Quality Jobs program pays out $54 million amid budget crunch

Backers say the incentive program helps create jobs and increase tax revenue in the long run, but some wonder if the costs are worth it.
BY PAUL MONIES Published: November 14, 2010
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Robert Dauffenbach, an economist at the University of Oklahoma, studied the effectiveness of Quality Jobs along with Larkin Warner, a retired economist from Oklahoma State University. A report they issued in 2004 found the program had benefited both employment and tax revenue in its first decade.

Both men are part of the state's Incentive Review Committee, which is studying the Quality Jobs program this year.

“There can be a lethargy that develops once a program gets put in place,” Dauffenbach said of such programs. “Some of them get grandfathered in forever and there's no sunset provision or mechanism for evaluation.”

Dauffenbach said Quality Jobs continues to get high marks for transparency and for not issuing cash rebates until companies actually add new jobs. The analysis used by the state Commerce Department to determine the percentage of the rebate also is fairly conservative, he said.

Is it worth it?

Still, some economists wonder if the state is rewarding behavior that would have happened anyway without the incentive. Mickey Hepner, an economist and associate professor at the University of Central Oklahoma, said programs such as Quality Jobs spread the costs among the entire population but the gains go to a small group.

“A vast majority of the jobs that are claimed under the program are not actually created by the program, and they're not created as a result of the program,” Hepner said. “A lot of those jobs would have been created anyway.”

Hepner said it's easy for lawmakers to expand Quality Jobs because the money for it is not subject to annual appropriations. The money for the rebates comes from state income tax revenues.

“We get the press releases about new jobs, but it's tougher to get the true cost of the program,” Hepner said. “For $50 million a year, you could eliminate the franchise tax, which would be much more effective and much more equitable to all businesses in the state.”

When Oklahoma is competing against surrounding states for new businesses, it helps to have programs such as Quality Jobs, said Mike Southard, president and chief executive officer of the Ada Jobs Foundation. The program allowed local manufacturers to expand their operations in Ada by putting more employees on the payroll. Those employees then spend more money in the community and pay taxes to the state and local governments, he said.

“It's not like these companies are saving that 5 percent and putting it in their pocket. They're able to put it into capital or debt service, and that strengthens their business.”

Southard said he understands the arguments against economic development incentives. But the rhetoric used to attack them can make businesses wary of expanding.

“Elected officials have to figure out how to solve both short-term and long-term financial issues,” Southard said. “Everybody who runs talks about better employment opportunities and creating higher-paying jobs. When we're competing with other states that are also going after those projects, you don't want to take tools out of your toolbox.”

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