Quality Jobs program shows low return on investment even after excluding pelicans


The Louisiana Legislative Auditor’s most recent analysis, which painted a lackluster picture of the state’s quality employment incentive program, specifically excluded New Orleans pelicans from the study because , according to the auditors, the extremely high salaries reported by the team would likely have skewed the results.

“They were such an anomaly compared to the rest of the companies that we were evaluating that we decided to exclude them,” said Gina Brown, head of performance audit, at Thursday’s meeting of the Louisiana Tax Institute, a commission lawmakers, academics and other professionals who advise lawmakers on tax policy.

Brown and his colleague Ed Seyler, an economist for the Legislative Auditor, were the principal authors of a 2020 performance audit that found that the state’s program for quality jobs, which offers private companies discounts in cash for the creation of new jobs, had a negative return on investment. (ROI), on average 5 cents for every dollar the state spends on the program.

In addition, most of the newly created jobs that companies claimed under the program would have been created regardless of the incentive, Seyler said.

The program, created to attract businesses, requires businesses to create jobs that pay at least $ 18 an hour to be eligible for a rebate. But last year, the state lost $ 140 million in revenue to 123 program companies, according to the Louisiana Department of Revenue’s tax incentive budget.

Tax Institute board member Joel Robideaux, an accountant and former Lafayette state representative, asked auditors whether pelicans’ participation in the program could have skewed the analysis.

“I just don’t want the commission to come together and discuss the pelicans situation, so when you were all doing that analysis… to turn on yesterday? He asked.

Wednesday, the Illuminator reported that for more than a decade, the Pelicans have received millions of discounts on quality jobs each year by counting team positions as newly created jobs with average wages of $ 608 per hour. Since the rebates are calculated as a percentage of the company’s total payroll for newly created jobs, the lucrative basketball salaries allowed the team to raise $ 3.65 million per year, one of the highest discounts of all companies in the program.

According to the Quality Jobs files obtained by the Illuminator, most other companies report typical average wages ranging from around $ 15 to $ 30 an hour, which makes the Pelicans an outlier among a list of companies that don’t have multiple millionaires on their staff.

However, the Pelicans’ pronounced numbers in the Quality Jobs program had no effect on the audit’s grim findings. The auditors entirely excluded the team from the analysis for the exact reason mentioned by Robideaux.

“We excluded them for this exact reason,” Seyler said. “The NBA players earning extremely high salaries were really not comparable to the program’s meat and potatoes, which will be chemical industries, manufacturers or other export-oriented businesses.”

The auditors examined other possible impacts of the program on the state. The state does not need to have a positive tax return on investment, which is why the audit calculated the program’s cost-benefit ratio to household income, Seyler said.

Even in this category, however, the Quality Jobs program generated an average of 74 cents in household income for every dollar it cost the state, the audit found.

Auditors found that 17 parishes in Louisiana had never seen a company receive a discount on quality jobs. All but two of these parishes have unemployment rates above the state average, and all but one have average wages below the state average.

The auditors gave several recommendations to the Tax Institute on how to reform the program, including requiring Louisiana Economic Development to report the actual number of jobs created rather than estimates. They also recommended reinstating the requirement that Louisiana Economic Development conduct a cost-benefit analysis for each applicant prior to approval. The legislature removed this requirement in 2002, resulting in a 626% increase in approvals of quality job projects, according to the analysis.

The auditors recommended changing the program’s eligibility to allow more businesses in rural areas to participate after their analysis found that 17 parishes in Louisiana had never had a business participating in the program. All but two of these parishes have unemployment rates above the state average, and all but one have average wages below the state average, auditors said.

Among other things, the auditors recommended requiring or encouraging more companies to direct their spending towards Louisiana-based companies. Their analysis found that only about 33.5% of the program’s capital spending goes to state enterprises.