Friday, January 14, 2011

Comment on Economic Development Report Issued by Good Jobs First

I was asked by a fellow economic developer via LinkedIn to comment on a report issued by Good Jobs First, a non-profit organization. The link to the report is

My commentary/review.

Well, I read the report and frankly was not surprised. It is very much like other reports prepared by the organization’s staff.  I enjoyed surfing the Good Jobs First website and found several useful tools and analysis.  On the other hand, the report raises very few valid points and indicts the privatization of state economic development efforts.  What I read was a biased report designed to create conflict and confusion. 

First, some background.  I worked for two state ED organizations. In fact I was in VA when the agency made the transition from a public agency to a semi private non-profit entity.  What the Good Jobs First staff cannot appreciate about state government is the lack of tools to available to managers.  For example, most state agencies offer employees the same percent increase in salary, thus weakening the value of an employee review.  In addition, a manager’s discretionary spending cap is very low and state purchase regulations are cumbersome.  When we decided to purchase a color copier back in the mid 90s, it took a couple of months to work through the state procurement rules.  By “privatizing” the state ED office, managers could reward stellar employees for outstanding work and make purchasing decisions much quicker.  When we bought a newer color copier, it took 10 days from the day we started evaluating new copier to the day it was installed and utilized.  By privatizing personnel and procurement procedures, managers exercised more control and a greater responsibility for their budget and staff.

As noted earlier, this report goes out of its way to disparage privatizing state economic development efforts. However, it fails to drive the point home that several of the “privatized” ED programs received state funds and thus were subject to legislative oversight. In addition, most of the economic development organizations noted in the paper were called to testify before a legislative budget committee and justify expenditures.  Whether oversight was done or not is not the issue, the point is that the means exist for a full legislative review. 

If anything, this report proves that when rules are broken, a legislative review follows and then, and if appropriate, punishment.  The paper is full of examples.  Perhaps the most damaging part of this entire report is a basis assumption that the private sector is untrustworthy and always trying to rip off the public sector. The main reason for not forming a private state ED organization is because private sector board members will take advantage and get special consideration not merited. Rather weak reasoning.  Again, the Good Jobs First misses the point. Private sector companies evaluating a state or community for investment want to talk to other private sector CEOs. 

One point I found humorous. The paper criticizes Enterprise Florida for helping complete an incentive application. I find this strange. In my last job I drafted as much of the application as I could and all corresponding documentation.   A good economic development organization has a laser focus on customer service.

As a high school debater I noticed several tricks the authors used. For example, the authors make a big deal about the amount incentives Embraer received, but never told the readers the current and projected employment and capital investment in Florida.  The author neglected to mention that Embraer is the world’s 4th largest aircraft manufacturer.  My research tells me the company committed to build a $51 million facility and create 200 jobs.  Given the industry, I think we can reasonably assume the jobs will pay very well. 

The Good Jobs Website offers an excellent step-by-step process in researching the background of a company receiving a subsidy.  Step 3 says find the names of people associated with the company in question. This is a very good idea. You look at the officers and board of directors. You are trying to link company people with elected officials and establish some level of possible favoritism. Step 5 suggests reading the company’s annual report and 10K. This tells you stock ownership, ect. The web page offers excellent sources for people starting this exercise.

Now allow me to apply it to Good Jobs First. I looked all over the website and I could have missed it. I could not find any annual report or listing of board of directors.  So my first question:  who funds your operation?  Why is this important? To see if the Good Jobs First has an ax to grind. Page ii of the report offers “strong accountability principles”. However, the last bullet calls for states to respect the rights of employees to organize a union.  This is not necessarily a state concern; it is a company/employee issue.  Also, the report suggests adding labor union members and non-profits to state economic development boards.   It took me awhile to find on this on Good Jobs First website, but if you access the list of allies, you will find several labor union organizations.  This leads to my second question.  For an organization that screams for accountability and oversight; who oversees the staff of Good Jobs First?

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