New state economic incentive proposal gets off to a rocky start in the Legislature

New state economic incentive proposal gets off to a rocky start in the Legislature
World-Herald News Service

LINCOLN — A proposal to update and modernize the state’s main economic incentive program had a rocky take-off in the State Legislature on Wednesday.

While state business leaders and owners said that thousands of jobs would not have been created without the state’s current economic incentive programs, Legislative Bill 775 and the Advantage Act, others questioned whether the billions in exempted taxes have been worth the benefits.

The opponents of Legislative Bill 720, known as ImagiNENebraska, included a former state senator who led a 2016 performance audit into the hard-to-pinpoint costs and benefits of such programs.

Dan Watermeier, now a member of the Nebraska Public Service Commission, cautioned current lawmakers that the Advantage Act was initially projected to cost $60 million a year in tax breaks, but has ended up costing $120 million to $150 million a year. He added that studies have never been able to determine whether companies would have expanded anyway, without the incentives.

“We’ve got to know what these things cost, and LB 720 doesn’t do it,” Watermeier said.

The Legislature’s Revenue Committee took no action on LB 720 following a public hearing that stretched into the evening. The bill is one of the top issues facing lawmakers this year, and ImagiNE Nebraska could become a bargaining chip in the larger debate about reducing property taxes.

The state’s largest agriculture group, the Nebraska Farm Bureau, made it clear that property tax relief for struggling farmers and ranchers is the state’s first priority.

But representatives of the Nebraska, Omaha and Lincoln Chambers of Commerce said that the state needs to update its economic incentive programs if it hopes to remain competitive with other states. Backers of ImagiNE Nebraska said that it would target higher paying jobs — jobs paying $40,600 a year and higher — and its costs would be more predictable.

Leaving Lincoln this session without updating the Advantage Act, which sunsets at the end of 2020, is not an option, they said.

“Do you want to hang a sign up that we’re closed for business?” asked State Sen. Mark Kolterman of Seward, the sponsor of ImagiNE Nebraska.

David Brown, president and CEO of the Greater Omaha Chamber of Commerce, said that if nothing is done, “every economic development professional in this room will prepare their resume and move to a state that’s serious about economic development.”

He said that in the Omaha area, $10 billion in capital investments and 40,000 jobs were generated since 2004 due to state incentive programs. In Lincoln, the numbers were 10,000 jobs and $2 billion in investments.  

More than one company executive said the Advantage Act prompted them to expand hiring beyond what they might have. And economic developers said that the incentives were essential in convincing Nebraska businesses to expand here rather than in other states.

David Arnold of Buildertrend, an Omaha software company, said that the firm was able to grow from 40 employees in 2006 to about 400 today thanks to Advantage Act incentives. The company, founded by a trio of Nebraskans, now plans to add 300 new workers this year.

“We would not have been able to grow at that rate without this program,” Arnold said.

State Economic Development Director Dave Rippe said that ImagiNE Nebraska was an improvement over current programs because it targeted higher wage jobs and would be easier for businesses to use. He said that annual reports required by LB 720 would help state and local governments better predict the impact on their budgets in lost tax revenue.

But Rippe faced a long list of questions from senators on the Revenue Committee. And critics of ImagiNE Nebraska, like Watermeier, said that the proposal ignored recommendations made in past legislative studies of economic incentive programs to make them more transparent and their fiscal impact more predictable.

Those studies found that the programs inspired few companies outside of Nebraska to relocate here, and that the Advantage Act cost state and local governments between $24,500 and $320,000 per job created — figures that were disputed by some backers of LB 720. Senators on Wednesday expressed worries about how the state could manage to pay out the $905 million in tax credits that companies have earned.

Lincoln Sen. Kate Bolz presented an alternative bill for the committee to consider that she said incorporated the “best practices” learned in past reports on incentive programs. Her LB 419, which would extend the sunset on the Advantage Act to December 2026, would cap the act at $40 million a year, target jobs that pay $60,900 a year or more, and pay back the tax credits earned in a shorter period of time.

The wild swings in the tax credits paid out by the Advantage Act are causing state budgeting headaches, Bolz said. The credits totaled $63 million last year, but are projected to be $200 million this year, she said.

Backers of her bill said that several states put “caps” on the amount of economic incentives they dole out. Iowa, for instance, caps all economic incentive programs at $170 million a year, Bolz said.

Restoring voting rights for felons touted as way to cut recidivism

LINCOLN — Shakur Abdullah got out of state prison in 2016, but it wasn’t until two years later that he felt truly part of society again.

That moment came during last year’s elections, when he finally was allowed to vote.

“It was the most uplifting, cathartic thing that I have participated in since my release,” the 61-year-old Omaha man told lawmakers Wednesday, while the wait to regain voting rights had left him feeling “marginalized and ostracized.”

Abdullah joined several others in calling for Nebraska to restore voting rights for felons as soon as they complete their sentences, including time on probation or parole.

Legislative Bill 83, introduced by State Sen. Justin Wayne of Omaha, would do away with a state law requiring felons to wait two years after finishing their sentences before they are allowed to vote.

Wayne called the two-year wait an “arbitrary” period adopted to get the current law passed in 2005. That law was enacted over the veto of then-Gov. Dave Heineman.

The current law partially undid a state constitutional ban on felon voting that dates to the 1875 Nebraska Constitution. Such bans spread after the Civil War as a way to reduce the number of freed slaves who could vote.

“We are trying to erase a dark, dark period in state history,” Wayne said.

In addition, he said studies show that allowing former inmates to participate in the civic life of their communities helps them more quickly reintegrate into society and cuts down on recidivism.

A report released in 2017 by Civic Nebraska estimated that more than 7,000 Nebraskans with felony convictions who have completed their sentences do not have the right to vote.

Wayne got a similar bill passed by the Legislature in 2017, but it was vetoed by Gov. Pete Ricketts.

In his veto message, Ricketts said the bill violated the state constitution by assuming the power to pardon that properly belongs to the executive branch of government. He also argued that the two-year waiting period gives felons an incentive to maintain a clean record.

On Wednesday, Sen. Mike Hilgers of Lincoln quizzed several testifiers about whether the Legislature has the power to restore voting rights to felons or whether a constitutional amendment would be needed.

Danielle Conrad, executive director of ACLU of Nebraska, and Spike Eickholt, testifying for the Nebraska Criminal Defense Attorneys Association, argued that the Legislature does have that legal authority.

They cited a pair of Nebraska Supreme Court cases that dealt with similar questions. They also pointed to the state’s current law, which has never been challenged in court.

According to the National Conference of State Legislatures, 36 states allow felons to vote after they complete their sentences, while two never take away their right to vote.

Iowa is one of three states that permanently ban felons from voting, but Gov. Kim Reynolds made it one of her priorities this year to undo that ban. On Wednesday, she hailed legislative action to advance a proposed constitutional amendment restoring voting rights for felons.

“Today’s unanimous vote by the House Judiciary Committee sends a strong message in favor of second chances and forgiveness for felons,” she said.