Last week, as the pandemic continued to rage and Amazon orders continued to soar, the nonprofit Good Jobs First released a stunning report. In total, Amazon benefited from at least $3.7 billion in taxpayer subsidies, the group reported. And in 2020, even as Amazon founder Jeff Bezos was able to add more than $90 billion to his own multi-billion-dollar personal piggy bank, Amazon wrangled nearly $150 million in subsidies from state and local governments, whose resources have been spread thin by the demands of the coronavirus and its impact on local economies.
GJF founder and executive director Greg LeRoy is incensed when a mega-corporation like Amazon pits states and localities against one another in a mad competition to woo a major employer. When Amazon was looking for a second headquarters, it settled on the Washington, D.C., area and New York City, a predictable choice, LeRoy says. When Amazon sites warehouses, he adds, what counts is their proximity to wealthy Amazon Prime customers. GJF created an interactive map that demonstrates that, he says. “Why on Earth would we subsidize something the market is already driving?”
Grassroots opposition to Amazon’s choice of Queens and the $3 billion in government incentives to build a headquarters site ultimately forced the corporation to back out of that deal. But that didn’t end Amazon’s presence in New York, LeRoy says. Amazon “continued to rapidly expand its footprint in New York City. They’ve hired lots of people. They’ve leased lots of new space. … They’re not avoiding New York.”
GJF provided New York activists help with research, LeRoy says. As a result of the Amazon controversy, “five presidential campaigns contacted us,” he says, adding, however, that President-elect Joe Biden’s campaign did not.
The Amazon report and research demonstrates what GJF does best: a deep dive analysis into tax breaks and other incentives that local and state governments offer businesses in the name of job creation. The reports generate significant media attention and often help grassroots groups and reform-minded public officials “to spend less on economic development, but get more.”
Its allies in this fight, who often benefit from its research, include New Jersey Policy Perspective, Together Louisiana, the Economic Analysis and Research Network at the Economic Policy Institute and the American Federation of Teachers. Journalists often use its databases to do their own investigations.
Usually, the nonprofit, with an annual budget of about $1 million and 6.5 full-time employees, focuses on state and local governments. Its major funders include the Reva and David Logan Foundation, the Surdna Foundation, and the Amalgamated Foundation’s Families and Workers Fund.
Waste in COVID stimulus
But with help from the Omidyar Group’s Democracy Fund, GJF in 2020 examined how the billions of federal dollars Congress directed to businesses actually got spent. After Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March, LeRoy and his staff began to build a database identifying the recipients of funds and the size of their assistance. GJF already had a massive database on corporations that had violated federal and state regulations and laws. When researchers matched recipients and violators, they discovered that more than $85 billion in grants and loans were going to healthcare providers that had defrauded Medicare and Medicaid or were penalized for other wrongdoing.
Using the GJF’s database and a study by the Kaiser Family Foundation, the New York Times reported that large, wealthy hospitals received the lion’s share of COVID relief assistance, leaving poor hospitals that could use the money out of luck and fighting for survival.
When GJF looked at COVID help to colleges, the group found a similar pattern. GJF researchers found that many colleges with healthy endowments had received federal help when they had the resources to retain their staffs without government assistance.
GJF also found that charter schools, eligible for education aid along with public schools, were “double-dipping” by also applying for Payroll Protection Program assistance as nonprofit corporations, LeRoy says. “That meant they got a lot more money per student than public schools.”
He understands that it was challenging for Congress to put together a massive aid package in the middle of a major crisis. “They were under a huge amount of pressure to move a lot of money in a short period of time.” Nevertheless, he hopes simple fixes can be adopted in future aid packages, such as requiring that charter schools can receive aid money from only one COVID stimulus program, not two or three.
Disclosure is crucial
LeRoy founded GJF in 1998, but his work dates back to the 1980s, helping groups fighting plant closings in Chicago. “I was the guy who knew how to find public money” in factories that [then] announced they were shutting down,” he says. In 1993, LeRoy wrote “No More Candy Store,” excoriating the abuses of what he calls “the tax break industrial complex.” The book called the lack of oversight of corporate tax incentives “the dirty big secret kept by most mayors and county executives and governors. They aren’t watching the store. They don’t know the value of what they have given away and they don’t know what they have gotten for it.”
“In the wake of those revelations, lots of states and cities and counties began enacting safeguards,” LeRoy says. “Prominent among them [were] clawbacks — that is, money-back-guarantee language saying you have to pay the money back” if you welch on your end of the deal. “If you run away during the life of the subsidies … you can’t take our money and the jobs, too. … We’ve published the biggest study ever done on clawback practice by states showing that they’re very common now.”
Disclosure is crucial to reform,” LeRoy insists. “If everybody really could see the system fully, lots of things would change. Public officials would have a stronger hand at the table, and would be much less prone to getting extorted and manipulated by the private sector.” As a result, he says, more money would go to priorities that really matter to communities and “really do work for the economy.” There would be more funding for education, infrastructure, assistance for genuine small businesses. Communities could address food deserts in poor neighborhoods and help those returning from prison learn new skills.
LeRoy makes clear he isn’t against tax incentives per se. But, he stresses, they must be used to achieve goals that benefit the public most effectively. For example, money for housing rehabilitation should also include a requirement that homes be energy-efficient. Likewise, job creation incentives could stipulate that jobs go to local residents and that they are reachable by mass transit.
The power of data drives the work GJF does. The “way the system has evolved,” he says, means that “politicians always obscure the costs and exaggerate the benefits.” GJF has worked with grassroots groups throughout the country to push for more disclosure about tax breaks and other benefits to companies promising more jobs. GJF began its subsidy tracker database 10 years ago, which the group terms “the first national search engine for economic development subsidies and other forms of government financial assistance to business.”
Back then, he says, 22 states were disclosing this information. At this point, all 50 states and the District of Columbia are disclosing corporate subsidies.
While the subsidy tracker has been very useful to the public, nothing has beaten another GJF database, Violation Tracker. “The thing is insanely popular,” LeRoy says, noting that it receives 2.9 million pageviews per month. Indeed, its success has prompted interest beyond the U.S. “We’re now being asked by a bunch of activists in the U.K. to create a replica there,” LeRoy says.
How schools lose out
Sometimes, getting more useful data means getting into the weeds of accounting rules. GJF had long criticized the Governmental Accounting Standards Board (GASB) for not requiring “giveaways” to corporations promising economic development be included in reports from state and local governments.
GASB cited GJF’s subsidy tracker to justify its request for public comment on a rule change that would require that states, counties, local governments and school districts report economic development tax breaks to businesses and how much those incentives reduced local revenues.
GJF submitted its own detailed comments, and actively publicized the GASB effort. GASB received about 300 comments, mostly pro-disclosure. GASB adopted the rule in 2015.
Using this new source of data, GJF released a report in December 2018 that found that economic development tax incentives cost schools at least $1.8 billion in the previous year. The lost revenue in 10 states alone added up to $1.6 billion, enough to hire more than 28,000 teachers, the report found. GJF is working with teacher unions to help them understand the impact of these tax breaks on schools.
Clearly time for another database. GJF is building it, LeRoy says, “one PDF at a time. Finally, we’re getting a more robust accounting of the costs to go along with the braggadocious politicians’ emphasis on benefits.”
