Subsidy shell game: New report says states waste billions luring jobs from each other

January 24, 2013 by Ken Ward Jr.

There’s a new report out this morning from the folks at Good Jobs First, which they summarize this way in their press release:

State and local governments waste billions of dollars each year on economic development subsidies given to companies for moving existing jobs from one state to another rather than focusing on the creation of truly new positions … Summarizing studies demonstrating that interstate job relocations have microscopic effects on state economies, the report reviews the history of economic competition among the states and presents eight case studies of those areas of the country where job piracy is currently most pronounced.

Among the highlights:

— In the Kansas City metro area, companies have been getting eight-figure subsidy packages to move from the Missouri side to Kansas, or vice versa.

— In Texas, the “deal-closing” Texas Enterprise Fund as well as a privately financed marketing group called TexasOne are used to brazenly lure companies from many states, including California.

— New Jersey has doubled down on both job piracy and job blackmail payoffs, continuing to lure firms from New York City-many of them Wall Street firms that were likely to come anyway.

— Georgia, which we rename the Poach State, stunned officials in Ohio when it successfully lured the headquarters of NCR from Dayton, where the company had been based for 125 years.

— Tennessee embodies all the policy contradictions. Its largest city, Memphis, is frequently the victim of poaching by bordering Mississippi, yet Tennessee created a whole new subsidy program to lure the North American headquarters of Nissan from southern California.

— The booming Charlotte region has job growth most states would die for. Yet instead of managing their growth, the 16 counties in North Carolina and South Carolina routinely poach jobs from each other, using both state and local subsidies.

— Rhode Island has long pirated jobs from Massachusetts, but when it gave a very large package to lure video game maker 38 Studios, founded by retired Boston Red Sox star Curt Schilling, the deal soon blew up and criminal prosecutions are now under way.

— Huge job blackmail subsidies have left many taxpayers bitter in states such as Illinois and Ohio, and Sears Holding Corp. has continued to shed jobs despite getting a second nine-figure retention deal from Illinois.

Greg LeRoy, executive director of Good Jobs First, said:

What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country. The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud.

The report, available online here, recommends that states should stop subsidizing companies for existing jobs that are treated as “new” simply because their location has changed, and it explains (see page 47) that West Virginia has done that with two of its economic development programs.

2 Responses to “Subsidy shell game: New report says states waste billions luring jobs from each other”

  1. Darren says:

    Hmm, remind me which party it is that advocates government intervention in the economy…

  2. rcj112 says:

    Hence the coach raises at WVU.

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