State’s economic development agency moves ahead on diversity rules for tax credits, but not without some criticism

Reporting from Sacramento —  The state agency in charge of handing out hundreds of millions of dollars in tax credits to companies that promise Californians jobs is moving closer to requiring those businesses to say how they plan to make their workforce more diverse.

Businesses soon will have to describe their hiring and recruiting practices to ensure women and people of color have equal access to jobs as part of their applications for tax dollars, according to a plan unveiled last month by GoBiz, the state’s economic development department. The new rules are expected to be in place by November.

The effort is in response to internal pressure made by Madeline Janis, who, as a member of the committee that hands out the tax credits, has pushed GoBiz in recent months on diversity issues.

Janis has wanted GoBiz to develop stricter rules for companies that receive state money with an eye toward the tech industry’s historic struggles with hiring a diverse workforce. Janis, who questioned app maker Snapchat Inc. and electric car company Faraday Future about their hiring practices at a tax credit hearing in April, believes state dollars could help incentivize businesses to focus on this issue.

“My view of tax credits is we should be getting more than what the private sector should be otherwise providing,” said Janis, the executive director of a Los Angeles-based organization that advocates for manufacturing public transit infrastructure in the United States.

“It’s essentially a taxpayer investment in the private company,” she said. “So there has to be a public purpose.”

The state’s tax credit program, California Competes, began after Gov. Jerry Brown signed legislation in 2013 to allow businesses to forgo some of their income taxes if they agreed to create jobs for Californians. Businesses can apply for credits awarded on 11 factors, including hiring and wage plans, with special consideration given toward jobs in economically depressed areas and for small businesses.

In the past year, the agency has awarded approximately $160 million to 259 companies, which GoBiz projects will create more than 20,000 jobs and deliver almost $3.2 billion in investments.

But in recent months, GoBiz has been criticized for not connecting with the California Black Chamber of Commerce and for dragging its feet on addressing diversity concerns during the tax credit process.

During an Assembly committee hearing in the spring, Aubry Stone, the head of the California Black Chamber of Commerce, said GoBiz executives had never contacted him to discuss the concerns in the black business community. Since then, Stone said in an interview, he’s had several meetings with GoBiz, but believed the agency could make its resources more available to black businesses.

“They could do much better,” Stone said.

Agency staff also initially took a dim view of Janis’ efforts to add diversity requirements to the tax credit process.

In a memo to Janis, an agency lawyer argued that new legislation would be needed to add inclusionary hiring practices as criteria in handing out tax credits and that any attempt could be thwarted by Proposition 209, a 1996 ballot measure that prohibits state agencies from administering affirmative action programs. The current plan to ask about a company’s hiring and recruiting practices passes muster because the information wouldn’t be part of the formal evaluation process, according to the agency.

Assemblyman Mike Gipson (D-Carson), who attended the spring committee hearing and was aware of Janis’ push on tax credits, said he was troubled that the agency hadn’t previously connected with Stone and was cold to Janis’ request to discuss the diversity issue.

“I am very concerned with the obstruction taking place to muffle this coming to the agenda,” Gipson said.

He said the agency should increase its training and outreach to disadvantaged communities and communities of color to ensure that more tax credits go to those businesses.

Will Koch, chief deputy director for GoBiz, declined an interview request through an agency spokesman. But in a statement, Koch said the agency had many partnerships with several statewide organizations to provide resources to communities in need and was revising its tax credit application to encourage awardees “to promote a workforce that is as diverse as California.”

No other ethnic chamber of commerce has expressed the same concerns as Stone. Pat Fong Kushida, the head of the CalAsian Chamber of Commerce, said GoBiz has helped her organization with promoting international trade, specifically with China.

“We have had a very productive and inclusive relationship with GoBiz,” Fong Kushida said.

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