Corporate welfare gone amok: “For ESPN, Millions to Remain in Connecticut”

The New York Times had an incredible article yesterday about Governor Malloy’s decision to give tens of millions of dollars in taxpayer funded corporate welfare checks to the extraordinarily successful ESPN Company.

Malloy is hardly the first Connecticut governor to provide excessive corporate subsidies to “win over” ESPN, but he certainly gets the “award” for giving away the most public money.

Over the past decades, time and time again, Connecticut taxpayers have been informed by their elected officials that it was vitally important to divert scarce public resources away from paying for vital services in order to pay for various expenses incurred by ESPN.

Governor Malloy holds out these virtually unending corporate welfare payments as proof that his economic development strategies are sound and working.

Instead of the traditional belief that a successful capitalist system will create its own winners and losers, Malloy and previous governors have claimed that by using taxpayer funds to select who wins and who loses, government can hand pick the winners and thereby build a stronger economy.

As the New York Times explained in their latest expose;

Governor Malloy “arrived at ESPN’s expansive campus here to celebrate the groundbreaking of the sports media giant’s 19th building, a digital center that would be the new home of “Sports Center.” It was August 2011, and this was the third visit in a year by Gov. Dannel P. Malloy, whose first was about three weeks before his election….This time, Mr. Malloy brought a hard hat, a shovel and an incentive package for ESPN potentially worth $25 million.

ESPN is hardly needy. With nearly 100 million households paying about $5.54 a month for ESPN, regardless of whether they watch it, the network takes in more than $6 billion a year in subscriber fees alone. Still, ESPN has received about $260 million in state tax breaks and credits over the past 12 years, according to a New York Times analysis of public records. That includes $84.7 million in development tax credits because of a film and digital media program, as well as savings of about $15 million a year since the network successfully lobbied the state for a tax code change in 2000.”

Malloy told the New York Times, “After I was elected, this was one of the first companies that I came to…I made it clear that ESPN’s needs were not going to be ignored by my administration.”

Instead there were plenty of other things to be ignored.

For example, Malloy, who once supported the CCEJF v. Rell School Funding Lawsuit, but who now – along with Attorney General George Jepsen opposes it, knows that Connecticut’s public school funding formula is $2 billion dollars underfunded.

As it was Governor Malloy who has pushed through the deepest cuts in history to Connecticut’s public colleges and universities, leading to massive tuition increases and forcing some Connecticut students to drop out of college altogether.

And as Malloy has to appreciate, a day almost never goes by that we don’t hear more and more reports about state agencies that are failing to fulfill their legal responsibilities due to their lack of sufficient staffing.

But none of those problems have stopped Malloy for funneling hundreds of millions in corporate welfare checks to ESPN, a multibillion-dollar conglomerate, and other extremely successful companies.

Of course, while Connecticut taxpayers are shelling out the money, they aren’t getting many of the benefits associated with investing in a success company.  Those benefits are accruing to the corporate executives and corporate shareholders of ESPN and companies like it.

Understandably ESPN, like many of these companies, take great pride in their economic success.

As an ESPN’s spokesman explained to the New York Times;

“Consistently since we launched, we’ve been a growth engine for economic development in central Connecticut…We’ve added employees on a consistent basis for 33 years in a state that in recent years hasn’t had as much success bringing companies that hire people here…Because we are visible and highly successful, the state can point to us as a company that loves being here and has flourished being in Connecticut.”

ESPN is extremely successful and deserves tremendous accolades but that hardly means Connecticut’s taxpayers should be shoveling more and more money into the company’s coffers.

And no one should fool themselves; these corporate welfare payments have been significant…

As the New York Times explains, Connecticut legislators have changed the corporate tax system a number of times to benefit ESPN and other media companies.

The cost to Connecticut taxpayers over the past seven years from the film tax break along has been over $450 million in lost state revenue.  Of that amount, nearly $100 million has gone directly to ESPN.  (Malloy proposed $50 million in new ECS School funding this year and called it a “major” initiative.”

Since ESPN doesn’t even pay enough in taxes to use all of their tax credits, the company “regularly sells the tax credit certificates to other entities in private transactions.”

