Today the FTB issued a legal ruling with guidance on the application of the BOE’s official opinion in the Nassco matter.

John Coupal issued a stinging missive today highlighting just how much Brown has caved to the Unions.  While everyone else is “sacrificing”, the Unions and Brown have made minimal cuts.  His rhetoric and his actions have been far from consistent.  And at the Unions, its business as usual.

Today, Assemblyman Don Wagner came out in favor of maintaining the Enterprise Zone program – and he doesn’t have on in his district.

By repealing the tax credits that fuel enterprise zones, California’s many employers who took the state at its word, located and grew their businesses in such zones, and have helped improve some of our struggling communities will instead find their tax bills climbing dramatically. This will leave them with less in their budgets for payroll, benefits, capital improvements and hiring.

At a time when California has the nation’s second highest unemployment rate, we will see more people collecting unemployment insurance rather than paying taxes. Additionally, businesses that set up shop in enterprise zones, will suffer from decreased productivity or have to shut down, thereby further reducing state and local revenues.

Read the full article.

Sacramento Bee reports that budget talks have broken down.  Governor Brown’s backers have said “no” to the GOP 5′s demands and talks are “done and over.” 

Bill LaMarr, executive director of the California Small Business Alliance, deftly responds to the Bee’s Board about teh EZ:

Matthew Mahood of the Sacramento Metro Chamber sheds some important light on the EZ debate, particularly as cast by Dan Morain.  Mahood, a member of the business development community, points out three important points:

1.  The number of the qualifying employees is small compared to the total employee workforce and employers only receive the credit for qualified employees;

2.  Surrounding states are aggressively courting California companies, evidenced by the large numbers of companies that have left the state.  Even if the critique is true that “major” corprations get tax credits, these corporations are also “major” employers who pay the lion’s share of the corporate taxes; and

3.     California needs more business incentives not less.  The ones we have work.

Read the full article here.

California’s budget problems dominate today’s political arena.   Without question, the biggest systemic problem draining the budget is one that most politicians are afraid to even approach.  Of course it’s the pension system.  No one seems willing to call out the patent iniquity in the public versus private workforce.  Jerry Brown on Friday did his part to quell the opposition to true pension reform by removing someone who championed for reform.

No, it’s not the events in Wisconsin (although that should serve as a wake up call).  Rather it’s the legal memo detailing why repeal of the EZ is illegal.  Essentially, repeal of the EZ violates the Contracts and Due Process clause of the California and U.S. Constitutions.  The memo’s conclusions are that repeal:

• Constitutes “bait and switch” taxation
• Violates the U.S. and state Constitutions
• Would subject the state to refund claims that nullify the proposed budget savings
• Invites legal action to enjoin repeal
• Subjects local governments to taxpayer lawsuits; and
• Endangers California’s bond rating which could be downgraded

The memo is well researched and convincing.  I hope Brown’s camp is enjoying reading it as well.

The Senate hearing just wrapped up.  As usual, there was spirited debate about the effectiveness of the EZ.  Businesses testified that they use the EZ credits to remain competitive against other states (e.g. Foster Farms).  The Black Chamber of Commerce testified that the EZ program helps minorities find jobs.  City leaders, chambers, and mayors testified about the EZ program creating jobs and the loss of jobs since the governor’s proposal to eliminate them.  

The unions response — each time — was the same:  ”VWR” moved union jobs into an EZ in Visalia and took the union jobs away.  Implicit in the union’s response was two important hidden insecurities:  First, once a union job, always a union job, i.e. an employer does not have the right to take away union jobs even if it means decreased productivity and increased prices, as long as the union dues are paid.  Second, reality doesn’t matter.   As Yolanda Benson pointed out, VWR merged with another company that chose to manufacture in an EZ because it could compete and not have to move those jobs out of state.  This was the same comment that Senator Huff made.  The unions are clinging to VWR, but that lifeboat is taking on water.

The other talking point that was distributed to all the union speakers was that the research proves beyond a shadow of a doubt that the EZ program doesn’t work.  I won’t rehash this argument here and now, but the PPIC study was based on data that was predetermined to show no job growth and the CBP report swallowed whole the flawed PPIC report.  Despite no one being able to refute the criticisms of these reports, the unions continue to parrot the same ineffective, monotone idioms and tag lines.  If that’s the best they can come up with in the face of the overwhelming and true doses of reality handed to them by the businesses, city leaders, chambers and minority groups, not to mention the USC study, then it makes this debate that much clearer.

As reported today by Californians for Jobs and Safe Communities, Assemblyman Cameron Smyth has called the Governor’s proposal to eliminate the Enterprise Zones exactly what it is – a $1b tax increase.   While the Governor has been trying to claim the high road, he’s skirting the real issues, i.e. that he is raising taxes on businesses and not taking it to the voters.

At the February 7, Assembly hearing, someone asked the LAO representatives why the Governor refuses to take his $1 billion tax increase to the voters.  The response was that because the tax increase doesn’t affect all the voters and it therefore doesn’t need to go to the voters.  Without commenting on the wisdom (or legality) of that response, I suggest that the reason why Brown doesn’t want voters to decide on whether the EZ program continues is because of what Max Shenker reported about the public’s opinion on EZs:

Asked if they favored or opposed continuation of this program, 66 percent of survey respondents indicated they favored continuation while only 26 percent opposed, with the remaining eight percent saying “don’t know” or “not sure.” A look at the demographics shows broad support that runs across gender, party and ideology lines, and irrespective of geography and ethnicity.

With less support in the public, perhaps Brown felt he had a better chance by letting the unions try to convince legislators to eliminate the EZ.  So far, his plan is not working with many legislators publicly lining up behind the program.  Brown needs a two third majority to prevail, which from what I’ve heard at the Capital, he isn’t anywhere near.