Private economic development agencies used by several states, including Ohio, have been marred by scandals over exaggerated job creation numbers, pay-to-play appearances, high pay for executives and a lack of public transparency, according to a study released Wednesday.
“We conclude that the privatization of economic development agency functions is an inherently corrupting action that states should avoid or repeal,” said the report from Good Jobs First, a Washington, D.C.-based policy group that advocates for greater accountability in economic development subsidies.
During the governor race in 2010, Republican John Kasich pitched the idea of replacing Ohio’s Department of Development with a private non-profit agency and charging it with economic development duties. Once in office, Kasich created JobsOhio and funded it with bonds backed by profits from the state’s liquor business.
Jobs First Executive Director Greg LeRoy said the study does not include original research but builds off a 2011 report as well as published news stories about JobsOhio and the other new private agencies.
“It’s difficult to comment on a document that is based on nothing more than a conglomeration of news articles that this group helped generate in its call for states to unilaterally disarm in the national competition for job creation,” said JobsOhio spokeswoman Laura Jones. “Our commitment is to Ohio and our mission is to help create more jobs for Ohioans by working with companies to grow and locate in our great state.”
Since its creation, JobsOhio has faced controversies:
* Six of its nine board members have financial ties to companies that received state incentives;
* Kasich signed a law that bars the state auditor from reviewing JobsOhio;
* The agency is exempt from public records laws and most ethics laws and it refused to disclose who provided $6.9 million in private donations to the organization, and it faces a lawsuit over whether it is constitutional.
Good Jobs First cites problems with JobsOhio as an example of why states should not turn to private agencies to handle economic development work.
“Economic development is complicated and there is lot of moving pieces. We think you want people who are covered by ethics laws and sunshine laws and accountability,” LeRoy said.
In recent years, newly elected governors in Ohio, Iowa, Wisconsin and Arizona all opted for the privatization model.
If a state goes this route, Good Jobs First says some safeguards are in order: maximum transparency on agency decisions and for subsidy recipients, strict rules against ethics conflicts and favoritism, appointment of a public ombudsman to oversee complaints and allow agency employees to unionize.