He also created the privatized JobsOhio soon after taking office. Although its launch was delayed by litigation, it has since been the subject of recurring controversies and is now legally shielded from performance audits by the state's auditor.
George Pataki presided over some extremely costly deals during his three terms in Albany, especially in computer chips and banking. Highlights include the then record-setting $660 million package in 2000 for IBM's Fishkill chip fabrication plant. That was dwarfed by the Advanced Micro Devices deal in Malta (now Advanced Technology Investment Company of Abu Dhabi), at more than $1.2 billion for 1,200 jobs, or $1 million per job. Pataki also oversaw the New York Liberty Development Corporation, the entity created to allocate, with New York City, $8 billion in post-9/11 "Liberty Bonds." Its biggest beneficiary: Goldman Sachs, which received $1.65 billion in Liberty Bonds as well as HUD Community Development Block Grant funds and additional city and state tax credits for its new headquarters in Lower Manhattan.
Jeb Bush spent aggressively seeking to turn Florida into a biotech hub, awarding more than $1 billion in subsidies, including $545 million to Scripps Research Institute and $233 million to Burnham Institute. But total job growth in the sector is far short of original projections, and the cost per job of the deals has been about $1 million. After leaving office, Bush took a lucrative board position with one company that had received a headquarters relocation subsidy package and a favorable land purchase from the state while he was governor.
Mike Huckabee served two and a half terms as Arkansas governor, but did little to improve transparency of economic development subsidies, which makes it hard to describe his track record. For example, during his administration, Arkansas published among the least useful tax expenditure budgets of any state.
Jim Gilmore recently entered the race; he was governor of Virginia from 1998 to 2002. His administration was not marred by big controversies; indeed, his Virginia Economic Development Partnership ran a tight ship, using safeguards such as clawbacks and job quality standards (one clawback would even recapture money later from Star Scientific, the company at the heart of the scandal surrounding Bob McDonnell, a later governor convicted of corruption).
Donald Trump's track record of getting and delivering (or not) on tax breaks for his many developer deals is a subject I have not yet seen well-explored, although a recent New York Times article described how tax abatements have shaped Trump's business strategy, as described in his book The Art of the Deal. I'm surprised that journalists have not spent more time yet on Trump's tax breaks. Our Subsidy Tracker database has some of his New York City deals thanks to that city's great disclosure law, but I assume many more deals exist in other local government records that are not yet online.
Among Democratic candidates, there are two governors and a former mayor that had executive branch authority over economic development.
Martin O'Malley did not "hunt buffalos" (i.e., spend large sums on individual companies) in Maryland, instead focusing on public investments such as transportation infrastructure and public education. During the Great Recession, his StateStat team made stimulus spending so transparent they won both of Good Jobs First's Recovery Act 50-state "report card" rankings. When in 2013 Texas Gov. Rick Perry came calling to pirate Maryland jobs, O'Malley zealously agreed to a nationally televised debate (that was pretty incoherent but feisty) on CNN's "Crossfire."
Lincoln Chafee, now a Democrat, won office in Rhode Island in 2010 as an Independent in part by decrying the state's worst-ever subsidy scandal: a $75 million package to 38 Studios, a video game company formed by former Red Sox pitcher Curt Schilling. The company soon failed, spurring fraud litigation. Taxpayers ended up being on the hook for some $89 million in principal and interest payments, and Chafee's administration doggedly sued the bond counsel on the deal and won a $4.4 million settlement. In the aftermath of 38 Studios, he steered away from big deals and focused on rebranding the state's commerce agency.
Bernie Sanders, an Independent running in the Democratic primaries, served as mayor of Burlington, Vermont for eight years starting in 1981 and began a process of reviving the city that was carried on by successor administrations, especially saving affordable housing and reclaiming the city's waterfront on Lake Champlain as a recreational and mixed-use space. His policies were so popular, two writers explain, that his economic development director was elected mayor for a total of 14 more years. For an inside account of Burlington's very intentional and successful 30-year development journey (with stingy and strategic use of subsidies), see Sustainable Communities, a recent book.
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