Insurance company’s expansion helped by a unique arrangement of tax credits and job creation rebates
Re-posting today’s story from the Business section:
BY PAUL MONIES
Database Editor
pmonies(at)opubco.com
Published: September 13, 2011
One of the state’s largest insurance companies has taken about $20 million in job creation rebates and tax credits in two separate economic development programs using a possible loophole in the law, The Oklahoman has learned.
Farmers Insurance Co. Inc., which is based in Los Angeles, received $9.6 million in Quality Jobs rebate payments from 2002 to 2011, according to Oklahoma Tax Commission records.
- View the Farmers Insurance Quality Jobs contract from 1999
- View the Farmers Insurance home office premium tax credit application for 2010
The company also claimed at least $8.8 million in “home office” tax credits against its insurance premium tax in the last decade, according to data from the Oklahoma Insurance Department. Those credits may be used if insurance companies establish headquarters or regional offices employing at least 200 people.
The Oklahoma Quality Jobs Program Act, which provides quarterly cash rebates for job creation, forbids qualified companies from claiming home office premium tax credits along with Quality Jobs rebates. An annual incentive guide published by the Commerce Department describes the tax credit for insurance companies and states, “This credit is not available to participants in the Quality Jobs Program.”
Farmers Insurance directly employs about 1,400 people in Oklahoma. The company recently opened a new customer service and data center on W Memorial Road in Oklahoma City after leasing space for several years at Shepherd Mall on NW 23. Farmers Insurance has another 750 agents, managers and staff in affiliated offices across the state.
Three state agencies are involved in administering the two incentive programs. The Commerce Department approves applicants for Quality Jobs. The program’s quarterly rebate payments are issued by the Tax Commission. Meanwhile, premium tax credits go through the Insurance Department, which collects premium taxes.
Farmers Insurance applied for Quality Jobs in 1999 and received its first rebates in 2002. It reached a 10-year cap on the program this year after receiving an average of $960,000 in rebates per year. Insurance Department officials said the company has claimed home office premium tax credits since at least 2003.
Company split its operations
Company representatives said the company has been able to claim rebates and tax credits under both incentive programs because it split its operations. Even though employees could be in the same office building, Farmers Insurance assigns their job functions to separate incentive programs.
Tony Morris, vice president of tax strategy for Farmers Insurance in Los Angeles, said most of the discussions on the unique arrangement happened more than a decade ago with Commerce Department officials. At the time, Oklahoma was competing with several neighboring states for placement of a Farmers Insurance regional office.
“For the company, the maximum benefit was to split it up the way we did,” Morris said. “We had a lot of conversations on the front end to basically go over, ‘Here’s the mechanics of what we would need to do and this is how we basically keep (track of) our people.’ We did run through the mechanics of how it was supposed to work and what information and documentation they were expecting from us on a quarterly basis.”
Don Hackler, deputy general counsel for the Commerce Department, said the agency has memos from Farmers Insurance detailing how it was able to use both incentive programs. That documentation is not publicly available because of an exemption in the Oklahoma Open Records Act, he said.
The Commerce Department did provide a copy of Farmers’ 1999 Quality Jobs contract, which is a public record. The contract makes no mention of other arrangements for the premium tax credits.
Hackler compared the department’s economic development incentive guide that tells companies they can’t take both incentives to a “Cliffs Notes” version of the law.
“The law is correct,” Hackler said. “You can’t take both incentives for the same activity, but since you have separate activities, you can take different incentives for each activity.”
Hackler said he wasn’t aware of any other insurance companies taking both Quality Jobs rebates and home office premium tax credits.
In a statement, officials from the Insurance Department said Farmers’ annual paperwork in qualifying for the home office premium tax credit has been in compliance. The department’s application form for the tax credit makes no mention of the Quality Jobs program limitations.
Quality Jobs payments totaled $61.7 million in FY 2011, according to Tax Commission
The Legislature’s Task Force on Tax Credits and Economic Incentives is holding another session today. This morning, it studied the Investment/New Jobs tax credit. This afternoon, it’s Quality Jobs.
Here’s some updated Quality Jobs totals through the 2011 fiscal year, via the Oklahoma Tax Commission:
Source: Oklahoma Tax Commission
Also, I pulled the company totals from FY 2007 to FY 2011. Below is a quick chart on the Quality Jobs recipients. Some companies have renewed and used the rebates under a different legal name, but I’ve tried to consolidate the names as best I could.
