BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2582


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          Date of Hearing:  May 18, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2582 (Maienschein) - As Amended May 12, 2016


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          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  








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          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. 









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            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  








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            revenue impact of AB 2582.


          Analysis Prepared by:Luke Reidenbach / APPR. / (916)  
          319-2081