States look to private sector for help attracting businesses; would it help or hurt rural areas?

Several Republican gubernatorial victors made campaign promises about privatizing various sectors of state government, but the devil is in the details, Melissa Maynard of Stateline.org reports. Incoming Ohio Republican Gov. John Kasich proposed privatizing the Ohio Development Department, saying, "The days of trying to connect to business leaders through bureaucrats are over." Govs.-elect Terry Branstad of Iowa, Jan Brewer of Arizona and Scott Walker of Wisconsin also made similar privatization campaign promises designed to spur economic development.

"The question of how to empower business leaders to play a more meaningful role in state economic development efforts without sacrificing the accountability and transparency with which public funds are used is hardly a new one," Maynard writes. "A number of states — including Florida, Indiana, Michigan, Texas, Utah and Virginia — have privatized some aspects of their economic development functions in recent years, with mixed results." The structures of each state's programs may be different but "the governing principle behind all of these approaches is the same: Let local business leaders, rather than bureaucrats, take the lead on state economic development and marketing efforts," Maynard writes.

"This is one of those skill sets that government just doesn’t have as a core competency in-house," insists Leonard Gilroy, director of government reform for the Reason Foundation, a free-market think tank. Texas has enjoyed some success with its public-private partnership with nonprofit TexasOne, which is able to use strategies like sporting-event tickets to attract businesses that state agencies can't. Other states have run into some trouble. In Michigan the "semi-privatized Michigan Economic Development Corp. last year awarded $9.1 million in tax credits to a convicted embezzler," Maynard writes. (Read more)

Privatization proposals may pose a risk for rural areas. "States should constantly evaluate and adapt their economic-development programs to changes in the private sector, but I feel obliged to raise a caution flag about privatization: It has the potential to shortchange rural communities, because most business consultants and perceived 'experts' are urbanites and may not be familiar with the distinct challenges and opportunities in rural areas," said Al Cross, the director of the Institute for Rural Journalism and Community Issues.

Meanwhile, a nonprofit group has issued a report showing how well each state does at disclosing information about economic-development subsidies. Good Jobs First "seeks to shed light on how well or poorly economic subsidies work," Steven Greenhouse reports for The New York Times. Illinois was rated best, followed by Wisconsin and North Carolina; 13 states got Fs. "The study links to AccountableUSA, a new set of Web pages about every state that contains an overview of each state’s subsidy practices as well as profiles of major subsidy deals, Greenhouse reports.