October 20, 2014

House Committee looks for ways to improve Quality Jobs program

A House Committee has held its first hearing digging into the Quality Jobs Program.

Representative Jay Barnes (speaking) says the committee on Government Oversight and Accountability will meet Friday, February 8 in Kansas City to talk about the Quality Jobs program and "What to do about Kansas."

Representative Jay Barnes (speaking) says the committee on Government Oversight and Accountability will meet Friday, February 8 in Kansas City to talk about the Quality Jobs program and “What to do about Kansas.”  (Photo courtesy; Tim Bommel, Missouri House Communications.)

The House Committee on Government Oversight and Accountability was originally formed to study the failure of a project to bring a sucralose refinery and more than 600 jobs to Moberly. Its chairman, Representative Jay Barnes (R-Jefferson City), acknowledges the Quality Jobs discussion began with the Mamtek investigation.

“It was just a catalyst to allow myself a platform to get people asking the first real questions about the Quality Jobs Act.”

Jones says Quality Jobs is has suffered from a low success rate. He says up until two years ago for projects of $1 million annually or more, about the jobs created matched the number of jobs promised about 35 percent of the time. More than 46 percent of those projects yielded no jobs at all. He says smaller projects met their job promises only about 20 percent of the time while creating no jobs nearly 76 percent of the time.

Barnes notes there have been some success stories, however, and says his goal is to find how to have more of those and fewer failures.

He says one way to achieve that might be to give the Department of Economic Development more discretion in what projects are approved for Quality Jobs incentives.

“Right now, as we heard the testimony, there is no discretion. You come in, you make certain promises, you get the tax credit automatically. What we know happened in Mamtek is the executives from Mamtek used that and some other things as leverage to put pressure on local communities for the offering of local government bonds which ended up in a tremendous failure.”

Proponents of Quality Jobs argue that in failures such as Mamtek, the project received no incentives because certain thresholds in job creation and other factors were not met. Barnes says there’s more to it than that.

“There’s two responses to that. The first is that the Quality Jobs Act authorizations are used in some scenarios to leverage local government resources or other resources in which taxpayer money is expended up front. We know from Mamtek that is what happened. The second issue is that these programs have caps … and every dollar authorized for a business that has no business receiving the authorization is a dollar that can’t be spent on a business that might actually create jobs.”

He also says the time spent by Department employees on failed projects is also wasted.

The committee also heard from the Director of the Institute for the Study of Economics and the Environment at Lindenwood University, Professor Howard Wall. He told the committee that academic economists view tax credit programs as “completely ineffective.”

He says the Department’s claim that Quality Jobs has created more than 11,000 new jobs over its life is hard to back up.

“There’s a credit authorized and a factory is set up then people are employed. That’s usually what’s called ‘jobs created.’ Maybe those were created by the credit, maybe they would have existed anyway. Also, that’s not taking into account the negative effects on employment everywhere else because those workers typically came from other jobs, other employers who might now shut down because they can’t get workers.”

Wall recommends that Quality Jobs be scrapped, but Barnes says realistically, that won’t happen.

“Politically speaking I believe it would be impossible. I have much sympathy for the professor’s position that it ought to be scrapped in total. However, I know that it has bipartisan defenders in [the Capitol] and I know that’s not going to happen.”

Barnes says the next step for the Committee will be a hearing at Union Station in Kansas City to discuss, “What to do about Kansas.”

He says the two topics are, “absolutely related, because the Quality Jobs Act is used as a measure of competition with the State of Kansas.”

Barnes says discussion of improving the quality jobs act will be one of the subjects at that hearing, as well as reducing taxes, which he says would do more to create jobs than all jobs tax credits combined.