BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 594 (Steinberg) - California Career Pathways Investment
Amended: April 3, 2013 Policy Vote: G&F 5-0, Education
8-0
Urgency: No Mandate: Yes
Hearing Date: May 13, 2013 Consultant: Robert Ingenito
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 594 would authorize several types of financial
mechanisms to promote corporate investment in career pathway
programs.
Fiscal Impact:
Unknown (greater than $50,000 General Fund) costs to the
Franchise Tax Board related to printing, processing and
information technology costs.
Unknown, likely significant costs to the Department of
Education, Chancellor of the Community Colleges, and the
California Workforce Investment Board, to provide staff and
resources to the California Career Pathways Investment
Committee.
In addition, the measure states intent (1) to appropriate $250
million from the General Fund to the Career Pathways State
Revolving Fund, and (2) to redirect $100 million from a current
tax credit program to the Career Pathways Investment Credit.
Background: California provides various tax credits designed to
provide incentives for taxpayers 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.
Proposed Law: SB 594 would provide tax credits and several other
new financing tools for the development of career pathway
programs, as defined. Specifically, the bill would create all
of the following:
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I. California Career Pathways Investment Committee. Senate
Bill 594 creates the California Career Pathways Investment
Committee, composed of the following:
The Chancellor of the California Community Colleges, who
serves as Chair,
The State Superintendent of Public Instruction,
The Chair of the California Workforce Investment Board,
or his or her designee.
One appointee of the Senate Committee on Rules to
represent the business community, who will serve a
four-year term, and
One appointee of the Speaker of the Assembly, who will
serve a four-year term.
The committee allocates funds from the Career Pathways Revolving
Fund and Career Pathways Investment Credits to local educational
entities, community college districts, and applicants. The
committee also creates application forms and procedures, as well
as sets criteria and guidelines for evaluating applications for
financial assistance.
The committee shall allocate financial assistance based on the
following priorities:
Local educational agencies and community colleges that
serve areas that have an unemployment rate above the
statewide average, as measured by the Employment
Development Department, or a high school graduation rate
lower than the statewide average, as measured by the
California Longitudinal Pupil Achievement Data System.
Local educational agencies and community colleges that
include in their applications significant amount of private
funding support.
Local educational agencies and community colleges that
include in their applications articulated pathways
connecting high school and postsecondary certificate and
degree programs in their region,
Local educational agencies and community colleges that
are not seeking state funding for existing activities.
However, priority shall be given to applicants that seek to
expand or augment existing investments in career pathways
programs.
The Superintendent of Public Instruction, the Chancellor of the
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Community
Colleges and the California Workforce Investment Board shall
enter into a memorandum of understanding to allocate staff
resources to the committee. The costs to these entities shall
be offset by fees charged to applicants for Career Pathways Tax
Credits.
The Committee can grant financial assistance, which is any
combination of tax credits, grants, loans, and workforce
development "bonds."
II. Lease Revenue Bonds. SB 594 allows local education
agencies or community college districts to issue lease revenue
bonds secured by the lease of any of its property, or enter into
other arrangements to lease or loan agreements not subject to
California's Constitutional debt limit. The measure exempts
school districts from any law that may restrict them from
entering into agreements or execute any other documents
necessary to carry out the purposes of the bill, such as
restrictions on rental payments exceeding a percentage of the
value of taxable property, number of years on the lease, and
wage payments. The local education agency or community college
district may enter into contracts or agreements with banks,
insurers, or other financial institutions that it determines are
necessary and desirable to improve the security and desirability
of the lease revenue bonds.
III. Trust Funds. The measure creates a Career Pathways
Investment Trust Fund in each local education agency or
community college district to finance program and administrative
costs resulting from operating career pathways programs. The
trust fund may accept money from any source, including property
tax resulting from the dissolution of assets formerly held by
now-defunct redevelopment agencies. The trust fund is
administered by each local education agency or community college
district. The administering agency shall use moneys in the fund
for qualified expenditures, administrative costs, as well as
grants, loans, and program costs with career pathways programs.
IV. Workforce Development "Bonds." SB 594 allows the Committee
to issue workforce investment "bonds" to applicants that have
entered into a memorandum of understanding with a local
education agency. The measure defines them as contracts between
the Committee and an applicant who agrees to provide capital to
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fund a career pathways program jointly operated by the applicant
and a school district of community college district, or a
consortium of school districts and community college districts.
