Accountable USA - Nebraska

Nebraska’s economic development program gained national attention in 1987 when ConAgra pressured the state into enacting what was then one of the costliest subsidy packages ever seen in the United States. The Employment and Investment Growth Act (LB775) included property tax exemptions, sales tax refunds —even a reduced income tax rate for wealthy individuals, including ConAgra’s executives (see below).  Then-Senator Ernie Chambers tried to filibuster with a series of amendments, including one to require that ConAgra’s corporate logo be “tastefully added” to the state flag.

LB775 remained controversial long after it was signed into law. In 2004, for example, a group of high school students marched to state capitol calling for its repeal because of its negative effect on funding for education. The next year, LB775 was replaced by the even more costly Nebraska Advantage Act.

There have been calls for company-specific subsidy disclosure and accountability standards since the passage of LB775. However, it was not until the Nebraska Advantage Act that the identity and location of companies receiving subsidies were required to be made public. While recipient names are now available for the Nebraska Advantage Act and the Employment and Investment Growth Act, the state still does not disclose the dollar amounts in most cases. 

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Employment and Investment Growth Act

known as LB775; controversial wage and investment tax credits for companies that create new jobs; allowed to sunset in 2005, but existing agreements last up to 21 years

$117.7 million (2012)
11/100
25/100
50/100

Nebraska Advantage Act

replacement for highly controversial LB775 program bundles investment credits, wage credits, sales tax refunds and exemptions, workforce training subsidies, R&D tax credits, microenterprise tax credits, and inventory tax exemptions

$44.6 million (2012)
26/100
53/100
67/100

Nebraska Advantage Job Training Program

discretionary job training program with grants from $800 to $4,000

$17.1 million (2012)
0/100
not included
not included

Nebraska Research and Development Act

refundable tax credit based on R&D expenditures

$2.7 million (2012)
0/100
not included
not included

Quality Jobs Program

wage benefit credit, or retain payroll withholding tax; phasing out but still generating cost to the state

(included in LB 775 cost)
11/100
not included
not included

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

ConAgra (1987)

Officials in Nebraska were shaken in 1986 by the decision of pipeline company InterNorth (later Enron) to move its headquarters from Omaha to Houston. So when ConAgra also made noises about abandoning the state, legislators were willing to give the agribusiness giant whatever it wanted. The price of staying put turned out to be a package of new tax breaks benefiting not only ConAgra but many large companies and all high-income individuals. The breaks included the enactment of a Single Sales Factor system for calculating corporate income taxes—a windfall for a firm such as ConAgra with a large payroll and extensive assets in the state.

Although some critics charged the company with job blackmail, ConAgra’s wish list was accepted by the legislature and enacted through the bill known as LB775. There was no direct disclosure of the corporations benefitting from the law, but journalists were able to assemble lists using property tax records. ConAgra was routinely mentioned in those analyses, which were done regularly by Scott Bauer of the Associated Press. By the time LB775 was replaced by the Nebraska Advantage Act in 2005, it had provided around $2 billion in subsidies to ConAgra and other companies. (Key sources)

Tyson Foods

After Arkansas-based poultry giant Tyson Foods acquired IBP Inc. in 2001, it became the owner of the latter’s beef processing plants in Nebraska. Those plants, like many other operations in the state, enjoyed generous subsidies under the Employment and Investment Growth Act (LB775), which the state legislature passed in 1987 under pressure from another agribusiness giant, ConAgra. Although LB775 was presumably intended to help retain and create jobs, Tyson used the subsidies to modernize a facility in Dakota City with new equipment that allowed the company to reduce employment. In February 2006 Tyson unexpectedly announced plans to consolidate its beef operations in Nebraska, resulting in the closure of plants in Norfolk and West Point, which together employed about 1,600. Both plants had received LB775 tax credits (the amounts were not subject to disclosure).

While state officials were reported to be exploring the possibility of clawback claims, State Senator Mike Flood sent a letter to the company saying it should reimburse Norfolk for special services the town had provided to employees at the plant, many of whom were recent immigrants. Flood suggested a payment of $2 million, but Tyson agreed only to donate $100,000 to the Norfolk Area United Way and $25,000 to the city of West Point. The state revenue department later denied it was doing a special audit and said that confidentiality rules barred it from revealing whether it intended to try to recoup any of the tax credits. (Key sources)

Walmart in Nebraska

  • At least 2 Wal-Mart locations have received subsidies worth about $17.5 million in Nebraska.
  • At least 2 Wal-Mart locations in Nebraska have challenged their property tax assessment.
  • Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.

For more information, see the Nebraska page of Wal-Mart Subsidy Watch.