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How does JobsOhio stack up? Don’t ask them

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Posted at 7:25 AM, May 31, 2022

The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.

Since 2015, JobsOhio has spent more than a billion dollars in an effort to revive the state’s lagging economy. That’s money that would have gone into the state treasury if JobsOhio hadn’t been created in 2011. But while JobsOhio is quick to boast that it’s been a big win for the Ohio economy, it’s pretty slippery about producing data to support that claim.

Over a decade of existence, the controversial agency — a non-profit corporation funded with proceeds from the state liquor monopoly — has rapidly boosted its expenditures. Its payroll alone has increased from $2.5 million to $19.1 million, more than sevenfold. And its 106 employees last year pulled down an average compensation package worth $180,000 — far more than double the salaryand benefitsthe average Ohioan earns.

Payroll isn’t the only part of the JobsOhio budget that has exploded.

In 2015, when the agency was fully up and running, it spent $4.6 million on marketing, compared to $32.6 million last year, according to its financial statements. Over the same period, expenditures for professional services have gone from $1.9 million to $16.2 million and the incentives the agency has passed out have grown from $46.6 million in 2015 to $210 million in 2021.

In all, JobsOhio’s operating expenses have more than quadrupled since 2015, to just under $300 million last year. So with all that money that had previously gone to the state treasury now going to an effort to boost the economy, how are we doing?

It’s tough to get straight answers out of JobsOhio.

Controversial history

The Ohio liquor monopoly goes back to 1933, when the 21st Amendment repealed national prohibition and Ohio voters repealed a similar provision in the Ohio Constitution.

Like the rest of the country, Ohio was mired in the Great Depression, tax revenues were in the toilet and the state government was desperate for money. What better way to raise it than by taxing the spirits many Ohioans turned to to ease their own depression?

The legislature passed the Liquor Control Act, which gave the state a monopoly on selling and taxing alcoholic beverages. For six decades, the state even owned the stores in which booze was sold, until the retail portion of activity was privatized in the 1990s.

In 2011, then-Gov. John Kasich led the effort to create JobsOhio, diverting liquor revenue that had been flowing into state coffers and sending it to JobsOhio. The law created the non-profit corporation and allowed it to lease the state liquor franchise by floating bonds and then repaying them through the proceeds of the franchise.

Although a spokesman for the agency earlier this month claimed that the state hadn’t awarded the agency anything, JobsOhio was the only corporation to be given a crack at leasing the franchise.

And it got a pretty sweet deal. JobsOhio was allowed to lease the franchise for 25 years by paying $1.51 billion. Meanwhile, the lease generated $338 million in net profit — almost a quarter of the total cost of the lease — in fiscal year 2021 alone, according to a March briefing to the General Assembly.

JobsOhio was controversial from its birth.

The group Policy Matters Ohio immediately sued, claiming the JobsOhio scheme violated several provisions in the state constitution prohibiting the state government from giving special treatment to a single corporation, including by extending credit to it. The Ohio Supreme Court threw out the suit, saying those who brought it didn’t have standing to sue because they didn’t show that they were personally harmed by the creation of JobsOhio.

In a dissent, then-Justice Bill O’Neill was appalled.

“Hundreds of millions of dollars in public funds are being funneled into a dark hole to be disbursed without public scrutiny, and the highest court in the land is looking the other way,” he wrote. “The Supreme Court of Ohio is the last house on the street, and passing on this case is an abdication of our duty as protectors of the Constitution.”

Transparency worries

By setting up a private corporation and creating a mechanism to divert all that previously public money into it, the creators of JobsOhio also put it largely beyond public scrutiny. Even though the governor appoints the agency’s board of directors, it isn’t subject to open-records and open-meetings laws.

That means JobsOhio doesn’t have to share full access to its deliberations.

In more than a few instances, there have been possible conflicts of interest. In 2014, for example, the Ohio Ethics Commission notified two Marathon Petroleum Corp. executives who also sat on the JobsOhio board that they had potential conflicts because Marathon was receiving benefits from JobsOhio.

There were other apparent conflicts as board members decided who would get what incentives. Board members’ ties to corporations enjoying JobsOhio largesse have included Sherwin-Williams, Bob Evans, Procter & Gamble and Manta Media.

And as it considers whom to award money, JobsOhio makes a claim that seems contradictory — that its funding is private, but at the same time it practices great transparency.

The agency is“wholly funded by an independent private source” its website says. A spokesman also has said repeatedly that “zero tax or public dollars are used to fund JobsOhio projects.”

The agency’s website adds that JobsOhio practices the “highest standards of accountability, transparency, ethical conduct, and responsible practices.”

But despite those lofty claims, JobsOhio Communications Director Ryan Squire wouldn’t even say whether the money funding his agency had been going into the state treasury before JobsOhio came along.

“You should reach out to the Department of Commerce to answer that question,” he said in an email.

Defensive tweets

Squire might be reluctant to say that Ohio is foregoing revenue in order to fund his agency, but he’s quick to take to social media and other forums to push back against critical media coverage.

For example, the Capital Journal on May 2 published a story about how JobsOhio forgave $12 million of a loan to FirstEnergy in 2017 — two years before the company engineered what federal prosecutors would say was likely the biggest bribery and money-laundering scandal in Ohio history.

Politically connected FirstEnergy was already well into its strategy to spin off unprofitable nuclear plants that would receive a billion-dollar bailout as part of the corrupt 2019 scheme. It also was creating a mechanism that helped fund the scandal. And 2017 was the same year that the Public Utilities Commission of Ohio — whose leaders are also appointed by the governor — allowed the regulated monopoly a big rate increase. The state Supreme Court later called the $460 million hike illegal, but FirstEnergy was allowed to keep the money anyway.

