Report: Privatization of State Economic Development Agencies Can Undermine Integrity and Accountability

Jan 12, 2011, 08:32 ET from Good Jobs First

WASHINGTON, Jan. 12, 2011 /PRNewswire-USNewswire/ -- Transferring business recruitment functions from state agencies to private entities is not the panacea its proponents suggest, and the track record of those few states that have taken the step is filled with examples of misuse of taxpayer funds and conflicts of interest, according to a report published today by Good Jobs First, a non-partisan research center based in Washington, DC.

The report, Public-Private Power Grab, is available at

"Rather than making economic development activities more effective, privatization is often little more than a power grab by governors and politically connected business interests," said Philip Mattera, research director of Good Jobs First and principal author of the report.

Interest in the issue has surged recently. It is being promoted by newly elected governors in Wisconsin, Ohio, Iowa and Arizona who are urging that development agencies be replaced by public-private partnerships (PPPs).

"Turning economic development over to PPPs is fool's gold," said Good Jobs First Executive Director Greg LeRoy. "What really matters is business basics: strategic public investments in skills, infrastructure, and innovation—not privatized smoke-stack chasing."

The report finds the following:

  • Only seven states currently allow private entities to control their recruitment functions: Florida, Indiana, Michigan, Rhode Island, Utah, Virginia and Wyoming.
  • Several other states used to employ PPPs but abandoned them because of performance problems.
  • Most of the states that currently use PPPs have experienced a variety of performance problems, including:
    • Misuse of taxpayer funds
    • Excessive executive bonuses
    • Questionable subsidy awards by those PPPs with a role in that process
    • Conflicts of interest in subsidy awards
    • Questionable claims by the PPP about its effectiveness
    • Resistance to accountability

Based on these experiences, the report concludes that creating economic development PPPs is not a wise course of action and recommends states focus instead on making their existing agencies more effective and accountable.

In states where a PPP already exists or is being created, the report recommends strong accountability safeguards, including transparency in decision-making and finances; strict conflict of interest rules; and respect for the rights of employees to organize a union (or transfer a representation agreement in place when the entity was a government agency).

Contact: Michelle Lee, 202-232-1616 ext.210

SOURCE Good Jobs First