Charles Chieppo: Prisons raise wider issue of privatization

The Justice Department's recent announcement that the federal government would phase out contracts with privately operated prisons has refocused attention on the issue of privatization in the corrections realm and beyond. The bottom line is that governments at all levels would do well to avoid knee-jerk reactions and consider each privatization proposal on its own merits.

Deputy U.S. Attorney General Sally Yates wrote that private prisons, in which the federal government began housing some prisoners in 1997, aren't producing substantial savings and offer fewer rehabilitative services, such as education and job training, than Bureau of Prisons facilities provide.

Reactions were predictable. U.S. Sen. (and former Democratic presidential candidate) Bernie Sanders issued a statement asserting that "study after study has shown private prisons are not cheaper, they are not safer, and they do not provide better outcomes for either the prisoners or the state." A spokesperson for one of the companies that operates prisons countered that public-private comparisons were inappropriate because the privately operated federal facilities house a larger number of hardened criminals than their federally operated counterparts.

The reality is that most of the nation's 2.2 million prisoners serve their sentences not in the federal system but in state and local prisons and jails. And prisons operated by for-profit companies account for about 6 percent of state inmates, according to the American Civil Liberties Union.

Beyond prisons, there are a number of reasons why privatization can be an appealing option for state and local governments. The pay for success approach can shift risk away from taxpayers by conditioning a contractor's payment on the achievement of various metrics.

Privatization can be particularly effective in areas outside a public agency's primary focus. The Boston area's transit authority, for example, is the second largest land owner in Massachusetts, but it had little expertise in property management. The authority realized large revenue increases when it contracted out its real-estate management operations many years ago.

And even if privatization doesn't provide short-term savings, over time it can reduce the costs of pensions and other post-employment liabilities by reducing reliance on public employees.

But privatization is no panacea. One trap state and local governments often fall into isturning to it as a last resort to plug budget holes. Public-sector financial woes are rarely a secret, which gives any potential private partner the upper hand in negotiations. Other situations that can lead to bad outcomes for taxpayers are when governments are unclear about what they want to achieve from a privatization contract or when a contract is not carefully written to make each side's rights and responsibilities clear.

Nevertheless, privatization can be a smart option when demand for a particular service increases more quickly than an unwieldy government bureaucracy can accommodate, as was the case with the federal prison system. Prison populations spiked in the wake of enactment of mandatory minimum sentences and other "tough on crime" legislation in the 1980s, and the federal government turned to the private sector to keep up with a rapidly rising inmate population. But with an overall drop in crime and a recent move away from zero-tolerance policies, the prison population has begun to decline.

It's too soon to predict the impact that the federal government's decision will have on the much larger universe of state and local corrections facilities. But one thing is clear: Political leaders and advocates too often approach privatization proposals with their minds already made up. Taxpayers would benefit from officials who combine an open mind with a healthy dose of skepticism and who judge each potential opportunity on its own merits.

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu) is a research fellow at the Ash Center, at Harvard’s Kennedy School. This first ran in governing.com.

Charles Chieppo: In Mass. and elsewhere low returns imperil public pensions

In June, I wrote that public-sector pension plans were facing an existential crisis. Even though many states have adopted reforms, a sampling by the Center for State and Local Excellence of systems that cover 90 percent of the nation's state and local government pension-plan members found that in the last year the plans had on average of 74 percent of the money needed to fund their liabilities -- only a slight uptick from the previous year's figure of 73 percent.

That news was particularly troubling in light of a McKinsey Global Institute reportearlier this year suggesting that pension funds were likely to see lower investment returns going forward. Those McKinsey folks are looking awfully smart: A recent report from the Wilshire Trust Universe Comparison Service found 20-year annualized returns for U.S. public pension systems at their lowest point in the nearly 15 years the service has tracked the statistic.

A look at public pension fund performance in Massachusetts suggests just how bad things might get and underlines the need for far more fundamental reforms if we are to pay for pensions without having to raise taxes or shift money away from core government functions. According to a recent Boston Business Journal report, in fiscal 2016 the state pension fund achieved a mere 1.14 percent return on its investments, just a fraction of the 7.5 percent assumed annual return on which the fund's financial projections are based.

And the state fund's performance looked pretty good compared to other Bay State public pension systems. Including the state fund, the 107 funds averaged returns of less than 1 percent. Twenty-two of the Massachusetts systems actually saw negative returns last year, and 20 have less than half of what they owe to current and future retirees. The pension system for Springfield, the state's third-largest city, is only 26 percent funded.

State officials have tried to put the pension funds on a path to solvency. In 2011, Massachusetts enacted reforms that included increasing the minimum retirement age and limiting the degree to which large salary increases just prior to retirement can boost pension payouts. But the impact of those reforms has been marginal.

Increasingly, it looks like sustainable pension programs will require reforms more likethose enacted earlier this year in Arizona, whose Public Safety Personnel Retirement System had in just over a decade gone from being fully funded to having less than half the assets needed to cover its liabilities. The fund's outlook is a lot better in the wake of a series of bold reforms. The maximum salary for purposes of pension calculations was reduced from $265,000 to $110,000. Current and future pension costs will be split evenly between employers and employees. And to reflect the shared risk, the number of labor representatives on the fund's board was increased.

Under the reformed system, new employees will choose between a defined-contribution plan and a hybrid that combines defined-contribution elements with those of traditional defined-benefit plans. While those new employees can't begin to collect retirement benefits until age 55, they can retire at any time. This important change makes pensions portable, so employees wanting to move on no longer have an incentive to stick around just so they can vest in the retirement plan.

The overhauled system will be so much less expensive that new employees will likely be required to make smaller pension contributions than current employees. In all, 30-year savings are expected to be more than a third of accrued liability.

Comprehensive reforms like those that Arizona has produced become all the more important in an era of paltry pension fund investment returns. While officials in other states may feel that they've already enacted politically difficult pension changes, it's become clearer than ever that the time for more sweeping action is upon us. And we know that nothing does more to add to the pain of necessary reforms than procrastination.

Charles Chieppo is a research fellow at the Ash Center of the Harvard Kennedy School and the principal of Chieppo Strategies, a public policy writing and advocacy firm. This piece first ran on governing.com. Charlie_Chieppo@hks.harvard.edu

Charles Chieppo: Undergoing treatment for sick sick-leave policies

BOSTON

The aftershocks are still being felt in Massachusetts from the case of a state university president who received a payout for unused sick and vacation time of nearly $270,000 upon his retirement last year -- in addition to an annual pension of more than $183,000 and a $100,000 consulting gig. Proposed fixes are taking shape that, though imperfect, are steps in the right direction.

The problem is very real for many state and local governments. In Massachusetts alone, as of last year taxpayers faced about $500 million in liability for unused sick and vacation time.

The outcry over former Bridgewater State University President Dana Mohler-Faria's golden payout has already had an impact. Mohler-Faria refunded the state for 15 weeks of improperly accrued vacation time and agreed to terminate his lucrative consulting contract.

