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Our New Blog Location

May 26, 2015

The Good Jobs First blog can now be found right on our homepage and is no longer known as Clawback. All old posts (with revised URLs) can be found on our new blog page on that site. This Clawback site will remain in place as an archive of old posts with their original URLs.

We invite you to change your bookmarks and RSS feeds (here is the new one). In addition to the blog, our redesigned homepage contains a news feed reposting the best journalism from around the country on subsidy controversies and advances in accountability.

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Uncle Sam’s Favorite Corporations

March 17, 2015

UncleSam_WebTeaserFederal “Corporate Welfare” Database Now Online
Study: Large Corporations Dominate Federal Subsidy Awards; Banks, Foreign-Owned Energy Firms and Federal Contractors Among the Biggest Recipients

Washington, DC, March 17, 2015 — Two-thirds of the $68 billion in business grants and special tax credits awarded by the federal government over the past 15 years have gone to large corporations. During the same period, federal agencies have given the private sector hundreds of billions of dollars in loans, loan guarantees and bailout assistance, with the largest share going to major U.S. and foreign banks.

These are key findings of Uncle Sam’s Favorite Corporations, a study with accompanying database released today by Good Jobs First, a non-profit and non-partisan research center on economic development accountability based in Washington, DC. They derive from the first comprehensive compilation of company-specific federal subsidy data. The study and database are available at www.goodjobsfirst.org.

The database, which collects more than 160,000 awards from 137 programs, expands Good Jobs First’s Subsidy Tracker, which since 2010 has posted economic development data from states and localities. The federal data was enhanced with Good Jobs First’s proprietary subsidiary-parent matching system, enabling users to see individual entries linked to more than 1,800 corporate parents, along with each parent’s total subsidies.

“For more than 20 years, so-called corporate welfare has been debated widely with little awareness of which companies were receiving most of the federal assistance,” said Good Jobs First Executive Director Greg LeRoy.

“We now see that big business dominates federal subsidy spending the way it does state and local programs,” said Philip Mattera, principal author of the study and creator of Subsidy Tracker. “Our hope is that the new Subsidy Tracker will serve as a resource in the ongoing debates over federal assistance to business,” Mattera added.

Other key findings:

  • Six parent companies have received $1 billion or more in federal grants and allocated tax credits (those awarded to specific companies) since 2000; 21 have received $500 million or more; and 98 have received $100 million or more. Just 582 large companies account for 67 percent of the $68 billion total.
  • The largest recipient of grants and allocated tax credits is the Spanish energy company Iberdrola, which acquired them by investing heavily in U.S. power generation facilities, including wind farms that have made use of a renewable energy provision of the 2009 Recovery Act. Iberdrola’s subsidy total is $2.2 billion. Other top grant/allocated tax credit recipients include NextEra Energy (parent of Florida Power & Light), NRG Energy, Southern Company, Summit Power and SCS Energy, each with more than $1 billion. The results exclude the numerous corporate tax breaks that cannot be attributed to individual companies.
  • Mainly driven by the massive programs launched by the Federal Reserve in 2008 to buy up toxic securities and provide liquidity in the wake of the financial meltdown, the total face value of loans, loan guarantees and bailout assistance run into the trillions of dollars. These include numerous short-term rollover loans, so the actual amounts outstanding at any given time, which are not reported, were lower but likely amounted to hundreds of billions of dollars. Since most of these loans were repaid, and in some cases the government made a profit on the lending, we tally the loan and bailout amounts separately from grants and allocated tax credits.
  • The biggest aggregate bailout recipient is Bank of America, whose gross borrowing (excluding repayments) is just under $3.5 trillion (including the amounts for its Merrill Lynch and Countrywide Financial acquisitions). Three other banks are in the trillion-dollar club: Citigroup ($2.6 trillion), Morgan Stanley ($2.1 trillion) and JPMorgan Chase ($1.3 trillion, including Bear Stearns and Washington Mutual). A dozen U.S. and foreign banks account for 78 percent of total face value of loans, loan guarantees and bailout assistance.
  • A small number of companies have obtained large subsidies at all levels of government. Eleven parent companies among the 50 largest recipients of federal grants and allocated tax credits are also among the top 50 recipients of state and local subsidies. Six of the 50 largest recipients of federal loans, loan guarantees and bailout assistance are also on that state/local list. Five companies appear on both federal lists and the state/local list: Boeing, Ford Motor, General Electric, General Motors and JPMorgan Chase.
  • Foreign direct investment accounts for a substantial portion of subsidies. Ten of the 50 parent companies receiving the most in federal grants and allocated tax credits are foreign-based; most of their subsidies were linked to their energy facilities in the United States.
  • The Federal Reserve aided a large number of foreign companies in its efforts to stabilize banks that had acquired toxic securities originating mainly in the United States. Thanks largely to those programs, 27 of the 50 biggest recipients of federal loans, loan guarantees and bailout assistance were foreign banks and other financial companies, including Barclays with $943 billion, Royal Bank of Scotland with $652 billion and Credit Suisse with $532 billion. In all cases these amounts involve rollover loans and exclude repayments.
  • A significant share of companies that sell goods and services to the U.S. government also get subsidized by it. Of the 100 largest for-profit federal contractors in FY2014 (excluding joint ventures), 49 have received federal grants or allocated tax credits and 30 have received loans, loan guarantees or bailout assistance. Two dozen have received both forms of assistance. The federal contractor with the most grants and allocated tax credits is General Electric, with $836 million, mostly from the Energy and Defense Departments; the one with the most loans and loan guarantees is Boeing, with $64 billion in assistance from the Export-Import Bank.
  • There is also a link to the current debate over so-called tax “inversions.” Federal subsidies have gone to several companies that have reincorporated abroad to avoid U.S. taxes. For example, power equipment producer Eaton (reincorporated in Ireland but actually based in Ohio) has received $32 million in grants and allocated tax credits as well as $7 million in loans and loan guarantees from the Export-Import Bank and other agencies. Oilfield services company Ensco (reincorporated in Britain but really based in Texas) has received $1 billion in support from the Export-Import Bank.
  • Finally, some highly subsidized banks have been involved in cases of misconduct. In the years since receiving their bailouts, several at the top of the recipient list for loans, loan guarantees and bailout assistance have paid hundreds of millions, or billions of dollars to U.S. and European regulators to settle allegations such as investor deception, interest rate manipulation, foreign exchange market manipulation, facilitation of tax evasion by clients, and sanctions violations.

Posted in Subsidies, Subsidy Tracker | 1 Comment »

Tax Breaks and Inequality

December 16, 2014

inequality_graphicReport: Development Subsidies Fuel Economic Inequality by Enriching Billionaires and Low-Wage Employers

Washington, DC, December 16, 2014—Taxpayer subsidies awarded to corporations by state and local governments, supposedly to create good jobs and growth, are instead fueling economic inequality by going to companies that are owned in whole or part by billionaires, and to low-wage employers.

Indeed, about one-third of the individuals in the Forbes 400 are linked to 99 taxpayer- subsidized companies, including every one of the 11 wealthiest individuals and all but two of the richest 25. Subsidies have also gone to 87 companies that pay low wages. More than $21 billion in taxpayer dollars have been awarded to these two sets of firms. Seven retailers appear on both lists.

Those are the major findings of Tax Breaks and Inequality, a report published today by Good Jobs First, a non-profit resource center on economic development based in Washington, DC. The report is available at  www.goodjobsfirst.org/taxbreaksandinequality and was funded by the Nathan Cummings Foundation.

“Inequality has many causes, and now we can say development subsidies are among them,” said Good Jobs First Executive Director Greg LeRoy. “Subsidies are being awarded to large, profitable companies controlled by billionaires such as Warren Buffet’s Berkshire Hathaway while we have too many communities that really need the help.”

