STATE FALLING SHORT IN ASSISTING AEROSPACE; LAWMAKERS' REPORT FINDS MULTIPLE FAILINGS.

Byline: Jim Skeen Daily News Staff Writer

To make California more attractive for aerospace jobs, state officials must do better in recognizing the industry, re-evaluating tax breaks to ensure they are working and expanding venture capital programs, according to a draft report prepared for the Legislature.

Called ``Other State's Incentives to Attract or Encourage Aerospace Manufacturing,'' the draft report notes that despite defense cutbacks of the early 1990s, there is potential growth for the industry, notably in space projects.

However, California now faces stiffer competition from other states in attracting aerospace work.

``Compared to other states, California's abundance of skilled labor, universities and other educational and research centers, as well as the existence of a strong electronics industry, gives the state a strong advantage for the development of high-tech aerospace activities,'' the report said. ``However, California's high cost of doing business, taxation policies, and state and local regulations have made California less competitive than states such as Texas, Georgia and Alabama.''

The report was prepared by the California State Library's California Research Bureau for the Assembly Select Committee on Aerospace Industry. Committee members will use the report to draft legislation aimed at promoting aerospace jobs.

The report's first recommendation is for policy makers to recognize the importance of aerospace in California's economy, including putting aerospace on the list of key strategic industries for development for the state.

The report notes the state's economic strategy panel of 1996 did not even mention aerospace as a key industry.

The state is making strides in recognizing the industry, said Assemblyman George Runner, R-Lancaster, the lead Republican on the aerospace select committee. Both the Assembly and Senate now have aerospace committees, and Gov. Gray Davis has indicated a willingness to appoint someone in the governor's office to be the point person for aerospace issues, Runner said.

Those developments are a far cry from when Runner first joined the Assembly in 1994, when more focus seemed to be on retraining aerospace workers for other jobs.

``When I got there they were putting a tombstone on the industry,'' Runner said.

Other recommendations in the draft report include having the Legislature redefine tax credits, research credits and other financial incentives for manufacturing in general and aerospace in particular, and to assure these policies actually benefit the state. The Legislature must ensure that tax credits bring jobs that stay in California.

The report also suggests re-evaluating the state's enterprise zones program to determine how effective they are in assisting aerospace companies. Enterprise zones, including one that covers most of the Antelope Valley, provide tax breaks offered on equipment and worker wages.

One recommendation is for the state to expand its involvement in providing venture capital for aerospace-related emerging technologies. That recommendation, Runner said, might run into opposition from taxpayers wanting to know why their tax dollars are being risked on private ventures.

``That's one (recommendation) I least understand,'' Runner said. ``I'm not sure what kind of partnership they are looking for. There is no place for the state to be involved in that.''

The report states one of California's major assets for attracting aerospace is the availability of a skilled work force.

``If we don't move quickly, that asset will dwindle away,'' Runner said. ``We will only retain that asset if we retain the jobs.''

ENTICING OFFERS

What some states do for jobs.

FLORIDA - Tax refunds of up to $5,000 per job for qualified defense contractors. Sales or income tax credits to businesses located in or hiring from certain areas. Research funds - up to half - for developing commercial products. Has 5.5 percent corporate tax rate.

TEXAS - Tax refunds of up to $250,000 a year for five years for new or expanding businesses in designated areas. Grants up to $1,454 per job for training employees in specialized skills. Franchise tax of 4.5 percent of earned surplus.

GEORGIA - Sales tax exemption on purchases of manufacturing machinery for NASA or defense contracts. Electricity sales tax exemption for manufacturing in which electricity is 50 percent of the cost. Investment tax credit that offset up to 90 percent of manufacturer's increased income tax liability after a major expansion. Has 6 percent corporate tax rate.

NEW MEXICO - Five percent tax credits for purchases of manufacturing machinery. Pays up to 50 percent of employee training costs and wages for an expanding or relocating business for up to six months. Has 4.8 percent - 7.6 percent corporate tax rate.

CALIFORNIA - Six percent tax credit for manufacturers. Eight percent tax credit for qualified research expenses, and 12 percent for basic research payments paid in cash to an outside company. Enterprise zone incentives for businesses in designated areas, including the Antelope Valley. Has 8.84 percent corporate tax rate.

SOURCE: Other State's Incentives to Attract or Encourage Aerospace Manufacturing.

CAPTION(S):

Box

BOX: ENTICING OFFERS (See text)