For the longer term. Gov. Charlie Baker, a Republican, has proposed legislation that would limit executive-branch employees' accrued sick time for to 1,000 hours, or about six months of work. The about 5,800 executive-branch workers who already have accrued more than that would be grandfathered, though their sick time would be capped at the hours accrued at the time of the legislation's passage.

Another bill, this one filed by Democratic state Rep. Colleen Garry, is tougher, limiting payouts to 15 percent of an employee's annual salary. Regardless of what you might think of her proposal, Garry made a point that public officials everywhere should heed, saying that government should "pay public employees fairly during their working years and not push compensation into retirement packages."

Mohler-Faria was one of 10 state and community-college officials who received six-figure vacation and sick-time payments between 2011 and 2015. Just this week, the Board of Higher Education eliminated the practice of rolling unused vacation time into a sick-leave bank and will gradually reduce the maximum vacation allowance to 50 days, still over 50 percent more than the limit for most state employees.

The University of Massachusetts, which is not governed by the Board of Higher Education, had previously limited accrued time off to 960 hours for non-union employees, but it remains unlimited for union workers -- yet another reminder of why post-retirement benefits should never be subject to collective bargaining.

The Board of Higher Education's new policies eliminate the worst abuses, but challenges remain when it comes to reforming policies around accrual of unused sick and vacation time. For one thing, whatever emerges from Massachusetts' legislative process is likely to cover only-executive branch employees.

Perhaps state and local government officials everywhere should be guided by Gov. Baker's simple point: "Sick leave is a benefit designed to deal with health and family issues, not a retirement bonus. Bringing … sick-leave accrual policy in line with other private- and public-sector employers just makes sense and is the fiscally responsible thing to do." What a concept.

Charles Chieppo  (Charlie_Chieppo@hks.harvard.edu) is a research fellow at the Ash Center at Harvard’s Kennedy School. This piece first ran at governing.com.

Charles Chieppo: Every state should have gubernatorial line-item veto power

The recovery from the Great Recession has largely been a half-­hearted one, and few see the economy improving dramatically in the near future. These realities present challenges for state and local governments that will likely require a range of responses, but giving governors the line-­item veto should be seen as low­-hanging fruit for the six states that don't have it.

Those states are Indiana, Nevada, New Hampshire, North Carolina, Rhode Island and Vermont, and there is a movement afoot in at least one of them to do something about it. Three bills pending in the Rhode Island legislature would put the issue before the Ocean State's voters this November.

Former gubernatorial candidate Ken Block, founder of the state's Moderate Party, has created a Web site, lineitemveto.org, that has gathered more 900 signatures for a letter urging the state's leaders to support the change.

There's good reason to consider the idea. The long­-term fiscal forecast is far from rosy for states and their local governments. A decade ago, the concern was rising health­care costs. Then came a number of municipal bankruptcies fueled in part by the costs of long ­underfunded pension systems. Next came a rule from the Government Accounting Standards Board that required governments to report liabilities associated with postemployment benefits such as retiree health care.

More recently, the focus has been on the need for costly improvements to infrastructure at a time when the sluggish recovery has produced slow revenue growth. It's not as though the line­item veto, which allows governors to delete items or parts of items in an appropriations bill without rejecting it entirely, will solve these problems for the six states that don't allow it ­­ after all, plenty of states that do have it struggle with their finances ­­ but it's one of the tools that will be needed if governments are to survive the fiscal challenges to come.

Like most things in politics, the full impact of the tool can't be measured in dollars and cents. The threat of the line-­item veto can shape debates and make it harder for legislators to lard up popular bills with pork. A line-­item veto could be overridden by lawmakers, but not without shining a light on provisions they might not want the public to pay a lot of attention to.

The temptation for public officials to duck responsibility for dealing with hard problems and let successors wrestle with them is always going to be great. But state and local leaders who want to deal with problems now face difficult choices. One approach, of course, would be to raise taxes, but voters are rarely happy about that. Another would be for governments to retreat entirely from some areas they now fund.

One could make a realistic argument that the public sector does a number of unnecessary things, but the inconvenient truth is that in a democracy every one of them has a constituency.

In most states, the far more realistic approach will be a combination of raising revenues and finding savings. The line ­item veto may be an imperfect tool for accomplishing the latter, but it's one that all states ought to have at hand.

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu) a research fellow at the Ash Center at Harvard''s Kennedy Center. This piece first ran on govering.com.

Charles Chieppo: Pay for success social programs

To its many critics, President Lyndon Johnson's War on Poverty is often described as the classic 1960s social program: a well-intentioned but naive effort that spends billions of dollars year in and year out without making much of a dent in poverty.

But imagine if government only paid social-service providers if their efforts actually yielded the desired results. That's the idea behind "pay for success" programs, also known as social impact bonds. Under this concept, businesses and/or philanthropies provide up-front money for programs to address difficult social problems. If they achieve a set of measurable outcomes within an agreed-upon time period, the funders get their investments back, plus interest. If not, government pays nothing.

Pay for success programs seem to be attracting a growing number of bipartisan fans since I wrote about them in 2014, and two new programs illustrate how implementation of the concept is becoming more sophisticated.

Last month, Connecticut Gov. Dannel Malloy, a Democrat, announced a four-year initiative to keep children from 500 families out of foster care. Social workers from the Yale Child Study Center will focus on parents with substance-abuse problems as part of an intensive effort to keep the children in their homes.

No funder has been named yet for the $12 million initiative, but several have expressed interest. If successful, the state will reimburse the up-front money plus a 5 to 6 percent interest payment. It's a pretty good deal considering that Joette Katz, commissioner of the state's Department of Children and Families, told The Washington Post that Connecticut currently pays about $350 million annually for services to children in foster care and institutions.

In South Carolina, Republican Gov. Nikki Haley recently announced a $30 million, four-year program to send registered nurses who specialize in maternal and child health into the homes of low-income pregnant women to teach them parenting skills and ways to keep their children healthy. The effort is funded by foundations and a corporation.

The Connecticut and South Carolina programs highlight the opportunity pay for success presents for prevention programs that can yield long-term savings but might not get funded through the traditional appropriations process. The South Carolina program also addresses the potentially sticky issue of determining whether a program has achieved the agreed-upon outcomes by designating an MIT research group to conduct an evaluation. Such provisions enhance the integrity and perception of pay for success.

As a model that is dependent on what funders are willing to invest in, pay for success isn't the silver bullet for addressing every stubborn and costly human-services problem. But particularly during a time when some once again seeing economic clouds looming, they can be a valuable tool for helping our neediest citizens by focusing state and local government resources on the best kinds of programs -- those that actually work.

Charles Chieppo is a research fellow at the Ash Center at Harvard's Kennedy School. This originated at governing.com.

Charles Chieppo: What Do the States Really Owe?

