Audit: Missouri job incentive program comes up short

JEFFERSON CITY, Mo. -- Missouri officials have overstated the economic benefit of the state's main job-incentive program and have been "woefully inadequate" in verifying businesses are following through on what they say they will do, the state auditor said Monday.

Auditor Tom Schweich gave the Department of Economic Development a "poor" rating for its administration of the Quality Jobs program, the lowest possible ranking. The department disagreed with Schweich's assessment, rejecting virtually all of the auditor's conclusions and recommendations.

The audit of the Quality Jobs program comes as Missouri lawmakers are at loggerheads over the state's tax credit policies, with some preferring to pare back existing initiatives and others seeking to expand incentives to targeted industries. The audit also comes as candidates for the governor's office and Legislature are campaigning on their ability to spur job creation.

The Missouri Quality Jobs program grants tax breaks to businesses that create a minimum number of jobs -- ranging from 10 to 100, depending on the type of business -- that pay at least average wages and cover at least half the employees' health insurance premiums. The program was created under a 2005 law signed by Republican Gov. Matt Blunt but also has been embraced by Democratic Gov. Jay Nixon and lawmakers of both parties.

From the program's inception through 2011, the Department of Economic Development approved projects estimated to create 45,646 jobs. But the audit said about 40 percent of those projects failed to meet minimum job thresholds and, as a result, the department reduced the total estimated jobs to 26,686. The actual number of jobs created stood at 7,176 as of Dec. 31, the audit said.

The audit said the amount companies were projected to invest also "appears significantly overstated." Based on project applications through 2011, companies are projected to invest $4.9 billion in facilities and equipment. Yet they had reported actual investments of about $1.1 billion as of February, the audit said. The investment amounts are self-reported and not verified by state officials, the audit said.

"It is creating jobs, there's no doubt about that, but their projections are overly optimistic and their monitoring is woefully inadequate," Schweich said in an interview.

The Department of Economic Development declined a request for an interview about the audit. Instead, it pointed to a written response that was included with the release of Schweich's audit. The department wrote that it disagreed with assertions that companies overstated the number of jobs they would create and the amount of money they would invest. It said the figures represented the companies' best original estimates for a five-to-eight-year period, and the department said it strives to provide accurate data on what actually occurs.

Businesses receive tax breaks based on the actual number of new jobs, not the projections.

The department said that when analyzing the actual jobs created and the capital investment reported to date, the state has a return of $3.26 to general tax revenues for every $1 of incentives it has provided under the Quality Jobs program. When the anticipated jobs and investment of all active projects are included, the state's return on its incentives is $4.16 for every $1 of aid it provides, the department said.

The audit took issue with the agency's procedures for verifying that companies are paying half their employees' health insurance premiums and keeping the correct amount of withholding taxes as an incentive for the jobs they created. The audit also questioned the accuracy of tax-credit information provided in annual reports to the Legislature.

"We want to be sure that when they say jobs have been created, they really have been created, and when they say jobs are going to be created, that it's a realistic estimate of how many," Schweich said.