Report examines growing cost of Quality Jobs program

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The Quality Jobs Program is one of the largest business subsidies in Oklahoma. Quality Jobs spending has grown steadily in recent years, reaching $82.3 million in fiscal year 2014 even as most other state programs saw budget cuts. A new report from Oklahoma Policy Institute examines what’s behind the growth in Quality Jobs spending and whether it’s been a cost-effective use of taxpayer dollars.

“Legislators have talked about scrutinizing Oklahoma’s numerous tax breaks,” said Gene Perry, the Policy Director of Oklahoma Policy Institute. “Quality Jobs is one of the biggest tax expenditures we give out. It may be popular, but it should not be exempted from that scrutiny.”

The report shows that who can receive Quality Jobs payments has expanded significantly since the program was created. It was originally focused on manufacturing jobs, but many other business sectors have been added over the years. Oil and gas companies were made eligible to receive Quality Jobs payments in 2005, and they now receive a majority of payments. In fiscal year 2013, the largest recipient of Quality Jobs payments was Chesapeake Energy, which received $8.3 million. The second largest recipient was Sandridge Energy, which received $6.1 million.

“Over the years the list of eligible industries has grown, and there is no reason to believe that will not continue,” said Mark Lash, who authored the report in collaboration with Oklahoma Policy Institute.

The size of companies approved for the program range from relatively small to those with thousands of employees and hundreds of millions of dollars in annual revenues. One provision approved by the Legislature in 2008 even arranged for the state to contribute towards the salaries of Oklahoma City Thunder basketball players.

The program is required to be revenue neutral. However, the report finds that at least two Oklahoma economists question the Department of Commerce’s methodology for determining revenue neutrality.

“The real issue I have with the [Department of Commerce] analysis is that they confuse the number of jobs claimed for the tax credits with the number of jobs created because of the tax credits,” said Mickey Hepner, the Dean of the College of Business at the University of Central Oklahoma. “Those are likely to be very different numbers.”

Recommendations made in the report include reviewing the economic analysis used to measure its impact on the state budget, developing more targeted criteria for which companies can receive payments, capping spending on the program so it cannot grow without limit, and reviewing the many special provisions that have been added to the program over the years. The report also calls for improving transparency of the program, since most information relating to these payments to private companies are currently not required to be made public under the Open Records Act.

“The rapid growth of Quality Jobs payments during a time when most Oklahoma public services have seen flat funding or budget cuts should be cause for concern,” said Lash. “At the least, lawmakers should create better oversight for the program, to ensure that the millions in taxpayer dollars going to private businesses are creating a benefit for the whole state.”

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