When it comes to getting your arms around just how much states really owe, there is no shortage of moving parts. There's bonded debt, and then there are liabilities for pensions and for other post-employment benefits such as retiree health care.

Dig deeper and you find that states set different periods over which they aim to pay down liabilities and that they assume differing rates of return on investments. Some states use fixed annual payments, but many use a gradually increasing schedule that results in payments being backloaded.

A new report from J.P. Morgan performs an important service by showing how states would stack up if all of these major variables were standardized. The study's author, Michael Cembalest, assumes a 6 percent rate of return on investments, level annual payments and a 30-year term for paying down liabilities.

Despite nearly $1.5 trillion in debts and unfunded retirement obligations, the study finds that, overall, state liabilities don't amount to the kind of national crisis that has often been portrayed. That is, unless you live in one of the states that face some very difficult choices because their debt and retirement costs are at or above a quarter of state revenues.

Cembalest finds that states with a liability-to-revenue ratio of 15 percent or less are in pretty good shape, and 36 states fall into that category. But eight states are in trouble. Given all the attention its pension problems have garnered, it's no surprise that Illinois is the worst, but wealthy Connecticut isn't far behind. Five of the eight (Delaware, Hawaii, Illinois, Kentucky and New Jersey) would have to more than double their annual payments to get their debt and retirement liabilities under control. The other two states on the watch list are Massachusetts and West Virginia.

The 6 percent rate of return Cembalest assumes on state investments is below historical averages, but it represents a much safer strategy than the 7.5-8 percent that most states assume. Such rosy assumptions result in gaping budget holes during tough economic times when states are least able to plug them.

While it might seem to make sense to increase annual retirement-liability payments each year on the assumption that inflation increases payrolls over time, too high a rate of annual escalation results in backloaded contributions that can understate long-term liabilities.

Perhaps as a result of the attention devoted to public-pension costs in recent years, 29 states made their full annual required contribution (ARC) to their pension funds in 2012. But the cost of other post-employment benefits (OPEB) is an even larger burden than pension liabilities in Hawaii and Delaware, and it is equal to pensions in Connecticut, New Jersey and West Virginia.

Despite the magnitude of the problem, just seven states made their full ARC toward paying down OPEB liabilities that year. Montana and Nebraska contributed nothing.

If the J.P. Morgan report is correct, most states have dodged a bullet. But to avoid a future crisis, they must do a better job of both calculating and addressing long-term liabilities. Massachusetts, for example, uses a debt affordability analysis calibrated to ensure that debt-service costs don't exceed 8 percent of budgeted revenue in any future year.

In addition, state taxpayers can no longer shoulder the entire downside risk for pensions. As I have argued before, they should transition to a system under which employees have a choice between defined-contribution and cash-balance plans.

The majority of states that face manageable debt and retirement liabilities can rightfully breathe a sigh of relief. But unless they get more conscientious about long-term liabilities, they won't be so lucky in the future.

Charles Chieppo/Jamie Gass: School-test conflict of interest

BOSTON What would have happened if the general manager of the MBTA had also chaired the board of Keolis or the Massachusetts Bay Commuter Railroad when the two companies were competing for the multibillion-dollar contract to operate the T’s commuter-rail system? That would never have been tolerated, and neither should a similar situation that is currently playing out in K-12 education in the commonwealth.

Later this year, Massachusetts Commissioner of Elementary and Secondary Education Mitchell Chester will make a recommendation to the Board of Elementary and Secondary Education about whether to replace the historically successful MCAS test with those developed by the Partnership for the Assessment of Readiness for College and Careers, or PARCC.

The problem is that Chester chairs PARCC’s governing board. As such, he should recuse himself from any involvement with the MCAS/PARCC decision-making process.

Chester serves as secretary to the state board and oversees the process for choosing between MCAS and PARCC. The Department of Elementary and Secondary Education that he heads gathers the information on which the decision will be made and conducts the internal evaluation.

Chester has formed a team of PARCC Educator Leader Fellows within the department. According to a memo from Chester, the PARCC fellows, who receive a stipend, should be “excited about … the Common Core State Standards” and “already engaged in leadership work around them.” The department has no MCAS fellows.

Some local education leaders aren’t buying into the charade that the PARCC/MCAS decision remains an open question. Brookline Superintendent and Massachusetts Association of School Superintendents President William Lupini, in a 2014 letter to the town’s school committee, flatly stated that “MCAS will be phased out in favor of either PARCC or another new ‘next generation’ assessment.”

A strong whiff of conflict tainted the process of choosing between Massachusetts’ previous academic standards and Common Core, which preceded the MCAS/PARCC issue.

The Bill & Melinda Gates Foundation has invested well over $200 million in the development and selling of Common Core. To help inform his 2010 recommendation to the board about whether to adopt Common Core, the three studies Chester relied on were all conducted by Gates-funded entities.

Furthermore, a 2010 WCVB-TV (Ch. 5) report described that he and other department personnel accepted $15,000 in luxury travel and accommodations from Common Core supporters before the board’s decision to adopt.

Gov. Charlie Baker has criticized the MCAS/PARCC and Common Core processes. He told the State House News Service, “I think it’s an embarrassment that a state that spent two years giving educators, families, parents, administrators and others an opportunity to comment and engage around the assessment system that eventually became MCAS basically gave nobody a voice or an opportunity to engage in a discussion … before we went ahead and executed on Common Core and PARCC.”

PARCC is also becoming increasingly desperate, which only increases the temptation to put a thumb on the scale. More than 20 states were originally part of the consortium; that number is now down to seven states and the District of Columbia.

The MCAS/PARCC choice is Chester’s last chance to regain the public’s trust in his department’s ability to manage an impartial, transparent and accountable process.
As chairman of PARCC’s governing board, the first step is to recuse himself from the decision.

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu) is a senior fellow and Jamie Gass directs the Center for School Reform at Pioneer Institute, a Boston-based think tank. This piece first ran in the Boston Herald.

Charles Chieppo: Providence stadium bogus 'economic development'

  BOSTON

As long as governments are made up of human beings, we can't expect them to be perfect. But they should learn from their mistakes, such as the whopper that Rhode Island state officials made in 2010 when they plowed $75 million into 38 Studios, a now-defunct video-game company started by former Boston Red Sox pitcher Curt Schilling.

Fast-forward five years, and another proposal that combines baseball, business and politics is on the table in Rhode Island. The owners of the Pawtucket Red Sox, Boston's top farm team, are asking for millions of dollars in taxpayer subsidies as part of a plan to build a downtown ballpark in neighboring Providence.

Under the proposal, the owners would spend $85 million to build the stadium and a parking garage. The state would take out a 30-year lease on the stadium land, for which taxpayers would pay $5 million annually in rent. The team would lease the stadium back from the state for $1 million per year, leaving state taxpayers on the hook for $4 million a year, or $120 million over the 30-year lease term.

The team is also asking city taxpayers for help. They want Providence to sign an agreement that would exempt the land from property taxes for 30 years.

