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Bill SchwekeOne of  North Carolina’s most experienced and insightful economic development experts, retired CFED wonk and former Senior Fellow Bill Schweke, forwarded the following brief essay in response to the series in Raleigh’s News & Observer on North Carolina’s rather amazing generosity in dispensing tax breaks and other giveaways to businesses in the name of “economic development.”  

JUST SAY “NO”
By William Schweke

The more things change, the more they stay the same. The new series in Raleigh’s News & Observer (“The Missing Money”) provides a near perfect illustration of this adage in the field of taxes, subsidies, and business attraction.

Like most states desperate for new jobs during the Great Recession, the price tag for the state’s package of general tax loopholes and company-specific, tailored incentives has increased significantly, during the past few years, with very little pushback from critics.

Indeed, the debate has tended to be framed as follows: Read More

NC Budget and Tax Center

Like all budgets, Governor Pat McCrory’s proposed spending plan for FY2013-2015 is based on a set of ideas about how the world works—what spurs economic growth, what creates jobs, and the most effective ways of using state government to achieve these goals.  Unfortunately, his proposal for economic development represents quite a few bad ideas, including the sharp reduction in spending for economic development nonprofits that receive state funding through the Commerce-State Aid portion of the budget.  These nonprofits provide vital economic development resources for historically disadvantaged and persistently distressed communities and minority populations. 

At the same time, he proposes boosting spending on industrial recruitment and other traditional economic development activities that will likely bypass the communities benefitting from the work of these nonprofits, if any meaningful job creation or economic growth is generated at all.  Read More

NC Budget and Tax Center

Later today, Governor McCrory will announce his proposals to convert the Department of Commerce into a public private partnership that administers at least some of the state’s economic development programs.  North Carolina taxpayers should be concerned.

Although we won’t know the specifics of this privatization scheme until the Governor’s announcement, we do know from previous public statements that the plan will likely involve the creation of a nonprofit economic  development authority that receives financial support from both taxpayers and corporate donations in exchange for overseeing a range of activities related to industrial recruitment, existing industry support, and possibly small business development. This may also include administration of the state’s incentive programs—the Job Development Investment Grants (JDIGs), the OneNC Fund, and the Jobs Maintenance and Capital program for large employers.

Privatizing economic development isn’t new—a number of states have experimented with this approach over the past two decades, and the results are not encouraging. According to one recent report, states that have adopted public private partnerships for their economic development efforts have seen the misuse of taxpayer dollars, questionable incentive awards to failing companies, the appearance of pay-to-play incentive granting to those companies providing financial support to the partnership, and frequent lack of transparency and accountability with how the partnership spends taxpayer dollars.

And to top it all off, many of these partnerships haven’t proven to be very effective in generating the job creation results promised

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NC Budget and Tax Center

With the imminent release of the Governor’s budget—possibly as soon as later today—this is the last in a series of posts looking at key issues ahead in the FY 2013-15 North Carolina state budget. This post examines the Natural and Economic Resources (NER) area of the budget, the functional area that provides spending for the Department of Environment and Natural Resources (DENR), Department of Agriculture, Department of Labor, the Clean Water Management Trust Fund, and a variety of programs associated with the state’s economic development efforts.  These include the Department of Commerce, the N.C. Rural Center, the N.C. Biotech Center, and about a dozen nonprofit entities that are funded as part of the Commerce-State Aid portion of the budget.

While the main story about NER in FY 2011-13 involved the dismantling of DENR’s regulatory functions and overall 49% cut in funding to the total budget area, the story for this biennium will likely involve the state pass-through funding from Commerce-State Aid to the various nonprofits engaged in economic development efforts on behalf of the state. 

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