Virginia Governor Vetoes Bill That Would Ban Pay-To-Play on Subsidies

May 30, 2014
By Good Jobs First

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This week, Virginia Governor Terry McAuliffe vetoed a

bill

that would have banned corporations seeking

Governor’s Opportunity Fund

(GOF) subsidies from making contributions or gifts to the elected official awarding those subsidies: in other words, the Governor himself. The bill had unanimous two-chamber support among both Republicans and Democrats, and members of both parties

criticized

the Governor’s action.

Governor McAuliffe’s primary

objection

cited in the veto to the bill was that state legislators ought to be held to the same standards. The

statute

and

guidelines

state that GOF subsidies are awarded primarily at the discretion of the Governor, though the General Assembly and the Attorney General have a modest oversight role. One co-sponsor of the bill stated that he hopes to

re-introduce

the bill again next session, though it’s unclear whether the bill will stay in its current form.

It’s a strange moment in Virginia politics. The bill arose out of concern related to the previous Governor’s gift

scandal

. Just after leaving office in January, former Governor Bob McDonnell was indicted, something that had never happened before in the state.


Is such legislation needed in Virginia?

Good Jobs First previously

highlighted

an apparent pay-to-play issue in Virginia when McDonnell awarded

Northrop Grumman

$3 million in GOF subsidies after receiving major campaign

contributions

from the company.

While banning contributions to politicians from companies seeking subsidies is one way to encourage stronger ethics in government, another approach could be to ban companies from receiving subsidies if they have given or subsequently give contributions to officials awarding or enforcing subsidy contracts. Both would deter pay-to-play practices. Excluding subsidies to campaign contributors would be far easier to implement by shifting implementation away from elected officials and onto agencies awarding subsidies. Just as failing to create jobs can result in recapture or rescission of subsidies, a subsidy contract can undergo a clawback if the agency finds that a company has given to key public officials.

Apparent pay-to-play subsidies are not a problem isolated to Virginia. For example:


  • Texas:

    As we blogged

    previously

    , several newspapers have suggested that economic development subsidies controlled by Texas Governor Rick Perry are tied to fund-raising.

  • Wisconsin:

    Investigative Reporter

    Mike Ivey

    reported this week that the Wisconsin Economic Development Corporation, a privatized economic development agency, has awarded more than 60 percent of $975 million in subsidies to companies that have contributed to Governor Scott Walker or the Republican Governor’s Association.

For decades, state and cities have taken strong stances against allowing gifts and campaign contributions to contractors. Why not ensure the same level of integrity when it comes to economic development spending?