Proceeds from the "sale," or amounts delivered from the
applicant to the school district under the terms of the
contract, may vary according to the measured level of
performance, and may be used for specified purposes in the bill,
including:
Career pathways program operation,
Development of rigorous and career-relevant curriculum,
Paid internships,
Post-high school financial aid for college,
Licensing and credentialing programs,
Wage subsidies for full-time employment for pupils who
successfully complete a career pathways program.
The bill requires the committee to develop performance criteria
for determining financial returns to private investors in
workforce development "bonds," including, but not limited to:
High school graduation.
Completion of post-secondary programs that culminate in
a certificate or degree.
Attainment of industry-recognized credentials that are
valued in high-growth, high-need or emerging economic
sectors.
Provision of high school pupil and community college
student internships.
Provision of paid summer jobs for high school pupils and
community college students.
Provision of high school teacher and community college
faculty externships.
Provision of scholarships or other financial assistance
for students pursuing post-secondary education or training
in a relevant career pathway.
Offers of paid employment or apprenticeship to high
school pupils or college students who are program
participants or graduates.
V. Revolving Fund. The bill creates the California Career
Pathways State Revolving Fund, a continuously appropriated fund
without regard to fiscal years that constitutes the sole source
of funds for the program. The measure states that the state has
no liability or obligation beyond the extent to which money is
provided under the program. Within the Fund, SB 594 creates the
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Career Pathways Financing Account to repay workforce investment
"bonds," a Career Pathways Grant Account to fund grants, and a
Career Pathways Loan Account to make loans.
VI. Career Pathways Investment Tax Credit. The bill enacts tax
credits against the Personal Income Tax and the Corporation Tax
in an amount equal to the amount the Committee allocates to a
taxpayer. Taxpayers can carry forward credits until exhausted.
The committee can allocate Career Pathways Investment Tax
Credits in an amount authorized in the Budget Act for that
calendar year. The Committee can allocate credits that
taxpayers can use for five calendar years as long as authorized
amounts don't exceed amount authorized in the Budget Act. The
bill directs the Committee to give priority to applications
where:
Applicants have entered into contracts or memorandums of
understanding with local educational agencies, community
colleges, or workforce investment boards in:
o Communities with unemployment rates above the
statewide average,
o High school graduation rates below the
statewide average,
o Proportions of private funding support that
exceed a one-to-one match,
o Not seeking tax credits for existing
activities, except for those that seek to expand or
augment existing investments in career pathways
programs,
To the maximum extent practicable, the Committee shall
give priority when allocating tax credits to applicants
that seek to expand or augment existing career pathways
program investments.
The Committee shall not give priority to applicants by
virtue of the date of application except to break a tie
between two applicants with the same rating.
The applicant must enter into an enforceable contract or
memorandum of understanding with the Committee to comply with
the bill. The contract or memorandum of understanding shall
provide for legal action to obtain specific performance or
monetary damage for breach of contract. The contract shall also
provide for periodic audits.
The Committee shall also adopt criteria that awards credits to
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applicants that demonstrate that either it or the local
education agency, community college, or workforce investment
board that consider:
The effectiveness of the career pathway program toward
preparing students for productive, high-wage employment in
growing or high-need sectors of the California economy,
including:
o Pathway completion rates,
o High school or community college graduation
rates,
o Percentage of students transitioning
successfully to postsecondary education or
apprenticeship,
o Employment and earnings after high school,
The level of the applicant's investment, oversight, and
ability to leverage and sustain current career pathways
applications.
The Committee shall also develop and provide forms to
applicants. The amount of credit reserved for a calendar year
shall not exceed 50% of the applicant's estimated expenditures.
The Committee shall report to FTB once each year regarding the
identity of the taxpayers to whom they allocate credits. The
Committee may consult with the Treasurer or the Tax Credit
Allocation Committee regarding allocation, of credits, and they
must aid the Committee upon request. The Committee shall also
adopt audit requirements.
Staff Comments: Staff recommends deleting the continuous
appropriation authority in the bill, as it reduces legislative
oversight.