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Bill Kennedy: S.B. 974 uses fuzzy logic

Right Here, Right Now

Posted: June 24, 2010 9:34 p.m.
Updated: June 25, 2010 4:55 a.m.
 

It is interesting to watch the maneuverings in Sacramento as legislators attempt to deal with a massive budget deficit, which most would agree was caused by irresponsible spending and a declining economy.

The latest initiative that has my attention is Senate Bill 974, a bill sponsored by Senate Pro-Tem Darrell Steinberg, who represents the 6th California Congressional District, which covers the Sacramento area.

In the bill, Steinberg proposes to eliminate several benefits now provided to businesses that operate within the 42 enterprise zones in the state.

As the basis for his bill, Steinberg cites a report by the Public Policy Institute of California that concludes the half-billion dollars invested annually in enterprise zones is ineffective.

The institute bases this conclusion on the fact it does not detect any net increase in employment within the established zones. This appears to be a rather tenuous basis on which to conclude that enterprise-zone incentives should be taken away. 

What is wrong with the logic? The principal fault is that the study only credits success as job growth, without granting credit for jobs saved. Given that most areas awarded enterprise zones are economically depressed or declining, a program that merely stops the bleeding should be credited as a success. The jobs retained are contributors to — not detractors from — the state’s general fund.

Using the institute’s criterion for success, one would have to consider as a failure any enterprise zone that merely maintained the status quo over the past two years. Yet, any area in the state that has not seen a job loss in the past two years should rightfully be considered a shining success.

Under the enterprise zone program, businesses located in the designated areas are given state tax credits for qualified employees.

Employees can qualify under a host of categories, including disabled individuals eligible for a state rehabilitation plan; certain military veterans; persons eligible to receive federal supplemental security income; aid to families with dependent children; food stamps, or state and local general assistance; and dislocated workers, among others.

Clearly, the program is intended to stimulate existing businesses, attract new ones and to get the unemployed off the dole.

If Steinberg is successful in killing the enterprise zone benefits, his bill proposes to redirect the hiring-tax credit benefits funds to a new, untested program, the Career Pathways Investment Credit administered by the state’s Department of Education to provide career-training programs in middle school and high school and worker training to businesses that partner with local education agencies.

By pitting a job-generating program against a job-training program, the premise of this bill appears to ignore the symbiotic relationship between the two. A job opening without a trained person to fill it contributes nothing to our economy; a person with training for which there is no job opening actually detracts from our economic well being by becoming a dependent of the state.

When job training and job creation are properly balanced a robust, efficient economy follows. 

It is additional fuzzy logic, therefore, to make mutual enemies of programs that work best as mutual allies. The wrong is compounded when the basis for the recommendation fails to account for one of the major benefits of the enterprise zone program. 

If this misconceived bill becomes law, it will have a profound local effect on our city and our valley, because since 2007 Santa Clarita has been one of the 42 designated enterprise zones in the state. During that time, the city credits the program with retaining and creating some 1,700 jobs and providing $69 million in economic impact.

In short, the enterprise program appears to be doing here just what it is intended to do — stimulate growth, development and investment in the area. That is likely why the Santa Clarita City Council voted Tuesday night to join with the county and the SCV Economic Development Corp. to file a joint application for a new, expanded enterprise zone that will also encompass unincorporated areas around the city.

Senate Bill 974 passed in the state senate by a 21-16 vote. It is on the docket for vote by the state Assembly on Wednesday. If it is approved there, it will go to the governor, who may sign it into law or veto it.

I encourage you to let Assemblyman Cameron Smyth and Gov. Arnold Schwarzenegger know your views on this bill before Wednesday, lest we lose one of the positive factors that is allowing our local economy to buck the negative trend in the state — right here, right now!

Bill Kennedy lives in Valencia and is a principal in Wingspan Business Consulting, chairman of the SCV Economic Development Corp, and a planning commissioner. His column reflects his own views and not necessarily those of these organizations or of The Signal. He can be reached at wkennedy@wingspanbusiness.com.

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