Meaning that not only does Connecticut fail to collect the taxes from ESPN, but ESPN MAKES MONEY selling the tax credits to other company that then uses them to get out of paying their fair share in taxes.

And as the New York Times noted, “Such transfers are common and within the rules of the program.”

This list goes on and on.  In fact, the New York Times story only scratches the surface.

When Governor Malloy proposed the largest tax increase in Connecticut history in 2011 the burden fell disproportionately on Connecticut’s middle income families.  Those making over $1 million a year didn’t even see their income tax rates increase.

With policies like that, Connecticut’s wealthiest families pay about 6 percent of their total income in state and local taxes.   Middle Class families pays about 10 percent of their income in state and local taxes and the State’s poorest residents pay about 12 percent of their income in state and local taxes.

And those figures don’t even count the more than $1 billion in corporate welfare payments that Malloy has given out to successful corporations….nearly all of which were charged to the state’s credit card.

The result of this spending spree on borrowed funds?

Connecticut residents will have to pay back all of the money plus the interest associated with borrowing those funds.

All so that Malloy could show up at groundbreakings like the one he attended at ESPN.

You can read the New York Times story at:  http://www.nytimes.com/2013/12/27/sports/for-espn-millions-to-remain-in-connecticut.html?_r=1&adxnnl=1&seid=auto&smid=tw-nytmedia&pagewanted=1&adxnnlx=1388171681-7lC2pbJS5xAUNAuHJ6XQbg

ESPN announces layoffs as part of Malloy’s “Jive Five” Economic Development Program

The Urban Dictionary defines “jive” as a “colorful form of speaking” that is “sometimes hard to follow.”

In the real world here is how it works;

On August 2, 2011 Governor Dannel P. Malloy announced that, in return for creating 200 new jobs over the next five years, the taxpayers of Connecticut would give ESPN $17.5 million toward the construction of a new building and at least $300,000 to train the new workers.  Malloy explained, “ESPN’s needs are not going to be ignored.”

That corporate welfare package brought the total Connecticut taxpayer support for ESPN to over $100 million in state tax breaks and grants over the past twelve years.

Then yesterday, May 20, 2013, The Wall Street Journal reported that ESPN, “was in the process of laying off a few hundred workers… a sign that the hugely profitable sports cable-TV powerhouse is responding to the rising fees it pays to air games as well as other changes in the media industry…ESPN said some of the job cuts are coming through attrition, or unfilled open positions, and didn’t disclose the precise number or types of workers who are being let go.”

Associated Press added, “ESPN is cutting its workforce, the latest Disney division to reduce staff…’We are implementing changes across the company to enhance our continued growth while smartly managing costs,’ the sports media giant said in a statement Tuesday. ‘While difficult, we are confident that it will make us more competitive, innovative and productive.’”

The AP explained that the ESPN layoffs follow 300 layoffs that occurred at LucasArts and LucasFilms after Disney acquired the companies for $4.1 billion.

As AP noted, “Still, Disney has been on a roll financially, beating or matching earnings per share estimates for the last eight quarters. After it reported a 32 percent gain in net income for its fiscal second-quarter earnings two weeks ago, more than a dozen Wall Street analysts raised their price targets on Disney stock to an average of nearly $72.”

So in essence, despite being an extraordinarily financially successful subsidiarity of an extraordinarily, financially successful company that is doing extraordinarily financially well in this extraordinarily financially successful Wall Street market, ESPN accepted almost $20 million in scarce taxpayer funds and promised to create 200 jobs but is now intentionally keeping vacancies open and laying off Connecticut residents, so that it can appear even more extraordinarily financially successful.

Despite this development, according to the Hartford Courant, when asked about it, a spokesman for the Malloy administration said that ESPN will not be forced out of the First Five program as a result of its layoff plan because it is still intending to add at least 200 jobs during the period starting in August, 2011 when the Governor gave them the public funds.

Meanwhile, the Connecticut General Assembly continues to consider major cuts to some of the most significant and vital human and healthcare services.

Now if that jive is not a “colorful form of speaking” that is “sometimes hard to follow,” I don’t know what is.