After Privatization Fails, Illinois Governor Creates New Economic Development Arm

by | February 4, 2016

By Kim Geiger

Republican Gov. Bruce Rauner used his executive powers Wednesday to pull an end run around Democratic lawmakers, signing an order that directs the state's economic development agency to work with a not-for-profit corporation the administration formed to recruit businesses to Illinois on the state's behalf.

The move comes months after a Rauner-led effort to partially privatize the Illinois Department of Commerce and Economic Opportunity stalled in the General Assembly when Democratic House Speaker Michael Madigan inserted a requirement that the public-private partnership be repealed after three years.

Rauner objected to that, saying the provision is "not an option."

"If we're going to recruit superstars for this effort, we can't tell them, well, the organization may disappear in a few years," Rauner said at a signing ceremony in the Loop. "The legislature slipped that into the legislation, so we decided to end those negotiations and now we're taking unilateral action."

It's the latest indicator of how deep the stalemate is at the Capitol, where disagreements between Rauner and Democrats have sent state government into an eighth month without a budget while the two sides engage in a public war of words.

Asked about the executive order, Madigan spokesman Steve Brown replied: "We still don't understand why he ran away from the agreed bill and why this took a year."

Rauner's workaround on the privatization effort involves the newly formed Illinois Business and Economic Development Corp., which he said will market and promote Illinois to business leaders and will negotiate incentives for businesses to bring jobs to the state.

The governor said the private non-for-profit would not be allowed to commit taxpayers to any deal, and that all agreements would have to be approved by the state economic development agency.

But Rauner's three-page executive order does not spell out how such a collaboration would work, other than to say that the state agency "shall comply with all applicable laws, regulations, and policies, including procurement, grant-making, and transparency, in seeking and entering into any such collaboration."

Similar privatization efforts in other states have had mixed results, and critics say that in some cases, the lack of transparency that comes with using a private corporation to conduct government business has led to misuse of funds. Mayor Rahm Emanuel has a similar organization at his disposal with World Business Chicago, a not-for-profit that functions as the city's economic development agency. That group has been criticized for a lack of transparency, including closing meetings to the public.

Rauner insisted his new not-for-profit would be "a transparent operation," that board meetings would be public and that the organization would be subject to the state's Freedom of Information Act. Asked if that requirement was spelled out in his executive order, Rauner said: "I think it is, I'm not sure. But they're going to be subject to FOIA."

Jim Schultz, Rauner's DCEO director, later acknowledged that wasn't quite right.

"The executive order does not require that," said Schultz, who added that the not-for-profit plans to publish its board minutes, any grant or tax incentives and donor names and donations. "So it effectively is going to be the equivalent of FOIA without the requirements of FOIA."

The legislation that stalled in the General Assembly spelled out that the private entity would be treated as a government contractor under open records laws. Rauner's executive order makes no mention of whether the public would have access to the private entity's records.

Rauner brushed away a question about how the executive order differs from the stalled legislation.

"The biggest difference is this isn't going to die in three years," Rauner said. "It can't be subject to the political games the legislature is attempting to play with this."

That's not necessarily true. Because Rauner established the arrangement by executive order, the next governor could reverse it. Rauner is up for re-election in 2018.

(c)2016 the Chicago Tribune