Last month, Transform Solar announced that it was closing and laying off about 250 people at its facility in Nampa. As StateImpact reported, the manufacturer of high-tech solar cells, had received $1.68 million in workforce training grants from the state of Idaho — money that the company will not have to pay back.
It’s not the first time that’s happened. Eleven companies that have received more than $5.3 million in training grants from the Idaho Department of Labor since 1996 no longer exist in the state. That’s according to data from the department and StateImpact‘s analysis.
The 11 companies are a combination of out-of-state businesses that no longer operate here and local companies that shut down a piece of their businesses. The department confirmed these companies are no longer in operation and calls were made to each for additional clarification. Many of those calls rang to disconnected numbers.
Reimbursed Expenditures Through 4/30/12
|2002-2003||ABC Banking, Inc.||$96,660||$6,042|
|1999-2000||Environmental Oil Processing Technology||$33,900||$33,804|
|1999-2000||JR Simplot Co. *||$181,220||$107,353|
|2010-2013||Transform Solar **||$3,600,000||$1,680,000|
|2006-2009||XL Four Star Beef||$564,231||$564,231|
Source: Idaho Department of Labor
* JR Simplot Co. closed its Heyburn, Idaho, potato processing facility which received this money
**Transform Solar isn’t officially closed yet, it announced it would be shutting down over the next two months
Recipients of workforce development training grants aren’t required to return the money in the event of layoffs or closure. “There is no clawback,” says Department of Labor contract manager Jenny Hemly. “At the time we’re going into the contract, the business is doing well. They’re growing, they’re creating jobs. So we want to go in and support that effort.”
In the 16-year life of Idaho’s Workforce Development Training Fund, about 200 businesses have been reimbursed more than $38 million to train their employees. Those companies range from airlines and agricultural producers to retail and high-tech industries.
From a disclosure standpoint, the grant program is Idaho’s most transparent economic development incentive. Which companies are being reimbursed for training and how much a specific contract is worth is public information.
But the department doesn’t go through a regular check-up of companies that have been reimbursed for training costs. Do they still exist? Are those grant-trained employees still working at the company?
Hemly says because the program operates by reimbursing approved companies for their costs, she doesn’t follow up with the business once the state’s check has been signed. “At the point in time we did the contract, they had a need and we wanted to step in and assist,” Hemly says. “It’s all in good faith on everyone’s part.”
Hemly says the department does keep track of all the employees that have received training through this grant and periodically will follow up with them to determine if they’re still employed at the same company. The last time the department did that was in 2005. It’s planning a similar internal audit of the program this year.
Closing Up Shop
According to the 2005 data, grant recipients retained, on average, 76 percent of their employees. But some of those businesses have closed their Idaho operations. According to the Labor Department’s own data, ABC Banking, Inc. closed after being reimbursed $90,618 in training costs. A company called Medinex closed after being reimbursed for $69,396 in state training grants.
Last year, XL Four Star Beef, Inc. shuttered its doors and issued 522 layoff notices. The Nebraska-based beef plant was reimbursed for $564,231 in training costs two years before it announced it was leaving Idaho.
Workforce Development Training Fund Background
The Workforce Development Training Fund started in 1996 as a way to encourage businesses to expand in Idaho or relocate from another state. The training dollars are used to help businesses train existing employees in danger of layoff or on-board new workers.
Most businesses in the state contribute to the fund. Three percent of the unemployment insurance tax paid by employers is set aside for the pool of grant money.
In order to qualify for the training grants, businesses must pay their employees at least $12 an hour and provide health benefits. Companies in urban areas must create a minimum of five new jobs. Rural businesses must create one in order to qualify.
To be eligible, companies must generate at least half of their revenue from products or services sold outside of Idaho, or be in the health care sector.
While the Labor Department manages day-to-day management of the training grant program, policy direction and oversight comes from Idaho’s Workforce Development Council. The 32-member council is appointed by the governor and has jurisdiction over several workforce development programs. It doesn’t decide which companies will receive training grant funds, but it does decide on matters such as eligibility requirements and reimbursement caps.
For example, the council recently expanded the training program to give access to the grant money to businesses that aren’t expanding or averting layoffs. Now, companies that want to replace retiring workers also can apply for these funds.
The Idaho arm of the AFL-CIO has two representatives on the council. Cindy Hedge is one of them. She says labor organizations like hers have pushed without success for a provision that would allow the state to recoup training money if a business folds or lays off workers. Such provisions are generally called “clawbacks.”
I think they should be required to stay a certain amount of time after the contract is completed so they have the opportunity to really get their feet into our economy and give back what we’ve given to them,” says Hedge.
Little Concern About Failure Rate
Workforce Development Council chairman Tim Komberec, whom Governor C.L. “Butch” Otter appointed to the council several months ago, says he’s confident the Department of Labor does a lot of background qualification work on businesses before approving them for grants. When asked about the possibility of implementing a clawback, he said he’d like to learn more about the idea.
“I can’t honestly tell you what the failure rate is,” Komberec says. “You’ve piqued my interest, and I’ll take a look at that, but I haven’t been aware that there’s been an issue or concern about a significant failure rate of the companies that have received the funds.”
In addition to chairing the Workforce Development Council, Komberec is president and CEO of Empire Airlines. The Coeur d’Alene-based company has received $863,000 in workforce training funds between 2004 and 2011. “That incentive was one of the pieces that weighed heavily to keep us here [in Idaho] instead of going to Spokane,” says Komberec.
Empire Airlines built a new facility at the Coeur d’Alene Airport in 2004. But before it decided to expand, Komberec says it considered moving the company headquarters 30 miles across the state line to Spokane, Washington, and building the new facility there. Komberec says that would have meant a loss of about 50 Idaho jobs. Then the company sized up the incentives Idaho offered. “Our board decided Idaho was where we wanted to be and it was the best offer,” he says.
Today, Empire Airlines employs 180 people in Idaho. That growth, Komberec says, couldn’t have happened that quickly without training assistance from the state.
But what about the closed companies like Transform Solar and XL Four Star Beef? Is the grant money doing what it’s intended — creating and retaining jobs? Jenny Hemly at the Labor Department says yes. “Those people now have new skills they can take with them to a new job,” Hemly says. “It’s a win-win, whether the company survives or not.”
Idaho’s AFL-CIO president and Workforce Development Council member Rian Van Leuven says that’s a short-term view.
“While I may have gained six to eight months or a year of training,” says Van Leuven, “that just puts me back on the unemployment rolls.”