The case of the missing Oklahoma plutonium
You can file this as Exhibit A in how not to test your website.
I stumbled across this while searching for state contracting regulations at the Oklahoma Department of Central Service’s website. (Click the image for a larger version.)
Wow. The state’s buying depleted plutonium. Sounds like a great story, right?
Well, after clicking on the supplemental attachments list, I got a picture of some folks in party hats:
So, this clearly looked like a prank. But I made a call to the department just to check. It turns out they are testing a new bid solicitation system and have been training their employees for the last several weeks on how to use it.
Long story short: That plutonium bid solicitation was just a test and shouldn’t have been available on the public portion of the DCS website. It has since been pulled down.
I still think it would have been a great story.
–Paul
Oklahoma agencies have spent $47 million on private attorneys since 2005
Posting today’s story:
- Scroll to the bottom for a complete list of agency expenditures on private attorneys.
BY PAUL MONIES
Database Editor
pmonies(at)opubco.com
Published: May 4, 2011
Attorney General Scott Pruitt said Tuesday he’s concerned about an exemption for higher education in a bill that would place bidding requirements on private attorney contracts with state agencies.
Private attorneys and law firms have made more than $47 million performing legal work for state agencies and boards since fiscal year 2005, according to annual reports filed with the attorney general’s office. That works out to almost $8 million each year.
Rep. Mark McCullough, R-Sapulpa, author of House Bill 1223, said it would not have passed the Senate without the higher education exemption.
“I’m hopeful the bill will pass,” McCullough said. “It is a good government reform measure. A great deal of thought, research and work has gone into this legislation.”
Among the state agencies spending the most on private attorneys since fiscal year 2005 were the Transportation Department ($11.9 million), the Grand River Dam Authority ($6.1 million) and the Department of Human Services ($5 million).
Oklahoma State University spent $2.5 million since 2005 on private attorneys and law firms, according to the annual reports.
View the annual report on private attorney contracts for 2010 (click image for report)
The state Accountancy Board went from spending about $11,000 on private attorneys in 2005 to spending more than $252,000 in 2010.
Randy Ross, executive director of the board, said administrative and disciplinary actions are now handled by outside attorneys. The board also contracts with the attorney general’s office for other legal work because it does not have an attorney on staff. It spent almost $32,000 through the attorney general’s office in fiscal year 2010.
Ross said costs increased recently because a case went to district court.
“That’s a pretty big case, and anytime you have one that goes outside the administrative process, it gets a lot more serious and lot more expensive,” said Ross, who recently became executive director.
AG part of process
Under current law, agencies and boards must apply to the attorney general’s office to contract with private attorneys. Attorneys or law firms who want to be considered for legal work also must request permission to be added to the attorney general’s list. Among the information attorneys provide are their hourly billing rates and other fees.
HB 1223 would require agencies to put out bids for private legal work on their websites. At the end of each case, private attorneys would have to detail their hours, fees and other expenses.
The bill also puts a cap on the hourly rate charged by private attorneys at $1,000.
The Legislature would continue to be exempt from restrictions in hiring private attorneys. Since fiscal year 2008, the Senate has spent $285,000 on private attorneys. The House spent $223,000 during the same period.
Opponents of HB 1223 said agencies and boards need the flexibility that exists under current law. Some lawmakers also said the measure could give the attorney general too much control over the legal affairs of agencies.
Thad Balkman, executive director of the Oklahoma Lawyers Association, said his group still has concerns with HB 1223.
Balkman said forcing outside attorneys to detail their hourly billing could give away their litigation strategy.
“Most of what is in the bill can be accomplished by the attorney general without legislation,” Balkman said. “He already has the discretion whether or not to approve those contracts. I think in the past, approval was given pretty routinely.”
Pruitt said HB 1223 is a step in the right direction. In a statement, he said the exemption for higher education “does not exist in current law and would be a step backward in the state’s effort to keep the public informed.”
The Senate amendment on the exemption for higher education was offered by Sen. Jonathan Nichols, R-Norman. The Senate approved the bill by a vote of 30-14 in April.
Separately from the legislation, Pruitt has developed stricter registration requirements for private attorneys who want to contract with agencies. Those changes will remain regardless of the fate of the bill, a spokeswoman said.
Click for larger view:
Oklahoma Economy: Tell us your unemployment story
In case you missed it, the story below appeared in Sunday’s Business section. I’ve gotten some good feedback via phone and e-mail from other people in a similar situation, so I created a form* in Google Docs to collect more stories.
