BILL ANALYSIS                                                                                                                                                                                                    






                         SENATE COMMITTEE ON EDUCATION
                              Gloria Romero, Chair
                           2009-2010 Regular Session
                                        

          BILL NO:       SB 974
          AUTHOR:        Steinberg
          AMENDED:       April 5, 2010
          FISCAL COMM:   Yes            HEARING DATE:  April 21, 2010
          URGENCY:       No             CONSULTANT:Kathleen Chavira

           NOTE  :  This bill has been referred to the Committees on  
          Education and Revenue and Taxation.  A "do pass" motion  
          should include referral to the Committee on Revenue and  
          Taxation.
           
          SUBJECT  :  Career Pathways Investment Credit.
           
          KEY POLICY ISSUE  

          Should career technical education program partnerships  
          between local educational agencies and private business  
          entities be encouraged through the use of tax credits?

           
          SUMMARY  

          This bill establishes the Career Pathways Investment Credit  
          (applicable to taxable years beginning on or after January  
          1, 2011), to be administered by the California Tax Credit  
          Allocation Committee and to be allocated to local  
          educational agencies (LEAs) for distribution to business  
          entities that enter into contracts or memoranda of  
          understanding with LEAs to provide career technical  
          education through the creation of career pathway programs.

           BACKGROUND  

          The California Tax Credit Allocation Committee (CTAC)  
          administers two low-income housing tax credit programs - a  
          federal program and a state program. Both programs were  
          authorized to encourage private investment in affordable  
          rental housing for households meeting certain income  
          requirements.
          Responsibility for administering the federal program was  
          assigned to the TCAC, first by a February 1987  




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          gubernatorial proclamation, and later by enactment of SB  
          113, Chapter 658, Statutes of 1987 (which also authorized  
          the state program). 

          The TCAC has seven members, including three voting members  
          and four advisors. The voting members include the State  
          Treasurer, the State Controller, and the Governor, who may  
          choose to designate the Director of the Department of  
          Finance as his representative. The non-voting members are  
          the Executive Director of the California Housing Finance  
          Agency, the Director of the Department of Housing and  
          Community Development, and two representatives of local  
          governments. One local representative must be associated  
          with a city and is appointed by the Speaker of the  
          Assembly. The other member is a county representative  
          appointed by the Senate Rules Committee.

           ANALYSIS
           
           This bill  :

          1)   Requires, on or after an unspecified date, the  
               California Tax Credit Allocation Committee (CTAC) to  
               administer the Career Pathways Investment Credit,  
               applicable to taxable years on or after January 1,  
               2011.  More specifically it requires the CTAC to:

                    a)             Determine and allocate the  
                    investment credit ceiling, as specified.
                    b)             Establish application filing  
                    deadlines, and give priority in allocating the  
                    credits to LEAs meeting specified criteria  
                    including, among other things, specified  
                    unemployment and high school graduation rates, or  
                    serving of socioeconomically diverse student  
                    populations.
                    c)             Allocate the credits to LEAs that  
                    enter into enforceable contracts or memorandums  
                    of understanding, as specified, with the CTAC and  
                    meet any additional requirements the CTAC deems  
                    necessary or appropriate.
                    d)             Adopt allocation criteria that  
                    award credits to LEAs that demonstrate specified  
                    elements in their application.
                    e)             Develop and provide forms to  
                    inform LEAs and taxpayers of the purpose of the  




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                    credit and certify to an LEA (which must provide  
                    a copy to the business entity receiving the  
                    credits) the amount of the allocated tax credits.
                    f)             Consult with the California  
                    Department of Education to develop forms,  
                    procedures for submission and review of  
                    applications, and to require the application to  
                    include, but not be limited to, specified  
                    components.  

          2)   Authorizes the CTAC to:

                    a)             Contract with other entities to  
                    process and review applications.
                    b)             Charge fees of applicants, as  
                    specified, and authorizes the borrowing of money  
                    to cover administrative costs, to be repayable  
                    solely from these fees. 


