Working for a leading California economic development organization, I am
often asked about the state of our economy and my thoughts on how we can
get it back on track. Clearly this is a top concern to citizens here in
California and across the country.
We’ve seen a lot of posturing on how to improve the economy and create
much-needed jobs from elected officials in Washington, DC as well as from
those campaigning for elected office last November. No question that with
sluggish job growth, a still-stressed economy and structural deficits as
far as the eye can see, our federally-elected officials must support
policies that spur business growth, stimulate the U.S. economy and
encourage private sector hiring.
Like their federal counterparts, our state officials need to enact
policies that support economic development and job growth. Similarly,
state leaders must also safeguard successful programs that have been
shown to generate jobs, reduce poverty levels and support local economies
– this must be part of any rational economic recovery program.
So why then would newly-elected Governor Brown be considering eliminating
the California Enterprise Zone program, which for about 25 years has
proven invaluable to creating thousands of jobs, decreasing poverty, and
revitalizing entire communities?
This is not a program that should be purged to help manage our state’s
budget crisis. Just the opposite. To solve California’s budget crisis the
smartest thing we can do is to grow revenues by growing our economy
through the EZ Program. Even so, the program will face outright
elimination if the Governor’s proposed budget becomes reality.
In these hard economic times, the California Enterprise Zone Program
plays a key role in revitalizing economically-challenged areas of the
state, encourages development in blighted neighborhoods and creates
economically-stable communities by embracing entrepreneurship and private
sector market forces to stimulate local economies. California’s
Enterprise Zones remain one of the only dependable statewide tax
incentives that local areas can use to encourage businesses to stay or
locate in-state.
These zones provide tax incentives for businesses in
economically-distressed areas to hire workers who face barriers to
employment. Returning veterans, laid-off workers, government assistance
recipients and other physically, mentally and economically-challenged job
seekers are all eligible for preferred hiring in Enterprise Zone regions.
What’s more, the working poor (single taxpayers making less than $16,334
or joint filers making less than $32,668) employed at an Enterprise Zone
business can obtain a state tax credit of up to $525 per year.
Contrary to the Governor’s interpretation, the program’s success rate has
been well-documented. A 2006 Department of Housing and Community
Development report confirmed that California Enterprise Zones have
outperformed the rest of the state in several key economic areas: poverty
decreased by 7.35 percent more than in the rest of the state,
unemployment rates fell by 1.2 percent more than the rest of the state,
household incomes grew 7.1 percent faster, and wages and salary levels
increased 3.5 percent more than the rest of the state.
In addition, the Governor assumes that by eliminating the program the
state will automatically generate an additional $924 million dollars. But
this is not true when one factors in the lost tax revenue from businesses
and jobs that will leave the state – but for the benefits offered in
these zones – and not return.
Here in Los Angeles County, we have eight Enterprise Zones that deliver
numerous benefits for employees and employers and create economic growth
and stability. These zones have been instrumental in helping attract and
retain scores of businesses in areas that would not ordinarily have the
capacity to do so.
In LA County, zones range from economically-depressed urban environments
in the cities of Los Angeles and Long Beach to the more rural locales of
the Antelope Valley and Santa Clarita. Without an Enterprise Zone
designation in these once neglected communities, opportunities for local
residents to achieve financial security and self-sufficiency would have
vanished. That’s not to mention the social benefits which would have been
lost to these communities; indeed, I don’t know of a more beneficial
social program than providing someone with a well-paying job.
Terminating the Enterprise Zone Program in the mistaken belief it would
help balance the state’s budget would be exactly the wrong prescription
for fixing our ailing economy. Eliminating these zones would almost
certainly make things worse in already stressed areas, which would suffer
further job losses, economic decline and diminished quality of life.
If anything, the Governor should strengthen his commitment to the
Enterprise Zone Program in these difficult economic times as a key
mechanism to revitalize economically-challenged areas by providing
incentives that create high-wage jobs and investment in these
communities. By responsibly doing so, he would not only strengthen local
economies, but strengthen the state’s long-term economic foundation as
well.
Too many of our state and local residents desperately need jobs. Until
such time when this is no longer the case, there will always be a
critical role for Enterprise Zones. This is one program our elected
officials cannot afford to eliminate.