OPPONENT TESTIMONY TO SUB. H.B.

1
OF BRIAN R. HESTER, ESQ.-
HOUSE FINANCE COMMITTEE

Honorable Chairman Amstutz, Ranking Member Sykes, and members of the

House Finance & Appropriation Committee, thank you for giving me the opportunity to

speak in opposition to Sub. H.B. 1. I support and applaud the efforts of Governor Kasich

and Director Kvamme and others to narrow the focus of the Ohio Department of

Development to focus on job creation, job retention, and out-of-state job importation.

However, their JobsOhio plan is where they lose my, and I imagine, millions of Ohioans’

support. In short, even if there was a “right” way to privatize a State’s economic

development efforts, JobsOhio is nowhere close to that system.

First, let’s clear up a few facts about this issue. A recent study found that only

seven States in United States allow a private entity to control their business recruitment

functions.1 According to the latest data from the U.S. Department of Labor’s Bureau of

Labor Statistics, three of the top five States with the worst unemployment in the nation

right now are Florida, Michigan, and Rhode Island.2 Three—three of the seven States

that already have in place private corporate economic entities are among the top FIVE

States in the nation in unemployment. Director Kvamme’s homestate of California,

technically, is the fourth because Gov. Schwarzenegger switched California’s economic

development efforts back into a public entity sometime in 2010 after critical reports

indicated that California’s private entity that had only been created seven years earlier

1
“Public-Private Power Grab: The Risk of Privatizing State Economic Development Agencies” Good Jobs First
(Jan. 2001), attached in full to this prepared testimony, incorporated by reference, and submitted to this Committee
for their own review.
2
U.S. Department of Labor Bureau of Labor Statistics website (http://www.bls.gov/web/laus/laumstrk.htm)
(Accessed 1/26/11).

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was grossly ineffective.3 So, at best, there’s no causative link between having a private

economic development office and unemployment; or, at worst, there is a negative

correlation.

Government doesn’t have to “move at the speed of business” to get

Ohio businesses moving again.

Indiana last year grew 25,734 jobs, but Ohio grew 72,302 jobs.4 Granted, Indiana

has a little over half the population of Ohio, but we still grew nearly three times as many

jobs. Indiana has a entity that’s very similar to JobsOhio. And yet, that State has almost

the same unemployment rate as we do and created jobs at a third of the rate we did last

year. We need to make sure we don’t do something to upset the economic recovery that

has already begun. Change for change’s sake can be just as foolish, if not more, than

sticking to the status quo and expecting a different result.

Moving at the “speed of business” under a dark, private system is as smart as

speeding down a dark, unlit country road with the lights out in a car with no windows.

Speed kills—especially in the dark.

Back in October, the Associated Press did a story about problems with Indiana’s

private economic entity that “found abandoned factories and idle cornfields where the

corporation claimed it had created new jobs.”5

3
See, “Power Grab” Study, supra at p. 5. (citing Feb. 2010 report by the Little Hoover Commission “Making Up
For Lost Ground: Creating a Governor’s Office of Economic Development” available on the Internet at:
“http://www.lhc.ca.gov/studies/200/report200.pdf”)
4
See, U.S. Department of Labor, Bureau of Labor Statistics Local Area Unemployment Statistics (Statewide,
seasonally adjusted from Dec. 2009 to Dec. 2010 (preliminary).
5
“Can CEOs lure business to Ohio,” Associated Press-Julie Carr Smyth (Oct. 11, 2010). (As found on the website of
the Columbus Dispatch (http://www.dispatchpolitics.com/live/content/local_news/stories/2010/10/11/copy/can-
ceos-lure-business.html?adsec=politics&sid=101)).

2
 (Image source: Plunderbund
Plunderbund.com)

When Michigan’s private economic development corporation “moved at the speed of

business,” it resulted in a convicted embezzler who was still on parole receiving over $9

million in economic development assistance.