Tax Breaks and Inequality is a “mash-up” of Good Jobs First’s Subsidy Tracker database with two lists of companies: firms linked to members of the Forbes 400 list (the wealthiest Americans) and major low-wage employers.

“This year, Forbes highlights those said to have built fortunes entirely on their own rather than through inheritance, yet our research shows that many of the billionaires got assistance from taxpayers,” said Philip Mattera, Good Jobs First Research Director and lead author of the report.

The members of the Forbes 400 control or are otherwise closely linked to 99 large corporations that have been awarded more than $19 billion in cumulative subsidies, as documented in Subsidy Tracker. Five of the 99 firms have been awarded more than $1 billion in subsidies, including Intel ($5.9 billion), Nike ($2 billion), Cerner ($1.7 billion), Tesla Motors ($1.3 billion) and Berkshire Hathaway ($1.2 billion). The average subsidy total for the group, which is limited to those firms receiving $1 million or more, is $196 million.

Among the individuals on the Forbes 400 linked to one or more of the 99 highly subsidized companies are every one of the 11 wealthiest individuals and all but two of the top 25. These include Bill Gates, whose $81 billion fortune comes mainly from his holdings in Microsoft, which has been awarded $203 million in subsidies; Warren Buffett, whose $67 billion net worth derives from Berkshire Hathaway, which has been awarded $1.2 billion in subsidies; Larry Ellison, whose $50 billion net worth comes from Oracle, which has been awarded $18 million in subsidies; the Koch Brothers, each worth $42 billion from Koch Industries, whose subsidies total $154 million; and four members of the Walton Family, each worth more than $35 billion from Wal-Mart Stores, which has been awarded more than $161 million in subsidies.

Inequality is also caused by the long-term stagnation and even the decline of wages in real terms for many low- and middle-income workers. Here, one would hope that the billions spent on economic development would help raise living standards for typical families. But instead Tax Breaks and Inequality finds dozens of large low-wage companies being subsidized.

Eighty-seven such companies have each been awarded more than $1 million in state and local subsidies, for a total of $3.3 billion. Retailers dominate the list, with 60 firms awarded more than $2.6 billion in subsidies. Twelve firms in the hospitality sector (restaurants, hotels and foodservice companies) account for more than $245 million in subsidies. The low-wage companies with the most in subsidies are: Sears ($536 million), Amazon.com ($419 million), Cabela’s ($247 million), Convergys ($202 million), Starwood Hotels & Resorts ($166 million) and Wal-Mart Stores ($161 million).

Eight companies, seven of them retailers, are both linked to members of the Forbes 400 and pay low wages: Sears, Amazon.com, Wal-Mart, Best Buy, Bass Pro, Meijer, Menard, and Allegis Group.

“Subsidies are certainly not the main cause of growing inequality,” LeRoy points out in a policy chapter. “But subsidizing billionaires and low-wage companies is a strong facial connection that our Subsidy Tracker now enables us to make.”

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Multiplying Megadeals

September 8, 2014

intel-ra-overheadjpg-4a39e7d62752a00aNevada’s $1.3 billion package for Tesla’s battery “gigafactory” is another in a seemingly endless series of giant subsidy deals that state and local governments have been made to think are the only way to attract major investments.

It comes on the heels of a $2 billion deal given to Intel in exchange for a commitment to expand its chip operations in Oregon (photo). Even California, which has tended to avoid the megadeal game, recently gave $420 million tax credits both to Lockheed Martin and to Northrop Grumman in connection with their competing bids to handle a big bomber project for the Air Force.

These are among 19 large subsidies announced in 2014 and eight from the second half of 2013 which Good Jobs First has just added to our Subsidy Tracker as part of an update to the research we did last year for our Megadeals report. We also added 27 older deals, most of them as a result of our decision to expand the definition of Megadeals to all those with a value of $60 million or more (the previous threshold was $75 million). The 54 new entries bring our total universe of Megadeals to 298, whose history — both in terms of number per year and total value per year — can be seen in the following charts.

