Public-private partnerships the wrong fix for more jobs

Editorial by News and Observer, October 28, 2013.

Gov. Pat McCrory often declares that some part of state government is “broken” and that his task is to fix it. The problem is that, as governmental handymen, McCrory and his crew back at the workshop in the General Assembly use only two tools: a hammer and a hacksaw.

That’s why the state’s “broken” unemployment insurance system had its eligibility standards, length of payment and maximum weekly payments sawed back to a nub. That’s why the election process had to be fixed by cutting off a week of early voting, same-day registration and straight-ticket voting and then to have a voter ID requirement nailed onto it. And, of course, the state’s Medicaid system was so broken that it couldn’t be expanded to cover about 500,000 low-income people who need health insurance.

Now the hacksaw is out for another fix. McCrory is moving to repair the state Department of Commerce by cutting off the department’s industrial recruiting, marketing, travel and tourism divisions and putting them under a new public-private nonprofit corporation known as the N.C. Partnership for Prosperity. The idea is that the partnership will free recruiters of red tape and allow for a more nimble approach to recruiting businesses to North Carolina and helping those already here to expand.

The idea is suspect on its face. Why would private business people be better at bringing in businesses than recruiters employed by the state? The answers offered by those who support the change is that the private sector knows more about business needs and has more sales and bargaining experience and that the new arrangement will allow for higher compensation for top recruiters.

The flip-side is that business people may have conflicts of interests – are they promoting what’s best for the state or what’s best for their company or industry? And adding a compensation motive for recruiters may tempt some to cut ethical corners to close a deal. Keeping watch for such abuses becomes harder when previously public functions become less public.

These concerns are not conjecture. As Rob Christensen reported in Sunday’s News & Observer, the type of public-private corporate recruitment partnership being pushed by the governor and Commerce Secretary Sharon Decker has had problems in other states involving misuse of taxpayer money. Those problems are documented in a new report from Good Jobs First, a Washington-based group that tracks state incentives tied to business recruitment. The report’s title could also serve as its summary: “Creating Scandals Instead of Jobs: The failures of privatized state economic development agencies.”

The report listed problems with public-private partnerships in Ohio, Florida, Rhode Island, Wisconsin, Arizona, Indiana, Texas and Michigan and concluded that “the privatization of economic development agency functions is an inherently corrupting action that states should avoid or repeal.”

Why do states proceed with public-private partnerships when the track record is thick with problems and thin with successes? The Good Jobs First report says politicians are trying to keep their jobs rather than find a better way of creating jobs.

“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,” the report said.

The Commerce Department has functioned effectively in business recruitment. There’s no need to fix it. Instead, the governor should take his hammer to this “improvement.”