At this week’s meeting, the Oklahoma Task Force for the Study of State Tax Credits and Economic Incentives scrutinized two government programs aiming to “incentivize” investment and economic growth.
As has been the pattern all summer at these hearings, one set of credits/incentives programs was panned by most task force members, while a second was almost universally praised.
Praise went to the Quality Jobs Program (QJP), focus of the afternoon session on Wednesday (September 7). In fact, so effusive was the positive attention that state Rep. David Dank, chairman of the task force, asked Secretary of Commerce Dave Lopez, “At what point in time would you be prepared to take over supervision of all these programs?”
Lopez demurred, saying he had come late to the state government’s Economic Development game. He credited the Commerce agency’s steady management improvements, and legislative changes made since the QJP was first created in 1993.
Dank asserted that in contrast to several state programs, there is certainty, accountability and a clear public purpose in the QJP. Dank, chairman of the Task Force, believes it meets the criteria defined by former Attorney General Drew Edmondson. Edmondson said in a 2010 formal opinion that some incentive programs fail to meet a public purpose and do not have adequate over sight and transparency.
Mike Ogan of the Greater Oklahoma City Chamber of Commerce credited QJP as “a fairly unique program. Other states are trying to duplicate it, but have not succeeded.”
In addition to Secretary Lopez, presentations came from Deputy Director Jonna D. Kauger Kirschner, Program Manager Richard Schwalbach, and researcher Jon Chiappe.
As summarized by Commerce officials in their presentations, to qualify for QJP a company must create a “new” job at a county’s average wage or a floor of $29,745, whichever is lower. A firm must achieve and maintain a $2.5 million payroll within three years, offer basic health insurance and commit to a variety of other specific steps. In return for successful performance of QJP strictures, a company can garner cash payments of up to 5 percent of new payroll for a decade.
Application is made to the Commerce Department, which handles “due diligence,” including approval and contracting for the Quality Jobs Program. The state Tax Commission processes claims, make payments and audits portions of the QJP.
At each stage, program details are defined and applications refined. A “new” job means a position, according to the Commerce presentation, that “has not existed in the six months prior to application.”
In the last 18 years, 610 companies have participated or are participating in QJP. The average wage of new jobs has been $34,619, and $15.9 billion in payroll has been created, according to Commerce estimates.
The most recent four quarter rebate came to $51.9 million, compared to payroll of $1.052 billion.
A point stressed repeatedly in presentations before the Task Force is that cost/benefit analysis at the front end has assured revenue neutrality over time. Use of QJP precludes involvement in most other incentive or tax credit programs.
Accountability and transparency in the program is robust compared to other programs. A triennial report is filed with the Legislature, the Commerce agency regularly releases names of new companies enrolled, a performance report is provided by the Tax Commission, and Commerce’s annual report regularly updates historic performance data.
Recently added subsets within the QJP include 21st Century quality Jobs, targeting “knowledge-based service industries” and aimed at jobs at 300 percent of average county wages, with higher incentives (10 percent of payroll for 10 years) and other provisions; the “PrimeWin” program intended to boost federal contract awards; and the Small Employer QJP.
Summing up the picture, officials point to total QJP incentives paid in Fiscal Years 2008-10 — $168.5 million. The state’s benefit came to $180.8 million, meaning the program netted $12.3 million for taxpayers.
Chairman Dank, an Oklahoma City Republican, summed up his view in these words: “It’s being run like a business … and supervised properly.”
Dank later concluded, in a formal statement, “Quality Jobs is tied directly to the creation of good new jobs or the saving of existing ones. Those new employees pay taxes and buy homes and help build our economy, and the return to the state is evident. I think the Quality Jobs concept can serve as an example of what we are working toward with this task force.”
While agreeing the program is in some respects a model, David Blatt of the Oklahoma Policy Institute offered some critical reflections.
Blatt told CapitolBeatOK, “At least the Quality Jobs Program meets some of the key criteria. The application process leads to review of specific standards, and the companies are held to their commitments and to the standards. That doesn’t seem to be the case with the other program we heard about today, the Investment/New Jobs Tax Credits. In that program, there is little oversight or accountability.”
Still, Blatt observed, “Even with QJP, a question that should be asked is whether or not the $60 million cost of the program is something to sustain at a time of scarce budget resources. Is it really worth $60 million cost to the state?”
Big news of the day was not the praise heaped on the quality jobs effort, but Rep. Dank’s disclosure that he will press to eliminate transferable tax credits. As for retention or elimination of any particular tax incentive programs, while making it clear QJP will survive legislative review, Dank said he would wait on further deliberations with colleagues before deciding the fate of most other tax credit/incentive programs.
The Task Force’s next meeting will be Wednesday, September 28. Dank said he will announce in a few days the subjects for that day’s deliberations.