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By Business Facilities Editorial Staff
From the September/October 2013 issue
One of the key ways to help California businesses grow is for the state government to get out of their way, California’s director of business and economic development said in San Diego.
“We need to develop … a more flexible, a more contemporary, a more modern set of tools and approaches from Sacramento,” said Kish Rajan, director of Go-Biz, the Governor’s Office of Business and Economic Development.
That’s exactly what California aims to do with a trio of tax incentive programs that begins in 2014, he said. California is considered by critics as one of the hardest states in which to grow a business, given its high individual and corporate income tax rates, high sales tax, and conflicting regulations.
But Rajan extolled the virtues of the new programs to about 100 business leaders and professionals at San Diego City College, where he talked about the end of the state’s Enterprise Zone program and the beginning of sales tax credits, hiring tax credits, and a new agency that can dole out income tax credits to companies considering expansion in the state. The San Diego Enterprise Zone, which ended Dec. 31, currently consists of areas of South County, southern San Diego and Rancho Bernardo.
Gov. Jerry Brown wanted to end the roughly 25-year-old Enterprise Zone program because he said it wasn’t creating jobs as intended. The Legislature this year approved a plan pitched by Brown to shift $750 million from the zones to these three new programs:
- The state will no longer collect sales tax on purchases of new manufacturing and biotech research and development equipment. Rajan said these fields lead the way in middle-class wage job creation, but California is one of three states that charges sales tax on new equipment.
“It’s been one of the biggest reasons that (competitors) have promoted this notion, this narrative that California is the worst place in the history of civilization to grow a business,” Rajan said.
That sales tax of 4.19 percent is going away, so businesses will now be taxed only on output from their investment in new equipment. The sales-tax exemption will be capped at $200 million per company per year. It kicked in on July 1.
- California will introduce a hiring tax credit on wages between 150 percent of minimum wage and $28 per hour for businesses located in high unemployment and high poverty areas, and some previous enterprise zones. Minimum wage is currently $8 per hour, so the minimum for the tax credit will start at $12 per hour. However, minimum wage is expected to increase to $9 next year and $10 per hour in 2016, so the base for the tax credit will increase. Previously, businesses located in enterprise zones could claim hiring tax credits on wages between $8 and $12 per hour.
The state has released maps of the eligible areas.
The credit will come on net new jobs created in a year. For example, if a qualifying employee is hired at $15 per hour, the credit is on $3 per hour, which is the difference between $15 and the current base of $12. The credit became available Jan. 1.
Qualifying employees are those unemployed six months or longer, veterans within one year of discharge, Earned Income Tax Credit recipients, ex-offenders, and recipients of CalWorks (a welfare program) or general assistance. Rajan said he understands concerns over whether those wages are realistic.
“We’re going to look at this program over time and we’re going to carefully assess whether is this in reality an incentive for businesses to invest in underserved people and hire people in those areas,” Rajan said. “We believe that it will.”
- The state is creating a California Competes tax incentive program that will provide income tax breaks to companies and small businesses considering expansion. The state could also use it to keep businesses that are considering moving to another state.
Rajan said the state would have ways of investigating whether a company is being honest about its intentions to leave, and therefore get a tax break. No company can take more than 20 percent of the available money, and 25 percent of the tax breaks would be reserved for small businesses. The state is planning to hold workshops starting next month as it configures details on the available credits, which will became available Jan. 1.
WORKFORCE TRAINING COMES WITH FEDERAL SUPPORT
California’s community colleges, which have been working to ensure the workforce of today is prepared for jobs that are available now. In fact, 13 community colleges, some a part of consortiums, recently received federal grant money to expand on demand-driven skills training and to strengthen employer partnerships.
“I’m pleased that our community colleges have earned even more grant money this year because that means the federal government sees the value in our workforce training programs and so too do our partners in industry,” said Van Ton-Quinlivan, vice chancellor of the California Community Colleges Workforce and Economic Development division. “The funds will go to developing critical training programs that will quickly qualify our students to get good-paying jobs in high-demand fields such as health care information technology, aerospace technology and advanced manufacturing.
The grants are part of the Trade Adjustment Assistance Community College and Career Training grant program from the U.S. Department of Labor.
“Community colleges play a vital role in training Americans to meet the needs of employers today,” said U.S. Secretary of Education Arne Duncan. “As our economy continues to rebuild, businesses are looking for employees with skills their company needs to stay competitive, and America’s students and adult workers want to be equipped to fill those roles. These grants help to meet those demands, providing critical investments in education and supporting key partnerships.”
The Los Angeles Trade-Technical College Consortium, which includes all nine colleges in the Los Angeles Community College District, was awarded nearly $20 million, with each school receiving federal money. The focus on the programs will be on health sciences and healthcare information technology.
Long Beach City College received two grants totaling $4.5 million. The grants will focus on alternative pathways to engineering education and careers, along with supply chain management.
“The announcement by the Department of Labor is a huge success for Long Beach City College, our students and the community we serve,” said Eloy O. Oakley, superintendent-president of Long Beach City College. “We are elated to have been selected as a recipient and eagerly await the award to begin the process of implementing new STEM and technical oriented programs that will lead students into fulfilling careers.”
“We now can build upon proven models of training with enhanced curricula designed with the input of industry employers,” said Lou Anne Bynum, Executive Vice President at Long Beach City College. “This joint collaboration and proposal is in direct response to the re-education needs of displaced, TAA-eligible workers, veterans, students and unemployed and under employed individuals and responds specifically to the training needs of industry partners seeking employees with associate degrees in engineering technology and electrical technology.”
MiraCosta Community College District’s Advanced Manufacturing program got a huge boost with more than $2.7 million in federal money.
A new healthcare career readiness and training program at Saddleback College is now possible thanks to $2.75 million in grant money. The college will launch Orange County Health Care Career Transitions-Fast Track to Success, a program to help Saddleback students, unemployed workers, and displaced workers affected by foreign trade for high-demand allied health careers.
“This grant funding will provide the college an extraordinary opportunity for our students to prepare for meaningful jobs in the healthcare sector,” said Dr. Tod Burnett, president of Saddleback College. “Participation in the Fast Track to Success program will eventually lead students to lucrative career opportunities while simultaneously creating partnerships in our local community.”
Dr. Donna Rane-Szostak, dean of health sciences and human services, stated, “This exciting and innovative health career training project will have a three-pronged approach: to enhance existing Saddleback College allied health programs to create clearer pathways to high-skill and high-wage healthcare careers; broaden the skills of many already working in the healthcare field; and develop innovative programs to train new healthcare workers for roles that are emerging as a result of the federal Affordable Care Act.”
These kinds of career pathway projects are just one prescription for make sure California’s recovery is robust and applies to more people looking for good-paying, middle-class jobs. The California Economic Summit has made workforce training and CTE programs a top priority and recruited many Californians to work on the Summit’s Workforce Action Team. And that’s some good news no matter who you are.