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SCRA Spins Its Economic Impact

The S.C. Research Authority, a state-created and state-controlled technology and real estate company, left out the bad news in recently announcing its latest economic impact results.

What the Research Authority did say: It contributed more than $1.4 billion to South Carolina’s economy in fiscal 2011.

What the SCRA did not say: Relatively speaking, the number barely budged from 2007; and within that overall economic impact total, employment and some other key indicators actually decreased in 2011 compared to 2007.

The numbers come from studies by the University of South Carolina’s Moore School of Business. The 2011 review was released in February; the 2007 report in February 2008. Economics professor Doug Woodward, director of the Moore School’s research division, oversaw the studies.

They are based on employment, salary and other data the Research Authority provided to the Moore School.

The SCRA paid USC to conduct the latest study, according to Woodward. In an email Wednesday he said he was traveling and did not have the cost figure.

On its website under the heading “SCRA Economic Output,” the Research Authority says the new study puts the entity’s total impact at $1.45 billion for 2011, an increase from $1.4 billion in the 2007 analysis.

That is somewhat misleading, though.

The number did increase, by $12.7 million – but from $1.436 billion in 2007 to $1.449 billion in 2011.

Over the four-year period, the $12.7 million averages a $3.175 million gain per turn of the calendar.

Similarly, on neither its website nor in a news release announcing its latest economic impact data does the SCRA share some of the bad news:

  • The number of jobs it “supported” in 2011 – 10,580 – was 1,185 fewer than in 2007 – 11,765;
  • The Research Authority contributed $4.5 million less in labor income to South Carolina’s economy in 2011 compared to 2007; and
  • The SCRA’s net contribution to the state’s economy, akin to its gross state product, declined by nearly $26 million in 2011 versus 2007.

In many places, the two studies are carbon copies of each other. Large passages repeat literally verbatim throughout both reports, sometimes embarrassingly so for the vaunted Moore School, whose international business program consistently ranks at or near the top nationally.

From the 2007 report:

“In the first decade of the 21st century, the prospects appear auspicious for transforming the state’s economy to one powered by technology and entrepreneurship.”

From the 2011 report:

“In the first decade of the 21st century, the prospects appear auspicious for transforming the state’s economy to one powered by technology and entrepreneurship.”

Moreover, far from sounding like objective analyses of the S.C. Research Authority, the studies read more like glowing endorsements of it. “Above all, the SCRA elevates the technological capabilities of local businesses, enabling firms to compete successfully in the knowledge-based economy,” says the conclusion of both reports.

In any case, like the U.S. economy as a whole, the Great Recession likely took a bite out of the Research Authority’s economic impact.

But regardless, it’s probably safe to say Bill Mahoney, the SCRA’s chief executive, wasn’t planning to get into those not-so-rosy numbers during a Research Authority board meeting scheduled for 10 a.m. to 12 p.m. today in Columbia.

Mahoney did not respond to phone and email messages Tuesday seeking additional information about the latest economic impact study.

The agenda for the board meeting included the SCRA’s year-to-date financials through February, its fiscal 2012 year-end forecast and an executive session closed to the public and the press.

The board often confers for lengthy periods behind closed doors, reflecting a secretive, enigmatic culture that pervades the Research Authority.

But if one ever questioned the very public, state government-rooted nature of the SCRA, a quick rundown of its board members should eviscerate any doubt. They include:

  • Bobby Hitt, state commerce secretary and director of the S.C. Department of Commerce;
  • Ken Wingate, chairman of the state Commission on Higher Education; and
  • The presidents of Clemson University (Jim Barker), the University of South Carolina (Harris Pastides) and the Medical University of South Carolina (Ray Greenberg).

Yet despite its state essence – created through legislation as something like a public-benefit corporation – the SCRA holds itself out as a private operating company.

Indeed, that representation, and the Research Authority’s latest public pronouncements about its economic impact, point up the kind of spin job the entity frequently shunts out its doors.

Here’s another example, which might well raise the hackles of hardworking Palmetto State taxpayers:

The SCRA loves to tout achievements of SC Launch, a venture capital and public relations program to grow a “knowledge-based economy” in South Carolina.

A little boilerplate, if you will, from the Research Authority website: “SC Launch provides services and support to help turn innovative ideas into companies, products and jobs that improve people’s lives.”

What the SCRA invariably fails to disclose about SC Launch, however, is that it’s funded entirely by state tax credits.

Under South Carolina law, the program receives $6 million per year from corporate and individual donors, who can deduct 100 percent of their contributions from their state income taxes.

The bottom line: That’s $6 million per year to SC Launch instead of $6 million every year to the state treasury to pay for troopers and teachers and so forth.

The Research Authority then takes that $6 million annually and divvies it out to start-up tech companies, public-private partnerships and sponsorships.

But you won’t find much if anything about tax dollars being diverted to SC Launch in the SCRA’s testimonials about the program.

Just like the Research Authority’s reporting on its latest economic impact results.

Bill Masters, a Greenville businessman and the former SCRA board chairman, often clashed with Research Authority CEO Mahoney and certain SCRA board members about many facets of the organization, including its studies.

Worn out with the toll the conflicts were taking on him, Masters resigned in March 2011.

“I argued with Mahoney a lot about the fact that every study we did had to be above reproach and verifiable,” Masters says, “and his response was they only have to meet industry standards.”

“This happens all the time – people use numbers to prove things that aren’t true,” Masters added.

So, dumb question: Does he miss being chairman?

“Hell no,” Masters says. “I’m back to being an entrepreneur.”

The SCRA, meanwhile, is back to business as usual.

Reach Ward at (803) 254-4411 or eric@thenerve.org.

Economic Development General Assembly SCRA Transparency

SC Launch University of South Carolina Doug Woodward Bill Mahoney Moore School of Business Bill Masters