Nebraska lawmakers have trouble getting answers on incentives

Deena Winter
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Aug 28, 2014 5:28 PM
Nebraska lawmakers have trouble getting answers on incentives

By Deena Winter | Nebraska Watchdog

LINCOLN, Neb. — Nebraska lawmakers were largely stymied Thursday as they grilled the state tax commissioner about whether the state’s tax incentives are working.

Graphic by Steve Wilson

INCENTIVES: Nebraska lawmakers are studying their incentive programs, trying to figure out whether they’re effective or if many jobs would have come anyway.

They grilled Tax Commissioner Kim Conroy as she went over the Department of Revenue’s annual incentives report, but couldn’t get a solid answer to that question.

Essentially, most of her answers were some variation of, “We are not required by law to figure that out.”

That’s basically what she said when asked by Sen. Paul Schumacher a whether some of the jobs would have come anyway.

Conroy said the law doesn’t require the incentives only be given out if the jobs wouldn’t be created without it. She said that would be a “fairly complicated thing” and “big task” for the agency to determine.

Which is strange, considering the very report she was reviewing has an analysis of that going out 20 years.

In 2012, buried deep in the annual report for 2011 was a number that seemed to show most of the jobs claimed to have been created by incentive programs would have come regardless of subsidies.

But trying to get the DOR to confirm that was like pulling teeth.

Former State Tax Commissioner Doug Ewald, who was still in office at the time, seemed squeamish about it, and referred me to other staffers. That culminated in a lengthy conference call with three state employees, including the guy who wrote the computer modeling program that generated the key jobs figure that caught my attention.

Eventually, a DOR economist acknowledged that indeed, on page 38 of the 96-page report, it basically says three-fourths of the jobs would have been created either way, according to the state’s own analysis. Of course, the report isn’t worded nearly that clearly.

That was obvious during Thursday’s hearing, because not one lawmaker asked about that key figure.

It is a bit like finding a needle in a haystack. The report for 2011 said companies had 1,585 employees working on projects that qualified for tax credits, 373 of which were created due to Nebraska Advantage Act incentives.

“This number is smaller than the first number, which represents more of an accounting number of employees at a project, because a number of these jobs would have occurred without the incentive tax credits under the Nebraska Advantage Act,” the report said.

Clear as mud, right?

In fact, the 373 figure even includes indirect employment — or jobs created by a ripple effect. So those 373 jobs were inflated by a multiplier.

This seemed like big news, and yet, two years later, lawmakers are still scratching their heads trying to figure out if the incentives are working, how much the state is spending — or forgoing — to create each job and whether the jobs would have come either way.

Nebraska Legislative photo

STUNNED: Sen. Danielle Conrad said she found it striking and odd that lawmakers still can’t get answers to key questions about business incentives.

The report Conroy went over with lawmakers still includes projections as to how many jobs would be created with or without incentives.

But last year, when Ewald was briefing lawmakers on the report, I noticed the figure in the report where the estimated job increase/decrease is reported said “0.” The very number I’d gone round and round with the DOR over had simply disappeared.

It seemed unlikely the DOR was reporting not a single job was created as a result of the incentives, so I asked Ewald about it. He said wasn’t sure of the answer, and said he’d get back to me on that. Never did. He stepped down in 2013.

As Conroy was giving her report Thursday, I noticed the same thing. The report lists “0″ for net new jobs created. None of the lawmakers asked Conroy about it, either. So I did.

She said the report is done differently now, noting there’s a new chief economist in the department, and that it says zero for 2013 because since 2013 has ended, it would be an actual number and they have no way of knowing how exactly what the number was. Look at last year’s projection, she said.

I did, and simple math shows 58 percent of the subsidized jobs would’ve been created either way.

Schumacher asked during the hearing what the state’s total exposure is, and Conroy said she didn’t know. She didn’t mention that the report does project that over the next decade, the total revenue loss is estimated at nearly a billion dollars.

Omaha Sen. Heath Mello asked whether there’s a way to figure out how much the state is spending — or forgoing in tax revenue — per job created with incentives. A performance audit done for lawmakers pegged the cost per job at $43,000 to nearly $235,000.

But Conroy said that’s not something the department is required to figure out, and it already struggles to keep up with all the studies it’s required to do now without doing more research.

When Mello asked if Conroy was suggesting the department has never looked at the cost per job, she said she hasn’t seen any state come up with a perfect formula for determining that. Of course, journalists do these kinds of calculations routinely. In fact, the New York Times did just such an exercise for every state in the nation, and pegged Nebraska as one of the biggest spenders.

Sen. John Harms, who heads up another committee examining incentives, said he didn’t see why Conroy couldn’t figure out the cost per job.

“To be very frank with you, there isn’t any reason in the world why you can’t get the cost,” he told Conroy.

Sen. Danielle Conrad said she found it troubling lawmakers still can’t get a handle on whether the incentives are working.

“I find it surprising that we don’t have that analysis or information available to us,” she told Conroy.

When Schumacher asked whether lawmakers need to allocate more resources to help the department get answers, Conroy said she’s not asking for more money or staff, she’s just doing what’s required by law.

“We’re not in the business of job creation,” she said.

That’s the Department of Economic Development’s job, she seemed to be saying. Later, a lawmaker suggested maybe they need to bring in staffers from that department.

That may be a dead end, too.

Two years ago, when I asked the Economic Development Department about the report’s conclusions that most of the jobs would’ve come anyway, Catharine Lang said her department’s role is to provide companies with information about incentive programs. The Revenue Department administers the programs, she said, and once a company applies for incentives, her department is no longer involved.

She also said her department has no responsibility for making sure incentives work.

Apparently, that’s nobody’s job at the Capitol. Except lawmakers, who are having a heckuva hard time of it.

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