An ounce of prevention is worth a pound of cure. This sage advice should be followed as lawmakers consider extending two pro-manufacturing bills this year.
The first provides funds for workforce skills training, the second encourages new manufacturing equipment purchases. Both are important to support manufacturers who pay $83,000 salaries on average and provide a middle class lifestyle for hundreds of thousands of California citizens. But while most lawmakers say they support the policies, they don’t think it is urgent enough this year to extend the programs past their scheduled expiration dates. We disagree.
The Career Technical Education Incentive Grant (CTEIG) was created in 2015 to fund career training programs as an integral component of a student’s education. The CTEIG signals to manufacturers that creating a skilled workforce is a high priority. Funding will be eliminated next year if the Legislature does not vote to extend it. The sales tax exemption on manufacturing equipment exempts 4.19 cents of the sales tax on qualified purchases. If it expires in 2022, California will be one of only a few states that fully tax these purchases, making us less competitive for manufacturing growth.
Every manufacturing investment and job creation decision is made by company executives who are looking down the road at future costs, taxes, and regulations. Many states and countries want to attract manufacturing investments and jobs. If they have longstanding policies that will be in effect for ten or more years, they will beat out the locations with policies that expire in the short term. In fact, the larger and more important the investments, the more risk averse company executives will be; they will assume the expiration in existing law will occur, as promised.
Lawmakers may believe that California will nevertheless attract manufacturing jobs and investments even without the policies under discussion, but the data states otherwise. Since 2001 California has attracted less than 2 percent of US manufacturing new sites or expansions, far lower than the state’s share of manufacturing GDP. More recently the re-shoring surge shows a similar loss to the rest of the country, with under 2 percent of those jobs coming to California since 2013. That means manufacturing jobs and investments are now shifting to other locations under our noses and long-term policies to keep manufacturers here are crucial.
California can either send a message that welcomes manufacturing or it can wait until the last minute – long after crucial investment decisions have already been made in favor of other locations. Even if our good intention is “don’t worry, we will not let it expire”, companies know that politics, budget pressures or other priorities could intervene in any future year to cause a policy to lapse.
Delay is not a freebie, it has a high cost. We should extend these manufacturing policies immediately and send a message that California is “open for business” and will not lose one more manufacturing job or investment that we need to support a growing middle class in California.