          3)   Authorizes a business entity that partners with an LEA  
               to provide career technical education, as specified,  
               to claim a career pathways investment credit against  
               qualified state sales and use taxes, as specified, and  
               imposes a number of related administering duties on  
               the Franchise Tax Board and the State Board of  
               Equalization.

          4)   Changes a definition within enterprise zone tax credit  
               provisions within the Revenue and Taxation Code.

          5)   Defines various terms for purposes of the bill.

          6)   Makes a number of technical and clarifying changes to  
               Revenue and Taxation Code provisions.

          7)   Makes a number of related declarations and findings. 

           STAFF COMMENTS  

           1)   Need for the bill  .  According to the author, new  
               research by the Public Policy Institute of California  
               raises serious questions about the effectiveness of  
               the enterprise zone tax credit in contributing to  
               economic and job development.  At a time when  
               California's General Fund is shrinking, it is more  




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               important than ever to prioritize investments and  
               ensure that tax credits are producing a beneficial  
               return on the state's investment.  California suffers  
               from too many high school dropouts, too little  
               meaningful career pathway programs at the middle and  
               high school levels, and shortages of skilled workers  
               to fuel high-need sectors of our economy. Investments  
               in high quality career pathway programs at the  
               secondary school level would bring a greater return on  
               the state's tax expenditure investment. 

           2)   Double-referral  .  According to information provided by  
               the author, it is the intent to redirect a portion of  
               the existing enterprise zone tax credits to businesses  
               that partner with public schools to build career  
               pathway programs. This bill authorizes a business  
               entity that partners with an LEA to provide career  
               technical education, as specified, to claim a career  
               pathways investment credit against qualified state  
               sales and use taxes. If passed by this committee, the  
               tax policy implications of this proposal will  
               appropriately be heard and considered by the Senate  
               Revenue and Taxation Committee.  

           3)   What are career pathway programs  ?  This bill defines  
               "applicants" as LEAs that apply for an allocation of  
               the proposed tax credit to create career pathways  
               programs.  According to the bill, these can include  
               high school pathway programs delivered through high  
               schools, regional occupation centers or programs,  
               California Partnership Academies, alternative  
               education programs, and adult education programs.  
               These programs are envisioned to include core academic  
               courses aligned with State Board of Education approved  
               career technical education standards and frameworks  
               that integrate academic concepts and skills,  
               work-based learning, and additional counseling or  
               supplementary instruction services. Most relevant to  
               the tax credit proposed, these programs must also  
               include active engagement by business and industry in  
               their design and implementation, work-based learning,  
               and assessment of student work.  

           4)   Will it work  ? This bill is premised on the belief that  
               better linkages between public school curriculum and  
               real world work experience will result in more engaged  




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               and successful students, increased graduation rates,  
               and better prepared students for both college and  
               career. According to a 2006 study of California  
               Regional Occupational Centers and Programs (CROCP)  
               conducted by the School Improvement Research Group at  
               the University of California, Riverside and funded by  
               the CDE, ROCP students improve their high school grade  
               point averages at a greater rate than comparison  
               students, enroll in post-secondary education in large  
               numbers, earn higher wages than comparison group  
               peers, have more success in securing raises and  
               promotions on the job, prefer ROCP classes over other  
               subjects, and question the value and relevance of many  
               of their high school courses.  A 2010 study conducted  
               by the Career Academy Support Network finds that,  
               after more than four decades of development and three  
               decades of evaluation, career academies (small  
               learning communities that provide a  
               college-preparatory curriculum with a career-related  
               theme) have been effective in improving outcomes for  
               students during and after high school and declares  
               them a proven strategy to prepare high school students  
               for college and careers.

           SUPPORT  

          California Regional Occupational Centers and Programs  
          (CROCP)

           OPPOSITION

           None received.