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Monday, November 10, 2003
States' mega-subsidy offers: bilking of the taxpayers?
By Neal Peirce
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It's watch-your-wallet time in the nation's states as massive subsidies get green lights.
The newest poster child of public wealth for private benefit is Florida, where Gov. Jeb Bush has persuaded the Legislature to spend $310 million to recruit, finance -- and thus deny to other states -- a new laboratory for a private biotech research firm, the Scripps Research Institute.
And with what money? Florida is paying this subsidy with economic stimulus funds from Washington, financed by federal taxpayers through legislation that the governor's brother, the president, signed.
Together with $200 million that Palm Beach County is offering in land, construction and temporary headquarters, the deal will cost taxpayers no less than $935,780 per job. (Scripps guarantees just 545 jobs, though state economic officials predict thousands of spin-off positions.)
Indeed, Jeb Bush argues that the Scripps laboratory will kick-start a biotech industry as critical to Florida as was the advent of air conditioning or the opening of Disney World.
Concurrently the Boeing Co., already busy gathering offers from states across the country to subsidize a factory to build its 7E7 ``Dreamliner'' airplane, has come up with a new wrinkle.
Now Boeing is asking bidder states to use their credit -- public funds -- to finance a small fleet of 747 jumbo jets. Expanded with a bulging fuselage, the planes (made by guess who?) would deliver parts from Japan, Italy and other global manufacturing locations Boeing selects. The added cost, again for some set of taxpayers to swallow: about $300 million.
Already, Washington state has made a seemingly desperate bid of $3.2 billion in subsidies and concessions to keep increasingly footloose Boeing anchored, at least in manufacturing, on the shores of Puget Sound.
Argue the merits of these deals as you will, there's an irrefutable bottom line: All subsidies are a zero-sum game. One's state's gain is another's loss. Without the subsidies, manufacturers would be obliged to go out and raise capital for their own operations.
That's not to say that government, federal and local, doesn't impact the private economy, deeply and continuously -- from tax laws to military posts, spending on roads to airports to health and safety regulations.
But subsidies to big or prestigious employers aren't just odoriferous. They appear to be coming increasingly at the expense of the most important 21st century job for state and local governments: educating their citizens so well that they (and the companies they work for) can compete effectively in a harsh global economy that puts an ultra-high premium on high skill levels.
The U.S. Department of Labor predicts an alarming ``skilled worker gap'' in this country over the next decade -- more than 10 million jobs specialized jobs going begging because there won't be enough Americans with the education and skills to fill them.
A lead culprit is lagging public education. Quite consistently, U.S. employers report two-thirds of today's job applicants seriously deficient in basic reading and math. In higher education, nationwide enrollments in computer science and engineering have actually declined.
So even if Florida were using its own and not federal money for the subsidy, is it making a smart choice putting such massive resources into a biomedical research center that may one day hire hundreds of scientists from a limited national pool of qualified individuals?
Maybe. But for decades, Florida has lagged in basic social spending. According to the ``Kids Count'' study of the Annie Casey Foundation, 20 percent of the children in today's Florida live in poverty. Thirty-two percent live in neighborhoods with high rates of school dropouts (compared to 25 percent in the United States as a whole). Without radically improved Florida schools, most of those kids will live out their lives on a different economic planet from the high-flying, publicly financed Scripps facility.
As for Florida's public universities, they face an avalanche of rising applications. Studies show universities yield a return to the Florida economy of $9.72 for every taxpayer dollar invested. The fourth-largest U.S. state in population, Florida ranks 42nd in the country in producing baccalaureate degrees, 32nd in graduate degrees.
Yet in this year's budget crunch, the Florida Legislature slashed the universities' budgets by $40.6 million. It raised tuitions and cut back community college funding. And then it applied economic stimulus funds from Washington not to basic education, but to the Scripps deal.
It's true, the Florida decision is hardly unique. Flashy deals, from factories to stadiums, routinely get hawked aggressively, trumping government investments that could have much stronger payoffs.
To effect change, the case has to be made that we're in a century in which states' and regions' biggest assets won't necessarily be subsidized factories or private laboratories. In the future, more winners will be places that draw strong economic activity because they've learned to invest first -- continuously, aggressively -- in the skills and capacities of their own citizens. Contact Neal Peirce at nrp@citistates.com.
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