Posts Tagged ‘University of South Carolina’
SCPC Continues to Speak Out on Questionable Deals at USC
SCPC President Ashley Landess was quoted in Sunday’s edition of The State in the story USC nixes bids; donor chooses architect- ‘Unprecedented’ move comes in late stage of bidding process. (this same article also appeared in the Rock Hill Herald, The Post and Courier) Landess said:
And one frequent critic of the university called it “an end run around the procurement process.”
“People shouldn’t deal with the university if they don’t play by the rules,” said Ashley Landess, president of the S.C. Policy Council.
If private money is mingled with public money, the project should have to follow public rules, Landess said.
“There will be public money involved in this project,” she said. “And a lot comes from other government sources. It’s a symptom of a bigger problem: the university blurring the line between private and public money.”
The Policy Council’s newest website The Nerve recently published a story that highlights the university’s continued unsuccessful participation in the economic development game. Also, this isn’t the first time the Darla Moore School of Business’ financial situation has been questioned.
At the Bottom of the Incentives Slippery Slope
It should come as no surprise that the House easily let pass a new budget proviso (89.112) that takes $15 million from the Insurance Reserve Fund to pay for a new economic incentives plan for the airline industry … that is, via regional economic development entities.
After all, the plan (H 4343) has already passed the House – on an unrecorded vote – and is currently awaiting review by the Senate Transportation Committee.
In fact, Ways & Means Committee Chairman Dan Cooper insured passage of the proviso by separating it from a much more controversial proposal to also take $10 million from the Insurance Fund to pay for tourism promotion (read: “The Heritage Golf Tournament”) in Beaufort County.
Legislators hotly debated that giveaway – because, to paraphrase Rep. Ralph Norman, they might not want to see newspaper headlines asking how lawmakers could cut education funding, but still use state insurance funds to back a golf tournament. In the end, though, lawmakers overcame their fear and the proviso passed anyway by a vote of 69 to 43.
No doubt, Norman is right that it’s not the state’s role to bail out a golf tournament.
So how about the airline industry? Why not a peep asking whether it is the state’s role to “provide more flight options, more competition for air travel, and more affordable air fares for the State of South Carolina”?
Consider that 16 percent of South Carolinians live in poverty – that’s about 716,000 people. Let’s ask these folks – as well as the taxpayers bankrolling the Insurance Reserve Fund – how they’d like to use this money? How about to fund more charter schools? Or to lower taxes on the working poor? Or to lower taxes for everyone?
It is doubtful that many South Carolinians agree with using taxpayer funds to prop up the airline industry.
But if we’re going to pay for a golf tournament, the same logic dictates that we subsidize the airfare for folks to attend. And that we also subsidize the planes they fly in (Boeing); as well as the places where they shop (Sembler and Bass Pro Shops).
It seems there is no economic activity – and recent legislation passed by the House may well insure that fact – that is not subsidized by the state government.
State government, though, is not an entity unto itself; it’s not a productive enterprise. So, if everything we do is already being subsidized, why not just cut taxes for everyone and take the politicians out of it?
More to the point, a government with the power to subsidize every economic activity also has the power to tax and license every economic activity (more on that, here). In short, it is a government with the power to control all economic activity.
The Exception Doesn’t Make the Rule
Lawmakers in South Carolina, and nationwide, like to point to Research Triangle Park in North Carolina as the model for taxpayer-funded economic development. They call it a success of “cluster theory.” As interpreted by state government, the theory holds that taxpayer-funded incentives will attract a particular industry to an area—film making, aeronautics, automotive, etc.—and that anchor businesses will attract similar or supporting companies.
Cluster theory emerged as a new mantra for government-driven economic development in the early part of the 2000s, including the 2003 launch of South Carolina’s “Council on Competitiveness”—now called New Carolina. But among economists, skepticism was emerging even before state policymakers started to embrace the theory. Economists warned in 1999 that cluster theory might be just another passing fad, and that “cluster theory should come with a public health warning.”