If you or someone you know has dealt recently with the Oklahoma Employment Security Commission on an appeal for unemployment compensation, please fill out the form here and tell us your story.
——————
By PAUL MONIES
Database Editor
pmonies (at) opubco.com
Two minutes and a computer mix up might have cost Debra Carrick $8,500 in unemployment benefits.
A late appeal after Carrick’s former employer challenged her benefits has turned into a yearlong ordeal for the Oklahoma City resident. But she said the real cost is her confidence in a longtime social safety net and the system used to administer it.
“It’s been over a year and not a penny,” Carrick said. “Lot of heartache. What seems like thousands of hours. Some days I take a break from it, but it’s always one more thing.”
Carrick’s case highlights just one of the nearly 200,000 initial unemployment claims filed in 2010, according to the Oklahoma Employment Security Commission. That number has fallen since a 10-year high of 241,000 in 2009, but remains high as the recession continues to take its toll on Oklahomans.
Carrick, 51, has taken her claim through two levels of administrative appeals and into district court in Cleveland County, where the case is pending.
“People have told me, ‘Why don’t you just give it up and put it behind you?’” Carrick said. “But it just makes me mad and want to fight it more.”
Firing facts in dispute
The facts surrounding Carrick’s last day on the job are in dispute, as they are in many appeals for unemployment claims. Carrick worked almost two years as an accounts receivable clerk for Delco Diesel Services in Oklahoma City. She claims she was fired without cause in January 2010 after an argument with her former boss, David Lanham. According to hearing transcripts, Lanham claims Carrick cursed at him and he fired her on the spot.
Debra Carrick
That incident started Carrick’s yearlong effort to claim unemployment benefits. State officials wouldn’t discuss the specifics of her case because it’s pending in court, but called it an outlier. They said federal and state benchmarks for the system try to make the process as quick as possible to help the unemployed.
“If you’re unemployed this week, that unemployment check is going to do you a lot more good in two weeks than it will in eight weeks,” said Karl Jahnke, director of appeals for the Employment Security Commission. “If you’re eligible, it’s meant to replace some lost wages. Eight weeks from now, you may have missed a car payment.”
In the unemployment compensation world, the technical term for a worker who has lost his or her job is a “separation.” The employee must file a claim for unemployment either online or by telephone. If they have worked long enough and earned a minimum amount to qualify, they are mailed a notice of eligibility. Employers then have 10 working days to challenge the circumstances of the separation.
Appeals backlog
Separations are grouped into either voluntary quits or misconduct. If they can show an employee quit in some way, employers win appeals more than 80 percent of the time. But the standard for misconduct in unemployment claims cases is higher for employers. Claimants win those misconduct cases more than 60 percent of the time, according to Employment Security Commission data.
Until the recession hit, Jahnke said more than 98 percent of the appeals filed were cleared within 45 days.
“We haven’t been able to do that since 2009,” Jahnke said. “We just got run over, and we’ve been playing catch up ever since.”
Last year, Jahnke’s division heard almost 20,000 appeals, double the number it heard in 2008. The appeals division has gone from nine full-time hearing officers in 2008 to 14 in 2010. Jahnke said an ideal staffing number for the division would be 18 hearing officers.
The administrative hearing process is a little less formal than a courtroom, Jahnke said. Hearing officers, who average about 1,000 cases a year, oftentimes have to be both hand-holder and explainer for those unfamiliar with the system.
“We try to maintain basic due process and fairness so that it runs quickly and there’s not many technical trip-ups,” Jahnke said. “It’s kind of like a little court. It is a formal proceeding. We talk to each other nicely. But this is not ‘Judge Judy.’ There’s no yelling allowed.
“There’s also simply pride involved. We as a society are kind of contentious: ‘You’re not going to tell me I’m wrong.’ People will stand on principle, too: ‘You’re telling me I can’t fire that person?’ ‘No, I’m only saying we can’t deny them benefits.’”
First-time filers
For Carrick, a single mother who used to run several aviation-related small businesses, filing a claim was a last resort.
“My first thought was, ‘There’s no way I’m going to file for unemployment, that’s for losers. I’m just going to get me a job,’” Carrick said. “But then I saw (national) unemployment at 10 percent and I said, ‘It probably wouldn’t hurt to go down there, even if I only use it for a couple of weeks.’ Couple of weeks. That sounds funny now.”
