NC Senate bill for private economic development organization criticized

Published June 5, 2014

by Richard M. Barron, Greensboro News-Record, June 4, 2014.

The N.C. Senate has written a new version of a bill that would turn a division of the N.C. Department of Commerce into a private corporation.

The problem is, the bill is too strict — or too lenient — depending which side you’re on.

Gov. Pat McCrory said in 2013 that the commerce department can’t work with businesses effectively in the way a private, nonprofit agency can. So he wants the department to spin off its recruiting division so private executives can work “at the speed of business,” as state officials have said.

The General Assembly did not pass a bill authorizing the change in 2013 when time ran out on its long session.

A new bill was proposed at the beginning of this short legislative session, and the draft announced Wednesday is the third version.

But the new bill doesn’t satisfy critics or supporters.

Critics say the bill would not prevent businesses from using private contributions to influence decisions on state incentive money.

And those who are working to set up the new system say the draft bill constrains their goal of creating a flexible recruiting organization that can move quicker than state bureaucracy to land jobs.

In this year’s first draft, the legislature proposed that the private corporation raise $10 million so it could be self-sufficient before the state would agree to contribute tax dollars.

The bill announced Wednesday by Senate President Pro Tem Phil Berger of Eden would regulate the Economic Development Partnership of North Carolina by requiring it to raise $250,000 in private dollars before it can receive state money — and it must raise $1 million a year thereafter.

The bill also requires the partnership to report frequently to the legislature and submit to regular audits.

Still, one critic says the bill that was announced Wednesday is a step backward from legislation proposed at the beginning of the General Assembly’s short session, which contained strict oversight of the partnership.

“We think this draft of the legislation is a step in the wrong direction,” said Allen Freyer, a policy analyst with the N.C. Justice Center, a Raleigh think tank.

For example, Freyer said the bill weakens some accountability requirements. The original bill required board, staff and officers to be subject to the state ethics act. The new draft requires the agency to establish its own code of ethics.

Berger’s news release said the legislation prohibits the partnership from awarding grants or deciding which companies receive state funds.

But what’s left out is the problem, Freyer said.

“It still allows private companies to give contributions to the new nonprofit and still receive incentive grants from the state,” he said. “This opens up the possibility for private companies to influence the incentive-granting process by making contributions to the nonprofit. And that is the definition of pay to play.”

Economic Development Partnership chairman John Lassiter, who has been guiding the effort along with N.C. Secretary of Commerce Sharon Decker, said the draft legislation is only a partial victory.

Lassiter said he believes a variety of restrictions in the new bill don’t advance the idea of a private recruiting arm.

“At the end of the day, we weren’t trying to create a new department within state government,” he said. “We’re trying to create a sales and marketing vehicle that can grow jobs in North Carolina.”

http://www.news-record.com/blogs/on_the_job/article_f6174994-ec1f-11e3-ba39-001a4bcf6878.html