Duplicating RTP, however, will be far more difficult than S.C. lawmakers seem to realize. In fact, not even North Carolina has been able to duplicate its own success. Just look at the Global TransPark Authority, a 20 year old industrial park near Kinston. Today the aerospace cluster venture has racked up nearly $38 million in debt to the state, with no idea how or when the debt will be repaid.
The Carolina Journal reported that even though the park landed an “anchor tenant” in Spirit AeroSystems, a Wichita, Kan.-based company, taxpayers still have to subsidize Global TransPark Authority at a rate of $200,000 per job.
South Carolina has clusters, make no mistake. Textiles, chemicals, forest products, apparel and furniture are just a few. But these clusters evolved naturally—without government incentives other than allowing the free market to create commerce spontaneously. Nonetheless, cluster theory has been exploited by governments looking for a rationale for enacting deals for special interests—and picking winners and losers in the marketplace.
The problem is that nobody, especially not government, can force economic development to happen. South Carolina attempted its own cluster theory economic development experiment, in this case attempting to create a “knowledge-based” cluster. It’s called Innovista. Perhaps you’ve heard of it, or seen its ghost town of mostly unoccupied buildings in downtown Columbia. Either way, you’re definitely paying for it.
SCRA’s ‘No Tax Dollars’ Routine Doesn’t Pass Smell Test
The State newspaper has a story in today’s edition about a groundbreaking ceremony for the South Carolina Research Authority-USC Innovation Center.
The Columbia innovation center is one of three such sites SCRA is building.
In the article’s last line, SCRA Chief Executive Bill Mahoney is quoted as saying: “No taxpayer money will be used to build the state incubators.”
Beyond the fact that in the 1980s the General Assembly gave SCRA $500K and approximately 1,400 acres of undeveloped state land – property the entity has sold off for many, many millions of dollars over the years - a simple glance at the artwork accompanying The State’s story indicates that at least some tax dollars are almost certainly going toward the SCRA-USC Innovation Center.
The rendering shows that underneath the SCRA moniker is the logo for the University of South Carolina. And, according to the FY 2009-10 budget, USC was allocated more than $900 million in total funding, including more than $140 million from the state’s General Fund.
So unless USC is allowing its name and logo to be used free of charge by SCRA (which seems implausible given the manner in which the school jealously guards its brand), one can reasonably assume that, contrary to Mr. Mahoney’s assertion, there are indeed tax dollars being used at the Columbia innovation center.
Endowed Chairs Report Earns an ‘F’ for Transparency
Given the fuzzy conclusions evident in the Centers of Economic Excellence (CoEE) program’s 2008-09 annual report, one might deduce that CoEE’s review board might want to consider pushing for an endowed chair in the area of philosophy.
Ponder the opening paragraph in program Chair Paula Harper Bethea’s message to the General Assembly and the Budget and Control Board:
At a time when much of the country is staring down the barrel of economic uncertainty, and the last thing anyone wants is “financial” in his or her job title, the Centers of Economic Excellence Program is celebrating unparalleled success. To date, more than $232 million in non-state funds have been invested into our state economy and nearly 3,200 jobs have been created through 45 public-private partnership research centers known as Centers of Economic Excellence, or CoEEs.
Unparalleled success? One of the original concepts behind the endowed chairs program was that money from the lottery would be matched by in large part by private investment to secure positions for top professors in areas that have the potential for raising the university’s stature or bringing economic returns.
But according to the most recent report, South Carolina has invested $183.6 million in lottery funds in the endowed chairs program since its inception in 2003 while receiving $145 million in “non-state” matching pledges. Of that $145 million, about $39 million has come from corporations and another $26 million from individuals.
The remainder was from foundations and non-profits (a little more than $49 million), federal funding (nearly $22 million) and health care providers (nearly $9 million).
That means the business community is chipping in one dollar for every $4.69 the state puts toward the program. Even if you combine the corporate and individual pledges, state funding is outpacing private contributions by nearly 3-to-1.
As to the statement that “more than $232 million in non-state funds have been invested into our state economy,” this figure is difficult to substantiate based on the annual report because there’s no breakdown of sourcing. Still, it’s apparent that a good bit of the money is coming from taxpayer pockets.
