The Business of Running State Government

We hear it all the time: “Government should be run like a business.” Those most prone to spouting this cliche’ are usually members of the business community themselves, and generally have an idealized notion that business is efficient and– thanks to competition in the marketplace – businesslike operations foster effectiveness.

Yet as McGill University professor of Management Henry Mintzberg has written in the Harvard Business Review, “Running government like a business has been tried again and again, and has failed again and again.”

It is, essentially, a logical contradiction, which ensures it will not succeed.

Mintzberg points out that the measure of business success is profitability. Yet as we’ve seen during seemingly endless Louisiana legislative debates over the past several years, those who advocate for “more businesslike government” are also the ones adamantly opposed to the state having even a fraction of a cent of surplus funding – insisting repeatedly on making Louisiana “do more with less.”

“Government,” they insist, “is not supposed to show a profit.”

Contrary to the usual preconceived notions of the makeup of the Louisiana Legislature, the majority of our lawmakers are not lawyers. (Perhaps logic would prevail more often, if they were.) Presently, only 27% (27 House members, 12 senators) of the 144 total legislators are attorneys by trade. However, more than 42% of total state lawmakers (45 House members, 16 senators) state their primary occupation as“business owner” or “business other”.

The persistent efforts of the Jindal administration (aided and abetted by business people in the Legislature) to starve state government by privatizing government services – while further wooing business “customers” with corporate tax giveaways – has done nothing to increase Louisiana’s overall valuation. We remain at or near the bottom of every list of “quality of life” measurements. We, the citizen-”shareholders”, have seen minimal return on ourinvestment.

Take an example from recent news: Georgia-Pacific, a subsidiary of Koch Industries, is permanently shutting down and selling off the majority of its Port Hudson paper mill by mid-March. The announcement, made Thursday, January 10, is costing at least 650 employees of the East Baton Rouge facility their jobs – positions that pay, on average, about $80,000 annually.

It’s a big turnaround from what local officials were told last month, as Georgia-Pacific sought a new industrial tax exemption (ITEP) for a recently-completed $42-million expansion that promised 30 additional jobs. The exemption from paying property taxes on the expansion is valued at $772,000 in the first year.

In 2018, through ITEPs previously granted, G-P was exempt from paying close to $9-million in local property taxes on the Port Hudson facility. Since 1998, they’ve received 36 exemptions, and avoided paying more than $203-million in property taxes, according to the database compiled by Together Baton Rouge.

Jindal speaking to Koch Bros. group AFP in 2015

In 2010, the Jindal administration cut an “economic development” deal with Georgia-Pacific: the company would do a $300-million mill modernization, and the state would finance it with $300-million in Gulf Opportunity Zone bonds – plus give the company a $3-million tax credit and ITEP property tax exemptions. The state would benefit, we were told, because 1000 jobs would be “saved”.

How’s that working out for us, now?

There is one sector of the business community that is doing phenomenally well: construction, and industrial construction, in particular.

On January 4, 2019, Gov. John Bel Edwards and the Louisiana Department of Economic Development announced South Louisiana Methanol – a project of New Zealand-based Todd Corporation, partnered with Saudi Arabia-based SABIC – is building a $2.2-billion new methanol complex in St. James Parish. Ultimately, it will provide 75 permanent full-time jobs, and, while being built, employ 800 construction workers temporarily.

November 16, 2018, it was announced Wanhua will build a $1.25-billion chemical complex in St. James Parish, providing 170 full-time jobs and 1000 construction jobs.

In July, Shintech said it was ready to start a $1.49-billion expansion in Iberville Parish, for 120 more full-time jobs and 3000 construction jobs.

In April, Formosa announced it would build a $9.4-billion chemical facility in St. James Parish, eventually offering 1200 permanent full-time jobs, and requiring 8000 construction workers.

Last January, Entergy began work on a new $872-million generating plant in Calcasieu Parish, requiring 700 construction workers.

And in April 2017, Lotte Chemical of South Korea agreed to move its US headquarters to Calcasieu Parish, overseeing their joint project with Westlake Chemical. That’s needing 3000 construction workers, and will eventually provide 265 permanent full-time jobs.

Louisiana is in a cycle of major industrial expansion, and demand for construction workers is continuing strong — so strong that workers are being imported from elsewhere to fill the positions.

Several reliable sources from within the construction industry have informed this reporter that many of the employees building these mega-projects are not U.S. citizens. Several of the contractors have file folders of names, ID cards, and social security numbers that they provide to undocumented workers, and in exchange, those workers are paid less than those who have their own documentation. In fact, one Louisiana Democratic candidate for Congress spoke out about this practice during campaign forums held this past fall.

The owners of Louisiana’s industrial construction firms are earning record profits. What to do with all that money?

A majority of CEOs and presidents of Louisiana’s top contractors utilize their wealth in philanthropic pursuits. Turner Industries’ Roland Toups is a notable supporter of Catholic organizations and a major contributor to Our Lady of the Lake Hospital’s programs and expansion campaigns. Ratcliff Companies’ Robert Ratcliff uses his wealth and expertise to support cultural improvement efforts in Alexandria.

Others use their wealth to benefit the universities located in their communities. Lenny Lemoine of Lemoine Companies is deeply involved with growth and improvements at U-L Lafayette. Lincoln Builders’ Clint Graham similarly supports Louisiana Tech, and Paul Flowers of Woodward Design+Build assists Tulane University in a like manner.

Over the past 15 years, each of these contractors and their companies have contributed to political campaigns and causes. They give to business-related political action committees (PACs), including the LABI-run regional PACs, but in modest amounts. Additionally, they support candidates within or from their local communities, but rarely do they give the maximum campaign donations allowed by law.

A few of Louisiana’s industrial contractors have made politics their charity-of-choice. Robert Boh of Boh Brothers and Lawrence Gibbs of Gibbs Construction both donate large amounts to candidates’ campaigns. Yet looking through their records of contributions over the past 15 years, it’s clear they are “non-denominational” in their support, giving to Democrats and Republicans alike – as long as those running are members of the local community to begin with.

Other industrial contractors on Louisiana’s top ten list have made it their mission to grow their personal influence on government policies, spending immense amounts toward buying politicians and political influence, and funding large PACs under their personal control. This is the group we’re calling the “Erector Set”.

Over the past decade, they’ve been weaving their web of influence through activism within the Louisiana Association of Business and Industry. (Principals with five of Louisiana’s top ten contractors serve on LABI’s Board of Directors.) They’ve each endowed their own political action committees (PACs) with six-figure donations – PACs they each chair and control – and have given copious sums to their buddies’ PACs, as well as those run by LABI and the contractors’ own trade groups.

They’ve heavily supported certain candidates for offices — almost exclusively Republicans – and have engineered policy changes through those paid-for politicians.

They’ve been testing their king-making machine, and now they’re ready to go all-in on crowning a new king with one of their own “Erector Set”, as Governor of Louisiana.  We’ll be bringing you all the sordid specifics next.

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Sue Lincoln
Sue Lincoln is a veteran and widely-respected reporter who has been covering Louisiana politics for nearly three decades. Originally from Long Beach, California, Sue’s career in journalism began on the radio in Los Angeles. After moving to Louisiana, Sue earned her bachelor’s degree. For ten years, from 2000-2010, she was the Assistant News Director at Louisiana Network. Sue also worked as the education reporter for Louisiana Public Broadcasting and has contributed to various state publications as a freelance journalist. But she is perhaps best known as the voice of the popular politics Capitol Access.