 

Number of megadeals per year Sept 2014

Total dollar value of medageals per year Sept 2014

It’s clear that the trend toward more Megadeals we identified in our report is continuing. The spike in 2013 reflects the record-setting $8.7 billion deal Boeing got in Washington State. The number of deals during the eight months of this year is already approaching the full-year totals for recent years, and the dollar total is already ahead of 2012’s figure. A full list of our 298 Megadeals can be downloaded here.

The Megadeal additions are only part of the updates we’ve just made to Subsidy Tracker. My colleague Kasia Tarczynska collected nearly 7,000 additional basic  entries from 60 programs in 13 states, including the first disclosures made for programs such as the new California Competes tax credit and the South Carolina Film Production Incentives. See the Update Log for a list of all the additions.

We’ve also continued the process of parent-subsidiary matching announced earlier this year with the introduction of Tracker 2.0. We just uploaded matches for more than 100 additional parent companies, bringing the total to 1,415.  We have linked these parents to 35,000 individual entries whose aggregate dollar value equals 77 percent of all the entries in Tracker.

Megadeals may be marching on, but they cannot escape our scrutiny.

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What’s Wrong with ALEC’s Subsidy Critique

July 25, 2014

alexexposedAt Good Jobs First we are normally pleased when another organization takes an interest in our issue and adds its voice to the campaign to end the wasteful subsidies given to corporations by state and local governments. Yet when it’s the American Legislative Exchange Council (ALEC) signing on, we can’t be quite so welcoming.

ALEC, a lightning rod for controversy relating to its role in promoting voter suppression, private prisons and “stand-your-ground” policies (read Trayvon Martin), has just issued a report entitled The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth.

At first glance, the study echoes many arguments we have made since our founding 16 years ago and which Greg LeRoy cataloged in The Great American Jobs Scam. It points out how the granting of special tax breaks for certain corporations (Boeing’s $8 billion deal in Washington State is cited as a “notorious example”) tends to increase the tax burden on other companies and puts them at a competitive disadvantage. ALEC also notes, using the example of the producers of the Netflix series “House of Cards” in Maryland, how companies that get subsidies to locate in a state may later threaten to leave unless they receive even more giveaways.

Yet the similarities to our work go only so far. Rather than an independent research group, as ALECExposed has documented, ALEC is essentially a front for powerful corporations to transmit their state legislative wish lists to business-friendly legislators. Although ALEC’s board is made up of elected officials, the real power in the organization comes from its corporate backers. The most important of these are the 10 companies represented on its Private Enterprise Advisory Council.

We checked those companies against our Subsidy Tracker database (which the ALEC authors choose not to mention, citing instead a New York Times compilation based largely on our data). It turns out that all but one of the 10 companies have received state and local subsidies. In some cases the aggregate subsidy amounts have been enormous: $340 million to Exxon Mobil, $278 million to Peabody Energy, $202 million to Pfizer, $133 million to United Parcel Service, and $89 million to Koch Industries, run by the supposedly free-market purist Koch Brothers. The total for the nine companies is more than $1 billion. The one company in the group that has apparently not received direct subsidies is Energy Future Holdings, but the struggling Texas utility (now in Chapter 11 bankruptcy) is owned by private equity firms led by KKR, whose other portfolio companies have received $55 million in subsidies.

We have no idea whether advisory council members reviewed the report before it was published, but one thing that may have placated them is that the document bends over backward to avoid criticizing companies that accept subsidies. Although the term “cronyism” implies some kind of improper collusion, the ALEC authors claim that taking subsidies should not be viewed as tax avoidance. “Businesses should generally not be vilified or blamed for tax cronyism,” they argue. “The key issue rests with the policymakers who introduce these laws.” The ALEC authors even go so far as to depict targeted tax breaks as a form of “central economic planning.”