The owners are following what has become a well-worn script for teams looking for stadium subsidies, warning that they will likely leave Rhode Island if the deal isn't approved. They've also commissioned the requisite economic-impact study, which estimates that the stadium would generate $12.3 million a year in direct spending for the local economy and about $2 million annually in state tax revenue. As usual with such studies, the owners call the projections "conservative."

Perhaps Holy Cross College economist Victor Matheson said it best when he told The Atlantic that, when it comes to these impact studies, "take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that's a pretty good estimate of the actual economic impact."

Building a minor-league baseball stadium in Providence would add little net new money to the local economy. The majority of fans would come from close by, meaning that they would likely spend their entertainment dollars at an area movie theater or restaurant if they weren't going to a game

As for benefits to businesses around the stadium, they tend to be limited to just a few blocks. And with 72 home games, what happens during the other 80 percent of the year?

The last time that  Rhode Island leaders dabbled at the intersection of baseball, business and politics, it cost their constituents $90 million (the $75 million in principle invested in 38 Studios plus $15 million in interest). Some may conclude that such non-economic benefits as local pride or entertainment value would make a Providence stadium worth the investment, but they should know better than to view the proposal as genuine economic development.

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu) is a  research fellow of the Ash Center at Harvard's Kennedy School.  This piece originated at governing.com.

States would be better with unicameral legisture

When the Founding Fathers were considering how American democracy should be structured, they decided on a bicameral national legislature, based in some ways on the one they were familiar with from Great Britain. And while our current state of partisan congressional dysfunction might suggest otherwise, it's a system that generally works on the federal level. But for state governments, bicameralism creates unnecessary and costly duplication.

Like the British system, the founders envisioned an arrangement under which one chamber of Congress (the House of Representatives) would be popularly elected. Senators, the rough equivalent of members of the British House of Lords, would be chosen by state legislatures. But U.S. senators have been popularly elected since ratification of the 17th Amendment in 1913.

One reason a bicameral legislature makes sense at the federal level was illustrated by the Connecticut Compromise. One proposal at the 1787 Constitutional Convention was for the number of representatives and senators from each state to be determined by population. But small states, such as  Delaware., were concerned that they would have little voice in federal affairs under such a system. The compromise was that the number of House members would be based on population, but that every state, regardless of population, would have two senators. That distinction doesn't exist on the state level, where both lower- and upper-house districts are drawn based on population.

Every state except Nebraska has a bicameral legislature, but with the passage of time, it's a setup that has come to make less sense. Nebraska passed a ballot initiative to create a unicameral legislature in 1934. When it was implemented in 1937, the state's legislative costs were cut nearly by half.

But cost isn't the only reason for states to adopt unicameral legislatures. Under the bicameral model, differences between bills passed by the lower and upper houses are hashed out in conference committees whose meetings are not public. Conference committees include only a few legislators, and their deliberations can easily be influenced by lobbyists. A unicameral legislature promotes greater transparency.

Then there is the efficiency of the process, with legislation not having to make its way through two bodies and then a conference committee before arriving on the governor's desk.

For those who fear that unicameral legislatures would lead to rash decisions, Nebraska has safeguards in place. In addition to judicial review and the gubernatorial veto, the state requires that each bill have a public hearing, that there be a period of at least five days after introduction before a bill is passed, and that each piece of legislation deal with only a single subject.

Unicameral legislatures are hardly radical; virtually every American municipality has one. The legislatures of Canada's provinces also are unicameral.

It's certainly unlikely that we're about to see a serious movement to do away with bicameral state legislatures. The impediments, from entrenched officeholders to the opportunity for lobbyists to have greater sway over legislation, are formidable. But there's little doubt that unicameral legislatures would save money and improve efficiency and transparency.

Perhaps George Norris, the crusader behind Nebraska's adoption of its unicameral system, said it best: "The constitutions of our various states are built upon the idea that there is but one class. If this be true, there is no sense or reason in having the same thing done twice. ..."

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu) is a Fellow of the Roy and Lila Ash Center for Democratic Governance and Innovation at Harvard. This piece originated on the Web site of Governing Magazine (governing.com).

Taxpayers cheated by government favoring firms

Cambridge

Recent headlines and new research remind us that when state and local governments bet on specific industries or companies, taxpayers usually lose.

In 2008, Massachusetts launched an initiative that authorized the state's Life Sciences Center to invest $1 billion over a decade ($500 million in grants, $250 million in loans and another $250 million in tax credits) to expand life-sciences-related employment and support research, development, manufacturing and commercialization.

One company that benefited from that largesse was Organogenesis, a biotech firm with operations in Canton, Mass., that was looking to more than double its local workforce. But The Boston Globe recently reported that the company now employs fewer people in Massachusetts than it did in 2009, when it received $7.4 million in grants from the Life Sciences Center.

A new study demonstrates that what happened with Organogenesis is not an anomaly.

In the lead-up to passage of the legislation that created the Life Sciences Initiative, then-Gov. Deval Patrick said that it could create 250,000 Massachusetts jobs over a decade. The new study, published by the Pioneer Institute, a Boston-based think tank, shows that more than five years into the program the state was about 245,000 jobs short. (I am affiliated with Pioneer Institute as a senior fellow and edited the study.)

The study found that the Life Sciences Center had disbursed nearly $557 million of the $1 billion as of the third quarter of fiscal 2014. To minimize concerns about bias, study author Greg Sullivan, a former Massachusetts inspector general, duplicated the methodologies used in four recent studies of the state's life-sciences industry.

The varying methodologies produced job-creation numbers that ranged from 3,657 to 6,107 since the initiative launched at the beginning of 2009. The average of the four approaches was 5,010 jobs. Based on that number, Massachusetts taxpayers paid more than $111,000 per job.

The closer you look, the more disturbing the numbers become. During the period examined in the Pioneer study (the beginning of 2009 through the end of the third quarter of fiscal 2014), overall job growth in Massachusetts was 8.4 percent. Under only one of the four methodologies did life-science job growth exceed that level.

Averaging the four methodologies yields a 6.9 percent growth in life-science jobs. So, thus far at least, an investment of more than a half-billion dollars in the life sciences has likely yielded a slower rate of job creation than that produced by the state economy as a whole.

In life, it's critical to know what you don't know. The time has come for state and local governments to recognize that they don't know how to pick winners in the private-sector marketplace. If government leaders can't come to this realization on their own, perhaps voters should nudge them.

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu), a Fellow of the Ash Institute of Harvard's Kennedy School and a longtime public-policy analyst and writer. This originated on the Web site of Governing magazine.

Charles Chieppo: Special interests book Boston Convention Center

BOSTON

As more information comes in, two things become even clearer: Plans to expand the Boston Convention & Exhibition Center, or BCEC, are absurd, and the project is like a case study in special-interest politics.

Convention centers are supposed to bolster the local economy by attracting visitors who would otherwise spend their money elsewhere. The best measure of success is the
 number of hotel room-nights they generate. We’re told that the BCEC needs to expand because space limitations and lack of availability at the bursting-at-the-seams facility mean we’re losing out on room nights.

