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The Leader July 2013

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Working Together Works

By Carl Guardino, President and CEO

For years, this has been our quiet mantra at the Silicon Valley Leadership Group. It captures the willingness of our 375 member company CEOs and their staffs to work together as companies – who are often fierce competitors in the marketplace – when it comes to the common good and the benefit of our region, state and nation.

It also captures the combined view of our companies to work with “unusual” allies in the labor, environmental, faith and NGO communities.

When it comes to our efforts to facilitate active and engaged partnerships with other business organizations; such as our California coalition of 23 regional business groups to advocate a united message in Sacramento (the REAL Coalition) and its nascent counterpart in Washington, D.C. of 20 regional business groups from around the country (the National Metro Business Alliance), we know we can best leverage limited resources by working together.

During the past two weeks in Sacramento, such coalitions of our members, our allies, and our business association partners were at play on two significant wins in our workplan – wins for the Golden State – with the bi-partisan passage of the sales and use tax (SUT) exemption for manufacturing equipment and R&D, and the funding formula for education.

Yet “working together works” is not solely a mantra for the Leadership Group. With Sacramento’s actions last week, we hope it will also be a mantra to Legislators; the good that can happen when they work across the aisle for common sense solutions to strengthen our economy and improve our education system.

Kudos to Governor Jerry Brown and legislative leaders in both houses and both parties for putting progress before politics with these two large wins. As the summer and the session heat up, we still hope and expect to see more bi-partisan wins, such as the need for significant and meaningful CEQA reform.

Much has been done, but working together, there is still much we can do.

Positive Steps to Improve California’s Jobs Outlook and Economic Competitiveness

By Kirk Everett, Vice President of Government Relations and Tax Policy

California businesses have operated since 1993 without any competitive tax incentives to invest in manufacturing, R&D or biotech. That changed last week when the Legislature overwhelmingly voted to adopt a sales and use tax (SUT) exemption for jobs and equipment purchases for manufacturing, R&D and biotech . This is a great step forward for California in advancing new and more effective economic development incentive options for broad segments of businesses. To help make this a reality, the Silicon Valley Leadership Group worked in conjunction with the California Healthcare Institute, PhRMA, BIOCOM and BayBio.

The Silicon Valley Leadership Group has been a strong voice during the last two decades in support of a full, broad-based SUT exemption giving California a more leveled playing field against competitor states. The new law will reform existing economic development funds, including an estimated $400 million on a sales tax exemption, effective July 1, 2014 to January 1, 2022. The exemption will boost manufacturing and biotech R&D jobs and business growth including $200 million to reform enterprise zones and up to $100 million to reward businesses that would like to expand and operate in California.

This game changing vote was made possible due to the partnership between Governor Jerry Brown and the Legislature. They focused on a compromise and solutions, rather than rancor and rhetoric. Deep gratitude for the vote outcome goes to the Silicon Valley Caucus: Senators Jim Beall, Ellen Corbett, Mark DeSaulnier, Jerry Hill, Bill Monning and Assembly members Luis Alejo, Nora Campos, Paul Fong, Rich Gordon, Kevin Mullin, Bill Quirk, Mark Stone, Phil Ting and Bob Wieckowski. Assembly members Jeff Gorell and Katcho Achadjian were instrumental in working to reach an agreement by expanding the sunset for the SUT exemption.

In the Golden State, boom and bust economic cycles are here to stay and will certainly affect the long-term fate of these tax incentives staying on the books. In the meantime, businesses will be able to expand investments creating roadmaps for continued success. The flexibility offered by the new law in deciding where to place long-term capital investments will result in a better, more sustainable economy and lead to additional jobs and investments in our communities.

If you would like more information or have any questions, please email Kirk Everett.

Local Control Funding Formula

By Dennis Cima, Senior Vice President

The Silicon Valley Leadership Group and our partners throughout California are pleased by the Governor and state Legislature’s recent action to create a new K-12 funding formula that will provide additional resources to the schools and districts that need them most. Our members have been seeking this type of reform for almost a decade.

The state’s new formula, known as the Local Control Funding Formula (LCFF), provides means that districts will receive funding specific to their students’ needs and are granted the flexibility to deploy resources to meet the needs of their local area. It fundamentally changes the way our students are supported by creating a more effective and transparent funding system. The measure also requires districts to become accountable for results to parents, community members, teachers and administrators.

The new formula allocates funding on three different levels. Each student gets a base grant between $6,947 and $8,289, depending on their grade level. Students who qualify as “high-needs” (English learner, low-income, foster child) will receive a supplemental grant, of 20 percent added to their base grant. Districts consisting of more than 55 percent high-needs students will be given a “concentration grant.” The concentration grant provides each high-needs student above the 55 percent threshold with an additional 50 percent of their supplemental grant money.

There are also provisions in the formula to ensure districts are held harmless by the new formula, avoiding wide fluctuations in funding.

LCFF will be implemented over the next eight years, and as with any sizeable change, there will be obstacles along the way. It is rare, however, that local school districts receive flexibility from Sacramento to serve their students. The Leadership Group urges all California communities to work diligently and patiently to implement this new initiative and to develop a complete system that makes antiquated funding methods a distant memory.

The new formula is unlike anything the state has experienced in the last 40 years in education policy. However, it is a reminder that the education funding “pie,” in both K-12 and higher education, is not growing at the necessary rate to develop our future workforce and to ensure high quality. If California is serious about closing the educational achievement gap, the state will need to take additional bold actions to develop a comprehensive birth-to-eight policy agenda and equally historic measures to stabilize and bolster our investments in our entire education pipeline.

Let’s hope this does not take another 40 years.

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