Lawmakers popose Education Tax Credits to help boost skilled labor force
Montana 67th Legislative Session
February 18, 2021
Casey Olson has been on a drill rig since 1991. Back then, Olson worked at a mineral exploration company, and though the work was “break-back,” learning the equipment wasn’t too difficult.
Fast forward 30 years later, he’s now running Rabco Services as an independent well drilling contractor in Columbia Falls and Olson says the technology is rapidly outpacing the knowledge of new workers, which are hard enough to find as it is.
“We’re trying to target younger guys, we take older guys -- we take whoever wants to come,” Olson said in a phone interview. “I don’t even know that it’s really an age limit anymore. Everybody I know in our industry has kind of given up trying to hire somebody who’s already trained.”
Olson founded his business in 2015 and now pays three full-time employees, but says it’s a struggle to find the time and money to pay for their continuing education, while also searching for more of a resource Montana has in short supply: skilled workers.
Nearly a month and a half into the 67th Legislative Session, a series of bills from Gov. Greg Gianforte have begun working their way through the process, all seeking to make cuts to numerous Montana taxes. One of the major proposals is aimed at solving the problem of Montana’s skilled-laborer shortage: House Bill 252. Advocates say the bill is just the next step in a long history of improving support for career and technical education in the state.
Tuesday, Feb. 9, marked the first day in what many in Gianforte’s circle dubbed “Tax Week,” and lawmakers heard the first of four bills from the governor seeking modifications to Montana’s business equipment tax structure, personal and corporate income tax.
HB 252 would create a tax credit for businesses in the trades -- like loggers, electricians, well drillers and others -- to cover 50% of the cost for up to 12 employees to attend technical school or receive additional training.
During its first hearing in the Montana House Taxation Committee, the bill drew overwhelming support from a broad range of business advocacy organizations, employers and even the Montana University System.
That’s where Olson testified in support of the measure, on behalf of himself, his company, and the Montana Water Well Drillers Association, of which he serves as president. He told committee members that keeping up with the cost of training his employees on new equipment -- and the expense of fully training new employees outright -- is a big factor preventing the expansion of his business.
Brock Tessman, Deputy Commissioner for Academic, Research and Student Affairs at the Montana University System, also testified in favor of the bill on behalf of the agency. He told committee members that Montana is desperately short of skilled workers.
Data from the Montana Department of Labor in 2018 indicates that 73% of total job openings in the state over the next decade will require a high school diploma or less. Currently, 66% of Montana’s workers hold jobs requiring high school completion or less.
However, national data provided by the department during the hearing shows that the bulk of workers in the skilled trades are older relative to other jobs. Among all workers nationwide in 2013, 23.6% were age 45–54. Among skilled laborers, that number rose to 32.4%.
The University System participated in a commission created by the Legislature in 2019 to study how best to restructure Montana’s 2-year education programs and Tessman said the committee recommended the state pursue more flexibility and variety in its career and technical education opportunities.
In 1995, the Legislature passed legislation that restructured Montana’s then-disorganized and disconnected “vo-tech” schools, officially looping the state’s five largest career and technical education schools into the University System. Since then, Tessman said the system has been working on strengthening support for the programs, but acknowledges a big barrier is cost.
“These are expensive programs -- expensive technology, equipment, sometimes specialists can be expensive,” Tessman said. “So what needs to happen is the cost of running these programs needs to be offset.”
According to data from Accredited Schools Online, the average cost to attend trade school in Montana is $3,600. HB 252 would offer employers up to half that amount in tax credits per employee.
To its supporters, HB 252 serves as a way to chip away at that difference by clearing the “cost” barrier Tessman acknowledged as a real concern.
In its original form, HB 252 allocated up to $1 million in credits per year to businesses for trade education that would be taken from the businesses’ corporate income tax. However, the bill’s sponsor, Rep. Llew Jones, R-Conrad, introduced an amendment to remove the $1 million cap, saying it would likely have discouraged businesses from applying if they knew there was a chance they could be denied.
Jones, who owns several businesses in the Conrad area, also chairs the House Appropriations Committee, a panel charged with setting the first draft of the state’s two-year budget.
Jones said HB 252 is part of a larger movement to support trades education in Montana that started in the state’s K-12 schools and is now setting its sights on postsecondary education.
“We have a workforce problem in Montana,” Jones said in an interview. “Half [of students] matriculate into the academic field, but the other half, we don’t do a very good job with.”
Jones carried the bill on behalf of Gov. Gianforte, a fellow business owner and entrepreneur who got his start in Montana by establishing software company RightNow Technologies in Bozeman. On the campaign trail and in his State of the State address on Jan. 28, Gianforte touted his belief in the ability of tax cuts and credits to help grow Montana’s economy, but added that lowering taxes wouldn’t mean making cuts elsewhere.
“Let’s be clear and set the record straight here tonight: we don’t pay for it by cutting services,” Gianforte said in the speech. “We pay for most of it by modernizing our corporate tax structure to reward businesses that create Montana jobs and make investments in Montana.”
But some standing in opposition to this bill and other tax bills promoted by Gianforte say the damage done to the state’s coffers will force Montanans to pay the price.
Heather O’Loughlin spoke against House Bill 252 on behalf of the Montana Budget and Policy Center. While she thanked Jones for his past work supporting education, O’Loughlin expressed concern over the removal of the $1 million tax credit cap and the ability of tax credits to accomplish a desired result.
“Creating further tax expenditures or tax credits that benefit a small subset of businesses will reduce or narrow the base of taxpayers, and is moving us in the wrong direction,” O’Loughlin told committee members.
O’Loughlin also said many businesses are currently able to deduct training expenses from their taxes, rendering the new tax credit unnecessary. The text of HB 252 states the new credit cannot be used if a business has already included qualified education and training expenses in a deduction.
In an interview, Jones said tax credits are pointless unless there’s a desire for what the credit is trying to incentivize. He said the bill wouldn’t impact businesses that can already afford trade education for their laborers, but provide the financial support needed by those that can’t.
House Democrats criticized Republicans’ tax-cutting approach to revitalizing the economy, saying it favors wealthy corporations and the rich.
“In terms of a tax credit like the one Representative Jones proposed, it’s an inefficient way to be approaching workforce development,” Democratic House Minority Leader Kim Abbott said during a press call on Tuesday, Feb. 9, adding that her caucus would rather pursue public-private partnerships.
Casey Olson says the credits would help him better afford the cost of year-long apprenticeships and continuing education, which he says will allow him to reinvest to grow his business.
“If we could get some help through this tax credit, it would be easier for us to spend a little bit more money to get them the education to make them more confident and hopefully find a little bit of loyalty in those employees,” Olson said. “The turnover rate is tough.”
Ultimately, Olson expressed optimism that the Legislature would advance Gianforte’s tax plan and bolster Montana’s trades industry from the ground-up -- including the “little guy” along the way.
“I’m a small business -- most drilling contractors in the state are. We’re not the big-employee industry that a lot of this tax stuff is targeted at,” Olson said. “But what we are is a dwindling population. Anything helps.”
Austin Amestoy is a reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association, the Montana Newspaper Association and the Greater Montana Foundation. He can be reached at firstname.lastname@example.org.