The 1997 feasibility study on which the decision to build the BCEC was based projected that it would generate 794,000 room nights annually.
But we recently learned that the facility actually generated a paltry 264,669 room nights during the fiscal year that ended last June 30.

So much for bursting at the seams.

Look more closely and the numbers are even more devastating. Not only is the BCEC’s room-night generation one-third of what was projected, but the biggest building in New England actually generates more than one-third fewer hotel room nights than the much smaller Hynes Convention Center produced in 2000, before taxpayers spent $850 million to
 build the BCEC.

The BCEC is hardly alone. There was a little over 36 million square feet of exhibition space in the United States in 1989. By 2013, that number had nearly doubled to 71.1 million. But demand has remained flat at best, which is why Las Vegas, Orlando, Chicago and Atlanta are among the cities that recently competed expansions only to have the larger facility do the same amount or less business than before it was enlarged.

Yet despite dismal performance and a declining market, proponents maintain that we must expand the BCEC.

The Massachusetts Convention Center Authority wants expansion because it would grow an MCCA empire fueled by a $123 million operating budget, nearly half of which is
supported by taxpayer subsidies, and keep $5 billion in hotel tax receipts flowing to the authority after the original BCEC construction bonds are paid off in 2034.

Another quasi-public authority, #massport, is pushing for expansion because it stands to reap a windfall as owner of the land next to the BCEC, on which a publicly subsidized headquarters hotel would be built. The Convention Center Authority is now appealing to the city of Boston for a tax break to build the hotel. They’ll need it; developers aren’t too keen on building hotels next to empty buildings.

Unions get their share too. The BCEC would expand using a project labor agreement, which means the nearly 84 percent of Massachusetts construction workers who choose not to join a union would be locked out of the $1 billion project.

Thankfully the Charles Baker administration has put the brakes on selling expansion bonds as it analyzes the issue.

BCEC expansion is like the perfect storm; all the usual suspects get a piece of the action — and taxpayers get the shaft. You can’t help but wonder whether its proponents even possess the capacity to feel shame.

Charles Chieppo  (charlie@chieppostrategies.com) is  principal of Chieppo Strategies LLC and a former vice chairman of the Massachusetts Convention Center Authority board of directors. This piece first ran in the Boston Herald.

Charles Chieppo

Chieppo Strategies LLC

(617) 548-7146

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Charles Chieppo: Olympics bid has a Big Dig ring

  This piece was first published in The Boston Globe. We use it with the permission of our friend Mr. Chieppo.

BOSTON The Massachusetts Bay Transportation Authority has yet to restore normal service after cold and snow that was the straw that finally broke the system’s back. Yet proponents of hosting the 2024 Summer Olympics are already pushing a proposal that harks back to the expansion policies that helped bring about the T’s  severe troubles.

At first, Boston 2024 organizers claimed that transportation improvements already in the pipeline would be the only Olympic-related cost to taxpayers. But when pushed, it became clear they meant any projects included in a $13 billion bond bill then-Governor Patrick signed last year. The problem is that bond bills only authorize the commonwealth to borrow money; just a fraction of the projects in them actually fit within state borrowing limits. A recent Globe story showed that some of the projects in Boston 2024’s successful bid to the U.S.  Olympic Committee aren’t even in the bond bill, and only a portion of the included projects are funded. Completing them all would roughly double the $4.5 billion that proponents claim taxpayers would have to kick in to host the games.

How quickly we forget. In 1991, the commonwealth committed to build a laundry list of transit expansions as environmental mitigation for the Big Dig. But no funding source was identified for any of them. As a result, building, operating, and maintaining the mitigation projects ran up more than one-third of the $9 billion the T owes in debt and interest.

Redirecting money from maintenance to expansion to pay for the projects is one reason for the authority’s maintenance backlog, now estimated at a stunning $6.7 billion, and for the recent systemwide meltdown.

State leaders must avoid letting organizers turn the Olympics into Big Dig mitigation 2.0. Among the many projects included in Boston 2024’s bid are South Coast Commuter Rail, extending the Fairmount commuter line to Newton, and expanding South Station. For those projects alone, more than $3 billion is currently unfunded.

Commuter rail featured prominently in the 1991 mandates. Required expansions included extensions to Newburyport, Worcester, and Plymouth, and construction of the Greenbush Line to the South Shore.

It is up to state leaders, not Olympic boosters, to plan the region’s transportation future. But a recent Pioneer Institute study by former state Inspector Gen. Greg Sullivan (full disclosure: I am a senior fellow at Pioneer but was not involved in preparing the report) revealed the folly of allowing mandates to dictate transit policy.

Sullivan looked at 18 American commuter rail systems and found that the T’s was the only one that lost ridership between 2003 and 2013. Despite all the expansion, MBTA commuter-rail ridership fell by a stunning 13 percent over a decade. The finding reiterates the direct relationship between investing in maintenance and the reliable on-time service that attracts riders.

No project captures the madness of transit policy by mandate better than Greenbush. Since the federal government wanted no part of it, the entire tab of nearly $600 million was picked up by the Commonwealth.

Greenbush was projected to take eight passengers off highways for each one that had previously used the MBTA’s South Shore commuter-boat service. Instead, about the same number of the line’s riders were lured from the ferry as from area roadways. When those who previously rode other commuter rail lines are added in, more than 60 percent of the line’s meager ridership was already using public transit.

Common sense dictates that new lines should be added only when there is enough money to build, operate, and maintain them without cannibalizing existing assets. To be sure, a number of the projects Boston 2024 organizers tout are important maintenance investments, including MBTA signal and power system upgrades. But it is up to state leaders, not Olympic boosters, to plan the region’s transportation future.

Those boosters are backpedaling furiously in the wake of revelations about the real cost of Olympic-related transportation upgrades. The group’s CEO, former state transportation secretary Richard Davey, told the Globe that the only transportation enhancements really needed to host the games are new Red and Orange Line cars that are already slated for delivery beginning in 2018. That’s quite a departure from their official bid.

Those who don’t know history are doomed to repeat it. Let’s not run the risk of repeating Big Dig mitigation’s devastating impact on the MBTA by allowing Olympic dreams to dictate the next generation of area transit policy.

Charles Chieppo is principal of Chieppo Strategies, a public policy writing and communications firm.

Charles Chieppo: Weather puts focus on need to fix MBTA

BOSTON

Sometimes events conspire to shine a spotlight on the effects of decades of bad policy decisions. Such was the case earlier this week when the Massachusetts Bay Transportation Authority — and with it the Greater Boston economy — all but ground to a halt under the weight of record snowfall and cold.

Fixing the T will require reform, restraint, and money, and it will be far more difficult than it would have been had state leaders acted when the agency’s problems became apparent more than a decade ago.

