Two big issues define economic development subsidy practices in Kansas: its job piracy battles with neighboring Missouri and its aggressive use of subsidies.
Companies for years moved between Kansas and Missouri. When they relocated existing jobs to the other state, they were rewarded with fresh subsidies. Kansas even created the Promoting Employment Across Kansas (PEAK) program to facilitate the relocations. Finally, in 2019, after business and community pressure, the governors of Kansas and Missouri signed an agreement to stop using state subsidies for company relocations within the Kansas City metro region. Unfortunately, local subsidies were not included in the truce and neither were hundreds of deals that were already in process.
Kansas diverts workers’ payroll taxes for the PEAK and the Job Creation Fund (JCF) programs. Other programs like the High-Performance Incentive Program (HPIP) bundle income tax credits and sales exemptions for companies that bring high-wage jobs to the state. The STAR Bonds program allows localities to use sales tax revenue to pay back bonds used for development projects. Almost a billion dollars in state sales tax revenue have been used for this program.
The majority of subsidies are managed and controlled by the Kansas Commerce Department and the Department of Revenue. JCF, a deal-closing fund, is also controlled by the governor.
In 2019, the state passed a law that enhanced subsidy transparency and tasked the Commerce Department with creating an online database. The database now includes recipient level information for major subsidy programs. While a great first step, it only includes deals done in fiscal year 2020 and later, it excludes tax credits and exemptions, and it misses critical outcome data for many included deals.
Grants costs are included in annual program reports posted to the Commerce Department’s website. The state’s tax expenditure reports include the costs of some tax-based credits and exemptions. No localities have reported under GASB 77, but the state does report STAR Bonds costs under the provisions.
The state Legislative Division of Post Audit evaluates subsidy programs on ad hoc basis. For example, a 2021 audit of STAR Bonds showed that the program didn’t generate enough new sales tax revenues to justify its costs.