For nearly two years now, we’ve been asking ourselves: Will this finally be enough to convince the governor or the Legislature to crack down on how the Commerce Department gives away our money?
The latest news is that the department is refusing to claw back state incentives from companies that fail to meet the meager requirements they agreed to meet in order to receive taxpayer funds or tax breaks.
Well, that’s not actually news: It’s come out in other reports. But as The Post and Courier’s Andrew Brown reports, the agency recently turned over a list of all the grants it gave out in 2020 from three large incentive programs, with some details about those grants, along with a list of 39 businesses it allowed to keep incentives in 2020 even though they had not complied with their requirements. In most cases, the companies created some of the jobs promised, but not all of them.
The Commerce Department’s argument is what it’s always been when questions arise about incentives: that some jobs are better than none, that our state is still better off having the companies here than not, and that the incentives were a small price to get them here. The agency says it looks at extenuating circumstances, and judges whether a company has made a good faith effort to comply — which is sort of like sports teams giving out “participation” trophies to everybody who played.
But Commerce agreed to let GE Gas Turbines of Greenville keep its $750,000 grant when it invested 10 times the amount of money it promised but produced none of the 83 jobs it promised. Likewise, ICE Recycling in Florence County got to keep its entire $55,000 grant after it invested about a third more money than promised and produced none of the 25 jobs promised. That’s right: zero jobs. In both cases.
Let’s be clear here: We give away our hard-earned tax dollars to help ensure that there are good jobs here for South Carolinians. The idea that our state government would not use the provisions written into a contract to claw back our tax dollars after a company fails to create even one of the jobs it promised should have lawmakers demanding immediate reforms.
And even without those examples, Commerce’s argument that it should hand out millions of dollars worth of participation trophies overlooks the importance of holding people to their promises.
We wonder how many of these companies would be so forgiving if their suppliers didn’t live up to written contracts. How many would say: “Oh, you can’t deliver but half the widgets we’re counting on you to deliver? No worries; just keep all the money we paid you”? How many banks would say that?
It would be one thing for Commerce to allow a company that just barely fell short of its promises to keep its incentives on the rarest of occasions, under the most extraordinary of circumstances. But this clearly is SOP at the agency.
And don’t think for a minute that companies doing business with South Carolina don’t know they’re dealing with a sucker. That in order to receive not just tax breaks but infrastructure and sometimes actual cash, they can just make inflated promises — and previous reviews have demonstrated that many of the promises are in fact inflated, and that nobody at Commerce seriously questions them — and then just not keep those commitments.
You don’t have to believe that government should operate like a business to find this deeply disturbing.
The agency notes in its report that state law doesn’t require it to release any of this information without being specifically asked to do so. So we appreciate the uncharacteristic forthrightness — and thank it for pointing out the first change the Legislature needs to make: Write a requirement into state law that such information be reported annually.
Sens. Wes Climer and Dick Harpootlian want those reports to be even more detailed, with annual updates on new incentives awarded and how companies are coming along in meeting the requirements. That’s a smart proposal, as is their idea of requiring the more independent state Financial Accountability Authority to decide whether to waive claw-back requirements instead of the insular and secretive Coordinating Council for Economic Development, which always has been a handmaiden for the Commerce Department.
It also would be a good idea to require someone other than Commerce and the Coordinating Council to take a look at larger incentive packages before the agency signs the deal, so it can’t just lower the requirements to make sure everybody it recruits gets to keep our money, whether they deserve it or not.
What’s not a good idea, at least not yet, is adding legislators to the Coordinating Council, which Mr. Climer hopes will provide some transparency and accountability.
Contrary to the belief on the second floor of the Statehouse, the direct involvement of legislators is not the solution to all problems. In many cases, it’s the problem. In all cases, what’s needed is for lawmakers to write good laws, and then hold the executive branch accountable for implementing them.