Today the MBTA owes nearly $9 billion in debt and interest, and faces a $3 billion maintenance backlog. With the T paying nearly as much in debt service as it collects in fares, the commonwealth, despite its own fiscal problems, will likely have to take over some of that debt. Otherwise, the transit agency will be like one of the many cars we’ve seen in the last week, spinning its wheels faster only to get mired ever-deeper in snow.

But the state can’t solve all the MBTA’s problems. The T should develop clear, customer-focused metrics, as promised in Massachusetts’s 2009 transportation reform law, publish them on its website, and regularly update its performance against the metrics.

Performance goals in such areas as on-time performance, percentage of operating costs covered by fare revenue, and a passenger-comfort index based on such variables as working heat and air conditioning and wi-fi availability, should be ambitious yet plausible given the condition of MBTA assets. Annual funding increases should be tied to achieving the goals, which should become more aggressive as the system gradually modernizes.

At first, additional funding should come from raising the state gasoline tax. But with the rise of high-mileage and alternative-fuel vehicles, the gas tax is at best a temporary fix. The longer-term solution lies in electronic tolling of limited-access highways in the state's metropolitan areas, similar to what the Massachusetts Transportation Finance Commission recommended in 2007.

Until now, residents outside Greater Boston and those who don’t use the MBTA have resisted any role in solving the T’s problems. But drivers benefit from a transit system that takes cars off the road. And a functioning transit system is critical to a metropolitan area that drives regional economic growth well beyond Interstate 495 or even the borders of Massachusetts.

The story of the MBTA’s downfall is one of underinvestment exacerbated by irresponsible expansion. For more than two decades, the T expanded faster than any other major American transit agency, yet no funding mechanism was established to pay for any of it.

Maintenance was the loser in this game of musical chairs. By fiscal 2010, things got to the point where just six of the T’s 57 most critical safety projects could be funded. As former John Hancock President and CEO David D’Alessandro wrote in his 2009 MBTA review, “It makes little sense to continue expanding the system when the MBTA cannot maintain the existing one.”

And it’s both unfair and unrealistic to think that tax- and toll-payers who just rejected indexing the state gas tax to inflation should kick in the astronomical sums it would take to simultaneously shore up MBTA finances and pay to build, operate, and maintain new lines.

While underinvestment and expansion are at the heart of the MBTA’s problems, other issues require attention. According to a 2013 study by former state Inspector Gen. Greg Sullivan, the T pays far more than it should to maintain its buses. Even though the agency’s chief procurement officer said that performing major bus overhauls in-house cost 50 percent more, the commonwealth’s anti-privatization law prevented the work from being outsourced. That level of inefficiency  should no longer be tolerated.

Nor  should the MBTA’s expensive and dangerously underfunded pension system. Unlike state employees, T workers’ pension contributions are subject to collective bargaining. The result is that they kick in about half as much as their state counterparts, leaving the beleaguered agency to pick up the slack.

Governor Baker is proposing $14 million in T cuts, although more than $8 million will come from a hiring freeze and administrative cuts, which are unlikely to have much impact over the remaining five months of the current fiscal year.

Our region needs a 21st-Century MBTA that facilitates economic growth instead of hindering it. In addition to money, achieving that goal will require determination to learn from past mistakes and the urgency to prevent the problem from spinning even further out of control.

Charles Chieppo is the principal of Chieppo Strategies LLC, a public-policy  communications firm. This piece first ran in The Boston Globe.

Charles Chieppo: Teacher education in a bad way, but there's hope

BOSTON Both a national nonprofit organization and the U.S. Department of Education have recently turned their attention to education schools that long have failed to produce teachers equipped to improve student achievement. The same focus that highlights just how grim the current situation is will be needed on an ongoing basis if we are to solve the stubborn teacher-preparation problem.

A new report from the National Council on Teacher Quality (NCTQ) rates 1,668 elementary and secondary teacher-preparation programs at 836 colleges and universities using criteria including content preparation, practice teaching and student-admission requirements. Sadly, a majority of the programs fall into the lowest of four categories.

The report places only 26 elementary and 81 secondary programs in its top grouping. Programs that prepare elementary teachers are 1.7 times more likely to fall into the failing category than their secondary-education counterparts. One reason, according to NCTQ, is that so many of them continue to disregard scientifically based reading-instruction methods.

Teacher-prep programs have long fallen short in science, technology, engineering and math. Nearly half the programs NCTQ reviewed failed to ensure that their teacher candidates were capable of STEM instruction. Many of the programs require little or no elementary-school math coursework and don't mandate a single science class.

NCTQ said that just 5 percent of the programs it reviewed have all the components in place for a strong student-teaching experience.

The academic strength of incoming teacher candidates is another longstanding problem. NCTQ found that three-quarters of the programs it reviewed don't insist that applicants fall in the top half of the college-going population.

In 2010, the SAT scores of students intending to pursue undergraduate education degrees ranked 25th out of 29 majors generally associated with four-year degree programs. On average, the credentials of candidates for graduate education programs also were dismal, and among those candidates undergraduate education majors score the lowest.

Rules proposed last month by the Department of Education are a step in the right direction. They would require teacher-preparation programs to either show proof that their graduates have the skills to advance student learning or lose the ability to offer prospective teachers federal financial aid. "This is nothing short of a moral issue," Education Secretary Arne Duncan told Education Week.

The 1998 version of the Higher Education Act directed states to identify poor-performing teacher-prep programs, but 34 states have never identified a single one. The new proposed rules would require states to place each program in one of four categories ranging from "low performing" to "exceptional." Those rated below "effective" for two of the three previous years would be blocked from offering students federal Teacher Education Assistance for College and Higher Education grants. The problem with the proposed rules is the timeline: There would be no withholding of grants until the 2020-21 academic year at the earliest.

For decades, public education in general and education schools in particular have been permeated by a Lake Wobegon culture in which everyone is assumed to be above average and mediocrity is the norm. But education consumes a huge part of state and local budgets, and many teacher-preparation programs are part of publicly funded colleges and universities. Fixing those programs is imperative if we are to improve the return on our education investment.

Charles Chieppo   is a research fellow at the Ash Center of the Harvard Kennedy School. His email address is:

charlie_chieppo@hks. harvard.edu

Charles Chieppo: Boston Olympics could be fiscal fiasco

 BOSTON

Boston, Los Angeles, San Francisco and Washington, D.C., are vying to be the  U.S. entry into the competition to host the 2024 Summer Olympics. The United States Olympic Committee (USOC) will make its selection later this winter, and word is that Boston has the inside track.

In a statement, the group spearheading Boston's effort wrote, "If Boston is selected by the USOC, a thoughtful and robust public process will begin ..." But the time for such a process is now, not after the USOC makes its selection.

Until now, neither Boston nor the state has taken any official action regarding efforts to host the Olympics. What has instead passed for process is hardly encouraging to those seeking fairness and transparency.