We find ALEC’s analysis here historically ill-informed and refer the authors to Jobs Scam for a primer on how corporations and their site location consultants drive the subsidy-industrial complex. Given that history, it is ridiculous to equate the haphazard nature of subsidy policies with any kind of planning.

Although ALEC wants to blame poor policymaking for tax cronyism, the report also fails to acknowledge that big subsidy giveaways are common in states celebrated in the Rich States, Poor States reports written for ALEC by the unreconstructed supply-sider Arthur Laffer. For example, Utah, which Laffer ranks first in terms of its economic outlook and second in economic performance, has given generous packages to companies such as Procter & Gamble, Goldman Sachs, eBay and Adobe Systems.

Besides the hypocrisy and lack of historical awareness, ALEC’s report has another fundamental problem (akin to that of other conservatives such as those at the Mercatus Center): their alternative to “tax cronyism” or targeted corporate tax giveaways are generalized corporate tax giveaways. That is, after decades of declining corporate tax rates and corporate contributions to state treasuries, they want big business to pay even less of a fair share of the cost of public services.

At Good Jobs First, subsidy reform is intended to improve economic conditions for working families and give small businesses a fairer shake; it isn’t about reducing tax rates for corporations like those bankrolling ALEC.

Posted in Subsidies | 2 Comments »

Subsidizing Corporate Offenders

June 5, 2014

moneybagsontherunIt’s been clear for a long time now that, despite recurring calls to get tough on corporate crime, companies can essentially buy their way out of legal entanglements. In most cases this has come about through the U.S. Justice Department’s willingness to offer companies deferred prosecution agreements. The recent Credit Suisse guilty plea, which is not doing much to impair the bank’s operations, shows that big companies can even go about their business with a criminal conviction.

That’s not the worst of it. It turns out that many of these corporate offenders have received tax breaks and other forms of financial assistance from state and local governments around the country. This does not come as a complete surprise, but it is now possible to quantify the extent to which this unfortunate practice is taking place.

This estimate comes from mashing up two datasets. The first is the Subsidy Tracker I and my colleagues at Good Jobs First have compiled. In recent months we have enhanced the database by matching many of the individual entries to their corporate parents. For 1,294 large companies we now have summary pages that provide a full picture of the subsidies they and their subsidiaries have received.

The other data source is a list of the companies that have entered into deferred-prosecution and non-prosecution agreements with the Justice Department to settle a variety of criminal charges. (Although I refer to these firms as corporate miscreants or offenders, it must be pointed out that they were never formally convicted.)

The list appeared in the May 26, 2014 issue (print version only) of Russell Mokhiber’s excellent Corporate Crime Reporter. Mokhiber obtained it from University of Virginia Law Professor Brandon Garrett, author of a forthcoming book on corporate crime prosecution, and used it for an article showing that the bulk of those agreements are negotiated by a small number of law firms.

I took the liberty of using the list for another purpose: determining how many of the companies also appear in Subsidy Tracker. The results are striking: more than half of the miscreants (146 of 269, or 54 percent) have received state and local subsidies. These include cases in which the awards went to the firm’s parent or a “sibling” firm.

Even more remarkable are the dollar amounts involved. The total value of the awards comes to more than $25 billion. A large portion of that total ($13 billion) comes from a single company — Boeing, which is not only the largest recipient of subsidies among corporate miscreants but is also the largest recipient among all firms. Boeing made the Justice Department list by virtue of a 2006 non-prosecution agreement under which it paid $615 million to settle criminal and civil charges that it improperly used competitors’ information to procure contracts for launch services worth billions of dollars from the U.S. Air Force and NASA.

To be fair, I should point out that not all the subsidies came after that case was announced. In the period since 2006, Boeing has received “only” about $9.8 billion.

