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Sen. John Kuehn

Sen. John Kuehn

District 38

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Evaluating Nebraska’s complicated and diverse tax incentives programs is a challenge. Although an accounting of tax credits and refunds earned by participating companies is straightforward, determining the impact of those incentives on the total revenue of the state and economic growth is not. Central to the difficulty in assessment is a lack of meaningful data that can be used to measure progress toward specific development goals.

In 2015, the Legislature adopted a requirement that each tax incentive program undergo a legislative performance audit every three years. Unlike a financial audit, performance audits assess the outcomes of program using concrete metrics measured toward specific policy goals. In 2016, the first performance audit report was issued. The overarching theme of the audit was the difficulty in measuring many of the stated intentions of the Nebraska Advantage Act.

A central finding of  the audit was the fact the expected standards of performance were not clearly outlined when the incentive programs were adopted. As a result, the data participating companies are required to report does not necessarily prove useful in evaluating whether or not the incentive programs are having their intended effect.

To illustrate, the Nebraska Advantage Act was promoted during debate as a program for job creation. However, the job creation required for qualification are FTEs, or full-time equivalents, not new full-time employees. Thus, a basic metric like identifying the number of new jobs created by companies through the incentive programs is impossible to determine. Companies are only required to create and report the number of equivalent positions. For example, a company could convert two part-time positions at 20 hours per week into full-time positions and count that as one full-time equivalent–even though no new position was created for a new employee. Additionally, determining how many jobs were created because of the state incentives versus jobs the company would have created through normal growth is impossible to determine using the standards for reporting required by the Advantage Act.

In light of these obstacles, a frequently cited statistic by both opponents and supporters of tax incentives, the cost per new job, is essentially meaningless. Depending on how the data is interpreted, the cost per FTE found by the performance audit could range anywhere from $24,500 to $320,000. Such a wide range makes it almost impossible to judge the merit of the current programs.

Job creation metrics are only one of the many challenges when evaluating the outcomes of Nebraska’s tax incentive programs. Many of the policy goals, such as recruitment of businesses new to Nebraska, growth of jobs in distressed areas, and the creation of high-wage jobs were not specifically detailed in the original legislation. Without intentions and objectives clearly delineated in statute, the subsequent programs do not require reporting of data or qualification of projects specific to those goals.

Significant criticism has been aimed at the cost of the incentive programs compared to legislative intentions when the programs were adopted. The original fiscal note prepared in 2005 during passage of the Advantage Act only projects the foregone revenue for the first two years following adoption. Transcripts of floor debate indicate the expected costs long term would run between $50 and $60 Million annually. While 2013 was a unique outlier, the economic model projections produced by the Department of Revenue through 2020 track close to that range. Given the challenges Nebraska has experienced with economic forecasting for revenues in recent years, the net revenue costs are not far out of line. Unfortunately, whether or not those costs are achieving the job growth, investment, and economic stimulus intended is currently impossible to determine with confidence.  

As discussion continues about changes to the tax incentive programs, it will be critical to clearly state the intended outcomes and require reporting that enables accurate and reliable assessment of progress toward those goals. At minimum, statute should change to collect better data for existing programs going forward. Accurate information is vital to ensuring full accountability of Nebraska’s tax incentive programs.


Sen. John Kuehn

District 38
Room #12th Floor
P.O. Box 94604
Lincoln, NE 68509
Phone: (402) 471-2732
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