Archive for September, 2013

Gov. Rick Perry’s Partisan Job-Piracy Tour: Where Will He Go Next?

September 24, 2013

ImageThe more I ponder Gov. Rick Perry’s costly partisan job-piracy raids, the more contradictory and wasteful they seem. If preying upon states with supposedly bad “business climates” is his mission, he might want to rethink his travel itinerary. (His office says there will be more trips.)

In case you missed them, last week we issued a report and a blog exploring the public taxpayer dollars and the private corporate dollars behind the state-sponsored non-profit group paying for Texas Gov. Rick Perry’s job-piracy trips—and big-budget TV and radio advertising campaign—to six states, all led by governors of the opposite political party. He himself framed them as “a good red state blue state conversation.”

So far, Gov. Perry’s response to our findings about the taxpayer money has been evasive: his spokesperson has simply repeated the misleading disclaimer “no state money,” even though we exposed the fact that there are oodles of local Texas taxpayer dollars flowing to the entity that funds his trips and advertising.

His discredited disclaimer aside, as we review his six trips, they look even more wasteful. Take his Missouri trip in August, for example: Perry used $100,000 in radio ads and a high-profile speech to support the cause of Missouri lowering its corporate income tax. Specifically, he urged an audience of Missouri legislators and business leaders to override a veto by Gov. Jay Nixon of a corporate tax-cut bill. But if Perry believes that lower taxes help a state attract jobs (he relentlessly cites the fact that Texas has no income tax), shouldn’t he have urged Missourians to hike their corporate taxes?  Wouldn’t lower Missouri taxes make it harder for him to pirate jobs to Texas?

Regular Clawback readers know that we don’t accept Perry’s premise that tax breaks are effective in site location; they rarely can matter because they are too small a cost factor; see more here. But holding Perry to his own rhetoric contradicts his Show Me State venture.

Contradictions aside, Gov. Perry’s trips are officially about policy one-upmanship, about preying upon states that are allegedly vulnerable because they have inferior “business climates.”  There are several states that supposedly have poor business climates that the Governor seems to be ignoring: the Tax Foundation, among other conservative groups, ranks some poorly (though there are good reasons to be highly skeptical of their methodologies, see our study here).

Such rankings beg the question: why isn’t Gov. Perry also pirating states like New Jersey and Iowa? The Tax Foundation rates New Jersey #49 on its State Business Tax Climate Index (and three other conservative groups all rate New Jersey between #43 and #49, a lower average score than any of the six states he has pirated). The Garden State is a target-rich environment packed with high-paid jobs.

The Tax Foundation also rates Iowa low, at #42.  Perry has traveled to Iowa, presumably because it has the first presidential caucus. Is that why he hasn’t criticized its business climate? Or is it because the Hawkeye State (like New Jersey) has a governor of the same political party? How about Wisconsin, rated the 43rd worst business climate by the Tax Foundation?

Another rational tack would be geography: we know from studies done in other states that adjoining states are often prominent sources of in-migrating companies. That would suggest Perry should stage trips to New Mexico, Louisiana and Oklahoma. As well, Florida shows up high on an in-bound list from the Austin Chamber of Commerce.

As my writings over two decades make clear: I don’t wish job piracy upon any state; it is objectively an ineffective strategy that can waste huge sums of taxpayer dollars. But if coaxing more jobs to Texas is his true goal, then all of these states are logical targets for Gov. Perry. Unless, of course, his choices are simply partisan, to avoid offending governors of his own political party.

We’ll be watching to see where Gov. Perry goes next.

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New Jersey Subsidy Overhaul Scraps Cost Controls and Accountability

September 19, 2013

Fallout from Hurricane Sandy and this month’s tragic boardwalk fire are not the only costs that New Jersey taxpayers will face in the coming years – Governor Chris Christie has signed off on a massive overhaul of the state’s business subsidy system that will cost the state plenty.

The Economic Opportunity Act of 2013 consolidates New Jersey’s biggest subsidy programs into two programs that will likely cost more than the largest five currently do.  Gone are the Business Employment Incentive Program (BEIP), the Urban Transit Hub Tax Credit, and the Business Retention and Relocation Assistance Grant (BRRAG) tax credit.  The state will now award job subsidies to companies through the Economic Redevelopment Growth Grant and the Grow New Jersey program.  Supporters of the Act argue that streamlining and simplifying New Jersey’s subsidy system will enhance the business climate of the state, but the legislation is seriously deficient in the matter of accountability.

This is not to say that the state’s previous subsidies were without problems.  In its nearly two decades of use, BEIP awards have cost the state over $1.5 billion.  At one point, the New Jersey Economic Development Authority was even issuing bonds in order to meet its BEIP debt obligations to subsidized companies.

