Companies that have laid off hundreds of workers in Oklahoma have collected millions of dollars in job creation incentives through the state's Quality Jobs Program.
Since 2010, six companies in the state have had mass layoffs while enrolled in the Quality Jobs Program — sometimes receiving incentive payments from the state weeks before laying workers off, or continuing to receive payments after layoffs.
The Quality Jobs Program has been one of the state's banner economic development programs for the past two decades. However, there is no “clawback” provision in the program that would require companies to repay incentives to the state if they lay off workers after receiving Quality Jobs money.
Since its inception in 1993, the program has paid out more than $877 million in payroll rebates. Companies enrolled in the program can get up to a 5 percent rebate on their payroll taxes for up to 10 years in exchange for creating new jobs in the state.
Participating companies have to create a minimum $2.5 million in new payroll within three years to qualify for the payments. Businesses enrolled in the program also must meet minimum wage and benefit requirements.
As long as companies maintain a baseline number of employees, there are no consequences for laying off workers while enrolled in the Quality Jobs Program. The law also contains no provision to require companies to repay the money if they lay off workers, go out of business or move out of state.
Job cuts don't change deal
Houston-based Halliburton Co. has accepted Quality Jobs money in 2013. It also laid off 130 manufacturing workers in Duncan. The company has accepted $1.29 million in Quality Jobs payments from Oklahoma in 2013 through August, and $16 million since 1996.
Because Halliburton keeps a presence in Oklahoma above the baseline of 2,666 jobs outlined in its Quality Jobs deal with the state, Halliburton remains eligible to receive state payments.
“The program pays companies based on employee number increases above that base number each quarter,” company spokeswoman Susie McMichael said. “If the number falls to the baseline or lower, we get no payment.”
Halliburton enrolled in the Quality Jobs program in 1996, and entered into a new contract with the state for another 10 years in 2006 to create 631 new jobs in the state over the next decade. The company plans to continue to participate in the Quality Jobs program until at least 2016, when its second contract with the state expires, McMichael said.
Wichita-based Spirit AeroSystems has accepted Quality Jobs money in 2013, during which time it also said it would layoff a combined 360 people in Wichita, Kan., and Tulsa. The company would not disclose how many Tulsa workers it has laid off this year, but Spirit said in August that it would sell its Tulsa plant, which employs about 2,800 people.
The company has accepted more than $2.5 million in Quality Jobs payments from Oklahoma in 2013, and $18.8 million in Quality Jobs payments since 2007.
“Spirit AeroSystems has a contract with the Oklahoma Department of Commerce and participates within the guidelines of the program,” the company said in a statement.
The company, which has a deal with the state to create 1,832 jobs over 10 years in Oklahoma, is above the baseline employment as spelled out by its contract with the state of 1,215 employees, and will continue to participate as long as it is eligible, Spirit said.
Chesapeake Energy Corp. has received more than $28.8 million from the state Quality Jobs program since 2007. With $8.27 million in the most recent fiscal year, Chesapeake received more Quality Jobs money than any other company. The company said it laid off 86 workers last week, after cutting an undisclosed number earlier in September. The company is expected to layoff additional workers by Nov. 1. Chesapeake, which had about 4,700 employees in Oklahoma City at the end of January, also remains well above its baseline of 2,493 jobs.
The company declined to comment about its participation in the Quality Jobs Program.
“In the case of Chesapeake, they have thousands of employees, many of them considered ‘new' jobs and therefore, although the recent layoffs are unfortunate, the overall job count remains well above the baseline at which Quality Job payments would otherwise stop,” State Commerce Department Deputy Director Don Hackler said in a statement. The Oklahoma Department of Commerce administers the Quality Jobs Program.
SandRidge Energy Inc. has accepted $27.3 million in Quality Jobs payments from the state since 2007. In 2013, the company has collected $2.48 million in Quality Jobs incentive money. In January, the company laid off an undisclosed number of workers in Oklahoma City after selling off its Permian Basin Assets.
SandRidge employed about 2,500 people at the end of 2012, according to its most recent annual report. The company exited Quality Jobs in the first quarter of 2013, after reaching the maximum dollar amount it could receive from the program.
“Quality Jobs establishes a baseline for companies upon entering the program,” Leslie Weiher, a spokeswoman for SandRidge said in a statement. “Benefits are based on payroll only for jobs created above baseline employment on or after the projected start date for the duration of the agreement. If a position was eliminated due to layoff, the company would no longer receive a credit for that job.”
Weiher declined to say how many people SandRidge laid off in January, but said the company reassigned many of the workers to jobs focusing on SandRidge's assets in the northern Oklahoma and southern Kansas' Mississippi Lime play.
A few companies that have accepted Quality Jobs money since 2010 have shut down their operations entirely in Oklahoma while participating in the program. The Tulsa-based glass manufacturer Zeledyne closed its plant in 2011 after business for auto glass from its primary customer, Ford Motor Co., dried up.
Between 2008 and 2010, Zeledyne accepted more than $2.26 million in Quality Jobs Program payments from the state. At one time, Zeledyne issued layoff notices to 206 Oklahoma workers in 2010 and another 325 workers in 2011, according to state records.
