Report: Quality Jobs program creates few jobs

Gov. Jay Nixon still sees expansion of the program as key to jump-starting Missouri's economy.
Monday, February 23, 2009 | 1:23 p.m. CST

ST. LOUIS — A program lauded by state officials for creating tens of thousands of well-paying jobs in Missouri has actually generated relatively few positions, a newspaper reported Sunday.

The St. Louis Post-Dispatch said that a review of state records showed that the Quality Jobs program has created 2,373 new jobs since 2005 — far below the 22,000 figure frequently used by politicians in both parties to describe the program's success.

The difference comes from how the jobs are counted. State officials count all the jobs the companies promised when they applied for tax incentives through Quality Jobs. But the Post-Dispatch said the actual number of jobs was much smaller because projects were canceled or scaled back because of the worsening economy.

The issue has become more important as Gov. Jay Nixon and state lawmakers have viewed an expansion of the program as key to jump-starting Missouri's economy and battling the highest state unemployment rate in 25 years.

The lack of actual job growth hasn't cost taxpayers because companies in the program don't receive any tax incentives unless they provide the promised jobs.

But critics say the program's poor track record doesn't make it a sensible foundation for new efforts to fight the economic recession.

Nixon wants to eliminate the $60 million annual ceiling for the tax credits as part of his emergency Show-Me Jobs plan. The Missouri House has already voted for the proposal and Nixon is pushing the Senate to do the same.

"I really think it will help us, if they get this bill on my desk, show America that this is a place where people work together, we're open for business," Nixon told the Missouri Press Association.

So far, only 33 companies have met the minimum requirements to receive tax benefits from Quality Jobs in the last four years. More than 160 other applicants either have yet to use the program because they haven't generated enough jobs or their two-year window for claiming the incentives has expired.

For example, Onshore Technology Services told the state in 2007 that it planned to add 453 jobs in Macon. Last year, it expanded that plan, saying it would add 116 employees in Lebanon and another 116 in Joplin.

But state records show the company, which wants to keep technology jobs from being shipped overseas, has added only 12 jobs. Shane Mayes, the company's founder, said his company was growing, but "not at the rate that I had originally planned."

Sen. Brad Lager, R-Maryville, said describing the program as creating 22,000 jobs was "misleading" and shouldn't be part of the debate on the governor's plan.

Nixon's administration used the figure earlier this month when asked to quantify the program's success.

"The Quality Jobs Act has worked," Nixon said in his State of the State address in January.

Quality Jobs started under former Gov. Matt Blunt, who signed it into law in 2005 and used the 22,000 figure as far back as 2007 in his annual report. The number was repeated in December by the Missouri Chamber of Commerce and Industry.

Greg Steinhoff ran the program as Blunt's economic development director. He said last week that it was necessary to compete with states that could offer companies cash grants to move or expand — a technique banned by Missouri's constitution.

"Before Quality Jobs, a lot of these companies would've said, 'We're doing this somewhere else.' We just didn't have anything to put on the table," Steinhoff said.

The plan allows businesses to keep the withholding taxes of new employees. In some cases, a formula provides them a "refundable" tax credit, meaning the state pays them extra.

To qualify, the company must detail how many jobs it plans to add and ensure those jobs will pay at least the county's average wage or the state average of $38,885, whichever is lower. They must also provide health insurance and pay at least half of the premium.

Small companies have two years to start adding the jobs while larger companies can take up to three years.

Linda Martinez, Nixon's economic development director, defended including proposed jobs in the program's total because they are presumably in the pipeline.

"In terms of what it's done, I think it did help companies make a decision that they were going to expand," Martinez said. "I think that's a wonderful thing. The economy has affected whether they can follow through."

Steinhoff pointed to some successes, such as ABC Labs. That company has received $219,154 in tax incentives for adding 96 jobs in Columbia and will receive an estimated $1.2 million over five years.

"ABC Labs would've been in San Diego," without the program, Steinhoff said.

Express Scripts, based in St. Louis County, is the program's biggest winner, receiving $1.6 million in tax breaks for adding 406 jobs.

A group of seven senators have slowed down Nixon's $90 million package, calling for more controls on tax credits.

Sen. Chuck Purgason, R-Caulfield, asked why the Quality Jobs cap needs to be raised, noting that the most the state has ever authorized in a given year was $23 million in 2008 — and companies redeemed only $2.8 million of that.

"When you're not even halfway to the cap, I don't know how you're creating jobs," by increasing it, Purgason said.

Steinhoff said the increase is necessary because once the state offers tax credits to a company, that amount is applied to the cap, even if it's never used.

He added that "in this economy, nobody's going to expand. But that doesn't mean companies aren't making plans to expand."

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