For the second time in as many months, Gov. Butch Otter’s administration has stacked the deck against a Boise company by subsidizing a competing business.
Otter’s Department of Labor announced Tuesday it will give up to $1.2 million to Paylocity to train its workforce. Paylocity, which announced its Idaho expansion last November, is an online payroll and human resources company based in Illinois.
According to Idaho Department of Labor regulations, the company receives the money only if jobs pay at least $12 an hour and provide health benefits.
Paylocity predicts it will pay workers more than $46,000 a year on average, plus benefits.
In a press release Tuesday, the Idaho Department of Labor said Paylocity had already created 50 jobs in Idaho.
Paylocity’s training slush fund, made available through the agency’s Workforce Development Fund, serves up another challenge for Boise-based Employer’s Resource, a direct competitor in the payroll and human resources market.
The training fund contract gives the company until November 2017 to train up to 500 workers at an average cost of $2,400 each. Paylocity can spend up to $4,800 to train individual employees, but they must hit the $2,400 average for all workers to remain in good standing.
This is the second subsidy the state is giving to Paylocity. Last year, the Otter administration offered the company a sweetheart tax deal in exchange for bringing the 500 jobs to the Treasure Valley during the next 15 years. That deal would refund up to $6.5 million in sales, income and payroll taxes to the Illinois-based company over that time span if Paylocity’s workforce meets certain income and benefit thresholds.
For Employers Resource owner George Gersema, the tax break directly attacked his business. His competition can hire talented workers at a lower cost, all subsidized by Gersema’s state government.
Gersema, who founded Employers Resource with his wife, Mary, in 1985, took action. In January, he made his case to the Idaho Statesman.
“Not only does Paylocity get my tax dollars, now I have to compete with them for employees, since they do much of the same kind of work I do,” Gersema told the paper. “Well, gee whiz, thank you, Legislature of the state of Idaho. Thank you very much.”
Then in March, he filed a lawsuit against the Idaho Department of Commerce, which wrote the tax break for his competitor.
Gersema was not available to comment Wednesday.
Georgia Smith, deputy director at the Idaho Department of Labor, said the deal is fair because her agency offers subsidies to all Gem State businesses.
“Labor’s training programs are available to all Idaho companies – new and expanding - including Employers’ Resource,” Smith wrote Wednesday. “If Employers Resource has workforce training challenges, the Idaho Department of Labor is more than willing to work with Mr. Gersema on an application for Idaho Workforce Development Training Funds.”
Smith said the Boise Valley Economic Partnership connected Paylocity to apply for the funds. Her agency, she explained, did not discuss Paylocity’s tax break during negotiations.
The Workforce Development Fund, funded by a portion of the unemployment tax businesses pay, has a failing record of achievement. A 2012 report by the agency found the program effective only in about 40 percent of training deals.
Department of Labor Director Ken Edmunds reformed the program in 2014 after several businesses who took training funds failed or left the state. Edmunds promised more guidelines and requirements for businesses who receive contracts, plus greater oversight.
Idaho Freedom Foundation President Wayne Hoffman, a longtime critic of the training fund, prodded legislators to end the program in a March 2016 column.
“The program is often described as a tool to keep businesses operating and to help meet industry workforce training goals,” Hoffman wrote. “In reality, it’s simply a government-giveaway to lucky companies that are mostly big businesses.”
Note: The Idaho Freedom Foundation publishes IdahoReporter.com.
Correction 7.6.16: The article's first version said Gersema founded the company with his brother. That was incorrect. He founded it with his wife, Mary, who serves as the company's chief operations officer. IR has updated the copy and regrets the error.
Correction 8.8.16: The article's first version said Paylocity will receive the tax break from the Department of Commerce for five years. The correct length is 15 years. IR has updated the copy.