Carrick, who had never filed for unemployment benefits before, said the system is daunting for first-timers. Long wait times on the telephone and problems with the online system compounded her frustration. The web-based system requires Microsoft’s Internet Explorer browsers and won’t process claims filed through other browsers such as Mozilla’s Firefox or Apple’s Safari.
John Carpenter, a spokesman for the agency, said it is upgrading its online claim system to reflect the range of browser options.
The Employment Security Commission’s call center handled more than 849,000 calls in 2010. The average wait time for an initial claim was a little more than 2 minutes. But the average wait time for follow-up calls fluctuated each month from a low of 19 minutes to a high of 47 minutes.
Claim denied
Carrick’s initial unemployment claim was denied because Delco Diesel provided a notarized statement by an employee who said he witnessed the confrontation between Carrick and Lanham. The claims analyst said that was enough to establish misconduct.
Carrick, however, said she had never before been written up or disciplined at her job. She also said the statement was notarized by Lanham’s daughter. It’s not illegal for family members to notarize documents, but the secretary of state’s office advises against it if the documents become part of a court case. The Delco Diesel employee who witnessed the confrontation, Dwight Daniel, told The Oklahoman he stands behind his statement, but declined further comment.
Both employers and claimants have 10 days to file an appeal if they aren’t happy with the claims analyst’s decision. Carrick filed her appeal via e-mail at 12:02 a.m. March 2, 2010, two minutes after the deadline.
Carrick said a range of issues kept her from filing the appeal until the last minute. With no income, she tried to get law students at the University of Oklahoma’s law clinic to take her case. They referred her to Legal Aid, which took the case but dropped it days later because of a heavy case volume. Carrick said she also encountered delays when filing for food stamps and in arranging financial aid to take business and computer classes at Oklahoma City Community College.
To Carrick, those two minutes have loomed large in the past year. If the appeals hearing officer wasn’t so strict about that deadline, Carrick said she could have better challenged Delco Diesel’s account of the day of her firing. Carrick appealed the hearing officer’s decision to the Board of Review, a separate panel made up of three people appointed by the governor.
“Considering this and the huge obstacles and impediments that came my way the entire last week of February 2010, I believe I have shown good cause for being two minutes tardy in responding to the false and defamatory allegations of Delco Diesel Services Inc., and that I was indeed laid off,” Carrick wrote in her appeal to the Board of Review in April.
‘Knee-jerk’ decision
The Board of Review affirmed the hearing officer’s decision in May. Acting as her own attorney, Carrick then took her case to Cleveland County District Court. After several more months, District Judge Tom A. Lucas ruled against the Employment Security Commission and the Board of Review.
According to a transcript of the ruling, Lucas said the Board of Review took a “knee-jerk” look at Carrick’s appeal that was filed two minutes late. He said even the legal system has some leeway.
“You know, we have lawyers down here at 5 (p.m.) knocking on the door, getting the clerk to let them in,” Lucas said. “If the clerk lets them in, they get it filed; and if the clerk doesn’t let them in, they don’t get it filed, and that counts. So I don’t know.”
The Employment Security Commission’s attorney, Teresa Keller, appealed the judge’s ruling, which was limited to the timeliness issue. It was not on the facts of Carrick’s firing. The next district court hearing is set for March.
For Delco Diesel’s part, Lanham would only say: “I believe OESC is a very competent group and I think they made the right decision.” He referred other questions to his attorney, Greg James.
James said Carrick’s appeals at the administrative level and in district court have been consistently late. He said Carrick had gone through what he called “on-the-spot” counseling for her behavior previously at Delco Diesel.
“It rose that day with the insubordination in the customer areas to a firing offense,” James said. “She’s got quite a mouth on her. I’ll just leave it at that. She was well-aware of the standards expected of her in the workplace.”
Carrick countered James’ assertion that she was disciplined: “If there are disciplinary records, I want to see them. It absolutely never happened.”
Meanwhile, Carrick said her yearlong experience with the Employment Security Commission makes it hard to believe she’s fighting for just $8,500 in unemployment compensation.
“I wonder how many taxpayer dollars are being spent to fight this case?” Carrick asked.
————————————
*Hat tip to ProPublica for the idea.
Tax credits to be major focus in 2011 Oklahoma Legislature
Once again, tax credits will be a major focus for the 2011 Oklahoma Legislature.
