A state senator wants lawmakers to consider expiration dates for two of Nebraska's tax-incentive programs that give tax to businesses to invest money and create jobs.
An audit released this week said the largest such incentive program, the Nebraska Advantage Act, gave $101 million in tax refunds and credits between 2008 and 2011. But it said there is not a clear way to see whether the incentives are working as promised. During that same period, the 33 businesses that used the Advantage Act benefits invested almost $1.4 billion in the state and created 4,079 jobs.
That audit, for the Legislature's Performance Audit Committee, "clearly demonstrates that we need more information about whether these multi-million dollar programs provide a good value for taxpayers," Sen. Danielle Conrad of Lincoln said.
The Legislature's Revenue Committee on Thursday discussed her bill (LB627), which would require the Legislature to decide every five years whether to continue the Advantage Act and the Nebraska Advantage Rural Development Act.
"We need this bill to act as a pause button so we can develop appropriate evaluations about whether or not to continue, amend or end these expensive programs and increase transparency," Conrad said. "LB627 simply puts economic development programs on par and under review like any other state spending program."
The report said an important limitation on the figures is that research on similar programs has shown it is difficult to determine whether investments and jobs occurred as a result of incentives or whether all or a portion would have happened without them.
Conrad's bill does not include the state's other two tax incentive programs -- the Nebraska Advantage Microenterprise Act and the Nebraska Advantage Research and Development Act -- because no new ones will be granted after 2015.
The report said the goals expressed in state law are too vague to evaluate whether the tax incentives are working as intended.
The Department of Revenue, it said, technically is complying with the statutory requirement that it make recommendations to the Legislature about incentive programs that should be eliminated, but, by always making "no recommendation," the department may not be complying with the spirit of the requirement.
Conrad expressed concern over one particular finding of the audit: The estimated cost per job for jobs created under the centerpiece Nebraska Advantage Act ranged from $42,747, considering only compensation tax credits, to $234,568, considering all earned benefits except the property tax exemption.
"We are potentially spending nearly a quarter of a million dollars to create a job that pays $21,000 to $54,000," Conrad said. "That should create cause for concern."
The Advantage Act is the state's most-used tax incentive program, attracting 339 applications since 2006. Of those, 143 resulted in signed agreements. As of Dec. 31, 2011, 33 businesses met the required investment and job creation thresholds and received almost $171 million in tax credits under the Advantage Act. That compares to $5 million under the Rural Advantage Act.
Some $8 million in tax credits have been granted under the Microenterprise Act and almost $11 million have been granted under the Research and Development Act.
Renee Fry of the OpenSky Policy Institute, a nonpartisan think tank, spoke in favor of the bill.
“There have been several national reports over the last year focused on the ballooning costs of tax-incentive programs across the country, along with steps that can be taken to better evaluate these programs and ensure they are effectively and efficiently stimulating economic development," she said. "LB627 is a great first step toward addressing this issue in Nebraska.”
She said 24 states have set up commissions to review such programs.
The bill is opposed by the state, Lincoln and Omaha chambers of commerce because, among other things, some projects take five years to complete, and putting a sunset clause in the incentives might scare some companies off.