An Open Letter to Five States’ Officials About Tesla Motors

August 26, 2014

The announcement earlier this year by Tesla Motors that it planned to establish a major electric-car battery factory in one of five western states has set off a bidding war among officials in these states. Yesterday, CBP Executive Director Chris Hoene joined with leaders at Good Jobs First and peer organizations in the other states to direct an open letter to state officials calling for greater openness in the process, strong accountability measures, and cooperation — not competition — among the states.

August 25, 2014

There is no question that state officials should place a high priority on boosting employment and fostering economic opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” — undoubtedly a valuable source of economic growth for its eventual home state — has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla — or any other company — could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent — no law requires you to negotiate with Tesla or any company behind closed doors — and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry — with its far-flung supply chains and 50-state market — is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Signed,

Diane E. Brown, Arizona PIRG

Chris Hoene, California Budget Project

Bob Fulkerson, Progressive Leadership Alliance of Nevada

Javier Benavidez, Southwest Organizing Project (New Mexico)

Craig McDonald, Texans for Public Justice

Greg LeRoy, Good Jobs First


How Should California Spend Nearly $2 Billion?

August 25, 2014

The state of California is poised to direct an estimated $1.8 billion over the next four years to new and expanded tax breaks for specific industries and businesses based on actions recently taken by state lawmakers, or actions pending and likely to be approved by state lawmakers in the coming days. These include:

  • Nearly $420 million in tax breaks for aerospace companies — specifically targeted to Lockheed Martin and Northrop Grumman — that are competing to build the next generation of stealth bombers, an incentive package approved by the state Legislature and signed into law by Governor Brown earlier this month;
  • Expansion of a state tax credit for film and TV production — from $100 million to $400 million annually — that is currently working its way through the Legislature; and
  • Efforts to lure Tesla Motors to build a new “gigafactory” in California, which are likely to include tax credits to help meet Tesla’s demands that state and local governments help pay for 10 percent (estimated at $500 million) of the cost of construction. The legislation, expected to emerge in the coming days, is also likely to exempt Tesla from some environmental (CEQA) requirements.

All told, these actions stand to commit the state to nearly $2 billion over the next four years in targeted tax breaks for business and industry.

We think that California would benefit more from investing this money in vital public systems and services. While we don’t question that state leaders should place a high priority on boosting employment and expanding opportunity, we do question whether these new and expanded credits and incentives are the best strategy for meeting those objectives. Consider just a few alternatives for the state’s $2 billion:

  • Phasing in a refundable state Earned Income Tax Credit (EITC) to further leverage the federal EITC, which would boost the incomes of working families most in need of assistance, raising thousands Californians out of poverty each year;
  • Continuing to restore the 110,000 subsidized child care and preschool slots (nearly one-quarter of the total) cut since 2007-08 that help working parents find and keep jobs and build a foundation for children’s success; and
  • Making a down payment on reinvesting in the economic engines that are the state’s higher education systems, for which state General Fund spending per student has declined significantly over the last three decades.

All of these alternatives, among others, are proven winners at helping working families to prosper, while the evidence on targeted tax breaks for businesses is mixed at best.

As state leaders clamor to give away tax credits to high-profile businesses and projects, we should all be asking the question “How should California spend nearly $2 billion?”

— Chris Hoene


Resolving Child Care and Work Schedules Proves Problematic for Many Low-Income Mothers

August 18, 2014

Last week, The New York Times reported on single parents’ difficulties juggling multiple responsibilities — including securing child care — while holding down jobs with erratic and unpredictable hours. The article included a profile of one such parent, a 22-year-old single mother in San Diego:

But Ms. Navarro’s fluctuating hours, combined with her limited resources, had also turned their lives into a chronic crisis over the clock. She rarely learned her schedule more than three days before the start of a workweek, plunging her into urgent logistical puzzles over who would watch the boy. Months after starting the job she moved out of her aunt’s home, in part because of mounting friction over the erratic schedule, which the aunt felt was also holding her family captive.

Unstable employer scheduling practices disproportionately affect women, who are often subject to inconsistent work schedules yet also the primary caregivers for children. In California, low-income mothers utilizing subsidized child care frequently rely on license-exempt providers — typically relatives and friends — to watch their children on short notice or during non-traditional work hours such as weeknights and weekends in order to work irregular hours. Unfortunately, during the Great Recession policymakers reduced the reimbursement ceilings — the maximum payment that a license-exempt provider can receive — from 90 percent to 60 percent of the maximum licensed rate, potentially limiting low-income families’ access to care

As we highlighted in a recent report, access to subsidized child care and development programs can be vital to the economic security of low- and moderate-income Californians, and has been shown to increase parents’ employment and earnings while reducing the chance that parents miss work or cut back on their hours due to child care responsibilities. However, California’s current provider payment policies may constrain access to care for many families. In the absence of federal or state policy regulating employer-scheduling practices, low-income parents’ access to license-exempt providers is critical.

