Posted tagged ‘James Ostrowski’

Court Allows Economic Development Illusion To Continue

November 21, 2011

Buffalo lawyer James Ostrowski made a tremendous effort to end the insanity of politicians providing taxpayer dollars to corporations under the guise of creating jobs. Ostrowski’s lawsuit made it up to the Court of Appeals, the highest Court in New York State, where we all lost in a 5 to 2 decision.

The New York State Constitution clearly states:

“[t]he money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking;”

Despite this clear language politicians regularly funnel billions of tax dollars in grants and loans to private businesses. These same private businesses in turn provide significant campaign contributions to politicians in a process frequently referred to as “pay to play”. It is a well known fact that any private business looking for tax dollars to subsidize their efforts must play the game of making campaign contributions to politicians. The “pay to play” shell game costs taxpayers billions of dollars and in just about every instance the number of jobs promised at press conferences rarely matches the hype.

As pointed out in the Court opinion politicians desperate to show that they are doing something to create jobs are spending insane amounts of tax dollars to assist private businesses. For example:

  • $140 million in tax dollars is being used to support the construction of a wafer packaging facility and continued research and development efforts to a joint venture of which International Business Machines Corporation is a member.  This expenditure, it is said, will result in the creation of at least 675 jobs and the “retention” of 1400 others.  That works out to roughly $60,000 of State money per job.
  • $300 million in tax dollars is being utilized to help an “international consortium of semiconductor manufacturers” expand a research and development program.  This,we are told, will result in the creation of 450 jobs and the saving of 250 others: more than $400,000 per job.  And the brief of defendant Global Foundries, Inc. discloses that the Legislature has appropriated $650 million to subsidize that company’s semiconductor manufacturing (an appropriation distinct from the $300 million semiconductor subsidy described by the State).  Global Foundries says that its manufacturing facility “is expected to employ more than 1,500 people, with an additional 5,000 jobs created by supplier firms”– implying a cost to the State of roughly $100,000 per job.

The five Judges ruling against Ostrowski’s argument that the New York State Constitution is being violated based their decision on the following:

  • It is against the Constitution for government officials to give or loan tax dollars to private corporations. However, it is not unconstitutional for government officials to provide tax dollars to state created Authority’s such as the Empire State Development Corporation, the Buffalo Urban Renewal Agency and the Erie County Industrial Development Agency and for these agencies in turn to give or loan public dollars to private corporations.

The two dissenting Judges led by Eugene Pigott from Western New York stated:

  • In 1967, state voters rejected a proposed amendment to the state constitution that would have allowed the distribution of funds to private businesses for the purpose of economic development in the same manner the Empire State Development Corporation is distributing funds now.
  • “There seems to me no fundamental difference between the State directly giving monies to such private enterprises and the State creating a public corporation with the express intention of doing so”. “…the majority errs in holding that the Legislature may do indirectly, through a public corporation conduit, what the Constitution forbids it to do directly.” (Justice Pigott).
  • “It is an illusion — one that seems to have the persistence of original sin — that prosperity can be attained by taking money from taxpayers and handing it to favored businesses.” (Justice Smith)
  • “I seem to remember a time when IBM could make money by selling its products for more than it cost to produce them.  I would have thought semiconductor manufacturers could do the same. If they cannot, a bail-out for their shareholders is not a prudent use of more than a billion dollars in taxpayer funds.” (Justice Smith)

I agree completely with the opinions of Justice Pigott and Smith that the State Constitution is in fact being violated by funneling tax dollars to favored politically connected private corporations at the expense of everyone else. This constitutional violation creates a “pay to play” environment of corruption, which impacts the operation of government in many ways.

What do you think about this Court decision?

End Taxpayer Subsidies For Economic Development

October 13, 2011

Buffalo attorney James Ostrowski recently argued a very important case before the New York State Court of Appeals, which if successful will have a huge impact on pay to play politics, and reduce taxes in New York State.

The law suit brought by a Lockport, NY financial planner and others belonging to an anti-tax group seeks to eliminate tax payer subsidies paid to corporations for economic development incentives. New York’s State Constitution states in Article VII, Section 8 — that “the money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking.” Despite this clear constitutional language politicians in exchange for campaign donations have found ways to steer money to connected developers and corporations.

Bill Hammond from the New York Daily News wrote a great article about the billions of dollars that politicians give away  to corporations in New York State. As Hammond states:

Year in and year out, politicians in New York and other states shower companies with billions of dollars in grants, low-interest loans, tax breaks and other goodies in the name of economic development.

In fact, what the pols are really doing is bribing those companies to locate within their borders – so that they can attend the ribbon-cuttings and pat themselves on the back for creating jobs that were probably going to be created anyway.

I agree completely with the above point and this one as well:

… elected officials have no business trying to pick winners and losers while gambling with the taxpayers’ money.

Another flaw in economic development programs is that they almost always favor larger companies – which have the wherewithal to win government help – even though it’s small businesses that actually create most new jobs.

Plus, the programs are breeding grounds for public corruption as elected officials and their appointees dole out favors to their pals and political supporters.

In 2006, an incredible $1.4 billion in loans, grants, tax breaks, (including $665  in cash) was provided to GlobalFoundries on a promise of creating some 1,400 permanent jobs in Saratoga County, which works out to about $1 million a job!

Hammond additionally points out:

According to economist Michael LaFaive of Michigan’s Mackinac Center for Public Policy, research consistently shows that the programs are a waste.

“It’s the illusion of job creation,” he says. “That’s why politicians like it. Illusion trumps reality in their industry.” LaFaive says money would be far better spent on improving the state’s overall business climate – by investing in infrastructure or lowering tax rates for all rather than a select few.

New York State is billions of dollars in debt making layoffs and budget cuts necessary. Now is the time to end the insanity of throwing public dollars at corporations, as it simply doesn’t work and we can’t afford it any more.

What do you think?