In her State of the State speech, Gov. Mary Fallin said: ” … Our course of action will be simple: only tax credits that create jobs will stay. For instance, my budget begins the process of restoring the Aerospace Engineer Tax Credit, which brings good, high tech jobs to Oklahoma. But those tax credits that do not create jobs must be eliminated.”
Rep. David Dank, chairman of the House Revenue and Taxation subcommittee, held his first committee meeting Monday evening. It was delayed several hours by a contentious meeting in the House to go over new rules.
“This is a very complex area,” Dank said of tax credits. “We’ve been working on it a long time and we’ll probably be working on it for a long time to come.”
Dank had one of the state’s foremost experts on tax credits, Mark Harter, give a presentation to lawmakers setting up the landscape of tax credits. Harter is assistant chief counsel for the House. Here’s a copy of Harter’s presentation:
Dank said a recent opinion by former Attorney General Drew Edmondson’s office would help shape the subcommittee’s work on tax credits this session. The opinion called into question the constitutionality of several existing tax credits and set up a framework for evaluation. Since only the courts can strike down existing statutes as unconstitutional, the AG opinion is nonbinding.
Basically, the AG opinion sets up a three-part test for the constitutionality of tax credits or other incentives: They must have a public purpose; the state should get something in return for giving up expected revenue; and incentives must have “adequate controls and safeguards.”
Several members of the committee had questions for Harter about the possibility of filing a lawsuit that would force the state Supreme Court to rule on the constitutionality of certain tax credits. Harter said it was doubtful the subcommittee could bring an action in court, but individual lawmakers might be able to band together to bring suit in either district court or before the Oklahoma Supreme Court.
Rep. Mike Reynolds, R-Oklahoma City, asked Harter if lawmakers could bring what’s called a “qui tam” lawsuit (a type of whistleblower lawsuit) and recapture revenue from tax credit claimants that has been lost over the years. Harter said he’d have to review the law in that area. Even so, former lawmakers who passed the laws setting up various tax credits would not have any personal liability in such a lawsuit, Harter said.
Lawmakers and panels studying tax credits have always grappled with a lack of information about their true costs. That’s partly due to the confidential nature of tax filings, which ties the hands of the Tax Commission. Tony Mastin, director of the Tax Commission, said his agency is not really set up to evaluate tax incentives passed by the Legislature.
“The commission has always taken the position that it’s there to enforce the statutes,” Mastin told committee members. “They are presumed to be constitutional.”
Mastin said asking the Tax Commission to pick and choose which tax credits are constitutional “would put us in an awful position. We have a very large tax code to administer. We are set up to administer and collect taxes, not administer economic development programs. That would put extra stress on our agency.”
A few lawmakers said the process for evaluating tax incentives should be a task for the state’s Commerce Department.
Dank warned committee members to be wary of lobbyists touting their favored tax credits.
“I think it’s a runaway train,” Dank said. “I think there are good things that happen, but there’s a lot of brilliant lawyers in downtown offices coming up with these credits. There’s going to be a lot of lobbying. Every tax credit is going to be good in the eyes of those presenting them, but we’ve got to remember the taxpayers.”
Dank has several bills dealing with tax credits this session, including HB 1284 and HB 1285. The first opens up certain information about credits claimed against the insurance premium tax that’s administered by the Insurance Department. HB 1285 sets up a so-called “Blue Ribbon” task force to study tax credits. (The state’s Incentive Review Committee has been studying such incentives for the last several years.)
–Paul
Previous posts:
- Oklahoma tax credits face scrutiny amid budget crunch
- Oklahoma Quality Jobs incentive program pays out $54m during budget crunch
Immigration: Oklahoma’s foreign-born population grows in most counties
From Sunday’s paper:
By PAUL MONIES
Database Editor
pmonies (at) opubco.com
Three out of four Oklahoma counties showed increases in the last decade in the number of residents who were born outside the United States, with much of the growth coming in the Panhandle, western Oklahoma and metropolitan counties.
Nationally, Oklahoma ranked 32nd in the percentage of foreign-born residents, according to estimates from the U.S. Census Bureau’s American Community Survey from 2005-09.
About 5 percent of Oklahoma’s 3.75 million residents were born outside the United States. That compares to about 27 percent for California and almost 15 percent for Arizona. At 1.3 percent, West Virginia rounds out the bottom of the rankings.
An estimated 12.5 percent of the nation’s residents — 38.5 million people — were born in a foreign country, the Census Bureau said.
