Wednesday, January 10, 2007

Should JOBZ include a Health Care Insurance Requirement ?

Gov. Tim Pawlenty has described the Health Care Crisis as “the most pressing domestic policy issue in the country. We have healthcare costs going up so quickly, so rapidly, that they are suffocating the abilities of individuals, family, businesses and governments from advancing other priorities.”

While Pawlenty recognizes dilemma of Health Care, he also proudly points to the success of the Job Opportunity Building Zones program (JOBZ). Pawlenty describes JOBZ as “the mother of all tax incentives to grow or establish businesses in parts of rural Minnesota. In a JOBZ area there are no corporate income taxes, no property taxes, no taxes on goods purchased and used in the zones, and no taxes on investments made in the zone for a period of up to twelve years[2016].”

Since the JOBZ program is over two years old, Center for Rural Policy and Development has reviewed the data and issued its findings last month. As indicated below, most of the projects were expansions from companies that were already in the community, but the encouraging finding was that the jobs created were in greater number and at a higher wage than pledged. In the data pool, there were 1,985 jobs pledged at a wage of $12.37 but the actual data indicates that 2,601 jobs were created at a wage of $14.86 with 69% of the companies achieving their wage target. The other interesting aspect is where some of these jobs were located … many in counties that border other states … with Fairborn County showing 418 jobs created, 270 in Lyon County, 236 in Chisago County, 177 in Olmstead County, 175 in Jackson County, etc.

What we don’t know is true influence of the JOBZ tax-benefit program in attracting jobs. Would these companies have expanded due to the overall economy? Did some of these companies build for other logical business reasons (i.e. there are a number of ethanol facilities included on the list and aligning processing facilities to where the soybeans, or corn, are grown make sense)? How do eliminating corporate income taxes help small business when most small business owners are not incorporated?

In an editorial, The Star-Tribune asked the question “the more the tax forgiveness program succeeds, the more it poses a fairness question: Is it right for only some employers to be excused from the obligation to pay for government services -- especially when excusing them causes taxes to increase for a community's other employers, not to mention its homeowners?”

Pawlenty is correct to encourage business to create new jobs, but the major problem for all business (and families for that matter) is health care. Although jobs are being created, is the health care problem being exasperated? If the JOBZ legislation has a wage requirement that the wage be at least 110% of the Federal Poverty Rate for a family of four – or $10.23, then why not a program to require minimum health care?

Senator David Durenberger, who was selected by Pawlenty to lead the Minnesota Citizens Panel on Health Care Costs, has stated that the resolution of the health care crisis is universal participation. In other words, everyone must pay in. With the creation of JOBZ, universal participation should be a requirement of any deal.

If a business has an existing health care benefit, it would be exempt from this requirement. If not, the State should create a pool, whereby using bulk purchasing power, it can provide minimum coverage for affected employees and their families. The cost would be a separate tax based on the number of full-time employees. NOTE : Massachusetts used a rate of $295 per year (or less than fifteen cents per hour) to establish its Universal Health Care Coverage. California is now considering a 4% tax on wages to create a program that would provide medical coverage for all residents.

Failure to address the Health Care problem will just create additional burdens on hospitals to provide Uncompensated Care which in the end is paid by all other users.

Since the program’s inception in 2003, there have been 282 deals completed by cities, counties and other governmental agencies. The committed number of new jobs is 4,147 and anticipates retaining 9,080 jobs with an overall wage of $11.37.
The state’s website lists the projects approved.
There are nine deals that involve retaining more than two hundred employees :
Polaris Industries in Roseau is an expansion project to retain 2,000 jobs and create 4 new jobs.
Benchmark Electronics in Rochester is an expansion project to retain 937 jobs and create 56 new jobs.
Mayo Collaborative Services in Rochester is expansion project to retain 459 jobs and create 92 new jobs.
ITRON in Waseca is an expansion project to retain 450 jobs and create 50 new jobs.
Innovance Inc. in Albert Leas is an expansion project to retain 386 jobs and create 10 new jobs.
DB Industries Inc. in Red Wing is an expansion project to retain 322 jobs and create 10 new jobs.
Columbia Gear in Avon is an expansion project to retain 234 jobs and create 38 new jobs.
Lexington Mfg. in Brainerd is an expansion project to retain 223 jobs and create 15 new jobs.
DB Industries Inc. in Red Wing also has a relocation project to retain 210 jobs and create 50 new jobs.

There are five deals that involve creating more than fifty jobs.
Iowa Turkey Products in Marshall is classified as a Move In project and pledges to create 200 jobs.
Total Card Inc. in Luverne is classified as a Move In project and pledges to create 150 jobs.
Polaris Industries in Wyoming has a relocation project and pledges to create 143 jobs while retaining 39.
Anderson Corp. in North Branch has a relocation project and pledges to create 135 jobs while retaining 33.
AMPI in New Ulm has an expansion project and pledges to create 122 jobs while retaining 118. NOTE : AMPI had a fire that forced a shutdown of the facility, so I do not know it this deal was as a result of that fire.

The remaining projects involve a lower number of jobs … with more than a few that only involve one job.


overland said...

The question is more fundamental than the heading here. WHY DO WE HAVE JOBZ? If we're having public revenue problems, why on earth would we exempt any corporation from corporate income and property taxes? That's where we get revenue, DUH! How is this good policy?

Economic development is more than jobs without benefits, and corporations leeching off desparate communities is ecnomic detriment, not economic development.

JOBZ has to go.

Millie said...

Good words.