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Government Investment Requires Transparency

CITIZENS IN THE DARK ON LAWMAKERS’ SO-CALLED “ECONOMIC DEVELOPMENT” EFFORTS

By Ashley Landess

The General Assembly wants to play an active role in the South Carolina economy – that much is clear. The state has recently allocated millions of dollars to special projects, proposed targeted tax incentives, and even sponsored local festivals and parades — all in the name of economic development.

Government’s role in economic development is well beyond what the public understands it to be. Politicians are no longer just implementing policies that encourage economic growth, such as tax relief or deregulation. Today, they are choosing which companies get tax incentives, funding speculative research and paying for projects for which there is no apparent consumer demand.

It is not clear what criteria legislators use to make economic development decisions, or whether those decisions have been good ones for the state. Citizens are not given the kind of market research or cost/benefit analyses that accompany most major investment proposals from the private sector. In fact, there are many laws that protect the investing public, provide disclosure and guard against corporate and accounting fraud.

Government is less open about investment strategies and expenditures. So when the state spends $500,000 to convert a textile center to a “retail destination center” in the town of Easley (population 17,754), the public has to trust that there is sufficient demand for it to succeed. When lawmakers vote to tell one motorcycle dealer it cannot locate next to another, or when they decide to subsidize in-state contractors, they are not only influencing which companies succeed, but also inflating the cost of goods and services.

If elected officials insist on tampering with the American free-market model, they should at least do it openly. Five simple, non-partisan transparency reforms would ensure greater accountability.

First, lawmakers need to bring the Freedom of Information Act process into the Internet age. There is no reason governments cannot simply post their check registers online. Comptroller General Richard Eckstrom has already made expenditures available online for many state agencies, and he has publicly offered to help local governments do the same. Taxpayers should not have to spend thousands of dollars to obtain public documents when governments can make the data available online.

Some lawmakers stepped up for taxpayers this year and introduced online transparency measures. They were beaten back by government lobbyists. That is why the second reform should be to ban lobbying by any entity that receives any public funding, including all levels of government and their publicly funded associations. The ban is long overdue, and lawmakers have no excuse not to end this blatant misuse of money and power.

Third, entities that receive public dollars should have to open their books to the public. Investor-taxpayers are committing millions of dollars for research projects and special promotions. They deserve to know how that money is spent. Some publicly funded organizations argue that they are not officially part of government, and therefore not subject to transparency. That should not be true – public dollars should come with open records.

Fourth, when legislators invest public money they should be directly accountable for their choices. That should be required to record their votes when they spend taxpayer dollars. Currently, roll call voting is the exception rather than the rule. For example, on bills it passed this year the House called roll only eight percent of the time and the Senate called roll one percent of the time. Roll call voting should be mandated, particularly on bills that spend public money.

Finally, if legislators are going to act as venture capitalists, they must assure the public that they will not profit themselves. Lawmakers should be required to disclose their sources of income, as they do in some other states and in Congress. Votes that benefit private companies and organizations raise concerns about conflict of interest. Such conflicts are less likely when the public knows who is paying their elected officials.

The free market works when government creates broad policies that promote economic growth, and leaves the decisions about which ideas succeed to market forces. That is how our nation’s economy has thrived, how innovation has always occurred and how economic opportunity has been afforded to all citizens.

The legislature is expanding government’s role in the marketplace. Clearly some believe that is a good strategy. Taxpayers should be the judge of that. Legislators should make decisions openly and provide citizens with easy access to information about every dollar spent. If legislators want to be investment brokers, then they must answer to their taxpayer investors.

Ashley Landess is the president of the South Carolina Policy Council Education Foundation, a non-profit, non-partisan research organization in Columbia. For more information about the Policy Council, please log on to www.scpolicycouncil.com.

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