The latest estimates come amid a continuing political debate at the Capitol and across the country about immigration. The Census Bureau does not ask about the legal status of immigrants, meaning the foreign-born estimates include both documented and undocumented immigrants and naturalized citizens.
Foreign-born residents come from all over the world to Oklahoma and have a variety of skills, said Deidre Myers, director of policy, research and economic analysis with the state Commerce Department. Manufacturing, agricultural processing, technology and service industries are all attracting immigrants from foreign countries, she said.
Among Oklahoma’s estimated 190,000 residents who were born in foreign countries, 60 percent were from Latin American countries, the Census Bureau said. Another 24 percent were from Asian countries. About 8 percent hailed from Europe.
“Oklahoma is a dynamic economy, so why wouldn’t we have people from different areas looking for opportunity in Oklahoma?” Myers said.
Generally, counties west of Interstate 35 had higher rates of foreign-born residents than those in eastern Oklahoma, according to an analysis of census data by The Oklahoman. Exceptions to that were Tulsa County in the northeast and Marshall County on the state’s southern border.
“You see a lot of growth in the foreign-born population in those areas that have a very strong agricultural and manufacturing presence; of course we see this in western Oklahoma and the Panhandle,” Myers said.
“A second area that people don’t often think about is that we’ve had a lot of foreign-born growth in high-skilled research and development, biosciences, nanosciences and other kinds of very high-tech positions. We’re seeing this kind of growth in Tulsa, Oklahoma and Cleveland counties, where you have a university or a very strong knowledge-based industry cluster.”
Texas County, which held the state’s top spot in foreign-born residents in 2000, stayed at the top in the latest estimates. The foreign-born population in that Panhandle county rose to 21.3 percent from 16.9 percent in 2000. Many immigrants have been drawn to hog processor Seaboard Corp., which has more than 3,000 employees at its Guymon plant.
Remaining in second place was another Panhandle county, Cimarron County, which had 11.5 percent of its residents from foreign countries in the 2005 to 2009 Census estimates. That’s up from 10.3 percent in 2000.
Blaine County appeared to show the largest growth in foreign-born residents in the last decade. An estimated 9.5 percent of its residents were born outside the United States. That compared to 3.5 percent in 2000.
Craig Cummins, superintendent of Watonga Public Schools, said many recent immigrants have found work on oil and gas rigs. Elsewhere in the county are dog food and gypsum wallboard factories.
“Our Hispanic population is our fastest-growing ethnic group,” said Cummins, who has been Watonga superintendent for eight years. “It is a challenge sometimes for classroom teachers, but the kids are accepted and they do give back to the school system. They provide some cultural experiences and they participate in our extracurricular activities.”
Farther south, Marshall County’s percentage of foreign-born residents rose to 7.4 percent in the latest estimates, up from 5 percent in 2000.
Light manufacturing for horse trailers and agricultural equipment has been a steady part of the industrial base in Marshall County for a number of years and has attracted immigrants, said Chris Moore, a board member with the Marshall County Chamber of Commerce.
Moore, a personal banker at Landmark Bank in Madill, said several tellers speak Spanish to help customers.
“We have a large Hispanic customer base, and not having Spanish-speaking employees, we would definitely lose that,” Moore said. “It’s important to our business now.”
Texas film commission denies state incentives over film’s content
The Austin American-Statesman has an interesting story today about a new film from Texas director Robert Rodriguez being denied state film rebates over its content.
The newspaper reports that the denial was made over of a section of the Texas law that allows the film commission to deny a rebate application because of “inappropriate content or content that portrays Texas or Texans in a negative fashion, as determined by the office, in a moving image project.”
Texas film industry insiders said they were disappointed by the decision to deny rebates for “Machete.” They also said films could still be made with rebates from other states, including Oklahoma:
Austin screenwriter and author Si Dunn , who was one of the paid extras in “Machete,” said Wednesday, “Texas needs to do a much better job of politically supporting its movie and television industry…. The notion that state legislators somehow can protect Texas’ image from ‘negative light’ is just laughable — and sadly naive. Movies casting some aspect of Texas in a ‘negative light’ can be made with help from state incentives in Louisiana, New Mexico, Oklahoma or almost any other state and then be shown in Texas theaters.”
