By : Washington Policy Center
Source : http://kpbj.com
Category : Small Business Grant
Introduction
This Legislative Memo provides an overview and analysis of HB 2802. This bill would establish a Washington Works Corps in an effort to create jobs and stimulate economic growth.
Washington Works Corps would operate within the state Employment Security Department and is intended to “provide unemployed individuals with the opportunity to perform needed services in communities throughout Washington.”
The program would “enroll” participants to carry out service projects as assigned by local officials in areas such as education, public safety, health and the environment.
Background
HB 2802 would use tax dollars to create short-term jobs administered by state officials through a new Washington Works Corps. The service projects funded by the program would include:
Protecting, enhancing and restoring the state’s environmental and natural resources
Assisting economically disadvantaged individuals via financial literacy, housing assistance and job training
Addressing the education-related needs of children, families and young adults in public education institutions
Increasing energy efficiency
Improving access to health care, disease prevention and nutritional assistance
Supporting needs of veterans, active duty and families of deployed military personnel
Providing child care for people working for Washington Works Corps
The new program would pay unemployed individuals (not considered employees, rather “enrollees”) $1,688 a month as a “training and subsistence” stipend. Those who complete what the program calls a “full term of service,” defined as at least 10 months but no more than 12 months, would be eligible for an education award equal to the maximum value of a federal Pell grant for that year.
The maximum Pell grant amount for 2012-2013 is $5,550. “Enrollees” in the program would be eligible for two “full terms of service” and two maximum value education awards — a total of up to $11,100. This education award money would be spent at institutions of higher education, on education training or repaying student loans.
The Office of Financial Management estimates the program will cost $33,669 per participant annually, which includes enrollees’ stipend, education awards and administrative and operating costs.
Not everyone would be eligible for the “opportunity to perform needed services” and to earn the paychecks and education grants provided by the Washington Works Corps. Sponsor Representative Connie Ladenburg says her bill is a direct response to her concern that the high profile “jobs” legislation (HB 2168, HB 2792, and HB 2793) under consideration in the legislature “would mainly create construction jobs for men.”
Policy Analysis
HB 2802 contains a number of elements that would make it ineffective as public policy. First, the bill does not specify how many participants the program would serve, making it impossible to predict the annual cost of Washington Works Corps.
Second, Washington Works Corps would place an emphasis on creating jobs for the long-term unemployed; veterans of Iraq and Afghanistan; and people considered economically, socially, physically or educationally disadvantaged. The bill, however, provides no definition for what constitutes long-term unemployed or any of the various classes identified as disadvantaged.
Third, the bill takes money away from one segment of taxpayers in order to provide a benefit to the “disadvantaged” beneficiaries. Washington Works Corps would be funded by increasing public debt; issuing $240 million in general obligation bonds. In order to pay the bonds the bill would narrow the Business & Occupation tax exemption currently offered on the sale of some agricultural products to not more than $200,000 in any calendar year, thus increasing the annual financial burden lawmakers impose on farmers.
The bill’s supporters may think a farmer reporting receipts of $200,000 a year is doing very well and thus should “pay his fair share,” that is, send more of his money to the state. The flaw with this reasoning is that our state’s B&O tax is levied on gross receipts, not net income. This means a farmer could easily report gross receipts of $200,000 or more and still have a net profit of zero, because the significant costs of doing business (payments for materials, rents, equipment, wages) have not been deducted from that amount. It is for this reason the legislature has passed so many special deductions, credits and exemptions as a benefit to industries such as agriculture.
Farmers, even those struggling to survive in this tough economy, would have to pay higher taxes in order to help the various undefined classes of “disadvantaged” people eligible under HB 2802. Washington Policy Center has often noted the fundamental flaw in government help programs is that every dollar government spends to benefit one person has to be extracted from someone else.
Fourth is the question of what would happen to the Washington Works Corps program in times of economic prosperity, when it would no longer be needed? The bill declares that, “Washington State is experiencing a prolonged period of high unemployment.” When unemployment rates drop, the Washington Works Corps program would have no purpose, but the bill includes no sunset provision linked to unemployment rates. As proposed, Washington Works Corps would continue to operate automatically until all the $240 million in borrowed money is spent.
Fifth, while the bill says Washington Works Corps would spend $240 million, the annual fiscal impact is unknown because the bill does not specify how much would be spent each year, nor does it define the intended lifespan of the program. Would the program spend the $240 million to create jobs for 7,000 people for one year, or operate for many years by enrolling fewer participants each year?
OFM’s Fiscal Note on HB 2802 notes the vague and imprecise way the bill is drafted: “Expenditure impacts for this legislation are indeterminate due to the legislation not stating the time period or the amount of funding available each year.”
Finally, there is no provision to sunset the proposed tax increase on farmers. Once the bonds that finance the Washington Works Corps are paid off, the tax revenue extracted from agriculture would no longer be devoted to that purpose. But the tax itself would continue. Without a sunset provision, the tax increases on agriculture would become permanent.
Conclusion
HB 2802 would raise taxes on some Washingtonians to benefit others, as well as create new public debt. Washington taxpayers are already spending nearly $2 billion in the 2011-2013 budget simply to service the outstanding public debt, comprising 6.1 percent of the state’s General Fund.
Increasing the state’s general obligation debt is contrary to Washington Policy Center’s recommended goal of reducing the state’s overall spending to create a sustainable budget.
Government policy should promote opportunity and prosperity for citizens, and growth in the private sector, and not try to create jobs directly, because every dollar government spends to benefit one person has to be forcefully collected from someone else. In this case, the money would be taken from farmers.
The intrinsic flaw in proposals like this is government cannot create the jobs that will spur economic recovery. The state would simply be shifting money from working taxpayers to select beneficiaries, not creating net economic growth. The private sector — small businesses specifically — creates the jobs that will pull our state out of the recession. History shows that the entrepreneurs who run small businesses, not government bureaucrats, create the jobs that become the catalyst for long-term economic growth and revitalization.
Policy Recommendation
HB 2802 would use tax dollars to create more government jobs at a time when small businesses are desperate for relief. Washington Policy Center recommends lawmakers instead provide B&O tax and regulatory relief, giving small business owners much-needed reprieve so they can create those jobs.
Source : http://kpbj.com/business_weekly/2012-03-19/why_the_proposed_washington_works_corps_program_wont_work
