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Dayton
Daily News Editorial
Kasich’s
booze-for-jobs plan is risky, but bold
Sunday, April 10, 2011
Gov. John Kasich’s plan to use liquor profits to finance economic
development is a bold embrace of big government.
While conservative, anti-big government forces warn that government is
not capable of picking winners in the business marketplace, the
governor is developing an operation to do precisely that — with money
that is now being used on other public purposes.
He wants the state in the venture capital business. He has brought in a
venture capitalist from Silicon Valley to run the operation he had the
legislature create, known as JobsOhio.
Now arises the question of how to come up with the capital.
The state has a monopoly on the wholesale distribution of liquor. The
governor wants to lease that enterprise to Jobs-Ohio. Liquor profits
would become venture capital.
The governor has been criticized for excessive privatization:
privatizing the liquor franchise to privatize economic development.
But this is faux privatization. The word “privatization” is typically
used when tasks are taken over by private industry — and the profits go
to private industry.
JobsOhio is a nonprofit. It’s called “private,” but the chairman is the
governor. All the members of the board are appointed by the governor.
So is the top executive.
So, with the liquor distribution business continuing to be a government
monopoly, this is big government all the way.
JobsOhio would finance its purchase of the liquor operation by floating
bonds against future liquor profits. (Profits came to $228.8 in fiscal
2010 and are growing.)
The plan is to have firms compete for JobsOhio money. In return for its
capital, JobsOhio could own part of the firms or the buildings in which
firms are housed. It could make or lose money on its investments.
The money consumers spend on liquor could — instead of going into the
state’s accounts, as some of it does now, thereby eliminating the need
to raise a like amount in taxes — either bring in jobs and new tax
dollars or just go down the drain.
Is it a good idea?
Despite his rhetoric about the importance of low taxes and low
regulation in making the economy grow, Gov. Kasich is not assuming
those things will be enough. In looking for something else, he’s right
not to close his mind to the potential of government activism.
His plan has the advantage of not complicating his task of balancing
the budget in the short run. He likely would get more money from
JobsOhio upfront — the purchase price of the lease — than the liquor
operation produces in a year.
Meanwhile, JobsOhio would be expected to get $100 million a year to
deploy.
Bloomberg news was unable to find any other state putting up money like
that. Its headline: “Kasich’s $100 million for Ohio Jobs May Start
Employment Race.”
Mark Kvamme, the venture capitalist whom the governor chose to be
director of job creation, says the key is having a steady stream of
money.
He said that typically, “When the economy is going down, you have less
money to invest in job creation. That’s the time you need it most.”
How crucial that $100 million a year might be to the state’s future
might be doubted. Mr. Kvamme himself has noted that more than $300
million is put up “in Silicon Valley in two weeks.”
Moreover, the governor wants entirely too much secrecy in the operation
of JobsOhio. This is unmistakably public business being conducted with
public money. Let the sunshine in.
Meanwhile, there remain important unanswered questions, including what
the investment strategy will be, what will happen to existing state
programs for luring businesses, and what will happen to the projects
now funded by liquor, including alcohol and drug abuse efforts and
economic development projects.
That said, some clever thinking is at work here, some ground breaking,
some energy. In the name of experimentation, of letting a new governor
take his best shot on a top state priority, it’s worth a try.
Read it at Dayton Daily News
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