Incentives eyed to spur job growth

Feb. 18, 2010

By KATY GRIMES

In spite of the federal stimulus money invested in California, unemployment is still in double digits and will remain so for a couple more years, according to state economic experts. Consequently, talk of jobs was all the rage in the Assembly Jobs Committee this week: “Shovel-ready jobs,” tax incentives for jobs, jobs training credits, public and private sector jobs, green jobs and lost jobs were all discussed.

“After two years of decline, California’s recession is finally over,” Dr. Jeffrey A. Michaels, Director of University of the Pacific’s Business Forecasting Center, said on Feb. 17. Michaels said the state’s recession began a few months before the rest of the country and emerged a few months later that the rest of the U.S. But Michaels added that employers should feel some relief soon as job losses are near their bottom and some regions are already showing signs of growth.

Three current job proposals are key, according to Michaels: Simplifying and accelerating permitting to facilitate federal stimulus funds, sales tax exemptions for green manufacturing equipment and hiring tax incentives.

Public-private partnerships are key to economic recovery, according to Julie Meir Wright, president and CEO of San Diego Economic Development Corporation. “Economic development can’t be based on wishful thinking,” she said, adding that the state cannot go it alone.

Wright is a former Republican who is now a “decline-to-state” voter. “The public sector needs to focus less on delivering services and more on delivering value,” she said. “Until California can be competitive across state lines, we will continue to suffer even globally. We are not just competing with other regions, but are part of a global economy that is far more focused on competitiveness than we are.”

Although her agency used to receive some funding from the state, she is critical of incentives and “deals.” Wright stressed that competitiveness should be the only basis for “systemic policy and regulatory reforms that benefit all companies.”

When Wright said that 43 other states offer sales tax exemptions for businesses, a woman sitting in the audience said, “47.” Wright was talking about bringing back tax incentives such as the investment tax credit and sales tax exemptions for businesses in the state trying to compete against other states for business.

Barbara Hayes, executive director of Sacramento Area Commerce and Trade Organization (SACTO), was less specific as much of her presentation centered on ways of connecting federal stimulus money with local projects, and working with groups such as the Green Capital Alliance (“connecting government, business and community leaders with green technologies and information”) and LEED (“linking education and economic development”). Hayes said there were two state programs that are effective: The Enterprise Zone program and the Employee Training Panel. Hayes also implored committee members to implement again an investment tax credit, at least for a “Clean and Green” type program. “Something is needed in the way of investment tax credits” for California businesses, she said.

Assemblywoman Mary Salas, D-Chula Vista, said she takes a different view of helping business in California. Salas referred to her time on the Chula Vista City Council when her city was growing rapidly. Salas said she recently spoke with a former PUC Chairman who told her that jobs and energy savings can be realized together.

Many jobs can be created, according to Salas, by making homes more energy efficient by weatherizing. “If we could get people to weatherize homes, thousands of people would get work,” Salas said.

Assemblyman Jim Beall, Jr., D-Los Angeles, asked Hayes and Wright if the Legislature needs to take a look at California’s tax incentives and possibly get rid of the incentives that are ineffective. Wright addressed California’s high corporate tax structure as well as states that do not impose corporate taxes. Hayes agreed that anything making California companies more competitive is what California needs to do.

The Governor’s Office of Planning and Research also addressed California’s litigious atmosphere and the difficulty of doing business. Legal Analyst Kathryn Pettibone explained that Gov. Arnold Schwarzenegger wants California to mimic the federal class action rules as a business reform issue, put a cap on money damages, and limit product liability schemes as ways to assist businesses in the state. Committee member Tom Berryhill, R-Modesto, suggested taking it further and make the loser pay the costs for frivolous lawsuits. “Judges look to the federal rules anyway” regarding class action cases, he said.