From today’s Highland Community News:

The San Bernardino Valley Enterprise Zone (SBVEZ) announced the businesses utilizing the zone have filed more than 2,000 hiring tax credit vouchers since Jan. 2011. The number of vouchers filed this year will soon exceed the total number of vouchers filed in 2010, in just half the time.

The 2,000 vouchers filed so far this year are estimated to produce $75 million in tax savings for these businesses during the five-year period they can claim the credit for a single employee. Reports also show that these cost savings have contributed to the creation of 14 new jobs and the retention of 1,998 existing jobs in the zone.

The California Legislature’s zeal for job creation is, shall we say, less than stellar.  The consequences are obvious.  They are also highlighted in this Sacramento Bee piece from Sunday.

From the Santa Clarita Signal:

Santa Clarita Valley officials said Wednesday that they’re skeptical of Gov. Jerry Brown’s latest budget proposals that plan to scale back a program that gives tax breaks to local businesses.

“The governor certainly wants to find Republican votes, but he’s going to have to do more than what’s come out of the May revisions,” Smyth said. “Enterprise zones should be left alone.”

The Governor’s May budget revision significantly reduces the credit available to businesses.    Essentially, the credit will be reduced to $5,000 per employee.  Below is the section that discusses Enterprise Zones.

Reform Enterprise Zones — The purpose of enterprise zones is to encourage economic activity for particular geographic regions. However, there are two significant failings in the way the current tax incentives are structured. First, the Enterprise Zone hiring credit encourages the hiring of employees. It does not encourage the creation of new jobs. A business that lays off five employees and hires one at $50,000 per year, gets the same credit as a business that expands its number of employees and hires an employee at $50,000 per year. In fact, if the employee in the first case meets one of the vouchering criteria — they live in the area — and the employee in the second case meets none of the vouchering criteria, the firm in the first case will receive a credit while the employer in the second case will not. Enterprise Zone programs should reward employers for creating new jobs. Second, employers can benefit from Enterprise Zone credits even when it is demonstrable that the existence of the credit had nothing to do with the fact that they have hired a new employee. This is evident by the existence of a phenomenon referred to as “retro-vouchering”. “Retro-vouchering” typically occurs when a private tax consultant makes contact with a business located in the zone and offers that business their services, on a contingency-fee basis, to determine if any of the employees hired by this firm within the last several years qualifies to be vouchered for the hiring credit. When this happens, clearly the hiring firm did not act based on the Enterprise Zone hiring credit as they were not even aware of the credit when they did the hiring.

Instead of repealing state tax benefits for Enterprise Zones, the May Revision proposes to reform Enterprise Zone hiring credits so that credits are only available to firms which actually increase their level of employment. Taxpayers would be eligible for a $5,000 credit for each incremental full-time equivalent employee that they hire. These credits would only be allowed if claimed on the taxpayer’s original return. Additionally, the May Revision proposal would not allow any new vouchers to be granted for tax years prior to 2011 when the application for that voucher was made more than 30 days after the date that the employee first begins employment. Additionally, to ensure that credits are creating incentives for relatively profitable, tax-paying businesses, the Enterprise Zone credits will be limited to a five-year carry-forward period.

According to the LA Times on Saturday, Brown’s May budget revise leaves the EZs intact:

The governor would use an unexpected multibillion-dollar influx of tax receipts to fill the gap left in his budget by the shorter period of income tax increases. He would also use the new money to keep in place “enterprise zone” tax credits for businesses that hire workers from blighted areas. Brown originally proposed eliminating those tax credits to save the state $924 million.

Just waiting for the official word today at 11.

From the Sacramento Bee just now:

Assembly Republicans issued their own budget proposal a few days ahead of the Governor’s May revised budget.  There is no mention of Enterprise Zones in the Republican proposal.

Read the full article.

One of the biggest disadvantages facing California employers is, not surprisingly, the unions.

One big finding: labor unions are more powerful in California.

“Andrew Puzder from Carl’s Jr. talked about how the 8-hour work day and the meal breaks (required in California) are harmful, especially for restaurant businesses,” said Assemblyman Dan Logue, R-Linda. “Because they may get a truckload of ….teenagers at 2:00 and he’s got to tell half of his staff to take a break while people line up out the door.”

 Read about the entire trip here.

This is from today’s Sacramento Bee:

The Senate Republicans made public their list of 53 demands in exchange for their vote to allow Jerry Brown to put the tax extensions on the June ballot.  Preservation of the EZ is on the list.  Assembly speaker John Perez said that the parties are now “farther apart” than they were before the list.