The other biggest subsidy recipients on the list are as follows:

  • Fiat (parent of Chrysler): $2.1 billion
  • Royal Dutch Shell (parent of Shell Nigeria): $2.0 billion
  • Toyota: $1.1 billion
  • Google: $751 million
  • JPMorgan Chase: $653 million
  • Daimler: $545 million
  • Sears: $536 million

Altogether, there are 26 parents on the DOJ list that have received $100 million or more in subsidies. As with Boeing’s $13 billion figure, the amounts for many of the companies include subsidies received before as well as after their settlement.

These results suggest two conclusions. The first is that state and local governments might want to pay more attention to the legal record of the companies to which they award large subsidy packages. A company that ran afoul of federal law might not be punctilious about living up to its job-creation commitments.

More broadly, the ability of companies caught up in criminal cases to go on getting subsidies suggests that there is insufficient stigma attached to involvement in such cases. If companies know that they can not only avoid serious punishment but still qualify for rewards such as tax breaks and cash grants, they are more likely to give in to temptations such as fraud, bribery, tax evasion, price-fixing and the like. Without real deterrents, the corporate crime wave will continue.

Reposted from the Dirt Diggers Digest.

Posted in Subsidies | 2 Comments »

The Latest from Subsidy Tracker

May 28, 2014

detectiveEarlier this year, my colleagues and I at Good Jobs First introduced a major overhaul of our Subsidy Tracker database. The big change in Tracker 2.0 was the addition of parent company information for entries representing three-quarters of the total dollar value of the dataset. This allowed us to document for the first time the outsized share of subsidy awards received by big business.

In the past three months we have been enhancing the enhancements. We have increased from 965 to 1,294 the number of matched parent companies, which together are linked to more than 31,000 individual awards with a total value of more than $113 billion. Our parent coverage now extends to the full Fortune 1000 as well as the Fortune Global 500, the Forbes list of the largest privately held companies, the Private Equity International list of the top 50 private equity firms (and their portfolio companies) and the Uniworld list of the 300 largest foreign firms doing business in the United States.

Each parent company has its own summary page, which can be accessed through a drop-down menu at the top of the Tracker search form. These pages include cumulative totals for the subsidies received by the company and all its units and subsidiaries; the states in which it has received the most awards; and a list of all the individual awards that went into those totals. Those lists are sortable and downloadable, and they include links to pages with details on the individual entries.

Since the release of 2.0 we have added a variety of new features to the parent summary pages, including indications of the time period covered by the data and the following identifying information: the company’s ownership structure, the location of its headquarters and its primary industry group. (See below for a summary of what these identifiers show.) We have also begun to add other key info sources on the companies, beginning with links (where available) to the firms’ CTJ-ITEP Tax Dodgers pages and to our Corporate Rap Sheets.

Along with the parent pages, we’ve created summary pages for each of the states and the District of Columbia. They show cumulative totals, the parent companies with the most awards and a sortable and downloadable list of all the listings for the state. The top states in terms of cumulative disclosed subsidy awards are New York ($21 billion), Washington ($13 billion) and Michigan ($10 billion).

We have not neglected the task of gathering new data. Led by my colleague Kasia Tarczynska, our effort to find new online and unpublished data has during these past three months resulted in 13,000 new listings, bringing our total to 258,000. Kasia is getting ready to implement a plan for systematically filing FOIA requests for missing data with state and key local agencies.

NEW CUMULATIVE SUMMARY DATA FOR SUBSIDY TRACKER PARENT COMPANIES

Top Parent Companies:

  • Boeing: $13.2 billion
  • Alcoa: $5.6 billion
  • Intel: $3.9 billion
  • General Motors: $3.6 billion
  • Ford Motor: $2.5 billion

Top Industry Groups:

  • Aerospace & military contracting: $14.3 billion
  • Motor vehicles: $13.9 billion
  • Steel & other metals: $8.2 billion
  • Semiconductors: $5.7 billion
  • Oil & gas: $5.3 billion

Top States Based on the Location of Parent Company Headquarters:

  • Illinois: $16.2 billion
  • New York: $13.6 billion
  • Michigan: $8.4 billion
  • California: $8.0 billion
  • Texas: $4.5 billion

Foreign Countries Whose Companies have Received the Most Subsidies for their U.S. Affiliates:

  • Japan: $5.3 billion
  • Germany: $2.4 billion
  • Netherlands: $2.2 billion
  • Italy: $2.1 billion
  • Canada: $1.8 billion

Subsidy Tracker 2.0 has a wealth of new information. Check it out today.

