Firms taught to milk 'cash cow'

A leading consulting firm is teaching American companies how to draw as much as possible from the government "cash cow," based on a deal by Washington state that gave Boeing billions of dollars in tax incentives in the face of threats and promised jobs.

Ernst & Young outlined the corporate welfare strategy in a PowerPoint-assisted presentation [PDF file] entitled, "Turning Your State Government Relations Department from a Money Pit into a Cash Cow," according to the Carolina Journal, a North Carolina-based business publication.

The presentation – shown to a recent meeting of the State Government Affairs Council, a national association – has been sent to leading firms, including Nextel, Best Buy, Alcoa, Goodyear, Wal-Mart, Home Depot, Toyota, Capital One, Bank of America, Bayer, BellSouth, Verizon, MBNA, Microsoft, Coors, Nissan, Anheuser-Busch and Pfizer.

The report, acknowledging taxpayers don't like corporate welfare, offers ways to "provide government with justification" for giving the "incentives" to businesses.

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One key strategy is to identify "public benefits" while making a threat of dire consequences if the deal is not made.

"Cash cow? You got that right," North Carolina state Republican Rep. Paul Stam told the Journal. "They look at [government] as just turning on the spigots."

The Journal said the presenation reveals "a cynical attitude and a willingness to 'milk the system.'"

Ernst & Young's Michael Press, who delivered the presentation March 26 in Savannah, Ga., told the Journal its purpose was to show businesses they should view their government-relations departments as "a source of value," rather than an administrative expense.

"This group [SGAC] gets together to discuss business that they have in common and the issues they confront," Press told the Journal. "The workshop on incentives constituted about one-third of the meeting."

Press said he didn't know who created the title of the "Cash Cow" seminar.

"That title was not my choice," he said. "It was part of a joint presentation."

Press delivered the presenation with Robin Stone, former vice president of state and local government relations for Boeing.

Press insisted, in reality, the "cash cow" is the "corporation that's providing jobs to the community – much the way the feedstock and the farmer provide an important commodity."

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"It's kind of a partnership arrangement and incentives are part of that partnership," Press said. "There's a lot the public gets out of it."

But the Journal talked to lawmakers from both sides of the aisle who view the terminology differently.

The cash cow, said the Republican Stam, ultimately is the taxpayers.

"They play state legislators like violins," he told the Journal. "They're treating us like a scam."

Stam insisted "partnership" does not describe the relationship.

"A partnership is two different entities that share in some risk, rewards, and control," he said. "There is no sharing here at all. The government is providing the money, and the business is getting it."

Democratic state Rep. Paul Luebke told the Journal, "referring to government as a cash cow is a very cynical way to look at the 50 state governments."

"It doesn’t surprise me that [businesses] would come together to trade notes," he said. "But it does strike me as cynical that the hard-earned and reluctantly paid taxes are there for the pickin.'"

The strategy of identifying "public benefits" while issuing threats was illustrated in the deal Washington Gov. Gary Locke made with Boeing.

The aircraft manufacturer required Washington to hire a consulting firm paid at taxpayer expense "to conduct a comprehensive economic impact study and analysis of the impacts and benefits [of the project] for the state, its citizens, and its taxpayers."

Then Boeing declared that without the government deal, it would be prepared to locate final assembly of its new jet, the 7E7, in a more welcoming state.

Since the company, founded in 1916, already had moved its headquarters from Seattle to Chicago, Locke took the threat seriously, recounts Jason Mercier, policy analyst for the Evergreen Freedom Foundation, a think tank in Olympia, Wash.

But instead of the expected job boom, Boeing since then has reduced state employment by more than 4,200, with further job cuts looming if 737, 757 and 767 planes cease production as expected, Mercier said.

The majority of the 7E7 production, in fact, will be done in Japan, Italy, Canada, Australia, Oklahoma, Texas and Kansas. Only about 800 to 1,200 jobs are expected to be located in Washington state, according to Evergreen.

Mercier notes Ernst & Young also advises businesses to "control publicity" and "avoid legislation if possible."

Boeing "set the standard" on these recommendations as well, Mercier says, requiring that all government press releases and publications concerning the incentives deal be fully coordinated with the company.

In fact, Mercier points out, Locke himself signed off on the agreement, not the Legislature, which obligates Washington to "assume the entire defense" for any legal challenge to the deal, including "all fees, costs and expenses."

The Ernst & Young presentation says restrictions can be set up that prevent legislators from rescinding the tax incentives if things don't go well economically.

Locke's agreement with Boeing, for example, promises "the state shall not suspend, revoke, or require repayment" of the tax incentives, regardless of whether or not more jobs are produced.

"Rather than turn our state’s depleted coffers into a 'cash cow' for private businesses, legislators should strive to improve the economic opportunity for all employers," Mercier said in an editorial published in the Columbian newspaper of Vancouver, Wash. "Tax dollars should never be used to allow state officials to pick and choose the economy’s winners and losers."