Some Call It Corporate Welfare: Is It Really Worth It?
Alabama ranks No. 7 nationally in the number of “megadeal” corporate subsidy packages since the late 1970s, according to a new study released Thursday by Good Jobs First, and Alabama is one of just seven states that do not publish regular public reports on the costs and benefits of state and local tax breaks.
In what is being called a “painstaking review” using hundreds of sources, Good Jobs First identifies 240 “megadeals,” or subsidy awards with a total state and local cost of $75 million or more each with a cumulative cost of more than $64 billion. In recent years, state and local governments have been awarding giant economic development subsidy packages to corporations more frequently than ever before. The packages frequently reach nine and even 10 figures, and the cost per job averages $456,000 and often exceeds $1 million.
“These subsidy awards are getting out of control,” said Philip Mattera, research director of Good Jobs First and principal author of the report. “Huge packages that used to be reserved for ‘trophy’ projects creating large numbers of jobs are now being given away more routinely.”
The number of such deals and their costs are rising, the report shows. Since 2008, the average frequency of megadeals per year has doubled (compared to the previous decade) and their aggregate annual cost has roughly doubled as well, averaging around $5 billion. For those deals where job projections were available, the average cost per job is $456,000.
“It’s governments job to get ’em here, it’s our job to organize ’em,” Al Henley of the Alabama AFL-CIO said about the report. “My only problem is that government is paying TOO MUCH for these jobs.”
Michigan has the most megadeals, with 29, followed by New York with 23; Ohio and Texas with a dozen each; Louisiana and Tennessee with 11 each; and Alabama, Kentucky and New Jersey with 10 each. Forty states plus the District of Columbia have done at least one megadeal.
“Despite their high costs, some of the deals involve little if any new-job creation,” said Good Jobs First executive director Greg LeRoy. “Some are instances of job blackmail, in which a company threatens to move and gets paid to stay put. Others involve interstate job piracy, in which a company gets subsidies to move existing jobs across a state border, sometimes within the same metropolitan area.”
In dollar terms, New York is spending the most, with megadeals totaling $11.4 billion. Next is Michigan with $7.1 billion, followed by five states in the $3 billion range: Oregon, New Mexico, Washington, Louisiana, and Texas.
“The public deserves to know how much money we’re handing over to corporations in the name of job creation and what we’re getting in return,” said Kimble Forrister, executive director Arise. “As long as Alabama remains among the seven states without a regular report on tax breaks, it’ll be impossible to tell if our generous subsidies are worth the cost.”
The megadeals list is a new enhancement of Good Jobs First’s Subsidy Tracker database, the first online compilation of company-specific data on economic development deals from around the country.
Until now, the content of Subsidy Tracker has consisted exclusively of official disclosure data provided by state and local governments. However, many large deals pre-dated disclosure and many recent ones are missing from the official lists because of gaps in state and local transparency practices.
To overcome those constraints, Good Jobs First went back and assembled information on large deals using a wider variety of sources. The resulting list of megadeals has been incorporated into Subsidy Tracker and is summarized and analyzed in this report.
Good Jobs First is a non-profit resource center based in Washington, DC. The group released the findings of the “Megadeals” report on Thursday. You can see the full report online here.
© 2013, Glynn Wilson. All rights reserved.