States and Cities Finally Declare Jobs Truce

April 1, 2011

For Immediate Release April 1, 2011; Contact: Greg LeRoy 202-232-1616 x 211

Good Jobs First today announced a comprehensive treaty agreement among the nation's leading associations of public officials to end the “economic war among the states” and the far more common “economic war among the suburbs” and finally direct job-creation subsidies where they are needed most.

“I applaud the National Governors Association, the National League of Cities, the U.S. Conference of Mayors, the International Economic Development Council, the Council of Development Finance Agencies, and the Governmental Accounting Standards Board for this stunning breakthrough,” said Greg LeRoy, executive director of Good Jobs First. “America's public officials are finally realizing that they are not each other's enemies, and that corporate tax dodging, off-shore job flight, and unsustainable sprawling land use are the real issues.”

To deliver on the 50 states plus-D.C. cease-fire, all of the governors have agreed to sponsor legislation that would prohibit the use of state economic development funds to subsidize interstate job flight. The same bills will also prohibit the use of state or local job subsidies to relocate jobs within a state. To end the “prisoners' dilemma” game, the states have entered a compact to call each other and tattle on companies seeking to play states against each other. The new state laws will require mayors to do the same within a state.

“We know we can't use federal funds to drag jobs across state lines,” said one Midwestern governor who requested anonymity. “But we've always used state and local dollars for interstate job piracy and of course federal money is often fungible. We have finally seen the light: state-eat-state is a futile net-loss game and a distraction from globalization.”

Getting back to basics, the new laws will allocate deals to communities based on how badly they have suffered job loss as recorded under the federal WARN Act on plant closings and mass layoffs.

To make development programs more transparent and encourage taxpayer engagement, the governors and big-city mayors also agreed to enact uniform legislation mandating that every deal be disclosed online, with reporting standards based on Good Jobs First's recent study Show Us the Subsidies. Mimicking the Recovery Board’s new iPhone app for federal stimulus projects, each state will also mandate that all smart phones come installed with an app for detecting nearby economic development dollars via GPS.

Guided by new rules issued by GASB, each state will publish a Unified Development Budget annually, detailing all forms of spending for jobs, especially tax breaks, which have never been uniformly reported. The rules include a requirement that states project revenues lost to each tax break program for the next 10 years. “We are very keen to see these new Unified Development Budgets,” said a credit-rating agency official on background. “We suspect that some states have been hiding huge tax-break liabilities. Now we will be able to compare apples to apples and whack states that generate bogus forecasts.”

Money-back guarantee clawbacks will also be attached to every program, and every tax break subsidy will be sunsetted every three years and not eligible for renewal unless a performance audit determines it is effective. “We are embarrassed that more than 20 years after clawbacks became a common safeguard, some states are still getting ripped off by runaway shops,” said a New England governor who asked his name be withheld.

In addition to locating deals where plant closings have been concentrated, the new laws will use other rules to explicitly address poverty and reduce greenhouse gas emissions: for deals in metro areas with public transportation systems, the new state laws will require that subsidized jobs be accessible via mass transit (for carless workers). To get employers to act in their own economic self-interest (and the environment’s), the new laws will also require that all subsidized buildings be built or retrofitted to LEED standards or equivalent green building efficiency.

Job Quality Standards will be attached to every program, requiring subsidized companies to pay wages at least as good as the market, i.e., the wages for that industry in that labor market, with a living-wage floor, plus health care.

Site location consultants will be registered and regulated as lobbyists under the new state laws, making commissions to them illegal. The states with film production tax credits will deny them to G, PG and PG-13 movies that include smoking.

To plug corporate tax loopholes and shore up state revenues, the states with Single Sales Factor will repeal it. The states that lack combined reporting will enact it. And the states with the sales tax “vendor discount” will repeal it.

Finally, the new state laws will shield public education from property tax abatements and tax increment financing (TIF). The school share of property taxes will no longer be eligible for abatement or TIF diversions. “We finally realized that K-12 is our best economic development investment,” said a big-city mayor. “It was nuts that we allowed abatements and TIF to undermine our economic foundation.”

Indeed, the law will go further: school boards will take control of abatement and TIF decisions now made by city and county boards. School boards will determine whether funding for non-education purposes is abated or TIFed. “They've played with our money for decades,” said one state’s school board association president. “It’s payback time.”

“Liberated by these safeguards, America's leaders will now be free to focus on the things that really matter in economic development,” said LeRoy, author of The Great American Jobs Scam. “Now we can all focus on skills, infrastructure, clusters, innovation—and fair trade—to restore the nation's ailing economy.”

Editor’s note: Happy April Fool’s Day!