Earlier this year, I asked Jill Simpson, director of the Oklahoma Film and Music Office, if there were any concerns about protecting free expression in Oklahoma’s film rebate program. At the time, we were talking about some of the violent images captured in “The Killer Inside Me,” which was filmed partly in Oklahoma and received rebates.
Here’s what Simpson said in a February interview:
My job is a really interesting intersection; it’s art meets industry. My job and the film commission’s mission in statute is to administer the rebate program to develop the industry and that’s what we do. Other than making sure it’s not pornography or child pornography, according to statute — I’m not the producer, writer, director on the film — that is beyond the scope of what my job is.
I will say, in the case of “Killer,” as I’ve said before, I took the script and compared it word for word to the novel and was very happy with how closely the script mirrored the original material, which is a classic. What you can’t know is exactly how it’s going to be filmed or edited.
But with states trying to find money anywhere to close budget gaps, incentives of all types have come under fire. Texas Gov. Rick Perry has proposed $9 million in cuts to that state’s film and TV incentives for the 2011 budget, according to the Austin newspaper.
In Oklahoma, the film rebate program is capped at $5 million a year. A separate program that allowed some filmmakers to use rural and small business venture capital tax credits was suspended by lawmakers earlier this year to help balance the FY 2011 budget.
–Paul
- Related post: DataWatch: Film incentives under fire fire–director’s cut edition
- Related: Film industry rallies to save Missouri tax credits
- Related: Center on Budget and Policy Priorities, State Film Subsidies: Not Much Bang for Too Many Bucks
- Related: MPAA slaps back at film tax incentive study
Behind the new Oklahoma GDP figures
The federal Bureau of Economic Analysis released its preliminary report on gross domestic product for the states today, and it was good news for Oklahoma.
The state took the top spot in GDP growth in 2009, growing at a torrid 6.6 percent clip from the previous year. That compared to a national decline of 2.1 percent. From the BEA:
In contrast to the nation and most states, several states experienced positive real GDP growth in 2009 due to real growth in agriculture, forestry, fishing, and hunting and in mining resulting from sharp declines in prices for petroleum, natural gas, and other mining products in 2009.
Oklahoma had the fastest growth in real GDP in 2009 (6.6 percent). The largest contributor to growth in Oklahoma was mining. Mining was also the leading contributor to growth in Wyoming and Louisiana. Agriculture, forestry, fishing, and hunting was the leading contributor to growth in North Dakota and Nebraska, and was the second largest contributor to growth in South Dakota.
Here’s how the latest GDP figures break down by state (click image for a larger view):
Source: Bureau of Economic Analysis
Behind the numbers, we can see that mining (most of which is energy production), accounted for the bulk of the growth in Oklahoma last year. Its growth of 7.23 percentage points from 2008 masked declines in several other sectors, including durable goods manufacturing (down 0.73 percentage points) and real estate rental and leasing (down 0.57 percentage points).
More telling is how much the mining sector (a.k.a. energy) now accounts for in Oklahoma’s economy. As you can see from the following chart, mining almost tripled its share from 4.72 percent in 1997 to 13.81 percent in 2009. Government — at the federal, state and local levels — remained fairly steady at 17 percent of the state’s economy. Manufacturing still claims a large share, although that fell to 11.3 percent in 2009, down from 14.3 percent in 1997.
Click image for a larger view.
Source: Calculations from Bureau of Economic Analysis data
–Paul
Oklahoma Quality Jobs incentive program pays out $54 million amid budget crunch
This is a longer version of what appeared in Sunday’s paper:
- Search an online database of companies claiming Quality Jobs rebates
- View the Quality Jobs contract for the NBA’s Thunder basketball team
- View the Quality Jobs contract for Boeing Co.
By PAUL MONIES
Database Editor
pmonies (at) opubco.com
Oklahoma’s longtime economic development incentive for creating jobs paid $54 million in cash rebates to companies last year despite the state’s budget crunch.
But economic development officials and some economists say that was money well spent for the Quality Jobs program, which began in 1994 and has been copied in other states.
Under the program, companies can receive quarterly cash rebates of up to 6 percent of payroll after creating jobs with health care benefits and above-average wages. A sister program helps small employers.
Among the largest claimants last year were some of Oklahoma’s most high-profile employers, according to data from the state Tax Commission.
Source: Oklahoma Tax Commission
The owners of the NBA’s Thunder basketball team received $5.28 million in Quality Jobs rebates, leading all companies. Dell Inc. received almost $3.7 million, while SandRidge Energy Inc. received $3.3 million. Spirit Aerosystems Inc., with factories in Tulsa and McAlester, had $2.4 million in rebates.