For example, in October, the University of South Carolina’s Center for Healthcare Quality received a $4.8 million federal grant from the National Institutes of Health.
According to Bethea, $113 million of the $232 million is comprised of “dollar-for-dollar partnership matches which each CoEE must raise in order to access state award funds.” The other $119 million is “composed of research grants awarded from corporations and federal agencies over and above program matching requirements.”
Without a breakdown, it’s impossible to tell how much support the program is getting from the private sector and how much is government-directed economic development.
Finally, there is Bethea’s assertion that nearly 3,200 jobs have been created by the Centers of Economic Excellence.
Actually, just seven pages after Bethea’s claim the job-creation numbers are modified: “To date, the CoEE program has resulted in 1,224 high-paying, knowledge-based economy jobs,” the report states. It adds that, according to the Darla Moore School of Business, another 2,000 new jobs are likely to have resulted from the impact of $120 million in extramural research funding brought into the South Carolina economy by CoEE chairs and their research teams.
So, nearly two-thirds of the jobs touted as being created by the Centers of Economic Excellence are nothing more than a guesstimate, an approximation made by an arm of one of the universities that benefits from the program.
The Centers of Economic Excellence has been unable to produce a detailed listing of jobs created through the Endowed Chairs program when requested by the Policy Council.
The uncritical assessment given by Bethea, who is vice chair of USC’s Research Foundation, is particularly embarrassing given that the University of South Carolina, for one, prides itself on being a research university.
Were a USC science student to turn in a report completed with the same methodology – poor research, lack of sourcing and dubious conclusions – they’d likely earn a failing grade.
Pastides Wants More Money for USC Railroad
In a move that should have surprised no one, University of South Carolina President Harris Pastides said Monday that when the economy improves he will ask the General Assembly for more money for the university.
Pastides, in a talk to the Columbia Rotary Club, said South Carolina now ranks last, with Arizona, in state taxpayer support of higher education, according to The State newspaper, adding that only 15 percent of USC’s funding now comes from state money.
“That’s no way to run a railroad,” he told the group.
No, it certainly isn’t any way to run a railroad – at least a profitable private one – as few railroads get 15 percent of their operating capital from state coffers. And willy-nilly expansion, operating with little to no accountability and pumping money into the rail equivalent of Innovista are also no way to run a railroad.
In fact, were Pastides the chief executive of a railroad and operated it as he does the University of South Carolina, he’d likely be run out of town on a rail by the company’s board of directors.
Pastides said legislatures in states that have successful universities, vibrant economies and educated populaces usually contribute far more money to their institutions of higher education than South Carolina.
But the fact is, if USC is in such difficult straits perhaps it should consider what other organizations do in difficult times, namely pull in their horns and concentrate on core areas, rather than expanding like kudzu on crack. Marshalling resources would enable USC to focus on its strengths, rather than spreading itself too thin.
What’s Happening in SC on Tuesday, 12/1
Purported Innovista Tenant Opts Against Financial Transparency
Collexis Holdings, the Columbia-based public company once held up by the University of South Carolina as a cornerstone tenant for Innovista, has decided it will no longer file information with government regulators about its financial condition.
Earlier this week, Collexis told the U.S. Securities and Exchange Commission it was terminating the company’s reporting obligations.
“With the filing of the report, the company’s obligation to file periodic and current reports with the SEC, including Forms 10-K, 10-Q and 8-K, is immediately suspended,” the company said in the filing.
Essentially that means investors will no longer be able to track through the SEC the company’s performance, such as Collexis’ annual report, due earlier this fall. The company’s fiscal year ended June 30.
Collexis announced to great fanfare in 2007 plans to relocate to Innovista. Two years later, it’s simply trying to stay afloat. The company lost more than $5.4 million through the first nine months of its fiscal year.
That came on the heels of an $11.2 million loss during the previous year. Collexis’s stock, which sold for as much as $12 a share in 2007, currently trades for between 4 and 5 cents a share.
Despite the company’s problems and the fact it has never relocated to Innovista, it remains listed among “tenant profiles” on the Innovista website.