Minnesota-based wind turbine tower manufacturer DMI Industries announced it would close its Tulsa plant in August 2012 and lay off 167 workers. The company accepted $2.18 million in Quality Jobs funds from 2009 through 2013, according to Oklahoma Tax Commission records. Although DMI closed its Tulsa plant in November 2012, the state processed $167,000 in incentive payments for DMI in 201to the company for continuing to employ workers in the third quarter of 2012.
Minnesota-based data security company Imation Corp. laid off 107 workers in Weatherford in 2011 when it closed its magnetic tape plant there. From 2004 through 2011, the company accepted more than $1.9 million in Quality Jobs payroll rebate payments from Oklahoma before voluntarily with drawing from the program in August 2011.
Reformers speak out
Greg LeRoy, executive director of the Washington, D.C.-based policy center Good Jobs First, said businesses that receive taxpayer funds for creating jobs should repay the money if the companies later lay workers off or close their doors. Good Jobs First advocates for reforms in economic development incentives.
LeRoy believes that repayment provisions should be included in all public job creation incentive programs like Quality Jobs.
“Economies are dynamic — not every company makes it or is above average. There are going to be companies whose business plans are not adequate, or they will fail with their new product line. All the more reason why clawbacks make sense,” LeRoy said.
Good Jobs published a 2012 study that scored economic development incentives in all 50 states based on transparency and safeguards. Oklahoma ranked in the top third of states with its economic development programs with a score of 65, but could have done better because its programs lacked provisions that would require companies that fail or lay off workers to repay public funds.
“I think that all public officials should support clawbacks, because the alternative is to say that we should let the companies take the money and run,” LeRoy said. “It only makes sense that companies should hold up their end of the bargain.”
Rep. Mike Reynolds, R-Oklahoma City, a longtime critic of the Quality Jobs Program, said many companies that receive the incentive payments would expand or start operations in Oklahoma even without the program.
“The problem with the Quality Jobs program is that companies do not hire people based on tax incentives,” Reynolds said. “It's an artificial incentive to hire somebody, and all it does is helps the taxpayers of Oklahoma pay for the salaries of those workers.”
The program also doesn't prevent companies from eliminating jobs if the economic climate changes or the business fails to turn a profit, he said.
“They are going to hire based on the work they need done. If you are not building as many airplane parts or drilling as many oil wells, then you don't need workers for that,” Reynolds said.
“A good program”
Oklahoma House Speaker T.W. Shannon, R-Lawton, said the Quality Jobs program is successful in attracting companies to the state and keeping jobs in the state. Shannon sponsored legislation in 2009 that expanded the Quality Jobs Program to include qualified federal contractors.
He cites Goodyear Tire's plant in Lawton, which has participated in the Quality Jobs program in the past, as an example of a company that Quality Jobs incentives have helped to expand. Goodyear is the largest civilian employer in southwestern Oklahoma, employing about 2,400 employees, according to the Lawton-Fort Sill Economic Development Corp.
“The Quality Jobs Program is a good program because it works. It's not a giveaway because a company only gets rebated a portion of what they pay,” Shannon said. “Goodyear Tire in my district is a good example. They continue to expand and are the most productive tire manufacturing plant on the continent. I've been told repeatedly by their corporate team that the program is a major reason they continue to bring jobs to Lawton. Our program has been so successful that other states are using our system as a model.”
The Quality Jobs Program is an important tool for luring new employment to Oklahoma, said Gwendolyn Caldwell, senior vice president of government affairs for the State Chamber of Oklahoma, a proponent of the Quality Jobs program.
“It's a good program that other states have tried to emulate because it's been very successful bringing new jobs to the state,” Caldwell said. “It helps put us on a competitive playing field with other states that offer similar programs.”
Companies also are paid only for the jobs they create after the workers are hired — Quality Jobs funds are never paid up front to the companies, Caldwell said.
Over the past 3 years, Oklahoma has reaped an average of more than a $2 million benefit per quarter over and above the program's cost — about $24 million — according to numbers from the Commerce Department.
The actual average wage of jobs created through Quality Jobs Program during the past three years — about $68,400 — is more than twice the $31,297 wage threshold for the program.
When companies expand, they often make substantial new investments in equipment and property, which also helps the local economy, Hackler said. Companies also pay taxes to the state on the Quality Jobs payments they receive, just like any other source of income, he said.
While companies take many factors into consideration, incentives help companies choose a location, Hackler said.
“Although incentives such as the Quality Jobs Program are not the only consideration a company will look at when choosing a new or additional location ... they are a high consideration on the decision list,” Hackler said. “Without such incentives a given state will have little chance of landing these companies.”
The Commerce Department performs due diligence on all companies before they enter the Quality Jobs program to ensure they have viable business plans, as well as history and payroll data, Hackler said.
“It is important to note, despite the availability of the Quality Jobs Program and other incentives, Oklahoma loses out on many potential projects because other states have put together a more attractive package than us,” Hackler said.
The program pays companies based on employee number increases above that base number each quarter. If the number falls to the baseline or lower, we get no payment.”
Halliburton Co. spokeswoman