An exploratory committee was assembled, but far from being neutral, it was stacked with Olympics boosters. No local economists were named to the committee, and its report included no independent cost estimate. Supporters say they have conducted "extensive and comprehensive" feasibility studies that include how the Olympic Village and stadium would be reused. For those of us who have been involved in what passed for processes around building and expanding convention centers, these steps are eerily familiar and hardly reassuring.

Boosters say hosting the 2024 Summer Games would require $5 billion in new construction, which they claim would be privately financed. They estimate that the state would have to spend $6 billion on infrastructure.

But those numbers don't stack up with data on the cost of hosting recent Summer Olympics, which has averaged more than $19 billion since 2000. Sponsorships, television, licensing, ticket and merchandise sales generally bring in $5 billion to $6 billion, less than half of which goes to the host city.

Signing on the dotted line includes a pledge by host cities that the games will go forward as planned regardless of the cost. That leaves state and local taxpayers on the hook for overruns, which experience teaches us are both assured and significant. Final costs average about three times the estimates included in initial bids.

It took Montreal 30 years to pay off its debt from hosting the 1976 Summer Olympics. Paying back $11 billion from Athens's hosting of the 2004 summer games was one of the reasons for Greece's subsequent debt crisis.

These costs haven't gone unnoticed. In 1995, there were nine applicants from around the world to host the 2002 Winter Games that were held in Salt Lake City; this year, just two cities are vying to host the 2022 Winter Olympics.

For Boston and the other American cities with an eye to hosting the 2024 Summer Olympics, the public's money -- and a lot of it -- is at stake. The public should not have to wait until one of those cities is anointed by the USOC to have its say.

Charles Chieppo is a research fellow at the Ash Center at Harvard University.  This piece originated on the Web site of Governing magazine (governing.com). We run it with Mr. Chieppo's permission.

Charles Chieppo: The wrong person to head Boston schools

  BOSTON

Massachusetts  Education Secretary Matthew Malone has made no secret about wanting to become the next superintendent of Boston Public Schools.

“I’ve been training for this job all my life,” Malone told The Boston Globe. “It’s my calling.”

But there is precious little in Malone’s background to support that claim.

Before becoming secretary of education, Malone was superintendent in Brockton, the commonwealth’s fourth-largest school district. During his 2009-2012 tenure, the percentage of elementary- and secondary- school students scoring proficient or advanced on MCAS fell at every grade level but one. Eighteen months before his contract expired, the city’s school committee informed him that he would not be rehired.

Malone, who is no shrinking violet, also told The  Globe that he’s “in the arena and willing to fight and die for these kids.” Not only is there little to support that claim, but there is extensive evidence indicating it is blatantly false.

Brockton is the largest city in Massachusetts that doesn’t have a charter school. Toward the end of his tenure there, Malone’s primary focus seemed to be on ensuring the rejection of a charter school that had been proposed for the city.

The school was to be operated by Sabis, a charter-school-management company that operates two inner-city schools recently opened in Holyoke and Lowell, and a third in Springfield that has been operating for nearly 20 years. Every graduate in the history of the Springfield school has been accepted to college and it has repeatedly been recognized by Newsweek and U.S. News & World Report as one of the nation’s best high schools.

Sabis Springfield has a four-year graduation rate of more than 90 percent compared to less than 70 percent at Brockton High. On 2012 MCAS English tests, two-thirds of Sabis Springfield students scored advanced or proficient; less than half did so in Brockton. On math MCAS tests, the majority of Sabis students scored advanced or proficient compared to just over one-third in Brockton.

So did Malone “fight and die” for Brockton’s kids?

Hardly. Emails obtained by Pioneer Institute (which I am affiliated with as a senior fellow) show that he used his office and city resources to do things like craft a less-than-clever “$ABIS” logo and use his political contacts to kill the charter proposal. As Malone wrote in an email to the Brockton School Committee and several of his staff members, “It helps to have friends at [the state Department of Elementary and Secondary Education].”

It worked. The Brockton charter school proposal was rejected, and the city is worse off as a result.

Perhaps Matthew Malone’s application to be superintendent of Boston Public Schools should read that he is “willing to fight and die for these kids” — once it’s clear that the status quo is protected and the jobs of every adult in the system are secure.

Charles Chieppo is the principal of Chieppo Strategies, a public-policy writing and communication firm.

Charles Chieppo: State tax cuts a dubious priority

BOSTON

Supply-side economics has been a subject of fierce debate ever since it came into the mainstream when Ronald Reagan was first elected president, in 1980. Do large tax cuts stimulate economic growth that makes up for the reductions in government revenue associated with lower tax rates, or do they just stimulate budget deficits?

As with so many questions, the answer is “it depends.” But in Kansas, where the administration of Gov. and former U.S. Sen. Sam Brownback has embraced the strategy, it’s looking like the result will be a whole lot of red ink.

Saying that they would provide a “shot of adrenaline” for the state economy, in 2012 Brownback pushed through a set of massive tax cuts. The income tax on small businesses was eliminated and the standard deduction for married couples filing jointly increased from $6,000 to $9,000. Three personal-income tax brackets of 3.5, 6.25 and 6.45 percent were reduced to two brackets of 3 and 4.9 percent.

Additional cuts enacted last year will push the top state income-tax rate down to 3.9 percent by 2018. By then, the total tax cut will amount to more than $4 billion. Even more cuts were passed in the waning days of the Legislature’s recent session.

So far, the results are not encouraging. In May, the Legislature’s nonpartisan research staff projected a $238 million shortfall in the approximately $15 billion state budget by July of 2017. But when tax revenues for April, May and June of this year came in a total of $334 million below benchmarks, the legislative research staff moved up the date for the projected shortfall by a year.

Moody’s downgraded the state’s bonds in May. This month, Standard & Poor's followed suit, citing Kansas’s “structurally unbalanced budget” and failure to match the tax cuts with spending cuts. By raising the cost of borrowing, the downgrades will exacerbate the failure to enact spending cuts.

S&P also said the tax cuts would leave the state with dangerously low reserves. Last month the Brownback administration said Kansas had $435 million on hand on June 30. The legislative research staff now says the number was $380 million.

And there’s little sign of adrenaline — at least so far. New business filings are up, but so are forfeitures and dissolutions. Overall, the number of net new businesses declined between 2012 and 2013.

The Reagan tax cuts did indeed provide a shot of adrenaline, helping topull the country out of its 1970s malaise and into the boom of the mid-1980s. But like the Kansas cuts, they weren’t accompanied by spending reductions and led to spiraling deficits. Supporters of the tax cuts counter that increased military spending during that time brought about the downfall of the Soviet Union and the end of the Cold War.

Whatever your view of them, there are two big differences between the Reagan tax cuts and what Gov. Brownback is doing in Kansas. The first is that federal taxes account for by far the biggest part of the overall tax burden. Changing state tax policy simply has much less economic impact.

