BILL ANALYSIS Ó
AB 2582
Page 1
Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2582 (Maienschein) - As Amended May 12, 2016
-----------------------------------------------------------------
|Policy |Revenue and Taxation |Vote:|9 - 0 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill provides a tax credit to employers who pay an
individual with a disability, who is otherwise eligible for a
special minimum wage, an hourly rate that is the statewide
minimum wage or higher. The credit, which is available for
AB 2582
Page 2
taxable years starting on January 1, 2017, and ending before
January 1, 2022, is equal to the difference between the
statewide minimum wage and the special minimum wage provided to
that employee, multiplied by the hours worked.
FISCAL EFFECT:
Annual GF revenue losses of $2.7 million, $11.0 million, and $21
million in FY 2016-17, FY 2017-18, and FY 2018-19, respectively.
These estimates are conservative because costs are likely to
increase further as a result of the statewide minimum wage
increasing to $13 by 2021, the last full year this credit will
be in effect (See comment #4).
COMMENTS:
1)Purpose. According to the author, the objective of AB 2582 is
to create an incentive for employers to hire Californians with
developmental disabilities and to pay them at the minimum wage
or higher. This bill will incentivize employers to offer
minimum wage jobs to persons who would receive less than the
minimum wage.
2)Background. Under federal law, persons with disabilities may
be eligible to earn less than the minimum wage if they are
unable to compete for a specific job with workers without
disabilities. This exemption is meant to provide employment
opportunities for workers who would otherwise be excluded from
the workplace.
Employers who hire such employees must receive a certificate
from the US Department of Labor authorizing them pay a special
minimum wage. The special wage is determined on a case by case
basis.
AB 2582
Page 3
According to the US Department of Labor (DOL), there are
currently around 26,000 California workers who are paid
special minimum wages. On average, special wages are set at
half the rate of the statewide minimum wage.
3)Executive Order 13658. The issue of the special minimum wage
and whether it helps or harms disabled worker has been an
ongoing debate between advocates, policymakers, and disabled
workers. Opponents to special minimum wages argue that the
policy is unfair and outdated, while supporters argue that
there is still tremendous value doing everything possible to
connect these individuals to jobs, which can be beneficial in
more ways than just salary.
In February 2014, the issue was brought to the forefront when
President Obama signed Executive Order 13658, which required
all employers who contract with the federal government to pay
at least the federal minimum wage. This included disabled
workers who otherwise would be eligible for a special minimum
wage.
4)Interaction with minimum wage. California's minimum wage is
set to increase incrementally to $15 an hour by 2023 as a
result of SB 3 (Leno), Chapter 4, 2016. As a result, this
credit will become increasingly expensive as the statewide
minimum wage increases faster than the special minimum wage
authorized by DOL. For example, the average special minimum
wage is set at half of California's statewide minimum wage
($10). If that ratio maintains as California's minimum wage
increases to $13 by 2021, the last taxable year that AB 2582
is in effect, then the dollar difference between the two wages
will increase from $5 to $6.50. This will mean the credit
available to employers would increase by $1.50 per hour worked
by the employee.
The revenue estimates cited in this analysis were completed
prior to SB 3 being signed into law. Therefore, these
estimates should be viewed as conservative estimates of the
AB 2582
Page 4
revenue impact of AB 2582.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081