Chamber of Commerce not happy with recommendation to end Advantage Act’s incentives early
LINCOLN — State Chamber of Commerce officials are breathing fire over a legislative suggestion, being released Friday, that calls for ending Nebraska’s top economic incentive program a year earlier than planned.
Sunsetting the Nebraska Advantage Act at the end of 2019, rather than in 2020 as now planned, sends the wrong signal about Nebraska’s desire to grow and attract businesses here, said officials with the state and Omaha chambers of commerce.
“Companies who are thinking about coming to Nebraska will be concerned about whether we’re open for business or not,” said Bryan Slone, the head of the Nebraska Chamber of Commerce and Industry.
Jennifer Creager of the Greater Omaha Chamber of Commerce said that to sunset the Advantage Act before having a replacement in place also adds anxiety.
“Companies don’t like uncertainty. They want to be able to predict what their future is, especially when they’re making project decisions,” said Creager, the Omaha chamber’s main lobbyist in Lincoln.
In its report, the Nebraska Economic Development Task Force, a committee of 10 state senators, calls on the state to craft stronger and more targeted economic incentive programs to replace the 13-year-old Advantage Act and its affiliated programs.
In a signal that the lawmakers think the Advantage Act isn’t generating sufficient jobs for the millions in tax incentives it provides, the task force recommended that the state not wait until Dec. 31, 2020, to sunset the program, but rather to end it a year earlier, at the end of 2019.
“This program needs to be addressed this (2019) session, and not prolong it,” said State Sen. Sue Crawford of Bellevue, who chaired the task force.
One term-limited senator on the task force was more blunt.
Columbus Sen. Paul Schumacher, whose second four-year term runs out next month, said it’s clear that Nebraska isn’t getting a sufficient bang for its buck from the Advantage Act, so why keep it around for two more years.
“It’s time to bring that problem to an end,” Schumacher said of the act. “It hopefully will incent some very serious negotiation and thought into the problem, which we have not been able to get in the last four to five years.”
For decades state leaders have been wrestling with how to inspire companies, through tax breaks, to locate or expand in Nebraska.
The state’s first economic development program, commonly known as LB 775, was passed in 1987 amid concerns that the state would lose not only Conagra but also the headquarters of Union Pacific Railroad to other states.
The Nebraska Advantage Act replaced LB 775 in 2005, and it has spawned a family of smaller incentive programs designed to reward companies who reach employment and investment thresholds, with tax credits and exemptions.
But in recent years, state lawmakers have begun to question the effectiveness of the Advantage Act and to express concerns about whether it attracts the kind of high-paying jobs that keep young people from moving away and attracts families to relocate to Nebraska. Others complain that it doesn’t help rural businesses.
A 2016 legislative performance audit of the program estimated that it cost between $24,500 and $320,000 in tax breaks for each full-time equivalent job that was created and that it inspired only nine businesses to relocate to Nebraska from 2006 through 2014.
Schumacher said that most Advantage Act beneficiaries were businesses already in the state and that the biggest recipients of tax breaks were a handful of large companies. Meanwhile, those companies hold hundreds of millions of dollars in unused tax credits that, if cashed in together, could bust the state budget, he said.
“The state doesn’t need, and can’t afford, something like the Advantage Act,” the senator said. “Something more targeted might be a more valuable tool.”
Priorities suggested by the task force, devised with the help of the Arlington, Virginia-based Center for Regional Economic Competitiveness and the Pew Charitable Trust, were:
Job training and workforce development to fill business needs. Worker shortages were highlighted as the state’s most pressing economic development issue.Community building and quality of life in both rural and urban areas.Strategies that encourage emerging, new business sectors and entrepreneurs.Better access to capital and investment.A focus on high-impact, high-quality jobs.Accelerating the sunset dates for the Advantage Act and the Advantage Rural Development Act to Dec. 31, 2019 and terminating three other incentive programs in 2019 that help beginning farmers, historic renovation projects and new markets.
Crawford, the task force chair, said the goal isn’t to end incentive programs, but to push for enactment of replacements that are “simpler and more effective.”
Slone, the state chamber head, said that economic incentives have been effective in inspiring job growth in Nebraska and are essential because the state’s corporate income tax and individual income taxes are so high.
“If our individual and corporate income tax rates were in the lowest 10 states in the country instead of the top 20, we wouldn’t need as many incentives,” he said.
Moving up the sunset date would require passage of a bill during the 2019 legislative session, which begins in three weeks. Revamping the Advantage Act was already going to be one of the top issues, and moving up the end of the Advantage Act would only intensify that priority.
Creager said the business community agrees that the state’s economic incentive programs, after 13 years, need to be updated to reflect today’s economy.
“It’s time,” she said.