Governor’s May Revise Proposes Important Fixes to Broken Enterprise Zone Program

While there were lots of complicated formulas on things like health care funding and education in today’s May Revise of the California budget that will take some time to fully analyze, one thing is clear: The Governor is no fan of the broken enterprise zone (EZ) tax giveaway program. At least not in its current form.

Today’s Budget Revise proposes a major overhaul of the EZ program that would likely do away with some of the worst abuses that are costing the state hundreds of millions without producing jobs in return.

From the May Revise:

Created over 25 years ago, the Enterprise Zone program should be reshaped to meet the needs of the current economy. In its current form, it fails to encourage the creation of new jobs and instead rewards moving jobs from one place to another within the state.

Governor Brown made a point of highlighting this massive flaw in the program when he unveiled the revised budget proposal this morning at a press conference. The Governor mentioned the debacle at VWR, a medical supply company in Brisbane that fired all its workers and relocated to Visalia to chase enterprise zone tax breaks. As a result, good-paying union jobs were destroyed and the community in Brisbane was devastated. VWR hired replacement workers at lower wages in Visalia, and because of the enterprise zone tax breaks, taxpayers subsidized the move.

In today’s proposal, the Governor also tightened up other areas of the tax credit so that it’s more focused on creating incentives for companies to hire the long-term unemployed, unemployed veterans and low-income Californians. All positive changes, in our view.

While details on the Governor’s reforms are still forthcoming, today’s proposal sent a clear signal that the Administration is committed to fixing this boondoggle of a program. In the meantime, the California Labor Federation will continue working with Sen. Jerry Hill on SB 434, which would reform enterprise zones to be more transparent, reward good paying jobs instead of incentivizing low-wage, dead-end jobs and end some of the other egregious abuses of the program.

Today’s May Revise adds more momentum to the movement to reform this broken, flawed program. Every tax break must be put to the jobs test. Tax breaks must either create new, good-paying jobs or they should be reformed or eliminated. Enterprise zones fail that test. One way or another, it’s time to fix this wasteful program before it bleeds taxpayers of another dime.