State Economic Development Agency to Convert to Nonprofit

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January 29, 2011; Source: Wall Street Journal | The NPQ Newswire has covered Ohio's plan to convert its economic development state agency into a private nonprofit before. This article from the Wall Street Journal puts Ohio Gov. John Kasich's plan to do so into context.

According to the WSJ, several states including Wisconsin, Iowa, and Arizona are thinking about privatizing the governmental function of economic development in this way, and it isn't in order to save money. Partly it is to function like chambers of commerce, according to Scott Walker, the newly elected Republican governor of Wisconsin. Walker told WSJ that private groups "are better equipped to create jobs and attract companies."

One of the "benefits" of privatization is that nonprofits may be exempt from certain kinds of disclosure that public agencies must adhere to, such as open meetings and disclosure of donors. But Ohio state legislators have pushed back against Kasich's proposed nonprofit, JobsOhio, and introduced legislation to increase disclosure beyond a once-a-year annual report and to permit the state's inspector general to examine the agency (see here and here), a position supported by much of the Ohio press (here, here, here, and here).

If governors are creating nonprofits so that they can camouflage their economic development programs and subsidies behind the confidentiality of a 501(c) (3) tax-exempt structure, nonprofits should feel mighty uncomfortable. If states want to create nonprofits for economic development purposes, hopefully these new nonprofits will bring the skills, speed, and flexibility to the task outweighing their attractiveness to governors and special interests because of their ability to withhold much important information from the press, critics, and the public at large. —Rick Cohen