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Legislative Update: Committee Hearings

AB 2476 was heard and passed in the Assembly Jobs, Economic Development, and the Economy Committee yesterday (4/20/10). Here is a link to an in-depth analysis of the bill from the Committee.

In his statements introducing the bill, Committee Chair and bill author Assemblymember V. Manuel Perez stated,

AB 2476 will serve a a vehicle for reforms to the State Enterprise Zone Program. As you know, this Committee has spent months reviewing the program and seeking public input on how to make the program more accountable, and better serve lower income communities, workers and the businesses located in the zones. Stakeholders are currently meeting. Key areas under discussion include better defining the program’s purpose, and streamlining a structure to ensure greater accountability, as well as reviewing each of the program’s individual incentives.

SB 974 was heard and passed in the Senate Education Committee today (4/21/10). Here is the press release from Senator Darrell Steinberg:

The Senate Education Committee today passed out on a bipartisan vote a bill authored by Senate President pro Tem Darrell Steinberg (D-Sacramento) that would swap out inefficient Enterprise Zone tax credits with new tax credits to encourage California businesses to invest resources, time and expertise in middle and high school “career pathways” to train students for their future careers

“California suffers from an abysmal dropout rate,” Steinberg said. “We must engage students with hands-on learning as early as possible to keep them on track to a diploma and prepare them for productive careers in the regions where they live.”

A report released in July 2009 by the Public Policy Institute of California found that the Enterprise Zone program – the state’s largest economic development effort – has failed to achieve its key goal of increasing economic and job development.

SB 974 redirects a portion of the Enterprise Zone tax credit to a newly created Career Pathways Investment Credit to be allocated by local educational agencies for distribution to business entities that enter into contracts with school districts to provide career technical education through the creation of career pathway programs that prepare students for further education, internships, apprenticeships, and high wage jobs.

“Faced with budget deficits, we need to scrutinize all state spending and tax credits programs to make sure scarce resources are put to their most productive uses,” Steinberg said. “We can provide powerful incentives for business and industry to partner with public education to benefit both our students and the economy.”

Several education groups testified in support of the measure today.

The Senate Revenue and Taxation Committee will take up the bill next week.

Cal-Tax reports on the Assembly Revenue and Taxation Committee:

The new chair of the Assembly Revenue and Taxation Committee, Assemblyman Anthony Portantino, made it clear during the panel’s April 12 hearing that any proposal for a significant tax cut or tax incentive faces stiff odds in his committee.

During hearings for several bills, Mr. Portantino urged authors to amend their bills to include expiration dates on tax incentives (in legislative jargon, “sunset dates” on “tax expenditures”) and to target tax incentives to small businesses, which he defined as those with “an income of $250,000 or less.” (Cal-Tax: Both of these ideas will make incentives less effective. When deciding where to locate operations, or whether to hire employees, businesses use long-range planning. They need to be able to count on a tax incentive being in place for more than a few years, and if they reach the $249,999 level they should be encouraged to continue their success, rather than being forced to decide whether making the extra dollar will lead to much higher taxes.)

“The other thing that we’re going to be looking at in the committee is trying to find things that pay as they go along,” Mr. Portantino announced near the beginning of the hearing. “We’re going to be asking all the authors that are proposing bills that cost money to try to find an identified revenue source in order to pay for them.”

Assembly Republican Leader Martin Garrick, presenting a bill to exempt new corporations from the annual minimum franchise tax (AB 2126) in order to stimulate job creation, noted that the official analysis of his bill ignores the economic impact of the new jobs, and thus incorrectly characterizes the bill as a having a cost equal to the amount of taxes that no longer would be required.

Mr. Portantino acknowledged that the committee’s analysis is not complete in this regard. “One of the things that I’m sort of frustrated with is we don’t ever score savings or projections in our analysis,” the chairman said.

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