— Kristin Schumacher


Stanford’s “Pathways” Magazine Echoes Our Report’s Key Findings on Poverty

August 12, 2014

The latest issue of Stanford University’s Pathways, a magazine featuring articles about poverty, inequality, and social policy, perfectly echoes a number of the key messages in our recent report, Five Facts Everyone Should Know About Poverty.

An article by Marianne Page, deputy director of the Center for Poverty Research at UC Davis, for example, calls into question the “common mantra [that] the only enduring solutions to poverty are economic growth and the jobs it delivers.” Page shows that economic expansions reduce poverty less than they did in the past partly because a growing share of the new jobs pay low wages. Similarly, our Five Facts report shows that poverty in California is more often due to low-wage work than to a lack of employment. Like Page, we argue that reducing poverty will take policies that boost workers’ earnings, such as continuing to increase the state’s minimum wage and establishing a state Earned Income Tax Credit (EITC).

Hilary Hoynes, professor of public policy and economics at UC Berkeley, demonstrates the resounding success of the federal EITC in another Pathways article, suggesting that it “may ultimately be judged one of the most successful labor market innovations in U.S. history.” Hoynes writes:

The effects of EITC extend well beyond simple income support and poverty reduction. … It leads to various improvements in the mental and physical health of mothers. It brings about a reduction in low birth weight among infants. And it improves the performance of children on cognitive tests. This burgeoning body of work suggests, then, that income support programs have benefits that extend well beyond an increase in cash flow for families in poverty.

With evidence like that, it’s no wonder that half of all states have created their own EITCs to further leverage the benefits of the federal credit. And it’s why California should do the same. Poverty is a problem state policymakers can address if they choose to prioritize investments in proven strategies.

— Alissa Anderson


CalFresh Receipt Among Younger Californians Highlights the Problem of Child Poverty in Our State

August 7, 2014

Recently, we looked at county-by-county trends in the use of Supplemental Nutrition Assistance Program (SNAP) benefits, known as CalFresh in California. While more than one in 10 Californians received CalFresh overall in 2013, there is significant variation among counties. For example, in parts of the relatively wealthy Bay Area, just about 4 percent of residents were enrolled in the program. But in San Bernardino County and many Central Valley communities, more than one in six people receive help buying groceries.

The California Department of Social Services has created a CalFresh Data Dashboard to help researchers and advocates measure counties’ performance in enrolling recipients, including by providing certain demographic characteristics such as age and language spoken at home.

The map below shows percentages of all children under age 18 in each county who were receiving CalFresh benefits in 2013. These statistics should call attention to the persistent problem of child poverty even at a time when the state is experiencing job growth. Because eligibility is generally capped at 130 percent of the poverty line (about $25,000 for a family of three), high rates of CalFresh use are another indicator of the extent to which many families are still struggling to meet their most basic needs in the aftermath of the Great Recession.

Here are some key facts about the share of California children receiving CalFresh benefits:

  • Statewide, one in four children are enrolled in CalFresh. This rate is comparable to the highest county rate for people of all ages, demonstrating that children are especially vulnerable to poverty and food insecurity.
  • In nine counties, at least one in three children are eating with the help of CalFresh benefits. Del Norte, Fresno, Imperial, Kern, Lake, Merced, Madera, San Bernardino, and Tulare counties are home to children receiving CalFresh at rates above 33 percent. This closely matches the counties with the highest overall poverty rates since 2008.
  • Nearly half of all children in Tulare County receive CalFresh. Coupled with a county child poverty rate above 36 percent, this exemplifies the extent to which sections of the state have yet to see the economic recovery.

(Click here to see full county data for 2013 and the two prior years.)

In a recent blog post, we wrote about the importance of CalFresh for children. Research shows that food assistance not only reduces hunger, but significantly improves young children’s health, reducing their odds of being underweight or at risk of developmental delays. These benefits are lasting. A recent academic paper found that low-income children who had access to food assistance early on were significantly less likely to suffer from chronic health conditions throughout their life. The girls in these families generally achieved higher levels of education, had higher earnings, and were less likely to need public assistance as adults.

Efforts to ensure that eligible children obtain food assistance are thus especially important. While it is difficult to estimate the potential number of eligible children not being reached, California’s overall CalFresh participation rate is just 57 percent — the lowest rate in the nation — meaning that nearly half of those who qualify for assistance are not receiving it. While the state pays a portion of administrative costs, counties are chiefly responsible for outreach and enrollment. Comparing county performance over time may yield key lessons on what works to improve access for different segments of the population.

— Miranda Everitt


Poverty Is a Problem We Can Address

August 6, 2014

California’s poverty rate is higher than that of all other states, based on the US Census Bureau’s Supplemental Poverty Measure. So it’s not surprising that Californians are increasingly concerned about poverty, and many see it as an intractable problem. More than two-thirds of state residents (68 percent) think that poverty is a big problem facing our society, up from 57 percent eight years ago — a rise that paralleled the increase in poverty during the Great Recession. In addition, fewer than half of Californians (46 percent) believe that policymakers can do much to address the problem.