An expansion of the program, called 21st Century Quality Jobs, was instrumental in landing more than 550 new jobs at Boeing Co. in Oklahoma City. Those jobs upgrading the C-130 and B-1 military aircraft are coming from Long Beach, Calif.
The 21st Century Quality Jobs program allows rebates of up to 10 percent, but the new jobs must pay at least three times the average county wage. In Oklahoma County, that’s about $94,400.
“When you compare all the things that companies compare, the incentives certainly made our business case for Oklahoma much, much stronger,” said Mike Emmelhainz, Boeing’s site director for Oklahoma City. “This has been a solid location for a very long time, but the folks have worked hard in establishing themselves as a good place for Boeing to do business and maintain the Boeing reputation.”
Emmelhainz said the incentives helped Boeing’s Oklahoma City location bid for expanded jobs within the company. That was important given the Pentagon’s emphasis on keeping older aircraft serviceable in a tough budget environment.
“Given shrinking or flat budgets, your ability to go build new platforms and products gets tougher and tougher,” he said. “You have to keep your existing inventory of platforms operational and flying. They need the people that supply them to do it in the most cost-effective manner they can.”
Boeing has been part of the older Quality Jobs program and has received rebates of $3.8 million since 2007, according to Tax Commission records. The company also is talking to Oklahoma City officials about getting local incentives for the new jobs from California. Both sides hope to finish those negotiations by the end of the year.
Program is a model
Economic development incentives of all types have drawn scrutiny as the state’s finances took a hit from the recession. Lawmakers placed a moratorium on several tax credits in the last legislative session. Although another budget hole is expected for the upcoming fiscal year, some are calling on the state to expand Quality Jobs and use it as a model for other state incentives.
Robert Dauffenbach, an economist at the University of Oklahoma, studied the effectiveness of Quality Jobs along with Larkin Warner, a retired economist from Oklahoma State University. A report they issued in 2004 found the program had benefited both employment and tax revenue in its first decade.
Both men are part of the state’s Incentive Review Committee, which is studying the Quality Jobs program this year.
“There can be a lethargy that develops once a program gets put in place,” Dauffenbach said of some incentive programs. “Some of them get grandfathered in forever and there’s no sunset provision or mechanism for evaluation.”
Dauffenbach said Quality Jobs continues to get high marks for transparency and for not issuing cash rebates until companies actually add new jobs. The analysis used by the state Commerce Department to determine the percentage of the rebate also is fairly conservative, he said.
Is it worth it?
Still, some economists wonder if the state is rewarding behavior that would have happened anyway without the incentive. Mickey Hepner, an economist and associate professor at the University of Central Oklahoma, said programs such as Quality Jobs spread the costs among the entire population but the gains go to a small group.
“A vast majority of the jobs that are claimed under the program are not actually created by the program, and they’re not created as a result of the program,” Hepner said. “A lot of those jobs would have been created anyway.”
For example, a company that planned to add 100 jobs could add another five jobs under Quality Jobs, he said. But the company would receive rebates on all 105 jobs, not just the five additional jobs that resulted from the incentives.
“We get the press releases about new jobs, but it’s tougher to get the true cost of the program,” Hepner said. “For $50 million a year, you could eliminate the franchise tax, which would be much more effective and much more equitable to all businesses in the state.”
Hepner said it’s easy for lawmakers to expand Quality Jobs because the money for it is not subject to annual appropriations. The money for the rebates comes from state income tax revenues.
When Oklahoma is competing against surrounding states for new businesses, it helps to have programs such as Quality Jobs, said Mike Southard, president and chief executive officer of the Ada Jobs Foundation. The program allowed local manufacturers to expand their operations in Ada by putting more employees on the payroll. Those employees then spend more money in the community and pay taxes to the state and local governments, he said.
“It’s not like these companies are saving that 5 percent and putting it in their pocket. They’re able to put it into capital or debt service, and that strengthens their business.”
Southard said he understands the arguments against economic development incentives. But the rhetoric used to attack them can make businesses wary of expanding.
“Elected officials have to figure out how to solve both short-term and long-term financial issues,” Southard said. “Everybody who runs talks about better employment opportunities and creating higher-paying jobs. When we’re competing with other states that are also going after those projects, you don’t want to take tools out of your toolbox.”
