California Needs to Compete for Key Military Jet Contract

Taxpayers in Missouri and Texas dance in the streets upon reading editorials such as The Times wrote Oct. 26 opposing my legislation to get California on a level playing field in the competition to win the Joint Strike Fighter contract.

While these states and others have actively competed for aerospace-related business, California has not even stepped onto the playing field. During the 1990s, California lost more than 500,000 aerospace jobs and $14 billion in contracts that would have paid significant taxes for new schools and more police patrols. According to the Los Angeles Economic Development Corp., L.A. County bore the brunt of the job loss: 180,600 aerospace jobs and 361,000 related ones.

Most of these aerospace jobs still exist but have been relocated to other states. Competing for aerospace contracts via California’s skilled workers, great weather and access to talented suppliers and subcontractors, as The Times recommended, is an outdated concept. Unfortunately, rival states have hired many of California’s skilled workers, suppliers and subcontractors. The key component in this competition is the bottom-line cost of production.

The two prime contractors competing for the Joint Strike Fighter program have indicated they will build the fighter planes outside California: Lockheed Martin in Fort Worth and Boeing Corp. in St. Louis. California was bypassed because of the cost of doing business here. My bill, AB 390, would make our state competitive in the battle for this contract.

The Joint Strike Fighter contract is the greatest military contract in history, a 20- to 25-year, $750-billion to $1-trillion program. Ten thousand workers will be employed by the winning prime contractor alone, and another 10,000 by subcontractors and suppliers.

My proposal would provide a 15% tax credit on gross sales resulting from the Joint Strike Fighter program. Your editorial claimed California could not bear the cost of this incentive, but I argue that California cannot bear the cost of losing. AB 390 would cost nothing unless we were successful in bringing the jobs to California. If the state won the contract, the state treasury would swell as a result of receiving the remaining 85% of taxes collected on gross sales (by one estimate more than $500 million in new revenue over three fiscal years). The treasury would also benefit from the sales, income and property taxes paid by newly employed workers.

My legislation would create a specifically targeted tax incentive. It would not put money into the pockets of prime contractors headquartered elsewhere, but rather would lower the bottom-line cost of doing production work in California. The incentive would be paid only for work actually performed in the state.

The winners would be California labor: 10,000 new prime contractor employees working on the project. The winners would be California’s small manufacturers and suppliers: 10,000 new employees who would manufacture at least 50% of the final product. The winners would also be the new employees of the spinoff, non-aerospace-related jobs created by this program. The biggest winner would be California.