BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 413 HEARING: 5/8/13
AUTHOR: Knight FISCAL: Yes
VERSION: 2/20/13 TAX LEVY: Yes
CONSULTANT: Grinnell
PERSONAL INCOME TAX CREDIT: STEM TEACHERS
Enacts a $1,000 or $1,500 annual tax credit for teachers of
science, technology, engineering, and mathematics teachers.
Background and Existing Law
California provides various tax credits designed to provide
incentives for tax-payers that incur certain expenses, such
as child adoption, or to influence behavior, including
business practices and decisions, such as research and
development credits and Geographically Targeted Economic
Development Area credits. The Legislature typically enacts
such tax incentives to encourage taxpayers to do something,
but for the tax credit, they would not otherwise do.
California once allowed a teacher retention tax credit
teachers based upon the taxpayer's years of service as a
credentialed teacher (AB 2879, Jackson, 2009). However,
the Legislature only allowed the credit for 2000, 2001, and
2003 taxable years, suspended it in 2002, and 2004 through
2006, before eventually repealing it in 2007 (SB 87,
Committee on Budget). Teachers claimed $165 million in tax
credits in 2003.
Teachers may claim a deduction from income on their federal
income taxes of up to $250 for any unreimbursed expenses
paid or incurred for books, supplies, or computer equipment
used in the classroom.
Proposed Law
Senate Bill 413 enacts a credit against the Personal Income
Tax equal to an eligible full-time science, technology,
engineering, or mathematics (STEM) teacher that teaches one
or more STEM course in grades 1 to 12. The credit is equal
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to $1,500 per year for teachers in high-needs schools;
$1,000 if not. The taxpayer may carry forward the credit
until exhausted. The bill sunsets the credit in 2019.
State Revenue Impact
According to Franchise Tax Board (FTB), SB 413 results in
revenue losses of $75 million in 2013-14, $55 million in
2014-15 and 2015-16.
Comments
1. Purpose of the bill . According to the author, "The
California education system is not keeping up with demand
for STEM jobs. In 2009, only 10% of California college
degrees and certificates were issued in STEM fields. Women
and
minorities were particularly underrepresented among
graduates. With unemployment rates soaring to 9.8% in
California, candidates with STEM degrees have their choice
of positions. For every STEM skills qualified candidate,
there is an average of 1.4 unfilled positions. This is in
contrast to 4.9 unemployed people for every 1 non-STEM
skills job. Well prepared, informed, and experienced STEM
teachers are the key to students pursuing a career in these
fields. However, the earning potential of teachers is much
lower than the salary of a position with a private firm
that utilizes these same skills. As such, individuals who
might prefer the classroom to the laboratory feel they have
no choice but to maximize their earning potential.
California must offer incentives for these highly qualified
individuals to be drawn to a career that is their passion &
that benefits our state's children. Otherwise, the future
employment demands of STEM fields will be met by
out-of-state workers. In prior years, California has used
personal income tax credits to incentive teachers toward
certain behaviors. For example, the Teacher Retention
Credit (created in 2000 and suspended in 2004) was created
to combat early teacher burnout rates by providing up to
$1,500 of tax credits. The lack of STEM education in our
schools has made finding California native engineers a
significant challenge for the aerospace industry. While
unemployment rates in California remain very high,
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aerospace companies have no choice but to look outside of
the state to satisfy their staffing needs. By providing
teachers incentives to create courses in fields that will
prepare students for these jobs, we can reverse this
behavior."
2. The right tool ? SB 413 assumes that there's a shortage
of teachers in science, technology, and math teachers, and
that tax credits are the best way to encourage more people
to become one. However, what evidence demonstrates that
these assumptions are true? The teacher workforce in
California lost more than 23,000 teachers from 2008 to 2011
due to retirement and budget cuts, according to a report
"Status of the Teaching Profession 2011" by the Center for
the Future of Teaching and Learning. Unemployment rates
for young people are at historically high levels,
suggesting a possible surplus of job seekers to job
openings. However, given the recent passage of
Proposition 30 (2012), school funding is set to grow for
the next few years, allowing school districts to hire more
teachers at better wage levels. Young people choose
professions for many reasons, including expectations of job
availability and future wage levels. If enrollment
continues to grow in California schools, and state and
local agencies place more emphasis on STEM programs, school
districts will have to hire more teachers above and beyond
those needed to replace retirees. Young people will
additionally seek degrees in education and teaching
credentials, especially in science and technology, to the
extent that they think they can find good-paying jobs when
they graduate. Why would a student choose science and
technology education because of a $1,500 annual tax credit,
when increasing wages for STEM teachers or allocating more
funds to STEM programs sends a more direct economic signal?
The Committee may wish to consider whether SB 413 is the
best option to improve the quality of the state's labor
force.
3. Performance measures . Most bills granting tax benefits
set forth an economic indicator or series of economic
indicators that its author expects will improve as a result
of a tax credit. For example, bills heard by the Committee
exempting manufacturing equipment from the sales tax have
used:
Increased employment for manufacturing, research
and development, and associated industries,
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Siting for new and expanded manufacturing and
research and development facilities in this state,
Capital investment in manufacturing equipment and
all other tangible personal property.
The now-expired Manufacturer's Investment Credit sunset in
2003 due to its failure to meet necessary levels of
employment in the manufacturing sector the Legislature
required be met for the credit to continue. However, SB
413 doesn't set forth the indicators that it expects to
change as a result of the credit: number of teaching
credentials, wage levels of STEM teachers, or number of
graduates in the state of STEM programs. The Committee may
wish to consider how the state can determine the success or
failure of SB 413's exemption without compelling any
performance standards.
4. Open issues . FTB identifies the following issues:
SB 413 doesn't contain a certification mechanism to
ensure that the teacher holds the degrees, works the
hours, and teaches the courses required to claim the
credit.
SB 413 should clarify whether it applies to home
schooling, charter, or private elementary or secondary
schools.
SB 413 would allow any school that ever received
specified federal funding to be designated as a
"high-needs school."
SB 413 should further define "STEM field" to be
more specific about the qualifications necessary to
receive the credit.
Support and Opposition (05/02/13)
Support : Antelope Valley College Division of Mathematics,
Antelope Valley
Union High School District, Science, and Engineering,
Antelope Valley Hispanic Chamber of Commerce, City of
Lancaster, BOE Member George Runner, Greater Antelope
Valley Association of Realtors.
Opposition :
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