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Governor’s New Enterprise Zone Proposal Moves Forward

As expected, Budget Subcommittees in the Senate and Assembly both passed the Governor’s revised Enterprise Zone proposal today. Those testifying in support of the program in both hearings outnumbered the opposition by about five to one. There was some lively debate. In the Senate hearing, Senator LaMalfa (R-4) expressed concerns about the retroactive nullification of previously earned tax credits, explaining that business relied on the program as it existed in statute to execute business plans. He called the state’s responsibility to keep its promises a “covenant.”

The subcommittee chair Senator Rubio (D-16) made a special point of complimenting and thanking the proponents of Enterprise Zones for all the work they have done on the issue this year. While he acknowledged that they were not happy with the Governor’s revised proposal, he called the shift in discussion from elimination to reform a “victory.”

Later, the representative from the Department of Finance explained that they planned to incorporate amendments from the Labor Federation to further disallow access to Enterprise Zone credits in cases where businesses move from one part of California to another. At that point Senator Rubio said, “Now you’ve lost my vote.” With only two of the subcommittee’s three members present, Senator Rubio decided to table the issue until Senator Evans (D-2) was able to join. When the issue came back up it was quickly voted through 2-1 without further discussion. Senator Rubio did not offer an explanation of how his previous concerns had been satisfied.

In the Assembly hearing, Assemblyman Wagner (R-70) also raised concerns about the retroactive nullification of earned tax credits. He specifically asked the Department of Finance representative why this would not be considered unconstitutional. The DOF representative explained that he was not a lawyer, and after attempting to explain the rationale as he understood it, finally gave up unable to explain the Administration’s justification. Assemblyman Wagner also asked the DOF to confirm if the new proposal would require a two-thirds vote, meaning if it was considered a tax increase. The DOF confirmed that it was. (Video of the Assembly subcommittee hearing should be available on Friday.)

Later in the day Senator Ted Lieu (D-28) also expressed concerns about the legality of the proposal to retroactively eliminate tax credits. On Twitter, the Senator said, “[The] bigger problem is that retroactive elimination of EZ credits is unconstitutional. Govt must keep its promises.”

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