Effort to privatize economic development questioned

Source: Judith Crown, State Journal-Register, February 18, 2017

The Rauner administration’s year-old move to privatize state economic development has been rocked by the sudden resignation of its CEO, a departure underscoring swirling questions about its effectiveness, transparency and efficiency.  Even before the departure announcement in late January by Jim Schultz, a veteran venture capital investor who said he was returning to the private sector, Intersect Illinois had come under fire for disclosing little about how it operates, its goals and how it planned to measure success. Watchdog groups also raised concerns about whether Intersect was adding to bureaucracy rather than reducing it. … Intersect, launched by Gov. Bruce Rauner in early 2016, followed similar privatized initiatives in Wisconsin, Indiana, Michigan and Ohio. Many of those efforts quickly came under attack for a lack of transparency as well as controversies ranging from exaggerated job creation claims to cronyism. With the state’s economic development efforts now at a crossroads, a looming question is whether Rauner remains committed to privatization and if Intersect will continue as it has been or change course. Intersect’s structure and dependence on private capital presented the potential for conflict of interest. It raised capital from 41 private and public organizations in the state, but didn’t publish the amounts raised or disclose what, if any, benefits are conferred on its contributors. Schultz told Crain’s the group raised or had commitments for $7 million, which would last it for a couple of years, and already had spent $1.6 million on establishing a Chicago office, hiring a staff of six and launching a marketing campaign.

… Illinois, where Republican Rauner assumed power in 2015, is somewhat late to the game when it comes to public-private partnerships for economic development. A wave of such initiatives took hold in states after elections in 2010, ushering in new Republican governors pledging to make their governments run more like businesses. Scandals were quick to mount. Some states exaggerated job-creation claims, misused taxpayer funds, paid questionable subsidy awards, or created appearances of insider dealing and conflicts of interest, according to a 2013 study by the Washington, D.C.-nonprofit Good Jobs First, which promotes corporate and government accountability in economic development. … But Rauner, a wealthy private equity investor before turning to politics, was undeterred. He made privatization a centerpiece of his campaign, arguing that the state suffered from the lack of a pro-business mindset. … But with the governor’s backing, Intersect is in a position to set the economic development agenda and recommend which businesses should receive incentives. Disclosure of incentives has been spotty. … Critics of privatization, largely Democrats, are skeptical of Intersect. They point to a lack of transparency about the donors, the initiatives underway and the decision making process. They note that Intersect is adding another layer of bureaucracy since decisions to use public dollars as incentives still must ultimately return to DCEO for review and approval. …

Related:

Rauner: No plans for mass privatization of state jobs
Source: Doug Finke, Journal Star, February 3, 2017
 
In yet another email to state workers in the process of voting on whether to authorize a first-ever strike, the Rauner administration said it has no plans for mass privatization of state jobs. … Terranova went on to say that the administration’s proposal “has offered protections against subcontracting that borrow from AFSCME’s contracts with other public employers. These protections give state workers a more meaningful role in subcontracting discussions, potentially leading to better outcomes for employees.”  Terranova said those protections were not part of AFSCME’s last contract with the state. Details of the administration’s offer can be found at the TeamIllinois website.  AFSCME said Terranova is spreading “misinformation.” Spokesman Anders Lindall said there were standards in the old contract that had to be met to outsource jobs. The last, best and final offer from the administration does away with those standards. … And in late January the PSC, whose members are appointed by Governor Andrew Cuomo, decided to allow Suez to ‘recover’ more than $50 million for something it did not build. Because of the Rockland Water Coalition’s efforts, the state required the company to implement stronger conservation measures. …

Donald Cohen: Privatization not the answer to budget woes
Source: Donald Cohen, State Journal-Register, June 5, 2016

When Gov. Bruce Rauner said during February’s budget address that Illinois taxpayers need “more value” from government, no one was surprised. As a private equity executive prior to taking office, he measured value in terms of cash flow and layoffs. … He’s pushing to sell off assets, like the Thompson Center. Despite the massive failure of the Illinois Lottery privatization, he continues to search for another private vendor. He recently all but privatized the Department of Commerce and Economic Opportunity by forcing it to work with a not-for-profit corporation he formed to recruit businesses. And he’s even trying to remove the modest protections against bad privatization deals from the state’s contract with its largest employee union. This flies in the face of all the evidence against privatization, let alone against outsourcing without transparency and oversight. … With a long history of insider political deals, Illinois taxpayers should be skeptical of more privatization. As the budget impasse continues, they deserve to know the terms of any deal that will put millions in the pockets of private corporations by cutting and outsourcing middle class, public jobs. Illinois should take steps now to ensure greater oversight of any privatization of assets and services, and the Governor should reverse course and lead that effort. …


Rauner turns to privatization push during second year in office
Source: Kim Geiger, Chicago Tribune, April 30, 2016

… Still, only one of Rauner’s ideas has been fully executed — the economic development not-for-profit, which he created by executive order. The others require buy-in from the legislature. As pressure mounts to resolve the nearly yearlong budget fight, Rauner has been working to position his ideas as options Democrats could grant him as part of a broader deal on spending. … Rauner’s move came after months of deadlock with Madigan over legislation to do much the same thing. The plan appeared poised for passage, but Madigan wanted a clause that would repeal the not-for-profit’s authority after three years unless lawmakers voted to renew it. Rauner objected and the deal was effectively dead. So the governor got around the legislature by forming a corporation on his own and signing an executive order directing the Department of Commerce and Economic Opportunity to work with the new not-for-profit. Rauner said he had decided to take “unilateral action” because Madigan’s insistence on a sunset clause meant it would be hard to recruit “superstars” to work on the project. … But Rauner’s go-it-alone strategy gave Democrats an opening. They’ve raised concerns about transparency at the private entity and questioned how taxpayer interests will be protected. Rauner so far has not allayed those concerns. When he announced the venture in February, Rauner insisted the group would be “a transparent operation,” that board meetings would be public and that the organization would be subject to the state’s Freedom of Information Act. Three months since its creation, little is known about the organization and what it is doing on the state’s behalf. Meetings are not public and the group won’t reveal its donors. On Friday, Rauner was asked what happened to his transparency pledge.

Rauner creates privately funded economic agency via executive order
Source: Sophia Tareen, Associated Press, February 3, 2016

Gov. Bruce Rauner used his executive powers Wednesday to establish a privately run and funded economic development corporation that’ll take over a state agency’s role in luring new business to Illinois, despite concerns from top Democrats about transparency. … The state’s commerce agency would still have oversight and would have to approve any incentives the corporation offers. … The Republican, who campaigned on the idea that Illinois should be run more like a business, said it’s too hard for the commerce department to promote the state on its own because of bureaucracy and red tape. Rauner said the corporation would draw on private-sector resources with proper checks and balances in place, though the executive order offered scant details on exactly how the private-public partnership would be run. …