Posted in Disclosure, Subsidies, Subsidy Tracker | 2 Comments »

Comparing State Pension Costs to Corporate Subsidies and Tax Breaks

January 30, 2014

PUTTING PENSION COSTS IN CONTEXT: NEW REPORT SHOWS CORPORATE TAX SUBSIDIES AND LOOPHOLES OFTEN EXCEED STATE RETIREMENT COSTS

Attacks on Pensions, Safety Net Programs, Distract from Corporate Giveaways that Exacerbate Economic Inequality

Washington D.C., January 30, 2014 — State lawmakers who are considering drastic cuts to the retirement benefits of state workers are simultaneously giving away billions of dollars in corporate tax subsidies and loopholes, often in amounts far exceeding the cost of pensions, according to a new report.

Putting State Pension Costs in Context by Good Jobs First examines 10 states where elected officials are threatening to undermine retirement security by cutting the pension benefits of their teachers, firefighters, police officers, and hundreds of thousands of other public employees.  The states included in the report are: Arizona; California; Colorado; Florida; Illinois; Louisiana; Michigan; Missouri; Oklahoma; and Pennsylvania.

The findings show that in each state, the revenue lost to corporations through loopholes and tax breaks outpaces the current cost of pension benefits to state employees.

“In states across the country, politicians are attempting to solve the budget woes caused by Wall Street and the Great Recession by cutting the pension benefits of public employees,” said Philip Mattera, Research Director of Good Jobs First. “It is often stated that budgets are a matter of priorities.  And our research shows that corporate interests are generally prioritized over teachers, firefighters, police officers, and thousands of other employees who dedicate their lives to public service.”

The average retirement for a member of the Louisiana State Retirement fund is $19,000 a year. Yet, Louisiana gives away about $1.8 billion a year to corporations through corporate subsidies and tax loopholes—totaling about five times the annual pension cost for state workers.

Pennsylvania loses nearly $4 billion annually as a result of corporate subsidies and loopholes—more than two and half times the cost of public pensions. Pennsylvania’s state pensions average a modest $24,000 a year. In Michigan, corporations also enjoy about $1.8 billion in subsidies and tax breaks – more than three times the cost of meeting the state’s commitment to retirees.   The list goes on.

These ten states were chosen for analysis because their legislatures are underfunding pensions or elected officials are threatening to cut pension benefits. Actuarial analysis provided the normal cost of funding pensions on a yearly basis, which excludes the costs of making up for past underfunding.  Data was derived by examining the latest state tax expenditure reports, state budget documents, and reports by state tax and budget watchdog groups.

“As a matter of honest accounting and fair budgeting, state leaders should examine all forms of spending before they single out pensions or any other expense,” said Mattera. “Corporate tax breaks and loopholes are often poorly understood and little-noticed because they do not get debated as appropriations, nor do they often get sunsetted or audited. But over time they add up to hundreds of millions, or even billions, of dollars per year.”

Good Jobs First is a non-profit, non-partisan research center focusing on economic development accountability. It is based in Washington, DC.

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Privatized State Development Agencies Create Scandals Rather than Jobs

October 23, 2013

scandalnotjobs_box

Report: Privatized State Development Agencies Create Scandals Instead of Jobs

Analysis of Arizona, Florida, Indiana, Michigan, North Carolina, Ohio, Rhode Island, Texas, and Wisconsin gives other states roadmaps to avoid

Washington D.C. – Three years ago, newly elected governors in several states decided to outsource economic development functions to “public-private partnerships” (PPPs). Together with a handful of other states’ PPPs, these experiments in privatization have, by and large, become costly failures characterized by misuse of taxpayer funds, conflicts of interest, excessive executive pay and bonuses, questionable subsidy awards, exaggerated job-creation claims, lack of public disclosure of key records, and resistance to basic oversight.