Recently the Christie Administration has accelerated its subsidy spending, amounting to more than $2 billion awarded to companies in the last 3 years alone through a combination of programs.  Over half of that amount was spent through the once-credible Urban Transit Hub Tax Credit program, a subsidy designed to spur development near transit stations.  With the support of Gov. Christie, the pool of credits available for the program was expanded and quickly exhausted, with many of the awards going to companies making short in-state moves.

The two remaining subsidy programs are deeply flawed.  The Economic Redevelopment and Growth Grant (ERG) program, enacted in 2008, diverts more types of tax revenue away from public coffers than any other tax increment financing program in the nation.  One of the first awards made through this program was a bailout for the struggling Revel Casino in Atlantic City – a project so financially toxic that Morgan Stanley walked away from its nearly $1 billion investment in the development.  (Revel has since declared and emerged from bankruptcy.)

Ironically enough, the other surviving subsidy, Grow New Jersey, was enacted to appease suburban and rural areas that had lost jobs through headquarters relocations subsidized by the out-of-control Urban Transit Hub Tax Credit program.  Since the first application was approved in April 2012, the state has awarded an average of $22.2 million per month to New Jersey businesses.

Unsurprisingly, in their new iterations, Grow New Jersey and ERG lack aggregate cost controls.  There is no annual or program-wide cap for use of either subsidy, virtually ensuring that New Jersey’s economic development spending spree will continue unchecked.  The potential costs to the state are immeasurable; fiscal analysis of the bill conducted by the Office of Legislative Services concluded that “the bill will produce an indeterminate multi-year State revenue loss” but it “cannot project the direction or magnitude of the bill’s net fiscal impact on the State and local governments.” There is a   $350 million maximum subsidy per company but business eligibility criteria have been loosened.

Aside from the potentially astronomical costs to the tax-paying public, the Economic Opportunity Act of 2013 introduces a host of other accountability problems to the state’s subsidy system.  Chief criticisms include the inclusion of retailers as eligible recipients, the removal of the state’s long-standing prevailing wage requirement for subsidized facilities, the elimination of the requirement that subsidized businesses pay a portion of health care benefit premiums, the allowance for businesses to count part time employees toward job creation requirements, and the high probability that both subsidy programs will accelerate suburban sprawl in the state.

In spite of the Christie Administration’s unprecedented spending on business subsidies over the past three years, New Jersey’s economic recovery lags behind most of the nation.  At last count, the state unemployment rate was 8.7 percent, earning it a ranking of 43rd in the country.  More unchecked spending on business subsidies is surely no remedy for the state’s employment problem.  The definition of insanity is doing the same thing over and over again and expecting different results, an adage unfortunately lost on Gov. Christie and New Jersey’s lawmakers.

Posted in Corporate relocations, Economic Recovery, Hurricane Sandy, Job Quality Standards, Jobs, New Jersey, Sprawl, Subsidies | 1 Comment »

Who Is Funding Texas Gov. Rick Perry’s Partisan Job-Piracy Trips?

September 19, 2013

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Washington, DC–September 18, 2013—Good Jobs First today released a study examining Texas Gov. Rick Perry’s unprecedented string of partisan job-piracy trips into six states led by governors of the opposing political party: California, Illinois, Connecticut, New York, Missouri and Maryland (today). It explores the funding behind the trips and the television and radio advertising that accompanies them, identifying both public and private monies that flow to TexasOne, which sponsors the trips. The report is available at www.goodjobsfirst.org .

“States have competed for capital for decades, but to our long knowledge there has never been such a red state-blue state partisan streak of job piracy as Gov. Perry’s,” said Greg LeRoy, executive director of Good Jobs First and lead author of the study. “Texas taxpayers have a right to know about the public funds that partially support TexasOne. And elected officials and consumers in every state may be surprised by our findings. Companies that serve national markets are paying Peter to try to rob Paul.”

The job-piracy trips represent an enormous surge in spending for television and radio advertisements that feature Gov. Perry himself. In eight months, TexasOne has spent about $1.8 million in advertising buys to publicize Gov. Perry’s job-piracy trips. That sum exceeds TexasOne’s entire FY2012 budget by more than half a million dollars, and is about nine times what TexasOne spent on advertising and promotion in FY2012.

The study finds that scores of local Economic Development Corporations (EDCs), funded by local sales tax dollars, as well as some city and town governments, and other local government agencies in Texas, form the most numerous group of dues-paying members to TexasOne and accounted for about one fourth of its revenue in FY2012. However, the federal tax returns of the non-profit 501(c)(3) corporation that sponsors TexasOne refer only to “private contributions.”

The study also points out that Gov. Perry’s press releases announcing his trips include a funding disclaimer that prompts more questions. They say state funds aren’t used to pay for the advertising air time or Gov. Perry’s travel or accommodations, but they are silent on local taxpayer dollars, and the trips involve many other expenses.

