By Stacy Martin
Special Projects Editor
Eighteen years in, Oklahoma’s economic development crown jewel, the Quality Jobs Program, has strayed far afield, costing taxpayers much more than originally intended and paying out much more per job in many cases.
The information was gleaned by CapitolBeatOK from open records sources and web resources, as well as Oklahoma Department of Commerce and Oklahoma Tax Commission personnel familiar with the program or directly involved in its administration.
Oklahoma City Chamber of Commerce President Roy Williams said a few months ago that QJP is a huge success, creating over $768 million in new payroll since its early 1990s launch.
But since QJP began, guidelines have become far more generous, and the state in many cases is paying more per job than it should have to – certainly more than once envisioned.
The program provides cash rebates of up to five percent of new payroll to new and existing companies for creating new jobs.
The contract can last for up to 10 years if $2.5 million in new payroll is created within three years.
But amendments to the law or Commerce Department decisions have relaxed the $2.5 million threshold for many recipients, records show.
The original legislative intent of the program was to support the start-up of viable business programs or companies that would create new jobs, attract new corporations, promote sales of Oklahoma products and services and provide workers health benefits.
In some cases, it has worked well. But many reincarnations and amendments in the law later, it appears it has become an easy way to “take the money and run.” (See the complete chart of QJP participants in the chart accompanying this story.)
Read the Quality Jobs List Chart
Would Oklahoma’s taxpayers be happy if they knew:
Oklahoma paid $6.5 million to underwrite Wal-Mart pharmacy jobs around the state?
Oklahoma pays quality jobs cash to companies as they’re going belly-up, laying off workers or vacating the state – and it’s crystal clear that’s the case?
Oklahoma makes no effort to recapture money in response to overblown job projections? There is is too much temptation to project large job predictions because incentive payment calculations take this into account. And, there are no penalties or disincentives for failure to meet the projections. In fact, it could be said companies are financially rewarded for at least three years for doing so.
Oklahoma paid $3.5 million to one Tulsa company projected to create 3,000 jobs and five years later, it listed 15 jobs in that program? That’s $233,000 per job.
A company has a good shot at re-enrolling for multiple 10-year contracts by simply by creating a new legal entity. Repeated failures to meet the jobs targets appear to matter little.
The Department of Commerce has earned tens of thousands of dollars to administer the program since inception — for doing what it is already being paid to do, i.e. facilitate job creation.
Numerous companies never make it past the three year ramp-up phase because they either failed to hit payroll targets or for other reasons of their own.
Indeed, numbers tell the story. Many QJP proposals to the Oklahoma Department of Commerce include vastly overblown new jobs predictions.
It isn’t until after three years that payments are directly tied to actual jobs.
No matter how many or how few jobs the company creates it gets to keep all the cash from the first three years. It is very difficult for a company to ramp-up a new program in less than three years according to Commerce’s division director for policy, research and economic analysis, Deidre Myers.
Every Quality Jobs participant goes through a “rigorous process” of analysis by Commerce officials to make sure their proposals are viable, Myers said.
“It’s impossible to know how a company will perform over 10 years,” Myers said. “There are a limited number of companies that are not going able to complete their contract because of economic reasons. That is normal and we expect that.”
She said the number of jobs under contract with Commerce and the number of jobs a company publicly announces may be different, but didn’t elaborate on that somewhat puzzling observation.
Though the law charges Commerce and the tax commission with jointly overseeing and determining proposal viability, one tax commission official who insisted on anonymity said, “The Commerce Department just sends us a list of who to send checks to. That’s the extent of our involvement.”
Though requirements are certainly more lax now, one goal has been consistent according to one Commerce official: that the money paid out not exceed the benefits to the state.
Commerce Department QJP program administrator Richard Schwalbach assures that the program is indeed revenue positive and that payroll is monitored closely. He said after ramp-up, no money is paid out unless the jobs are actually on the participant’s payroll.
He defends imposing no “clawback” provisions, saying companies would avoid doing business in Oklahoma if faced with such risks. Clawbacks would return some or all taxpayer money if jobs aren’t created, the company goes belly-up or leaves the state.
A look at the Oklahoma Tax Commission chart shows companies having to exit the program for failing to hit target numbers, while others remain in. Numerous others drop out voluntarily. But they kept every dime of the ramp-up money.
Guidelines seem to have been loosened by lawmakers such that the $2.5 million payroll threshold doesn’t apply to many manufacturer classifications anymore.
But around the country, The City Sentinel found the same trends. Few companies are held accountable. And fewer still are monitored by outside agencies of officials, according to a study by www.goodjobs.org.
Goodjobsfirst.com is a corporate subsidy tracker search engine. The hosting group collects data to help promote accountable economic growth across the nation.
QJP’s guidelines have placed it in the middle of failing or dying company dramas many times, as well as companies exiting the state in a hurry.
The Great Plains Airlines fiasco is one example. Branded by experts as ill-conceived and doomed from the start, the Oklahoma Legislature ultimately coughed up an estimated $28 million for the venture, which failed heading into 2004. That was also the year the QJP gave the airline $336,000.
The downfall didn’t just hurt taxpayers. Bank of Oklahoma stepped up in good faith, lending $7 million to assist the venture, only to lose it several years later.
Weatherford’s Imation Corp. announced it was closing in early 2010. Several months later, it received $78,000 in Quality Jobs checks. In 2011, Commerce gave Imation another $109,309.
Commercial Financial Services received over $9 million in QJP money over nearly 10 years, then collapsed into a bankruptcy blaze in 1999. After dodging prison time over criminal allegations, the company president has re-enrolled in QJP (http://capitolbeatok.com/reports/tulsa-debt-collection-firm-gets-up-to-9-million-in-state-money-from-the-quality-jobs-program), but has yet to file a claim for any cash rebates, records show.
Dell Computer Corp. came to town in 2005. It began laying off in 2008 and is now 500 below its original public jobs announcement (http://capitolbeatok.com/reports/dell-retrenches-but-ranks-among-highest-quality-jobs-recipients). It has received about $19 million in QJP incentives.
In cases such as Dell, is the state delaying the inevitable, propping up companies at great cost to taxpayers — buying time? It remains to be seen.
Meyers said the program works as lawmakers have structured it and Commerce is simply carrying out its directive.
“I would not assume I know better than legislators how to formulate this incentive program,” she said. “The Department of Commerce simply implements the program. Right now we administer the program according to the law and according to the best of our ability.”
Clearly, there are companies that have enrolled in QJP with viable business proposals and have – and are making — earnest efforts to reach targets. And many are creating jobs with staying power.
Read the Quality Jobs List Chart