(Image source: Plunderbund)6

And we shouldn’t confuse having an organization “moving at the speed of

business” to moving this legislation too quickly, either. For example, last year Governor

Strickland signed an executive order that forbids the use of outsourced labor. This was

in response to press reports that the Texas company hired by the Ohio Department of

6
See also, “State Officials ‘Embarrassed’ After Learning $9M in tax credits went to Richard A. Short, convicted
embezzler” Flint Journal (Mar. 17, 2010)
(“http://www.mlive.com/news/flint/index.ssf/2010/03/state_officials_embarrassed_af.html
http://www.mlive.com/news/flint/index.ssf/2010/03/state_officials_embarrassed_af.html”).

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Development to administer the “Cash for Appliances” program hired a call center in El

Salvador. Even though it is my understanding that executive order is still in force,

under HB 1, JobsOhio could use outsourced labor, so long as they used private monies

to pay it. Is that something this legislative body really wants to permit?

The Administration has claimed that eventually JobsOhio will be “self-funding.”

But that claim is based on Director Kvamme’s hope that JobsOhio could actually get an

equitable stake in the companies it helps. At least one Ohio constitutional law expert

agrees with me that this would seem to violate Art. VIII, § 4 of the Ohio Constitution.7

Shouldn’t this body take some serious time exploring this issue now, rather than finding

out later that the Administration’s path to self-funding is unconstitutional?

Objections to entities like JobsOhio are not confined to any political party or

political ideology (nor has the corruption under such systems.) In Michigan, the most

vocal critical of that State’s private economic development is the right-of-center think

tank Mackinac Center has argued that Michigan’s private entity has created “more job

announcements than jobs.”8 Just yesterday, Matt Mayer, President of the Buckeye

Institute for Public Policy Solutions “tweeted” that JobsOhio must be “100% transparent

and subject to open record laws.”9

Instead of lowering the bar on transparency, ethics, and accountability as Sub.

H.B. 1 does, JobsOhio—if it must be created at all—needs to be under higher outside

7
“Lawmakers seek JobsOhio accountability” Jim Siegel, Columbus Dispatch (January 26, 2011)
(“http://www.dispatchpolitics.com/live/content/local_news/stories/2011/01/26/copy/lawmakers-seekjobsohio-
accountability.html?adsec=politics&sid=101”) (quoting Capital Law constitutional law professor Dan Kobil.)
8
“Michigan's economic development office says $9 million awarded to embezzler has led to witch hunt” Flint
Journal (May 25, 2010)
(http://www.mlive.com/business/index.ssf/2010/05/michigans_economic_development.html).
9
(http://twitter.com/#!/ohiomatt/status/30283667305668608)

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scrutiny than any other agency. Sub. H.B. 1 must be amended to remove the ability of

JobsOhio’s executives and employees to also work as lobbyists to JobsOhio during and a

year after their employment. We cannot expect an ethical administration within

JobsOhio under a legal system that permits the employees to lobby one another while

working. We cannot tolerate a more lenient ethics standards that lets them accept gifts

less than $500 in value without reporting it, and allows them to solicit or accept

employment from companies whose economic development applications they are

handling either. Instead of making it exempt from the jurisdiction of the Ohio Inspector

General, as Sub H.B. 1 does, JobsOhio needs to have its own Inspector General assigned

to it, just like the Ohio Department of Transportation and the Bureau of Workers

Compensation. Instead of the weakest gift and outside income standards, the directors

and executives of JobsOhio should face no less than the same rules as the State’s

legislators.

But in the end, the record is clear. No matter how transparent and ethical you

strive to make JobsOhio, it will create more problems than it solves. At the end of the

day, there is absolutely no evidence, none, to suggest that having a private economic

development entity will significant impact Ohio’s economic development efforts in a

positive way. And there has not been a single problem identified by the Administration

with the current system that could not be more easily resolved by simply making

changes within the existing structure of the Ohio Department of Development.

JobsOhio is a solution looking for a problem… that will likely cause them instead. For

that reason, I ask that this committee table indefinitely Sub. H. B. 1. I thank the

committee for your time and attention. I will answer any questions you might have.