Then-University of South Carolina president Andrew Sorensen, a driving force behind Innovista and now a member of the company’s board, pinned high hopes on Collexis in 2007, when he made the announcement about the company moving into the research district.
“I am delighted that Collexis will become part of Innovista,” said Sorensen, who retired as president last year and serves as a distinguished professor at the University’s School of Medicine. “Collexis aligns very nicely with our research in alternative energy and fuel cells, the health sciences and computing. It is exactly the type of company that we want to have here.”
Collexis has been closely tied to Innovista and USC almost from the time it began in Columbia:
- In October 2007, it was announced that USC had signed an agreement with Collexis and SC Launch to create a partnership for hydrogen fuel research. The project was funded with $200,000. SC Launch is an arm of the S.C. Research Authority, created by the General Assembly. SC Launch is partly sustained by contributions to the Industry Partnership Fund, for which contributors receive dollar-for-dollar tax credits;
- Last November, former USC president Sorenson joined Collexis’s board.
- Collexis is a graduate of the USC Columbia Technology Incubator. The Incubator has received $572,000 in state tax dollars since its inception.
Collexis’ difficulties mirror that of Innovista, the 500-acre research campus that was originally touted as a public-private partnership. Despite costing taxpayers more than $100 million, Innovista has just a single tenant, the University of South Carolina’s Arnold School of Public Health. The venture has produced no private sector jobs.
Innovista was intended to be a center for research on hydrogen and other technologies, and a magnet for private companies building spin-off products. Nearly four years later, Innovista’s goals remain largely unrealized as a majority of the buildings constructed can’t even be completed for lack of funds.
S.C. Media Glossing Over Hydrogen Realities
Much of the South Carolina media seems reluctant to pull back the curtain on the realities associated with government-funded hydrogen transportation research.
The Obama administration has expressed grave doubts about the viability of hydrogen transportation, but that hasn’t kept the South Carolina media from hyping the concept like it’s a no-brainer solution to our nation’s energy concerns.
Take a story that appeared in The Charleston Post and Courier this past weekend. The piece provided a decidedly uncritical look at the tens of millions in tax dollars that have been invested in hydrogen research in South Carolina, even though there’s been little return on that investment.
Highlights from the story:
State taxpayers have chipped in $12.3 million to hydrogen fuel cell efforts, while federal, municipal and private sources have invested an additional $115 million in South Carolina, said Shannon Baxter-Clemmons, executive director of the S.C. Hydrogen and Fuel Cell Alliance.
Singing Innovista’s Praises while Parroting Incorrect Data
Columbia Mayor Bob Coble has been among Innovista's biggest supporters.
Columbia Mayor Bob Coble touted the benefits of Innovista in last week’s State newspaper but it’s difficult to lend credence to his take on USC’s $140-million research campus when he’s clearly out of touch with what’s going on in area technology circles.
For example, Coble never misses a chance to highlight the USC Columbia Technology Incubator, as he did in last Wednesday’s piece, but he seems unaware of what’s going on at the Incubator, which receives funding from the city of Columbia, along with the state and the private sector.
In Coble’s piece on Innovista, he writes that the USC Columbia Technology Incubator has “assisted 63 companies and created 554 new jobs, including 142 jobs held by minorities and women.”
If that’s true, then the Incubator has been stuck in neutral for quite some time. Consider:
- In an op-ed Coble penned for The State back in April he wrote that the Incubator had “assisted 63 companies and created 554 new jobs, including 142 minority and female jobs.”
- Last fall, he wrote to the Free Times newspaper and said that the Incubator had “assisted 63 companies and created 554 new jobs, including 142 minority and female jobs.”
- He said the same thing more than a year ago in another State op-ed, writing that the Incubator had “assisted 63 companies and created 554 new jobs, including 142 minority and female jobs.”
- And in May 2008, Coble again wrote in The State that the Incubator had “assisted 63 companies and created 554 new jobs, including 142 minority and female jobs.”
However, according to Incubator officials, the project has created more than 660 jobs since its inception, including more than 170 minority jobs.
