Oklahoma's Quality Jobs Program: Corporate Incentive Or Payoff?
TULSA, Oklahoma - A job incentive program that has created tens of thousands of good-paying jobs in Oklahoma has also rewarded companies that cut jobs and even exported jobs overseas, an investigation of the program has revealed.
The Quality Jobs program has the unwavering support of the Oklahoma Department of Commerce and a majority in the Legislature for what they say is its proven track record of attracting and retaining good jobs.
And yet the program has its detractors; lawmakers and jobless who believe it doesn't measure up to expectations and needs to be revised, if not repealed.
Now in its 20th year, Quality Jobs has paid out three-quarters of a billion dollars in tax breaks to companies that have created new jobs in Oklahoma. Among those to cash in on the program's benefits have been big names like Chesapeake, ConocoPhillips, Coca-Cola, and Devon.
But the majority of participants haven't been household names, and the majority have actually fallen well short of their own projections for the number of jobs they would create.
And what some critics find more disturbing is the fact that some companies -- after being accepted into the program and collecting millions of dollars in tax breaks -- have cut all the jobs they created and more, and not been required to return any of the money.
"I went to work for Zeledyne in May 2008," explained 59-year-old Doug Coltrane. "And in September 2011, I was told that you're not needed anymore, go away. And it was over. Thirty-five years [of] experience in the glass industry just gone."
Coltrane was one of hundreds of Tulsans who had worked for years at the Ford glass plant, and was hopeful that nothing would change -- except the name -- when the plant was sold to Zeledyne in 2008.
"This was the best," said Coltrane, "the absolute best blue collar job in the world."
But it wasn't to last.
Despite a letter of intent from Zeledyne, saying the plant would be maintained as "a viable ongoing facility," at least, through 2015, management shut the doors on Coltrane and hundreds of other workers.
"I feel betrayed because many people like me had their life laid out, and had plans to enjoy life, but our job ending suddenly changed everything for my wife and me."
According to the Commerce department, which oversees the program, there were 388 jobs at the glass plant when Zeledyne took over. The company invested in the operation, and was able to add 129 more positions.
But, within 20 months of that high point, Zeledyne had shut down production and eliminated all 517 jobs.
In the three years Zeledyne operated the plant, the company received tax breaks totaling $2.2 million under the Quality Jobs program.
"As a taxpayer, I believe we just gave that money away," Coltrane said.
Robert Price, the Chairman of Zeledyne and a Tulsa resident, says they did all that they could to avoid layoffs. In a statement, Price said, "State incentives were an important element of the company's initial plans and its sustained efforts to keep the plant open...[w]e did everything we could to save jobs. Ultimately, Zeledyne could not overcome the impact of the global recession."
In Weatherford, Oklahoma, a similar story: the 45-year-old 3M plant there was also shuttered recently.
Imation, which purchased the plant, ceased operations and exported all the Weatherford jobs to Mexico and Japan.
In a statement, the company blamed "global manufacturing overcapacity" and a "declining magnetic computer tape market" for the move.
Still, Imation received $1.9 million in Quality Jobs tax breaks; its final payment came four months after management announced they were closing the plant.
Imation is not the only Quality Jobs participant to move jobs out of Oklahoma while collecting benefit payments from the state, and that frustrates some legislators.
"Literally, we're incentivizing companies to send jobs overseas," complained Rep. Eric Proctor, D-Tulsa. "It's wrong and immoral."
Officials with the state commerce department disagree.
They point out that companies that have been approved and enrolled in the Quality Jobs program only benefit from new jobs that are in Oklahoma. Participating businesses, generally, are eligible to collect a rebate of up to five percent of any new payroll taxes they generate in the state, after they're accepted into the program.
Therefore, Commerce Secretary Dave Lopez says, while they certainly don't encourage companies to export jobs, it's not necessarily a bad thing, if they do.
"I think we need to respect the decisions that our businesses make," Lopez stated. "If they do have to take some jobs that aren't on U.S. soil, that only makes them stronger. Now, do we provide benefits for those jobs that are outside the state of Oklahoma? No."
One of the latest companies approved for the program is a manufacturer called Malarkey Roofing. So far, the company is on track to meet its projection of creating 80 new jobs. At last check, the plant was employing 54 people.
"Give me about another year," said Jim Fagan, Malarkey CEO. "Hopefully, we'll be up to 100 employees."
But, in order to hit its projection, Malarkey would have to buck the program's history.
Approximately 660 companies have been accepted into the program. As a whole, they've promised to create 237,000 jobs. Less than a third of the companies have met their projections, while slightly more than a third of the jobs promised have actually been created.
"Those are pie-in-the-sky projections anyway," scoffed Rep. Mike Reynolds, R-Oklahoma City.
Reynolds calls the Quality Jobs program a socialist-style redistribution of wealth and a miserable failure. He says the program isn't an incentive; it's corporate welfare.
"I don't think any company creates a job just because they get in the Quality Jobs program," said Reynolds. "No, it's just a payoff to those companies."
Reynolds and other critics believe the companies enrolled in the program that have created new jobs would have created the jobs, with or without the tax break.
Commerce Secretary Lopez acknowledges that incentives like Quality Jobs are not usually the primary reason that a company decides to relocate or, if they're already here, add new positions. But he argues they do help.
"I doubt that any CEO would say, because of that alone, did we make that decision," Lopez explained, "I think it's an array of factors, and part of it is the general economic climate of the state -- is it supportive?"
Lopez insists that Quality Jobs sends a strong message to businesses that Oklahoma wants to partner with them.
Far from being a 'corporate payoff,' Lopez says, the program is a payoff to the state. Even if companies haven't hit all their job creation projections, they've still created thousands of new jobs.
"Did they not meet the total number of jobs? No," Lopez admitted. "But every one of those jobs [that they did create] was important to somebody who got the benefit from the compensation from that job."
The bottom line, Lopez says, is that the Quality Jobs program makes it possible for Oklahoma to compete with other states that can offer similar incentives to businesses.
Most every state has some of job incentive program. According to Good Jobs First, a national policy resource center that promotes corporate and government accountability, there are ten other states that have programs very similar to Oklahoma's Quality Jobs.
An important difference in half of those states, however, is that their programs include 'clawback' provisions. Clawbacks allow the state to recover money paid out to a business that doesn't meet basic performance measures.
Companies enrolled in the Oklahoma's Quality Jobs program have three years to generate $2.5 million in new taxable payroll for four consecutive quarters. If they are unable to achieve this benchmark, they are dropped from the program. Approximately one out of every three companies approved for Quality Jobs ends up being dropped.
Oklahoma does not have a clawback provision, which means that tax breaks paid to companies that fail to meet the $2.5 threshold do not have to be repaid -- a fact that some lawmakers would like to change. Some say they'll be looking to eliminate the program altogether.
"Anytime I see legislation available to end the program," said Rep. Reynolds. "I'll be trying to do that."