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What Corrupt States Spend Their Money On

A study finds that more corrupt states spend more money on construction, highways and police protections and less on health, education and other public services.

Former Charlotte, N.C., Mayor Patrick Cannon’s guilty plea this month to one count of honest services wire fraud wasn’t just a blow to Charlotte’s clean reputation – it’s a mark against North Carolina’s status as one of the nation’s least corrupt states.

Cannon, who was arrested and resigned from his post on March 26, repeatedly sought and accepted bribes in exchange for his backing on transportation, planning and zoning projects while in office on city council and later as mayor, according to prosecutors. His methods aren’t original. Economic development projects are ripe for corruption, the study published this spring in the Public Administration Review, found. 

Using data from the Department of Justice that encompassed more than 25,000 public corruption-related convictions nationwide between 1976 and 2008 of elected officials, judges and local employees, the study concluded that higher instances of corruption correlate with more spending in certain areas. Among the most corrupt states were Mississippi, Louisiana, Alabama, Florida, Tennessee, Kentucky, Pennsylvania, Illinois, South Dakota and Alaska.

U.S. Public Officials' Corruption, 1978-2008

corruption-map.jpg

Source: Public Administration Review

The study found that high levels of corruption in a state can shape its budget allocation. More corrupt states tended to spend money on construction, highways, and police protection programs, which provide more opportunity for corrupt officials to use public money for their own gain. These states spend less on health, education, and welfare, which provide less opportunity for officials to collect bribes, according to Indiana University's John Mikesell, who co-authored the report with Cheol Liu of the University of Hong Kong.

"If levels of convictions are high, that's a sample of the climate of the state," Mikesell said. "The convictions are just the ones who got caught. If there's a lot of convictions, there's probably a bunch that haven't been caught."

Indeed, some estimate that the impact of so-called “legal corruption” is even greater than the type of corruption tracked in Mikesell and Liu’s study. Chuck Thies, a local political consultant in Washington, D.C., said the “wink, wink, nod, nod” culture of campaign finance can sometimes run right up to the line of bribery. For example, Thies said, a local business owner is lobbying a politician for favor on his project. That politician, who is running for reelection, then approaches the business owner and asks that person to donate a significant amount of money at the official’s next fundraiser.

“It’s that simple. It happens all the time,” Thies said. “The savvy person knows not to say, ‘If I do my $25,000, will you authorize my earmark?’ But they know exactly what’s just transpired.”

The shakedown culture can also be a deterrent to economic development, with developers who are attempting to play fair getting disenchanted by pay-to-play politics, he added. After all, there's little incentive to spend time and money on a bid when the winning bidder has already bought political favor. Public confidence in government is also a hidden – and immeasurable – cost of corruption, added Sergio Acosta, a corporate attorney who was the former federal prosecutor for the Northern District of Illinois.

“Illinois officials have taken a real hit in this state as a result of that,” he said.

In order to prevent corruption, Mikesell suggested that aggressive yearly audits, budget processes without shortcuts, and a degree of internal control over finances are among the actions that governments can take to deter corruption in public officials.

Even so, big development spending isn’t the only draw for potentially corrupt dealings. Barak Cohen, a former federal prosecutor who is now a defense attorney in Perkins Coie’s white collar practice, said he worked a case in Puerto Rico that stemmed from the fact that the commonwealth had hired too many police officers, then undertrained and underpaid them.

“It was a perfect storm for police corruption,” Cohen said.

Liz Farmer is a former GOVERNING fiscal policy writer.
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