Kansas wants jobs. Actually, Kansas needs jobs. Despite having one of the nation's lowest unemployment rates, state officials know they need to add jobs to help grow the economy -- hopefully enough to cover the massive income tax cuts enacted in the past two years.
Even conservative legislators realize the private sector cannot do this all on its own. Direct intervention into the state's economy by the government is common practice not only in Topeka, but in most cities and counties throughout Kansas.
So it comes as no surprise the Legislature is looking to expand the Kansas Department of Commerce's PEAK program. Promoting Employment Across Kansas was launched in 2009 to help counter Missouri's Quality Jobs initiative. PEAK-approved companies that relocate jobs to Kansas are able to retain 95 percent of the income tax withholdings that normally would go to Topeka, as long as the salaries are high enough.
Since 2009, lawmakers continuously have amended the program. Start-up companies in Kansas were added. So were existing Kansas firms looking to expand, then Kansas firms looking to retain jobs. Non-profits were included. Wage requirements were decreased.
This session, House Bill 2430 is attempting to bring even more companies into the PEAK program. Not only would salary minimums be lowered again, the qualifying period defined for existing PEAK companies would be extended. The bill also seeks to change the $6 million annual cap of PEAK funds disbursed, instead of having $6 million be the maximum amount of additional PEAK funds the Commerce Department can award each year.
HB 2430 has not yet had a hearing, but Commerce officials apparently knew questions would be raised. They commissioned the Docking Institute of Public Affairs at Fort Hays State University to assess client satisfaction and the economic impact of Promoting Employment Across Kansas.
On both counts, the program fared well. "Highly successful," even.
"For every dollar used in PEAK there's about $960 in economic activity, which is pretty darn good," said Preston Gilson, an economist at Docking, during a presentation to the House Commerce and Economic Development Committee.
Gilson said the Kansas economy grew $7.5 billion because of direct and ripple effects from the PEAK initiative.
The Docking study was not 100-percent feel-good, however. Warnings such as, "The full impact of the PEAK Program cannot be validly assessed at this time," and, "Revised data collection methodology will yield more reliable impact assessment," were offered as well.
Committee members who had read the Legislature's own Division of Legislative Post Audit report on the PEAK program likely found those warnings familiar. That audit blasted the Department of Commerce for having incomplete and inaccurate data for the program. More than a few companies had not complied with the reporting requirements, making analysis difficult. A lot of Commerce's data was based on companies' self-reported projections, not what actually happened both with hires and capital investments.
The audit also pointed out the disproportionate number of PEAK companies that moved from the Missouri side of the Kansas City metropolitan area to the Kansas side needed to be taken into account. This paper long has maintained moving a company's operations 10 minutes away will not translate into employees moving into the state or Kansas vendors being selected. We also believe such border raids result in companies obtaining financial gain while both states lose tax revenues to pay for services.
If we don't know how many qualifying companies are, in effect, corrupting the PEAK program, taxpayers should not be asked to sacrifice even more.
In its response to the audit, the Commerce Department took exception to most of LPA's findings. Commerce did acknowledge, however, it "has placed a priority on getting companies into the program as opposed to focusing more on certain reporting requirements."
Rep. Travis Couture-Lovelady, R-Palco and a member of the Commerce and Economic Development Committee, has yet to decide if he'll support expanding the program.
"I do not believe Commerce has fully explained themselves after the LPA report and believe they will get a thorough line of questioning on this during the hearing," the Hays native said in an email. "We want people and businesses moving to Kansas, not just businesses leapfrogging a border to get tax breaks."
We welcome such overdue scrutiny. Before legislators expand PEAK even more, they and all Kansans need a better grasp on what's happening. PEAK is supposed to promote employment across Kansas, not merely in and around Johnson County. And if PEAK is being used as the latest way to play the border war game, tax dollars should not be used.
Editorial by Patrick Lowry