Despite all that easy money FirstEnergy got from sources connected to the governor’s office, Squire thought it was unfair for the Capital Journal to mention JobsOhio and the 2019 scandal in the same story.

“So based on this tweet, why have you connected the two in your story?” he asked in a tweet. “Didn’t the investment happen long before the scandal?”

Similarly, Squire didn’t think it was fair for the Capital Journal to point out in a May 10 story that despite the mountains of money JobsOhio is spending, U.S. News and World Report still ranks the Ohio economy well down in the bottom half of states — 34th — using such criteria as employment, business environment and growth.

“It’s not accurate to hold JobsOhio accountable to the entire economy of the state as this tweet does,” Squire said in an email, referring to a Capital Journal tweetpromoting the story. “JobsOhio competes for projects and growing jobs in only nine private sectors of the economy, plus the Federal/Military sector. Those 10 targeted industries represent 36% of Ohio’s gross state product, just 21% of its employment, and 28% of Ohio’s payroll.”

Big claims

So what is accurate?

Also in response to that Capital Journal tweet, Squire posted one of his own, painting a dire picture of Ohio if it weren’t for his agency.

“Imagine what it would be like without JobsOhio?” it said. “We’ve helped create 250,000 jobs in the last 11 years. And that’s just in 10 sectors of the economy where our focus is…”

In a subsequent one, Squire made a claim that was perhaps even bolder: That 680,000 jobs might have left the state if not for JobsOhio.

What evidence does JobsOhio have that just because it signed contracts with companies giving them grants or loans, they decided to either create or keep nearly 1 million jobs in Ohio?

“A JobsOhio deal with a company creates a contractual commitment for that company to create a job,” Squire said in an email. “We publish those commitments on our website and track them for performance. Our agreements with companies define a ‘performance period’ that allows the company to hire the jobs, and then an ‘evaluation period,’ where we work with the company to verify that they met their commitment.”

But there’s a real question about how big a role such incentives play in businesses’ strategic decisions. In other words, is JobsOhio handing businesses hundreds of millions to do what they were going to do anyway?

Many economists believe other factors such as a suitable workforce, natural resources and adequate infrastructure play a far greater role in businesses’ decisions to locate, stay or expand in a given place. It’s an important question as states and cities have engaged in an ever-more intense bidding war against each other.

For example, Ohio is poised to give chip maker Intel $1.9 billion in incentives in exchange for a $20 billion project to build two semiconductor plants in Central Ohio. But to what extent did those incentives seal the deal as opposed to the fact that Ohio has plenty of water for a notoriously thirsty industry?

Timothy J. Bartik is an economist who studies economic development for the Upjohn Institute for Employment Research in Kalamazoo, Mich. In 2018, he published a paper reviewing 30 relevant studies of the efficacy of economic development incentives in the United States.

Bartik concluded that, at most, 25% of businesses wouldn’t have made the decisions they did to locate, expand or stay if it weren’t for the incentives they were offered.

“In other words, for at least 75% of incented firms, the firm would have made a similar… location/expansion/retention decision without the incentive,” Bartik wrote.

So, if he’s correct and that conclusion applies to JobsOhio, that could mean that $575 million of the awards the agency has made since 2015 didn’t change a thing.

Asked whether it’s misleading to act as if, in the absence of JobsOhio incentives, the state would never have gotten 250,000 jobs and would have lost 680,000 more, Squire didn’t answer directly. Instead, he referred questions to businesses that got money from his agency.

“This is an opportunity to talk to any of the thousands of companies we’ve worked with,” he said. “Ask them if JobsOhio and our work were essential to their decision to expand in Ohio or come to Ohio. Simplifying our work as only offering incentives is an error, and no one has suggested that incentives alone are the reason companies chose Ohio.”

Squire made that last statement despite his tweet flatly claiming that JobsOhio, “Attracted $72 billion in capital investment from companies.”

How do we stack up?

If it’s not fair to hold JobsOhio accountable for the overall performance of the state economy and if it’s also unfair to simplify their work to offering incentives of uncertain effectiveness, what would be a good basis on which to evaluate the performance of the agency and its large, highly paid staff?

One might be to look at the 10 sectors on which Jobs Ohio focuses and see what’s happened with employment in them and compare it with those in other states.

But again, it’s hard to get a straight answer.

Asked if JobsOhio tracked such data, Squire said it did, but he didn’t provide any numbers.

“We capture data from (Economic Modeling Specialists International) which uses (Quarterly Census of Employment and Wage) data,” he said. “It’s slower than (U.S. Bureau of Labor Statistics) data, but more accurate. It typically lags about six months. We track growth year over year in Ohio and we watch for other state trends.”

Maybe the question was too open-ended. In a follow-up, Squire was asked to provide those data, along with data regarding the incentives other states offer. He declined to.

“In terms of providing data compared to other states, that is publicly available and accessible by you,” Squire said.

So, while the agency boasts of its “transparency,” if the public wants to see how JobsOhio compares its performance to that in other states, it needs to find specialized government jobs data and do its own economic modeling and hope it uses the same methodology that JobsOhio’s contractor did.

Squire was asked why, if the information is “publicly available,” he didn’t simply provide it.

“I’m pointing you to the entities that own that information and should be the ones to give it to you,” he responded.

Reminded that if it’s public information, we all own it, Squire didn’t respond.