Update: The Arambula Memo

I was reading through the memo and was generally pleased with the direction things were heading. Some good, common sense ideas regarding administering and tracking the efficacy of the zones and so forth. Then I got to section III on the zone incentives. He starts out with an idea that I like quite a bit which is also being floated in a bill authored by Arambula himself, AB 2502, to allow small businesses to apply tax credits they have generated to any form of taxes, not just income taxes. That's good, make the credits better for small business. From there follow a series of recommendations that are about the most draconian I have yet seen, even more severe than SB 1008.

Recommendation 28: Replace the voucher apportionment schedule from a sliding scale of 50 to 10 percent over 5 years to a straight percentage for each year.

By this I don't think he is referring to the apportionment of zone vs. non-zone income, it seems like he is recommending a change in the credit calculation formula. The intention here is likely to lower the earlier years of credit and increase the later years of credit thereby removing a healthy amount of the incentive.

Recommendation 29: Specify that an applicant's statement may only be used as a last resort to document eligibility for a hiring credit.

Ho hum.

Recommendation 30: Prohibit an employer or the employer'’s agent from being the second signatory on the applicant's statement for establishing eligibility for a hiring credit.

Ditto.

Recommendation 31: Define eligible resident within a targeted employment area as a resident within the area from a low-income household.

This sounds more serious. While not entirely spelled out, it sounds like the Assemblyman would like a verification of household income to go along with a TEA address. Besides the fact that this would duplicate the low-income category of qualification, it would also effectively kill the TEA as a category. Documenting income for whole households is generally impractical for employers.

Recommendation 32: Clarify that a hiring credit may only be issued by the EZ where the business is located and the employee works 90 percent of the time. Authorize companies located in more than one zone to obtain vouchers directly from HCD.

Besides the fact that the correct percentage according to the current code is 50%, this issue has already been dealt with by HCD and we discussed it here.

Recommendation 33: Authorize small businesses to transfer the value of the hiring credit against any state taxes owed, excluding property tax.

This was detailed earlier in the memo and is an idea that I like. Again, it's also being proposed in AB 2502.

Recommendation 34: Define eligible ex-offender, for the purpose of the hiring credit to mean a person who has been convicted of a felony under any statute of the United States or any state.

This idea has been kicked around a lot and seems to carry a lot of truck with legislators. People keep tossing out the canard that everyone is being vouchered for having a parking ticket. Arambula goes so far as to say that it is not clear that individuals convicted of misdemeanors face the same barriers to employment (even though misdemeanors include such innocuous offenses as burglary, drug offenses, and lewd conduct). With 80% of employers conducting background screening, I would think that these kinds of things would pose a greater barrier to employment than when the zones were created.

Recommendation 35: Add former foster youth as a new category of eligible employee under the hiring credit program.

This is from AB 2709.

Recommendation 38: Modify the hiring tax credit by requiring qualified employees to be enrolled in specified job training programs rather than just being eligible. Allow businesses that already use the "eligible criteria" to continue using said criteria until termination of the current zone.

Skipping a few, this will upset some.

Recommendation 44: Prohibit retroactive vouchering.
Recommendation 45: Require employers, within 21 days after an employee begins work for the employer, to submit a notice, signed by the employer and employee under penalty of perjury, to the designated local vouchering agency as part of a written request for such certification by HCD.

These two together would completely change the character of the program. At the fourth Committee hearing on Feb. 14 one of the panelists made the incrediblycogentt point that the enterprise zone program is not a social welfare program. The above recommendations aremodeledd after the federal Welfare to Work program which really is much more of a social welfare program than it is business economic development tool. By eliminating retroactive vouchering and requiring that voucher applications be made within 21 days of hire the whole program is transformed into a jobs program and away from an economic development program. This is besides the fundamental logistical differences that exist between the state and federal programs. I think these last two are fundamentally bad ideas that go against the purpose of the program.