The study also finds 40 corporations funding TexasOne, including two dozen that are publicly traded companies or subsidiaries of such companies. Some serve national markets; some even have headquarters or large facilities in states that Perry is trying to lure jobs from. These include Lockheed Martin in Maryland and Citigroup and Verizon in New York. Others have significant facilities in piracy-target states, such as: the ExxonMobil and Shell refineries in California; the Union Pacific rail facilities in California, Illinois and Missouri; Capital One’s banking networks in Maryland and New York and Citigroup’s in California and Illinois; and various production facilities of Altria (Illinois), Lockheed (California and New York) and Novartis (California and New York). Finally, the study names consumer-oriented companies that fund TexasOne, such as     AT & T, Verizon and Capital One, and asks: would their customers approve of the companies’ funding partisan job piracy?

Good Jobs First is a non-profit, non-partisan resource center promoting accountability in economic development and smart growth for working families. Founded in 1998, it is headquartered in Washington, DC and includes Good Jobs New York.

 

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The Affordable Care Act’s Employer Penalty Gap

September 3, 2013

walmart_jwj_subsidiesAlong with the scandalous number of the uninsured, one of the biggest healthcare outrages in the United States has been the ability of large companies employing low-wage workers to avoid providing decent group coverage, letting those employees enroll instead in public programs such as Medicaid.

Those programs were meant for poor people not in the labor force or those working for marginal employers.  In the absence of any legal obligation to provide workplace coverage, giant corporations such as Wal-Mart exploit the public programs and thus shift costs onto taxpayers. A recently updated report by the Democratic staff of the U.S. House Committee on Education and the Workforce estimates that the workforce of a typical Wal-Mart Supercenter costs taxpayers some $250,000 a year in Medicaid costs.

One might think this is going to change under the Affordable Care Act that is gradually taking effect. While the law contains a requirement for individuals to have coverage, there is no real employer mandate to provide that coverage to workers. Instead, the ACA imposes penalties on certain employers for failing to provide affordable and inadequate coverage. Yet there are no fines levied when a boss pushes a worker onto the Medicaid rolls.

In fact, the ACA’s provisions encouraging states to expanded Medicaid coverage, while a good thing for the uninsured, will make it easier for low-wage employers both to avoid providing group coverage and to escape penalties for that refusal. This is worth keeping in mind when businesses complain about the supposedly onerous employer penalties in the ACA—penalties whose implementation the Obama Administration announced in July will be delayed for a year.

The ACA’s employer penalties have a very narrow scope. They will apply only when an employee of a firm with 50 or more full-time workers (the law’s definition of a “large” employer) seeks non-group coverage from an insurance company through one of the new state Exchanges and the employee qualifies for a premium or cost-sharing subsidy based on his or her household income. Those individual subsidies are available only for workers whose household income is between 100 and 400 percent of the federal poverty line (FPL) for their family size and whose employer either fails to provide any group coverage or provides coverage that is unaffordable or inadequate.

This means that employers of people earning less than the FPL or more than 400 percent of the FPL face absolutely no risk of penalties for failing to provide decent coverage, while the workers in those income ranges are denied subsidies from the Exchanges. Those earning less than the FPL may or may not be eligible for Medicaid, depending on the state. Those earning more than 400 percent of the FPL are not eligible for Medicaid in any state.

Penalties may also not apply when “large” employers fail to provide affordable coverage to those in the 100-400 percent of FPL range. That’s because some of those workers will for the first time qualify for Medicaid if they live in a state that accepts the optional federal incentives in the ACA for expanding Medicaid eligibility.

Some concern has been expressed about the potential coverage gap for those low-income families which are not eligible either for an Exchange subsidy or Medicaid, but much less attention has been paid to what amounts to an employer penalty gap.

A primary aim of the ACA is to reduce the ranks of the uninsured, but the rejection of a single-payer system means that workplace-based coverage needs to be strengthened. That should have meant a rigorous employer mandate. Instead, the ACA went with a pay-or-play system whose penalties turn out to be full of holes. Companies such as Wal-Mart may thus find it easy to continue shifting healthcare costs onto the public.

At the state level, one of ways activists have sought to fight such cost-shifting has been to push for disclosure of data showing which companies account for the most enrollees in Medicaid and other public plans. Such lists have been published for about half the states, with Wal-Mart or McDonald’s typically appearing at the top.

The ACA will require “large” employers to file reports indicating whether they provide group coverage, but it appears these reports will not be made public. Not only does the ACA fail to impose a real employer mandate; it also misses an opportunity to shame those freeloading employers which expect taxpayers to pick up the tab for their failure to provide decent coverage to their workers.

Note: This an a shortened version of a piece originally posted in the Dirt Diggers Digest.

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