When most people are still in bed, Hattie Bacon is up before the sun, making coffee and getting ready for her day job at a Magoffin County tire store. And when most are eating supper, she's hawking products like mortgage insurance at her night job as a telemarketer.

That's two jobs, 8 a.m. to 11 p.m. most days, plus part of the day Saturday. Eighty hours or more a week, with only Sundays off to clean house, do laundry, buy groceries and, every now and then, take a little break.

For her exhausting effort, the 38-year-old woman makes $6.75 an hour at one job and $6 an hour at the other not enough to pay all the bills and afford health insurance.

"It's hard to find something you can make a living on," explains Bacon, who works in a county where one in 10 residents searches in vain for a job.

Kentucky's Cabinet for Economic Development has spent more than $1.8 billion over the past 25 years wooing new jobs from afar, but its efforts have failed to lift the state from a perennial position near the bottom in national rankings of poverty, pay and economic vitality, a Herald-Leader investigation shows.

For Lexmark International, Lexington's largest private employer with 4,000 workers, the state's largess helped reduce its state income tax bill to zero in 2001, 2002 and 2003. Meanwhile, the printer company has shifted nearly every manufacturing job from here to Mexico or Asia.

For Whiting Manufacturing in Wolfe County, the state provided a $450,000 cash grant to boost the bedclothes maker's work force by 60, but the jobs never materialized. The company was never asked to repay a penny.

For TexStyle, Inc., a home decor company in Manchester, a $750,000 grant was supposed to help raise employment from 100 to 180, but records indicate the company had only 141 workers four years later. Officials asked for a $121,875 repayment, but the company filed for bankruptcy protection months later.

Even Wal-Mart, the world's largest company, has received subsidies worth up to $28 million from the state. In exchange, the mega-retailer agreed to locate two massive distribution centers in Hopkinsville and London. The company has received more than $600 million to build 84 centers across the country, a pro-union group said in a 2004 report that criticized the inducements.

"Our economic development policy is based on giving some companies special treatment," said Jim Waters, policy director of the Bluegrass Institute, a free-market think tank based in Bowling Green. "It is not an accountable process. It is not working."

The Herald-Leader's investigation, based on a review of more than 15,000 pages of documents and interviews with more than 100 people, reveals a pattern of government giveaways that, all too often, ends in lost jobs, abandoned factories and broken promises.

n Companies that received incentives often did not live up to their promises. In a 10-year period the paper analyzed, at least one in four companies that received assistance from the state's main cash-grant program did not create the number of jobs projected.

A tax-incentive program specifically for counties with high unemployment has had little effect in many of those areas. One in five manufacturing companies that received the tax break has since closed.

There is spotty oversight of state tax incentives. The state sometimes does not attempt to recover incentives, even when companies don't create jobs as required.

of the state's economic development funds have been used to subsidize companies, leaving relatively few funds to train workers. And experts say the state must improve its work force to have hope of attracting high-wage technology companies.

Unlike some other states, Kentucky makes little information about incentives public. The Cabinet for Economic Development refuses to release much of the information about its dealings with businesses, citing proprietary concerns. The cabinet has never studied its programs' effectiveness, and it blocked a legislative committee's effort to do so.

The Herald-Leader's examination of Kentucky's business-incentive programs comes when, nationally, questions are mounting about the effectiveness and legality of expensive government job-creation efforts. The U.S. Supreme Court is expected to decide by spring whether trading tax breaks for jobs is legal or whether they amount to discrimination against other companies.

Meanwhile, states continue engaging in costly economic battles for new jobs, even though research strongly suggests that few business subsidies actually influence where a company sets up shop.

Officials with the Cabinet for Economic Development disagree, claiming that incentives are solely responsible for a projected 265,627 new jobs since July 1, 1992.

For more than four years, she worked at Sykes Enterprises in Pikeville, which contracted with Internet providers to help customers fix computer problems.

The company's debut in Eastern Kentucky was auspicious, with officials sharing the stage with President Bill Clinton. As part of Clinton's 1999 swing through Appalachia, officials announced that Tampa, Fla.-based Sykes would open customer-service call centers in Pikeville and Hazard.

Within a year, the company created more than 1,000 jobs at the two facilities. But by spring of 2004 Sykes had shuttered both, after announcing plans to add jobs in El Salvador.

Sykes had driven a hard bargain when Patton recruited the company. It received more than $7 million in incentives, including free land and title to the buildings. Even a street was renamed Sykes Boulevard, as the company demanded.

Normally, the local government would have owned the buildings and the tenant would have leased them. Lease payments would then have been recouped by the company through tax breaks.

Eventually, another company, Affiliated Computer Services, struck a private deal with Sykes. The county, however, paid Sykes $167,526 to buy back an adjoining lot the state had given Sykes in 1999.

Patton said it doesn't bother him that Sykes is profiting from an office underwritten by taxpayers. The building is still meeting the original goal, he said: providing a space for jobs.

"As long as the jobs show up like they evidently are here in Pikeville, then it's successful," Patton said. "If Sykes makes money off of it, that's secondary."

Like many other former Sykes employees, Bacon believes the company moved to Eastern Kentucky to milk state and local governments, pump up profits, then leave.

Spokeswoman Andrea M. Burnett did not directly answer the question of whether Sykes abused Kentucky's incentives, but said that because the company is "a business about people serving people," the local work force is an important issue when contemplating expansion.

