Bribery Scandal Hits Jeb Bush But Nobody Cares
Huge Bribe Offer Leaked to Public
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Bribery is illegal, or at least it should be. For a private company to give money to a public official would be scandalous. But when a public official suggests giving huge stacks of taxpayer money to a private company, the corruption scandal gets little publicity. Here are portions of a news article that originally appeared in the Orlando Sentinel. |
$500 MILLION CORPORATE WELFARE PLAN TO ATTRACT BIOTECH FACILITY SPURS DEBATE; GOV. BUSH'S PROPOSED GIVEAWAY PACKAGE
original by Jerry W. Jackson and Barry Flynn, Sentinel Staff Writers
Jeb Bush's bold plan to lure the prestigious Scripps Research Institute with more than $500 million in state and local money promises to be one of the nation's most expensive government incentives ever.Bush characterizes the deal as a landmark opportunity to diversify beyond tourism. Legislators, who meet Monday in a special session to consider the proposal, have a chance, he said, to "endorse a grand new vision for our economy."
No one in Florida is likely to object to the prospect of bringing good jobs to the state. The key question is value: How much will the jobs cost, and are they worth the diversion of half a billion dollars from other potential uses?
Scripps says that within seven years of its start in South Florida, the nonprofit biomedical leader would employ 545 people in Florida with an average salary of $58,000 a year.
While the details are still unfolding, economic-development specialists from throughout the country are stunned by the basic arithmetic: The state's $310 million paired with up to $200 million that Palm Beach County has pledged, the package amounts to a staggering $935,780 per job.
The Progress Report asks you -- can you think of any better use for $935,780 of your tax dollars, than the transfer of one job from elsewhere to your neighborhood?The huge bribe offered to Scripps could pay the salary of all the employees for more than 16 years.
"That's very, very pricey," said Greg LeRoy, executive director of Good Jobs First, a nonprofit research group in Washington, D.C., that studies economic-development practices.
Alabama's famous corporate welfare handout to Mercedes-Benz in 1993 cost $168,000 per job.
Other states that paricipate in government-sponsored bribery have shelled out far less for significant companies, particularly when measured on a job-creation basis.
Let's Imagine
Bush contends the payback from a nationally renowned research center would be far greater than the basic job creation.
He imagines that after 15 years in operation, the Palm Beach center might employ almost 2,800 people and account for a total of 6,500 jobs, with spinoff companies started by people from the research center or based on the technology it produces.
More than that, however, is the enormous magnetic force the center's scientists and their research would exert on pharmaceutical and other companies that would establish facilities nearby for access to its scientists and their work, Bush said.
Art Rolnick, director of research at the Federal Reserve Bank of Minneapolis and a longtime critic of government bribes to businesses, suggested that Palm Beach may be too late to develop the kind of clustering effect that Bush hopes will come.
San Diego's success "makes it less likely they'll go to Florida," Rolnick said of pharmaceutical firms that feed on newly developed drugs and other biotechnology.
"They're already clustered in San Diego. If you're a start-up company, you're more likely to go to San Diego than Florida."
In any case, "there's not a state in the country that isn't doing this," Rolnick said, referring to corporate welfare handouts.
ALL-CASH BRIBES ARE UNUSUAL
In the Scripps plan, the state's portion is all cash, a highly unusual offering. Most states and cities give tax credits or build infrastructure such as roads and bridges. But nonprofits such as Scripps don't need tax credits because they already get all tax breaks.
"Cash is the absolute worst of all packages. It's robbing Peter to pay Paul," said Michael LaHaive, director of fiscal policy for the Mackinac Center for Public Policy in Michigan.
LaHaive, who testified last week before the Michigan Senate on the issue of economic development, said cash tax incentives paid to one company take resources away from other companies and away from other needs.
"It's worse than a zero-sum game," LaHaive said. Research shows, LaHaive said, that there is no strong correlation between a state's economic health and what it spends on incentives and economic development.
LaHaive said he looked at proprietary data on economic-development spending by states and compared that to gross state product, the total measure of goods and services, on a per-person basis.
"We found that a given state's spending on economic development has no significant impact on the economic well-being of that state," he said.
As an alternative, LaHaive said, states are better off focusing on basic tax structure, roads, public safety and quality education. Those elements also correlate more closely, LaHaive said, with what chief executive officers of top companies say they look for in determining where to do business.
"A fair field and no favors is the best way to create economic development and growth," LaHaive said.
Florida is looking beyond Scripps. When the Legislature convenes to look at Bush's package for the institute, lawmakers also will consider creating a $190 million "mega-fund" to bribe more companies.
OTHER BRIBES ALSO LARGE
Although the price per job that Florida is considering offering Scripps is huge, it may not be the highest offer ever made, depending on how the various elements are valued.
For example, The Boeing Co. admitted this year that it was soliciting bribes from states for the plant where it will build a new passenger plane, now called the 7E7 and expected to be in service in 2008. "This is the first time we have sought a final assembly location for one of our planes" in such a competitive process, said Mary Hanson, a Boeing spokeswoman. "What we're trying to do is find the very best place to build this airplane."
The state of Washington, fearing that it may lose Boeing's production jobs the way it lost its headquarters to Chicago, responded with a bribe offer estimated at $3 billion in tax cuts -- all for a plant likely to employ just 800 to 1,200 people.
In an earlier incentive program, New York state agreed in 2000 to provide more than $500 million in corporate welfare to IBM for a microchip-fabrication plant in East Fishkill, N.Y.
The promised payback was 1,000 jobs. Since then, however, the deal has disappointed some. Paul Gromkowski, who had worked as a systems analyst for IBM in the 1990s, said that IBM added the 1,000 jobs as promised but kept cutting others in the Duchess County area, where the company has long been a major employer. As a result, he said, the company's overall job level still is even lower than it was in 1993.
BRIBERY 'ISN'T IRRATIONAL'
The system of states, counties and cities competing among themselves is a waste of taxpayer money from a national perspective, the Federal Reserve's Rolnick says.
But from a local viewpoint, it makes sense: "I don't necessarily blame the mayors or the governors. You've got to match what others are doing. It isn't irrational to play this game, given the rules."
"Half a billion dollars? That's one of those baseball stadiums," he said. "Relative to a lot of the deals I've seen go down, this one looks pretty good. It's a worthy goal. If I compared it to a stadium, I have no doubt it's a good thing."
The Progress Report notes -- it is true that no stadium project, not a single one of them, has turned out to be a good investment for taxpayers.
As for the best use of the state's money, an analyst at the Economic Policy Institute in Washington, Michael Ettlinger, said a wide range of competing uses should be considered.
"You have to look at what else you can do with the money," from a public perspective, Ettlinger said.
For the millions earmarked for Scripps, he said, "you can employ a lot of schoolteachers."
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