The State of Illinois is doing an above-average job in providing information about its economic development programs and subsidies, a new report says.
In October, Gov. Pat Quinn announced his administration would provide $3.5 million in subsidies to the tech darling Groupon, promising the money would create 250 jobs at the firm's headquarters in Chicago over the next 10 years. The "business investment package" included corporate income tax credits and "job training funds that will help enhance the skills of its workforce," according a statement from Quinn's office released at the time.
This was a controversial decision on Quinn's part. Groupon is one of the fastest growing businesses in state history; the firm did not need direct support from Illinois to explode its workforce in Chicago from seven in 2008 to more than 900 just two years later. Meanwhile, the State of Illinois has reached deadbeat status with its vendors, social service providers, school districts, and public universities, among others. It simply doesn't have $3.5 million to throw around, even if that's a relative pittance.
Corporate subsidies have been a basic fact of the U.S. economy for a long time, a commonplace policy that gives lie to the notion of an utterly free marketplace of private competition. The mobility of capital has only intensified such practices, with politicians, often despite evidence to the contrary, citing worries that a firm would depart for greener pastures should taxpayers not pony up. Chicago Mayor Richard Daley and the City Council's decision to provide the Mercantile Exchange with up to $15 million in tax increment financing dollars exemplifies the latter dynamic.
What's good for elected officials and companies isn't always good for taxpayers. "CEOs, mayors, and governors use deal announcements as rosy publicity stunts, garnering public approbation for bringing what are often badly-needed jobs to an area," reads a guide from the watchdog group Good Jobs First. "What gets lost after the news cameras stop rolling is the fact that these big subsidy deals don't always yield community benefits."
In recent years, watchdog groups like Good Jobs First (GJF) have fought to shine a light on government subsidies and economic incentives for business so politicians and companies can be held accountable for the promises they make when announcing a deal.
GJF says that residents of the Land of Lincoln are actually pretty well equipped to do that. In a new report (PDF) called "Show Us The Subsidies," GJF ranks Illinois first among the 50 states and the District of Columbia in providing accessible disclosure over its economic development activities. For the top subsidy programs offered by each state, GJF researchers assigned a numerical value for several criteria, from how much basic information is provided about the subsidy to whether or not reports about the deal include the actual number of jobs created or retained.
Five of Illinois' programs -- the Economic Development for a Growing Economy (EDGE) Tax Credit; the Enterprise Zone Program; Film Production Services Tax Credit; the IDOT Economic Development Program; and Large Business Development Assistance Program -- came under scrutiny in GJF's analysis. On the group's 100-point scale, Illinois scored 82, and that number was dragged down by the state's lack of disclosure about its film tax credit.
Good Jobs First points out that residents curious to find out more about the performance of these programs (save the film credit, of course) should click over to the Illinois Corporate Accountability site. There, you can search subsidies by when they were awarded, which state agency provided them, and when companies provided reports about their use of the money. The reports provide some telling information. Critically, they ask firms to explain any discrepancies between the number of full-time permanent employees companies promised to bring on in their applications and the number hired by the time of the report.
For example, in 2009, International Paper received $949,445 through the IDOT Economic Development Program for a warehouse in Shelbyville. The firm stated (PDF) it in its agreement with IDOT that the agency's assistance would allow it to create eight, full-time "semi skilled positions" that paid an average annual salary of $28,038. Those jobs haven't materialized yet because the additional warehouse won't be built until 2012 now, as well as due to what International Paper called its seasonal business cycle and "general market conditions."
Note too that the report provides wage data, an important aspect of subsidies the public, journalists, and researchers need to be able to track, given all the talk of how taxpayer dollars are helping to create "good jobs."
There is much more Illinois could do to enhance its disclosure. First and foremost is distributing more data about its film production tax credit. Another idea comes from Michigan, where residents can map subsidies provided through the Michigan Economic Development Corporation. Details on the map -- check it out here -- include the number of jobs created, the facility address, and a link to project summaries. You can filter by industry and various political districts too. It's a useful, innovative tool that GJF recommends expanding: "[S]tates could consider mapping the geographic distribution of subsidies to see if they match up with patterns of economic need, based on unemployment rates, business closures and other factors. In other words, are subsidies helping to bring economic activity and employment opportunities to communities that need them the most."
Good Jobs First offered several other solid suggestions about expanding the reach of subsidy disclosure as well:
The public should also know about the track record of subsidy recipients regarding compliance with environmental, workplace and other government regulation. In some cases, individual companies are receiving hundreds of millions of dollars in state tax breaks or other subsidies. The public has a right to know whether these firms are law-abiding. Ideally, this information should also be reported when a company applies for a major discretionary subsidy, so the public can comment.
While lawmakers and state employees deserve a pat on the back for setting up the Illinois disclosure site, the information still has to be used by voters and organizations to hold elected officials and companies accountable for their promises and, more broadly, ask whether tax dollars are best appropriated in this manner. Economic development programs are important, but no one should pretend they don't come at a cost.
One final thought. The State of Illinois is light years ahead of the City of Chicago on economic development disclosure. Tax increment financing grants were Mayor Daley's favorite development program but basic information about TIF districts remained obscured for years. Prodded by several city council members, an inadequate first attempt at TIF transparency went online last year. Chicago's mayoral candidates would do well to replicate Illinois' corporate accountability standards and website.
One very specific change a new mayoral administration could make is simply requiring all progress reports on TIF grants to be posted on the city's website. Right now, it takes a Freedom of Information Act request to get them.