Wednesday, November 26, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Should California subsidize new Air Force bomber?

walters column sig

By
From page A11 | July 04, 2014 |

The U.S. Air Force apparently wants to develop a new high-tech strategic bomber – but the scope of the project, or even whether it materializes, is a bit hush-hush.

If a new bomber flies, it apparently will be a bidding competition between a partnership of Boeing and Lockheed Martin on one side and Northrop Grumman on the other – but even that is a bit fuzzy.

The aerospace giants brought their dogfight to the Capitol on Tuesday as a Senate committee considered – and changed – a bill that would provide as much as $420 million in state subsidies to the Boeing-Lockheed Martin combo.

Subsidies for manufacturing significant portions of the “advanced strategic aircraft” in California have kicked around the Capitol for months. But suddenly, last week, the Assembly passed a newly drafted measure that would provide tax credits for California jobs created by a “major first-tier subcontractor” – a term that, as defined, applies only to Lockheed Martin, Boeing’s junior partner.

Assembly Bill 2389 was drafted by Lockheed Martin, along with Gov. Jerry Brown’s administration, and legislators were told it must be enacted quickly to meet a Defense Department deadline in July for filing proposals, because the Legislature is recessing for a month at the end of the week.

However, when it hit the Senate Governance and Finance Committee on Tuesday, its passage – at least as drafted – became somewhat problematic.

Northrop Grumman, which has extensive operations in Southern California, cried foul, as did smaller would-be subcontractors, because they wouldn’t qualify for tax breaks under the bill’s narrow definitions.

The Senate leadership, meanwhile, was displeased with a potentially heavy hit on the state treasury and wanted to have the tax credits come from “California Competes,” a money pot that Brown can use to underwrite job-creating investments.

The bill’s backers said that imposing limits on the tax credit might doom the Boeing-Lockheed Martin bid in the Pentagon competition.

The bill’s nominal author, Assemblyman Steve Fox, D-Palmdale, resisted amendments, but chairwoman Sen. Lois Wolk, D-Davis, insisted and the amended bill passed on a 4-2 vote.

This appears to be the year for big corporate subsidies. A big tax break for the movie industry is moving through the Capitol, and Brown and legislators are working on “incentives” to persuade Tesla tycoon Elon Musk to locate a big battery factory in the state.

The Finance and Governance Committee’s staff suggested in its analysis of AB 2389 that if it’s enacted “without complete and verified information,” legislators “should expect other firms to threaten to shift employment out of California unless the Legislature grants them significant tax benefits outside the usual process . . . ”

Indeed they should.

Dan Walters is a columnist for the Sacramento Bee. Reach him as dwalters@sacbee.com.

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