But poverty is a problem we can address. That’s the key message of the newly released CBP report, Five Facts Everyone Should Know About Poverty. This report shows that we’ve made significant gains reducing poverty in the past, and it provides evidence that anti-poverty efforts continue to be effective today. Tax credits for working families, food assistance, and unemployment insurance, among other policies, lifted an average of nearly 4 million Californians a year — including 1 million children — out of poverty in the wake of the recent recession. This is a significant accomplishment, and it suggests that California can reduce poverty further by making greater investments in what’s already working.

What will it take to cut poverty further?

Reducing poverty will require a broad-based effort to address the various factors that contribute to families’ economic hardship. One of the most significant of these is low-wage jobs. The majority of families living in poverty are working families, which means that poverty is largely a problem of low pay. That’s not surprising given that California’s minimum wage remains a poverty-level wage, in spite of its recent increase to $9 per hour. A mother who works full-time, year-round at the minimum wage brings home just over $18,000 per year. That’s an income well below the federal poverty level for a family of three and just a quarter of what we estimate that a family needs to support a modest standard of living in California.

In our report, we recommend two ways policymakers can boost workers’ earnings in order to lift more families out of poverty. First, they can continue to gradually raise the state’s minimum wage — even beyond the increase to $10 per hour that is scheduled for 2016 — and then tie it to inflation so it keeps pace with increases in the cost of living. Second, they can create a refundable state Earned Income Tax Credit (EITC), which would help low-income working families keep more of their earnings and better meet their basic needs.

The federal EITC is one of the most effective tools for cutting poverty. In fact, it pulls more children out of poverty than any other federal policy. Half the states have created their own EITCs to further leverage the benefits of the federal credit, and establishing a refundable state EITC in California would be as easy as adding one line on state tax forms. This simple measure could bring nearly 170,000 Californians out of poverty each year, according to estimates from the Center on Budget and Policy Priorities.

As with any new policy, lawmakers are certain to ask whether California can afford to create a refundable state EITC. But a better question is whether California can afford not to invest in a policy that is proven to cut child poverty more than any other measure. Allowing poverty to persist is extremely costly, both in human and economic terms. Children who grow up in poverty don’t have a fair chance to reach their full potential. They face numerous obstacles that make it harder to do well in school and get good jobs as adults. That means poverty doesn’t just set children on a path toward future hardship, it also puts California’s future workforce at stake.

The good news, however, is that when low-income families’ incomes are boosted through public supports like tax credits, their children tend to attain higher levels of education and perform better academically. They may even earn more in the future. In other words, investing in proven anti-poverty strategies has a long-term payoff that makes the investment well worth its upfront cost.

Cutting poverty lays the groundwork for a stronger economy and a more prosperous future for all of us. That’s why policymakers should make reducing poverty a key state priority. And that’s also why we at the CBP have launched an initiative to greatly expand our work on poverty over the next couple of years. Watch for our additional reports on key poverty-related issues, including analysis and commentary that will help policymakers determine and prioritize policy options to expand economic opportunity and generate more broadly shared prosperity in our state.

— Alissa Anderson


A County-by-County Look at CalFresh Use in California

July 31, 2014

Five years after the Great Recession officially ended, more than one in 10 Californians now rely on the federal Supplemental Nutrition Assistance Program (SNAP) — called CalFresh in California — for food assistance. This rate has risen slowly but steadily since 2011.

CalFresh benefits are available to most households with low incomes, generally defined as at or below 130 percent of the federal poverty line (about $24,000 for a family of three). Caseloads thus closely track trends in poverty rates.

However, California is tied with Wyoming for the lowest SNAP participation rate among all states. In addition, undocumented immigrants are ineligible, as are seniors and people with disabilities who receive a Supplemental Security Income/State Supplementary Payment (SSI/SSP). Taken together, this means that the share of Californians in poverty has been higher than the share receiving food assistance.

As we blogged about this year, poverty rates vary widely by county. The same is true of the share of the population using CalFresh in each county, as the map below shows. The highest rates of CalFresh use are in the counties with the highest poverty rates, such as San Bernardino (18 percent enrolled in the program), Imperial (20 percent), and many Central Valley counties (most with rates higher than one in seven). In Tulare County, one in four residents are receiving CalFresh. In San Mateo and Marin, around 4 percent do.

(Click here to see full county data for 2013 and the two prior years.)

Even as job growth picks up, some counties are faring worse than the state overall. High rates of food assistance in many places show a clear need for policies and programs that reduce poverty.

One of the most important points isn’t captured in the map: Nearly half of those eligible for CalFresh — estimated at 3.2 million people — are not receiving it. Recent efforts to expand access and streamline enrollment should bring help to those who need it. These efforts include ending time-consuming and stigmatizing fingerprinting requirements, and reaching out to newly enrolled Medi-Cal recipients who are likely eligible for food assistance.

Some counties have begun to employ targeted outreach programs to increase participation among underserved populations, especially seniors, non-English-speaking households, and people who are homeless. Comparing county performance over time may yield key lessons on what works to improve access for different segments of the population.

Stay tuned for more analysis of CalFresh data by county, including a special focus on children.

— Miranda Everitt


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