Illinois shines light into the giveaway quagmire

THE BALTIMORE SUN

LAST Friday, to learn whether corporations getting Maryland economic development incentives are honoring their pledges of job creation, I asked the Department of Business and Economic Development for a list of employers failing to meet job-growth goals.

It took two business days and some backing and forthing, but I got an answer yesterday afternoon. The list showed seven companies, including Honeywell International, John H. Harland Co. and Skylar Development, were obligated to pay back more than $2 million because they didn't create enough jobs.

That wasn't a bad turnaround time for a government agency, but there is a better way to make this kind of important information available. Illinois has shown us how.

By signing the Corporate Accountability for Tax Expenditures Act last week, Illinois Gov. Rod R. Blagojevich trained a beam of light on that state's heretofore murky corporate welfare system. Along with a similar statute in Texas, the Illinois law is a national model for states struggling with budget deficits and citizens and reporters trying to understand where government money goes and which companies pay their fair share of taxes.

"Nobody will have as much data collected on the Web as Illinois under this new law," says Greg LeRoy, director of Good Jobs First, a Washington group that promotes accountability and higher wages for economic development projects. Illinois will publish an annual report disclosing which recipients of incentives are breaking or fulfilling their economic development agreements.

But that's only a start. Companies receiving Illinois assistance will submit detailed reports on their operations. They must enumerate and describe jobs at the relevant facility and say whether the jobs are permanent or temporary, full-time or part-time. They must disclose the number of new jobs.

More important, Illinois will be the first state I know of to regularly add up all corporate welfare and publish the cost. Grants, low-cost loans, tax credits, tax discounts - "the aggregate amount of uncollected or diverted state tax revenues resulting from each type of development assistance" - all go into the report.

Illinois citizens will be able to easily learn the bottom-line cost of corporate blandishments as well as what deals their government is doing and with whom.

State economic development jockeys like to "operate in the dark and cut their own deals," says Jack D. Franks, the Illinois legislator who was a key force behind the law. "Sunshine is the best disinfectant. That's the only way to keep it clean. Let everyone know what's going on."

In some ways Illinois had some catching up to do with Maryland. The new Illinois law includes a requirement for companies to repay incentives if they don't meet investment or employment promises.

Maryland has been using these "clawback" provisions for several years, and they have saved taxpayers millions. Thanks to reforms by former DBED finance boss Stephen Lynch and his successor, Robert C. Brennan, the department's financing unit operates less like the disorganized giveaway factory of yore and more like a bank these days.

But in disclosure, Illinois is now far ahead of Maryland. You can easily learn about the loans, grants, bond guarantees and equity investments made by Maryland's DBED, which amounted to $74.3 million for the year that ended June 30. But annually updated particulars on the numbers and kinds of jobs for each project are harder or impossible to obtain. And broader categories of spending - Maryland-wide economic-development tax discounts, tax exemptions and tax credits, for example - are largely a black hole.

These latter kinds of benefits - taxes forgone, instead of money given directly to a company - have become a much more common form of incentive, and harder to gauge.

By measuring them and disclosing them with other giveaways, "you get the whole iceberg on the table every year so that legislators can weigh the cost and benefits on an equal basis," LeRoy says.

Businesses will grouse about the paperwork and the release of confidential worker counts, but if you get special treatment from the state revenue authorities, that's the price you should expect to pay. Ideally, we shouldn't make tax-law exceptions for any single company. If you want to cut or raise taxes, cut or raise them for everybody.

But as long as we're going to make a mockery of equal treatment under tax laws, we at least should reveal what we're doing.

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