SENATE BILL REPORT

SB 6548

BYSenators Lee, Warnke, Smitherman, Rasmussen and Fleming; by request of Employment Security Department

Providing funding for the targeted jobs tax credit program.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):January 20, 1988; January 26, 1988

Majority Report:  That Substitute Senate Bill No. 6548 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Lee, Chairman; Conner, Deccio, McMullen, Smitherman, Warnke, West.

Senate Staff:Stephen Boruchowitz (786-7429)

                  January 26, 1988

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, JANUARY 26, 1988

BACKGROUND:

The targeted jobs tax credit program (TJTC) provides federal tax credits for employers hiring individuals from target groups who have historical difficulty in obtaining and holding jobs.  The credit can amount to $2,400 per worker in the first year of employment.  The Department of Employment Security reports that since 1980, approximately 78,000 Washingtonians have been assisted by this program, and businesses have received about $250 million in federal tax credits.

The Department of Employment Security has the responsibility to issue federal tax credit certification to employers.  The TJTC program also requires the department to provide technical assistance, training, monitoring and other administrative functions to support the certification process.

After a brief program lapse in 1985, the federal government reinstituted the program in 1986, but did not include administrative funds, which had been provided before.  The Department of Employment Security has been covering these administrative costs out of other operating funds.

The federal interest payment fund was established by the state to reserve funds, in case of need, to pay interest on a federal loan granted to the unemployment insurance fund.  The FIPF was created out of a special tax for the first quarter CY 1984.  The loan was repaid to the federal government prior to interest being due, and the fund has been used once before to appropriate funds for administrative costs of the department's programs.

SUMMARY:

Legislative findings state that:  the state has a vital interest in the economic benefits from tax credit savings being reinvested in the economy; the tax credit also serves as an incentive to hire otherwise hard-to-place workers; the Departments of Corrections, Social & Health Services, Veterans Affairs, and the Superintendent of Public Instruction utilizes TJTC as an incentive for employers to hire hard-to-place workers.

$1,706,089 for the biennium is appropriated from the federal interest payment fund to support administrative costs incurred by the Department of Employment Security related to the certification of federal tax credit for hiring workers under the TJTC.

This appropriation provides a funding base for the department to operate the program for the current biennium.

EFFECT OF PROPOSED SUBSTITUTE:

A processing fee is provided for, rather than appropriation from the federal interest payment fund, to cover the cost of administering the program.

Appropriation:    $1,706,089 from a special account within the unemployment compensation administration fund

Revenue:    none

Fiscal Note:      available

Effective Date:March 1, 1988

Senate Committee - Testified: Graeme Sakrison, ES; Isiah Turner, ES; Cliff Finch, AWB