Gov. Pat McCrory recently unveiled his plan to privatize the economic development efforts that are currently being performed by the Department of Commerce. I applaud the governor’s recognition that North Carolina’s economic development system needs reform. But his plan to privatize the state’s economic development efforts? Not so much.
The crux of my concern rests in the administration’s apparent intention to continue using the kinds of corporate welfare programs that don’t create long-term and widespread opportunities across the whole state. If the state is bent on attracting cherry-picked companies by using selective enticements rather than creating a business environment attractive to all, then some simple reforms could make a difference for the effectiveness and public understanding of economic development.
Proponents of economic development incentives – generally a euphemism for cash grants and special tax breaks or credits – persistently assert that such incentives create jobs. But, truth be told, North Carolina does little to track the real-world results of its economic development give-aways.
Records of the negotiations aren’t available until the negotiations are over. Current law exempts economic development records from disclosure until 25 days after an incentive is announced or a business announces it will not locate in North Carolina. By then it is too late for taxpayers to weigh in.
The press and the public have little information about an incentive package beyond what appears in a news release or gets said at a carefully scripted news conference.
Press releases often tout that the business getting an incentive will create “up to X number of jobs.” Attention gets paid to the number cited but the “up to” part gets overlooked. It is difficult to discern what the minimum is that a company must do to get its slice of the corporate welfare pie.
Privatization of economic development efforts does nothing to redress these problems and, in the case of public records and transparency issues, may actually make things worse. As the state moves forward, I encourage the governor and the General Assembly to consider three possible reforms.
• First, create an ombudsman in the Department of Administration, away from the Department of Commerce and any new private entities that are responsible for wooing businesses and crafting incentives in the first place. The Department of Administration’s website describes it as the “business manager for North Carolina State government.” An ombudsman could scrutinize the state’s investment in economic development programs and verify that the taxpayers are getting a real, positive return on investment.
• Second, require public disclosure of negotiations and incentive promises at least 30 days prior to legislative or executive action committing us to any economic development package, and require local governments to do the same. This would allow advocacy groups, the news media and the general public time to analyze the merits of the deal and communicate concerns or support to their public officials.
• Finally, use the number of jobs a company actually commits to creating in news releases and public statements, rather than the ubiquitous “up to X jobs” that so often reflects theoretical multiplier effects of a business locating in North Carolina.
This would raise public awareness of what a company is really committing to do and not just what someone projects might possibly happen.
Reforms to the public records law and more candid press statements cost us nothing but present the public with a truer understanding of economic development practices. A small but strong ombudsman’s office would require some funding. A good place to find that money may be current economic development slush funds.
Jeanette Doran is executive director of the N.C. Institute for Constitutional Law.