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House Committee looks for ways to improve Quality Jobs program

January 28, 2013 By

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.

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House Oversight committee sets sights on Quality Jobs incentives

September 11, 2012 By

The House Committee that last year dug into the failed Mamtek deal at Moberly will now turn its attention to one of the incentive programs administered by the Department of Economic Development.

Representative Jay Barnes

Representative Jay Barnes (R-Jefferson City) says work by the Committee on Government Oversight and Accountability last year, and a report by the State Auditor’s Office, say the Quality Jobs Program could be oversold and under-performing.  Barnes chairs that committee.

He says the Auditor reported two things. “They first is that they had lax oversight and the second was that the program did not deliver as advertised on the front end … that there were a lot of ballyhooed press announcements and press releases on the front end but then when you came back a year or two years or three years later, there weren’t any jobs created. I think when you look at the record of massive announcements like in Mamtek what you find is a string of epic failures.”

The Committee in January announced it had reviewed a list of 91 projects that received more than $1 million in state incentives in the past six years. Those projects reported creating only about a fourth of the more than 20,000 jobs they projected. Among them, Mamtek had been awarded $7.6 million in Missouri Quality Jobs Program tax credits and produced no lasting jobs. Barnes said at the time that raised questions about the performance of Quality Jobs.

Barnes says as Governor Jay Nixon calls back together his Bi-Partisan Tax Credit Review Commission, and as some state senators push again for tax credit reform, the Quality Jobs Act has not been brought up.

“If it’s worth looking at tax credits, it’s worth looking at all of the tax credits, even those favored by politicians and the powerful.”

Barnes is critical of the Governor’s tax credit review commission, saying it failed to look into Quality Jobs in its initial review and lacks any active state legislators. He says the group was not interested in asking difficult questions about the program.

Barnes expects the Committee to begin where it left off. “I simply asked for that list to be updated, and then we start hearing testimony on whether an employer being able to keep the withholding taxes from new hires for a short window of time is actually a sufficient incentive to have employers create new jobs, or whether its, ‘Hey, we’re going to create new jobs. How much money can we get from taxpayers on top of what we’re already going to do?’”

Barnes issued this statement:

“More than a year after the Mamtek disaster, the Department of Economic Development chugs along with Quality Jobs Act authorizations accompanied by other public benefits and often high-profile press conferences. Unfortunately, recent reviews of the Act have shown that it may be oversold and under-performed.

“Last year, an investigation by the House Committee on Government Oversight and Accountability revealed that five out of every six Quality Jobs Act authorizations failed to deliver as promised and only about one in four jobs promised under the Act have actually been realized. Following our investigation, Missouri Auditor Tom Schweich released a blistering audit of the program, concluding, as our committee did, that (1) the number of jobs created has been vastly overstated; and (2) the Department of Economic Development conducted inadequate oversight of the program.

“In the past few weeks, both Missouri Senate leaders and Governor Nixon have announced intentions to consider thorough tax credit reform in the next legislative session. Governor Nixon recently announced the re-formation of his Tax Credit Review Commission, a group of 27 people hand-picked by the governor that does not include a single active legislator. Unfortunately, the Governor’s Tax Credit Review Commission failed to make any investigation into whether the Quality Jobs Act was delivering as promised. From the Committee’s 2010 report, it is apparent they were not interesting in asking difficult questions about the program’s efficacy.

“Missouri taxpayers deserve better. They deserve elected leaders willing to look at all tax credits for potential reform – even those favored by the powerful and politicians who like using them to claim false credit for “creating jobs.” The House Committee on Government Oversight and Accountability will go where the Governor’s Tax Credit Review Commission didn’t and won’t.”

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State auditor slams management of Missouri Quality Jobs program (AUDIO)

July 3, 2012 By

The State Auditor says the economic development department is mismanaging the Quality Jobs tax incentive program and overplaying its results.

Deputy State Auditor Harry Otto

Quality Jobs tax incentives are available for employers who create or retain full-time jobs, pay at least half the health insurance premium for them and pay at least the average wage in the county. Employers can receive tax credits or hold onto income tax withheld from the employees it keeps or hires.

Deputy Auditor Harry Otto says when an employer applies to the program it offers an estimate of the number of jobs it expects to create or retain. “Later the employers have to report the actual numbers of jobs retained, jobs created, dollars spent. What we’re saying is when you look at the actual numbers after the fact they are less than the projected numbers.”

The audit says those are the figures used to measure the economic impact of the program and calls them “significantly overstated.” 

Since the program was launched in 2005 DED has approved projects touted to create 45,646 jobs. According to the annual report on the program that estimate has been reduced by 18,960. So far, just over 7,000 jobs have actually been created.

It also says DED is not providing enough oversight into whether companies getting the credits are eligible for them. Otto explains, “We, I think, pointed out one where there’s still a disagreement as to whether or not the jobs were rolled I think from a parent to a subsidiary or from a subsidiary to a parent, that we don’t think that really the jobs were created. They were moved from one company shell to another.”

The auditor’s office also didn’t like how the employers DED authorizes to retain the income taxes they withhold account for it. Otto says, “The employer then reports to Department of Revenue … they’re the ones that are the tax collectors of the state. We think there should be more communication between DED and DOR to determine that the proper amount of withholding occurred and that the employer who created and/or retained jobs has retained the proper amount.”

See the “Citizen’s Summary” of the Auditor’s report here.

The auditor’s office gave the program’s administration a “poor” rating, making it the first state program to recieve that rating. Otto empasized that isn’t an assessment of the program, but how it’s been run. “That they could do a better job by acting responsibly with respect to a quicker turnaround or reporting of the information and then giving the General Assembly updated information all the time and not just relying on the initial estimates that were projected by the employers who said they would create or retain jobs.”

Otto says the findings were not well received by the Department. “We were told by DED in some cases the entire program hasn’t unfolded yet, so you can’t really look back and tell the entire thing is over but we say they should update their numbers … the numbers that they give to the General Assembly, because the General Assembly’s making decision based on these projections and if the projections turn out fo be inflated or too high, the General Assembly ought to know that.”

The auditor’s office also says data should be reported in a more timely manner. Otto says, “(DED) has established a November date for receiving information from employers and we think that’s too much time … we think that they could improve reporting by establishing an earlier date to have that information submitted to them.”

Missourinet’s call to the Department of Economic Development has not been returned. View its response to the audit along with the rest of the report from the Auditor’s Office here.

AUDIO:  Mike Lear interviews Deputy State Auditor Harry Otto, 10:09

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