Add the spending of more than a dozen other state agencies to that total, and the amount disbursed each year to spur Kentucky's economy balloons to $808 million, according to a study by the Mountain Association for Community Economic Development (MACED), a small business lender based in Berea that would prefer to see more money spent nurturing home-grown businesses.

The biggest beneficiary of Kentucky's economic development spending has been manufacturing firms, which reap more than $200 million a year in tax breaks, grants, loans and worker training money, the report said. In comparison, it found that only about $25 million is spent each year boosting the economy's high-tech sector.

The state's economic improvement strategy is largely one-dimensional, the report concludes, with a majority of funds given to businesses through tax breaks.

"The state has made the same bet over and over again with our economic development resources," said MACED president Justin Maxson. "They are gambling with the public's money, and we don't even know if we're winning."

The cabinet rejected MACED's conclusions, saying it carefully monitors incentives and has a comprehensive plan for improving the economy, including help for small businesses and high-tech companies.

The government itself has never produced such a report, even though a state law specifically directs the Cabinet for Economic Development to compile a list of development activities undertaken by all state agencies.

For example, documents obtained by the Herald-Leader show that toymaker Mattel's manufacturing plant in Murray produced zero state income taxes in 1994 and 1995 and hadn't been expected to have an income tax liability in 1996.

Unfortunately for Mattel's 1,000 workers in Murray, that did not save their jobs. Mattel closed the plant in 2002 and moved those jobs to Mexico.

"They would tell us how good we were doing ... then one day they came in and said 'by the way, we're moving to Mexico,'" said Kerry Pinkston, who had worked at Mattel for 14 years. "It was a shock and a letdown."

When rumors surfaced in late 2003 that the company would close, managers denied it. But a couple of months later, employees received notice in their paychecks that Sykes would close in 60 days, Bacon said.

From April to September, she collected unemployment and looked for jobs. With one check left on her unemployment benefits, she found a part-time job at Influent, a telemarketing center in Salyersville.

Soon after, she got a chance to start working full-time at Rice's Tire & Service Center, where she'd done secretarial work on Saturdays for years.

So now, Bacon works the day shift at Rice's. As country music plays softly on a radio, she does billing and bookkeeping, answers the phones and helps customers.

Weekdays, just before 5 p.m., Bacon leaves the tire store for the two-minute drive to Influent's office in a strip shopping center, where she works until 11 p.m. On Saturday, she clocks a few more hours at the tire store.

On a normal day, Bacon gets up around 5:30 a.m. to make breakfast for her husband, Howard, an auto mechanic, and brew coffee for him to drink at work.

Then she cooks something to leave him for supper, showers and drives 20 miles to work. She eats at her desk at the tire store most days and eats supper when she gets home around 11:30 p.m. She cleans the kitchen, gives her arthritic cocker spaniel, Sam, his medicine, and finally gets to bed.

Bacon's busy schedule leaves no time for simple pleasures, like watching a NASCAR race with her husband, renting a movie or embroidering baby gifts. "I'm always on the go," she said.

When she gets down, Bacon assures herself that she is working toward firmer financial footing. When Bacon was making decent money at Sykes, she and her husband, who have no children, went into debt for some purchases, which she's still trying to pay off.

With two jobs, she comes within $15 or $20 a week of making as much as she did at Sykes. But she falls into an uncomfortable gray area, making too much money to qualify for public health benefits, but not enough to afford insurance on her own.

The last time she and her husband went to the dentist was when she had dental insurance at Sykes, and they haven't gotten new glasses since 2003, when she had vision insurance at the company. They're trying to figure which financial corner to cut now to get him a new pair.

As Bacon and more than half a million other Kentuckians do without health insurance, some of the state's wealthiest companies pay no income taxes. But they still receive the equivalent of a large refund by using incentive programs to keep their employees' payroll taxes.

"Basically, the state gets no revenue from the firm and very little from its employees, but the state still has service responsibilities, such as educating their children," said Fisher, the University of Iowa economist.

In one study, Fisher and a colleague simulated what 16 corporations would pay in taxes if they put a plant in any of 20 states. In Kentucky, 15 of the companies would enjoy a so-called negative tax rate.

So far, companies have claimed $778 million using the state's five largest tax-incentive programs. There are at least 19 incentive programs that fall under the Cabinet for Economic Development.

When that occurs, lawmakers find they must either raise taxes on everybody else or cut funding for government services such as education and health care.

Kentuckians have endured both in recent years, slashing funding for higher education and Medicaid, while increasing fees for things like drivers' licenses.

Greg LeRoy, author of The Great American Jobs Scam, sums it up this way: "By its rampant tax dodging, big business is saying 'we don't care if the schools fall apart and the bridges are crumbling and the public health systems are impoverished and college is becoming unaffordable. We are not all in this together.'"

When another call center moved into the empty Sykes building this spring, Bacon applied but got turned down by the new company, Affiliated Computer Services.

She and her husband have talked of moving to Central Kentucky, where jobs might be easier to find, but they have family in Eastern Kentucky and don't want to leave.

Bacon doesn't know exactly what it would take to fix the weak economy that hinders large portions of the state. Part of the answer, she thinks, would be more help for local businesses and entrepreneurs who will stay, and less chasing after out-of-state companies.

"I'd like to see the state learn their lesson and encourage jobs from inside," she said before heading off for her night job. "I'd like to see them create jobs that will stay."

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