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