Then there’s the magnitude of the cuts. When President Reagan took office, in 1981, the top individual income-tax rate was nearly 70 percent; by 1988 it was down to 28 percent. That kind of cut to a much larger portion of the overall tax burden had an exponentially greater impact than cutting Kansas’s top income tax rate from 6.45 to 3.9 percent over roughly the same amount of time.

Even if you believe in supply-side economics, the smaller impact that state and municipal taxes have on the overall economy and that, for the most part, the days of confiscatory tax rates are thankfully behind us make tax cuts a dubious choice as the centerpiece of local governments’ economic policy.

Charles Chieppo is the principal of Chieppo Strategies, a public-policy writing and communication firm.

Charles Chieppo/Mary Z. Connaughton: More corruption comin' up!

BOSTON As we learned during the recent trial about the Massachusetts Probation Department’s job-rigging scheme, there’s a difference between patronage and cooking the books. Patronage is legal; cooking the books to foster patronage and political favoritism will land you in prison.

It’s ironic that only five days after former  Massachusetts Probation Commissioner John O’Brien and others were convicted, Gov. Deval Patrick signed legislation to expand the Boston Convention and Exhibition Center in a boondoggle designed to feed the Massachusetts Convention Center Authority’s patronage empire and premised on layers of fictional numbers.

On the merits, the $1 billion expansion simply doesn’t make sense. This sums it up: There was a little over 36 million square feet of exhibition space in the United States in 1989. By 2011, that number had nearly doubled to 70.5 million. In the midst of this decades-long convention-space explosion, demand has remained flat at best.

Lest you think that Boston is immune from the trend, the BCEC — touted to be so full that it had to be expanded — is generating less than half the hotel room nights that had been predicted in the 1997 feasibility study on which the decision to build it was based. Before being cannibalized by the BCEC, even the much-smaller Hynes Convention Center had years in which it generated more.

A small group of consultants show up in city after city to prop up the declining convention industry. They made the same claims in such  cities as Sacramento, St. Louis and Myrtle Beach, S.C., which got the same or even worse results than were achieved here. Learn from their mistakes? In a 2005 legal deposition, Charles H. Johnson, who conducted the 1997 BCEC study, said, “Once the deal is done, if we’re not engaged, we … give them our report, our final invoice, and wish them good luck.”

But all that can be overlooked to feed the convention center authority’s patronage empire and reward political friends. None of the 80 percent of Massachusetts construction workers who don’t belong to a union will be working on the BCEC expansion, because the legislation includes a union-only project labor agreement.

Security guards also got a piece of the pie: The expansion bill extended the commonwealth’s prevailing wage law to include them.

From the beginning, BCEC expansion has been a case study in government at its worst: A group heavy with tourism industry sycophants was assembled to explore the feasibility of expansion. When they gathered each month, the choir was preached to by convention cheerleaders. After they predictably endorsed expansion, a case made by using unrealistic projections about the convention center authority’s finances and hotel-tax receipts was blessed by state officials disinterested in the substance.

Is it any wonder that the result will be to enhance the ability of politically connected players to dole out jobs and favors to the detriment of the taxpaying public? Time will tell whether it’s all just patronage or it rises to the level of cooking the books.

Charles Chieppo is senior fellow and Mary Z. Connaughton director of finance and administration at the Pioneer Institute, a Boston-based think tank.

Charles Chieppo: Convention center follies

  BOSTON

Politically, it's almost irresistible. Revenue from hotel and other taxes, paid largely by people from other places, will be used to subsidize convention centers that lure those visitors to town to spend in hotels, stores and restaurants. But a new book demonstrates a far less appealing reality. In Convention Center Follies, Heywood Sanders, a professor at the University of Texas at San Antonio, tells the tale of projects that continue to be built and expanded at a record pace even though they almost always fail to deliver the promised benefits.

There was a little over 36 million square feet of exhibition space in the United States in 1989. By 2011, that number had nearly doubled to 70.5 million. The problem is that in the midst of a decades-long convention-space explosion, demand has remained flat at best.

Sanders describes the usual scenario in which local convention or visitor-industry officials complain that a convention center is jammed to capacity or, worse, that lucrative events want to come but are too big for an existing facility. Consultants are retained, and they invariably endorse either building a new convention facility or expanding an existing one.

The idea behind convention centers is to bolster the local economy by attracting visitors who would otherwise spend their money elsewhere. The best measure of success is the number of hotel room-nights they generate.

Sanders' s numbers tell the real story. Washington, D.C.'s new convention center was supposed to deliver nearly 730,000 room-nights by 2010; the actual number for that year was less than 275,000. Austin, Texas' expanded center was supposed to bring 314,000 room-nights by 2005 but produced just 149,000. The 2003 expansion of Portland, Ore.'s convention center was expected to yield between 280,000 and 290,000 room-nights, but the actual number was 127,000 -- far less than before the center's expansion. Atlanta, Chicago, Dallas, Milwaukee, Minneapolis, Pittsburgh and Seattle are among other cities that have had similar experiences. The challenge is to find an exception to the rule.

That's not all. When projects fail and debt service mounts, consultants routinely conclude that the center needs a "headquarters hotel," which at the very least requires a large public subsidy. Sometimes the lack of developer interest results in the hotel being publicly owned. It's a classic example of finding yourself in a hole and continuing to dig.

Many factors result in convention center feasibility studies dramatically overestimating economic impact, but one that stands out is the fact that about half of convention attendees are generally local-area residents who would still spend their money in the region if there weren't a convention to go to. Consultants generally assume that each convention attendee will stay in a hotel for three nights or more. But because of the preponderance of locals, the reality is generally about one room-night for each attendee.

The consultants don't compare their past projections against actual performance or use that performance to inform future estimates. Sanders quotes one such consultant, Charles H. Johnson, from a 2005 legal deposition: "Once the deal is done, if we're not engaged, we … give them our report, our final invoice, and wish them good luck."

And the consultants routinely use expansions that are underway in other cities (often undertaken at those same consultants' urging) as evidence of why subsequent clients need to expand to remain competitive. Another consultant, Jeff Sachs, was blunt in his comments to Forbes, saying, "You lose clients if you shoot down projects."

Sanders makes a strong case for what he believes to be the real goals behind convention-center development. Sometimes it's to increase area property values. Boston is an example of a new convention center being used to help jump-start a developing neighborhood. In other cases, the facility is seen as an anchor to insure against downtown erosion or, in such cities as  St. Louis, part of an effort to reverse neighborhood erosion.

All are worthy goals. But taxpayers deserve an honest debate about whether building or expanding a convention center is an effective way to achieve them. And the debate should be informed by realistic economic-impact projections. What we don't need is a continuation of the charade in which elected officials, local business leaders and convention consultants tout benefits that at least some of them know will never materialize.

Charles Chieppo (Charlie_Chieppo@hks.harvard.edu)  is a research fellow at the Ash Center of Harvard's Kennedy School.

Comment by Robert Whitcomb:  As for building stadiums for professional sports teams:  They're  almost always welfare for the rich and do not bring the promised economic-development benefits.