Public-Private Partnerships: Schools for Scandal

“If only they would run government like a business,” goes a familiar conservative lament, the gist of which equates “business” with the kind of furious efficiency that rewards honest, hard work in both industry and the animal kingdom. But now a new study shows what actually happens when elected officials hand over the keys to the private sector and ask it to run the services that society depends on.

Suddenly, according to Creating Scandals Instead of Jobs, the book of Ayn Rand fairy tales is shut and a dangerous reality asserts itself. The study, conducted by Good Jobs First, discovered an especially dizzying level of corruption in those enterprise and commerce agencies charged with expanding state economies and creating jobs. (Californians will remember how, until it was recently changed, their own Enterprise Zone program helped wreck the middle class by rewarding businesses for downsizing their work forces and lowering wages.)

Among Scandals/Jobs’ findings about so-called PPPs (public-private partnerships):

• Enterprise Florida faced new questions about shortfalls in the job creation performance of the companies it has recruited. There have also been controversies over a performance bonus paid to its CEO and subsidies awarded to companies represented on its board.
• The first chief executive of the Arizona Commerce Authority was given a three-year compensation package worth $1 million, and even though he resigned after a year he received a $60,000 privately funded bonus.
• The Wisconsin Economic Development Corporation (WEDC) was accused of spending millions of dollars in funds from the U.S. Department of Housing and Urban Development without legal authority, failed to track past-due loans and hired an executive who owed the state a large amount of back taxes.
• JobsOhio received a large transfer of state monies about which the legislature was not informed, intermingled public and private monies, refused to name its private donors and then won legal exemption from review of its finances by the state auditor.
• The Indiana Economic Development Corporation has faced continuing criticism over its job creation claims. Triggered by tenacious investigative reporting by Indianapolis TV station WTHR, a state audit found that more than 40 percent of the jobs promised by companies described by IEDC as “economic successes” had never materialized. IEDC was also rocked by allegations that its representative to China solicited bribes from companies.
• The Rhode Island Economic Development Corporation is still litigating the biggest economic development scandal in Rhode Island history: its $75 million loan to the now-bankrupt 38 Studios.

The study charts a swamp of conflicts of interest, unearned bonuses and misuses of tax dollars. Its authors report that “the real agenda behind these PPPs was not to make economic development efforts more effective but rather to more tightly concentrate the control over—and credit for—job creation events in the hands of governors and their appointees.”

Commenting on the study, Donald Cohen, executive director of In the Public Interest, notes that “public dollars should be controlled by accountable and transparent public agencies, not handed off to private interests with looser standards and less oversight.”