Especially in light of the difficult budget decisions facing California, taxpayers ought to feel confident knowing that companies who receive millions in economic development subsidies are actually creating public benefits for the state. For years the Enterprise Zone program, which is expected to hand out more than $750 million in corporate tax breaks this year, has lacked transparency or accountability.
Yesterday the Senate took a major step to reform California Enterprise Zone program by passing AB 93 a bill strongly backed by Gov. Jerry Brown.
CALPIRG supports this legislation because it makes economic development subsidies much more transparent, targeted, and accountable to the public.
Initially created to lift disadvantaged parts of the state by giving tax credits for companies to create a workforce there, the Enterprise Zone Program has been plagued for years by a lack of transparency and accountability—which companies take advantage of. Most experts, such as the Public Policy Institute and the Legislative Analyst Office, agree that this subsidy program has failed.
In March CALPIRG Education Fund released our annual report, Following the Money 2013, which analyzed all 50 states for transparency in government spending. Unfortunately, California received an “F”, scoring lower than almost every other state in the country. One of the reasons for California’s low score? The lack of transparency in our tax expenditure programs, like this Enterprise Zone program.
AB 93 would make California’s economic development subsidies (including the Enterprise Zone program) more accountable to its goals, by making these CALPIRG-backed changes:
- To accomplish real gains in employment: Businesses in high-need areas will only be given credits for net increases in jobs, rather than simply handing “hiring credits” to those with new hires, as is done now.
- To target areas that need it most: Enterprise Zones located where unemployment and poverty rates are lower than the other 75 percent of the state would not be eligible for these hiring credits.
- To keep things in check moving forward: All incentive credits and hiring credits would be made public and easily accessible online.
- To make the outcomes matter to businesses: If the business fails to meet the terms and conditions of its contract, the incentive credit can be revoked
These transparency and accountability measures will allow citizens to hold companies accountable to delivering the public benefits they were expected to provide.