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Watching Out for Taxpayers – or Corporations?

If South Carolinians want to know who some state legislators are looking out for in economic development incentives – taxpayers or corporations – a fly on the wall at a recent hearing might say it all.

The meeting took place near the end of this year’s legislative session, and it was a rare site indeed: A panel of the Senate Finance Committee took up a bill to shed more light on special-interest subsidies for businesses.

It was unwonted because the committee, chaired by Republican Sen. Hugh Leatherman of Florence County, had sat on the bill for 362 days without acting on it.

The same is true of two other incentive transparency bills pending before the committee for well over a year – S. 206 and S. 832, both sponsored by Sen. Tom Davis, R-Beaufort.

But on May 30, a Finance subcommittee chaired by Sen. Billy O’Dell, R-Abbeville, held a hearing on S. 954.

That bill, sponsored by Republican Sen. Shane Martin of Spartanburg County, would prohibit the House and Senate from giving a second reading to any targeted incentives until the state Department of Commerce provides a cost-benefit analysis of the subsidies.

The cost-benefit review would have to be given to members of the General Assembly and posted on the Commerce Department's website.

Bills require three readings, or votes, to pass both chambers. Second reading usually is the most critical.

Enter the fly on the wall.

Early during the hearing, Sen. Mike Fair, R-Greenville, spoke to secrecy surrounding incentive projects.

“Once you guys start disseminating information, then whether it’s named here or in a piece of legislation, it will be named,” Fair said, referring to the Commerce Department. “I mean it will cease to be a clandestine (project), or whatever we want to refer (to it as).”

"Right," O’Dell adds, and it would give another state or country an opportunity to “throw a package” at the company in question, too.

Martin: “My point is, in order for us to cast a vote, we have to know exactly what we’re voting for. We just can’t blindly pass some incentive package without understanding at least what the cost is.”

O’Dell counters that in his experience, if he has questions about a company locating in his district or elsewhere in the state he can call the Commerce Department and get answers “without making it all public, and I can decide whether I want to vote for it or not.”

Martin: “You know, a little bit of risk versus reward is kind of what I was looking for.”

Fair: “And everybody doesn’t require, I wouldn’t think, this same kind of clandestine environment, is the best way for me to say it.”

No doubt; two independent nonpartisan groups have published studies – the Pew Center on the States in April and Good Jobs First in December 2010 – ranking South Carolina among the worst in how well states track and report on incentives.

The Palmetto State’s laws favor concealment in this realm, guarding the details under the guise of confidential taxpayer information and company trade secrets.

Continuing the subcommittee discussion, O’Dell, who has been in the Senate since 1989, again called upon his experience – this time when the state handed out perhaps the largest subsidies package in South Carolina history, to Upstate automaker BMW.

“And that was, you know, Commerce worked that real well and we were informed and we knew what we were doing,” O’Dell said.

“I just don’t know why we’ve got to put a lot of this stuff in that’s just more and more laws that we’re putting in,” he added. “Who are we trying to satisfy, a certain group?”

Martin: “Well to me, it’s not about a group to me. It’s just when I’m asked I want to be able to tell somebody why I voted yes or no for a project.”

O’Dell: “Most people, I wouldn’t say most but a lot of people aren’t as diligent as you might be in casting your vote, but I think it’s good that you are. I don’t know that we ought to mandate that to everybody.”

After a few more exchanges, including a Commerce Department staffer reiterating that the agency already performs cost-benefit analyses of targeted incentives, the subcommittee unanimously approved Martin’s bill.

However, the panel struck the part that would require the pluses and minuses to be posted online. Instead, the cost-benefit information would be provided just to lawmakers.

Sen. Glenn Reese, D-Spartanburg, wanted to get a word in first, though:

“Before we vote,” Reese said, “I do think we need to amend it to say that any roll call or second reading on any economic development bill cannot be used in any kind of report card or legislative rating.”

The room busts up in laughter.

“I think that’s a good idea,” O’Dell says. “I think that’s a wonderful idea.”

Reese, gesturing with his hands: “Free everybody up.”

In a previous story on Martin’s bill, he told The Nerve that Leatherman had promised him a hearing on it this session.

“I wish it hadn’t been so late,” Martin said Wednesday.

The hearing was held with just a week remaining in the session, leaving no chance for the bill to pass this year.

Martin is undeterred, however. “I will be pushing it again next year,” he says.

Now, if the fly were to answer that question about whether some state legislators are watching out for taxpayers or corporations in economic development deals, what do you think it would say?

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

State Agencies Legislation Incentives General Assembly Economic Development Budget Corporate Welfare Accountability Transparency

Sen. Billy O'Dell Sen. Shane Martin Sen. Tom Davis Pew Center on the States S.C. Department of Commerce S.C. Senate Finance Committee Sen. Mike Fair Sen. Hugh Leatherman Good Jobs First