Companies can get subsidies by boosting hours, not adding people

By Deena Winter | Nebraska Watchdog

LINCOLN, Neb. — A state program to attract new jobs allows companies to earn huge subsidies by simply boosting the work hours of existing staff rather than hiring additional employees.

Under the Nebraska Advantage Act, Gallup last year earned a $2.5 million tax credit by encouraging — and sometimes requiring — its call-center employees to work extra hours and even attend a workshop.

Gallup, the Washington, D.C.-based polling firm with offices in Nebraska, declined interview requests.

State Tax Commissioner Kim Conroy would not specifically address Gallup’s situation. But she defended the practice, saying if a company bumps employees’ hours, employees make more money, and that’s good for the general economy.

According to the Tax Commissioner’s 2012 report to the Legislature on business incentives, Gallup signed an agreement with the state to get tax credits and rebates on the promise that it would invest $4.6 million and add the equivalent of 30 full-time employees. The company also applied for incentives in 2006 and 1996.

Internal Gallup documents obtained by Nebraska Watchdog show the company rallied employees to work more hours so that Gallup would earn tax credits under the Nebraska Advantage Act, also known as LB312.

A Gallup employee newsletter said all employees would need to work an extra seven hours in September because “this is the only way we can reach our LB312 goal for the month and cover the large workload that we have.”

Another newsletter advertised a paid, three-hour Bellevue workshop “because of LB312.” Other internal memos mandated some overtime for certain employees and offered overtime to others, with prizes for those who put in the most hours.

A Gallup employee told Nebraska Watchdog that many of the company’s public-opinion surveyors being asked to work extra hours are high school and college students, with jobs starting at minimum wage and progressing to $14 an hour. The employee questioned whether the tax incentive program was intended to help high school and college students work extra hours temporarily.

Greg LeRoy, executive director of Good Jobs First, a national policy research center that scrutinizes economic development incentives, said his organization recommends companies not be allowed to count employees as additions unless they work at least 30 hours per week.

“There’s too many part-time jobs out there,” he said. “Obviously we would all like to see more people get hired so the unemployment rate goes down.”

Leigh McIlvaine, research analyst for Good Jobs First, said she’s never heard of companies offering employees overtime to reach job thresholds.

“It’s important part-timers not be used to get job-creation subsidies,” she said.

On the other hand, if a company gains more FTEs by adding hours, those people have more buying power, LeRoy said.

He questions whether companies would just ramp up hours during reporting periods and then slack off afterward, “whereas if you actually hired people, it would imply a greater degree of commitment.”

Conroy, the tax commissioner, said companies that apply for tax incentives under the most common Nebraska Advantage Act program, Tier 2, must show they’ve increased employment by a certain number of full-time equivalent employees. Under this tier, companies can get tax incentives if they invest at least $3 million and hire at least 30 new employees.

When her office audits companies to see if they’ve met the employment threshold, Conroy said, they look at the full-time equivalent employees — which can be part-time or full-time employees — over the course of a year. They look at the number of hours worked and whether they met the minimum pay threshold.

Contact Deena Winter at deena@nebraskawatchdog.org. Follow Deena on Twitter at @DeenaNEWatchdog

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