Those are the cautionary conclusions of a study issued today by Good Jobs First, a non-profit, non-partisan research center.  The report looks at eight states with existing PPPs and one more proposed.  “Creating Scandals Instead of Jobs: The Failures of Privatized State Economic Development Agencies” is available at www.goodjobsfirst.org/scandalsnotjobs. It is a follow-up to a study issued in February 2011 when four states moved to create new PPPs.

“Things have gotten demonstrably worse in the past three years. We conclude that privatizing a state development agency is an inherently corrupting move that states should avoid or repeal,” said Greg LeRoy, executive director of Good Jobs First and lead author of the study. “Taxpayers are best served by experienced public-agency employees who are fully covered by ethics and conflicts laws, open records acts, and oversight by auditors and legislators.”

“In 2007 we consolidated Wisconsin’s economic development efforts, including terminating a state-created private economic development entity, Forward Wisconsin, in order to reduce political favoritism and misuse of public funds,” said State Senator Mark Miller. “Unfortunately we reverted to old-style cronyism in 2011 with the creation of the Wisconsin Economic Development Corporation which has been plagued with predictable ethics improprieties and gross mismanagement.”

“Enterprise Florida is our state’s most glaring example of cronyism and institutional corruption,” said Dan Krassner, executive director of the nonpartisan government watchdog group Integrity Florida.  “The organization engages in pay to play: it sells seats on its board to corporations for $50,000 and then gives away taxpayer-funded subsidies and vendor contracts to them in return.”

“Public dollars should be controlled by accountable and transparent public agencies, not handed off to private interests with looser standards and less oversight,” said Donald Cohen, executive director of In the Public Interest.

The report finds that:

  • Enterprise Florida faced new questions about shortfalls in the job creation performance of the companies it has recruited. There have also been controversies over a performance bonus paid to its CEO and subsidies awarded to companies represented on its board.
  • The first chief executive of the Arizona Commerce Authority was given a three-year compensation package worth $1 million, and even though he resigned after a year he received a $60,000 privately-funded bonus.
  • The Wisconsin Economic Development Corporation (WEDC) was accused of spending millions of dollars in funds from the U.S. Department of Housing and Urban Development without legal authority, failed to track past-due loans, and hired an executive who owed the state a large amount of back taxes.
  • JobsOhio 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 from review of its finances by the state auditor.
  • The Indiana Economic Development Corporation has faced continuing criticism over its job creation claims. Triggered by tenacious investigative reporting by Indianapolis TV station WTHR, a state audit found that more than 40 percent of the jobs promised by companies described by IEDC as “economic successes” had never materialized. IEDC was also rocked by allegations that its representative to China solicited bribes from companies.
  • The Rhode Island Economic Development Corporation is still litigating the biggest economic development scandal in Rhode Island history: its $75 million loan to the now-bankrupt 38 Studios.

Based on this persistent pattern of abuses, the report concludes that the privatization of economic development agency functions is an inherently corrupting action that states should avoid or repeal. With the “economic war among the states” already dominated by corporate interests and bargaining dynamics made worse by a long-term drop in job-creation deals, taxpayers are best served by experienced public-agency employees who are fully covered by ethics and conflicts laws, open records acts, and oversight by auditors and legislators.

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Editor’s note: Good Jobs First is a non-profit, non-partisan research center founded in 1998 and based in Washington, DC. In the Public Interest is a comprehensive resource center on privatization and responsible contracting. www.inthepublicinterest.org

Posted in Jobs, Subsidies | 3 Comments »

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.

Posted in Hidden Taxpayer Costs | Leave a Comment »

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