Brown meditates on inherited tax-break crisis

Give Gov.-elect Jerry Brown credit — he means what he says, even if we need some help trying to decipher it.

Brown not only invited the 800-pound gorilla into his first, meditative town hall-style reflections on California’s deepening economic crisis this past week, he offered to take it around the state and show it off to the voters, who may be asked to tax themselves to reduce our weighty problem.

We don’t know for sure yet, because Brown is not really saying, and why blame him: He didn’t create this mess and he’s happy to let Gov. Arnold Schwarzenegger take full credit for it the next few weeks while the Legislature bickers into the final days before the new year.

Brown may have a lot more questions than answers in solving our near-$30 billion deficit, but I’m all but certain that one of the possible fixes won’t be extending tax breaks to giant corporations as a way of generating new jobs.

At least not right now. And for that we can give credit to our South San Francisco neighbor, biotech behemoth Genentech, which recently pulled off one of the biggest ballot ruses seen in our once Golden State.

That is the outcome from the fate of Proposition 24, which was crushed at the polls last month. The initiative was designed to repeal several corporate tax breaks that the Legislature passed during the raucous budget negotiations of recent years, breaks that will cost California more than $1 billion annually.

Several California-based corporations led the fight against the measure, most notably Genentech, which donated $1.6 million to the No on 24 campaign.

During the campaign, Genentech officials said they were targeting the initiative because the tax breaks provided incentives for job growth and future investments that would allow corporations like itself to continue expanding.

And then about two weeks after the election, Genentech announced that it was laying off about 800 workers in California, most of them at its South City headquarters.

I think it would be fair to say that many people, including the legislators in Sacramento who helped pass the tax breaks, were a little miffed. Outraged might be more to the point, but you can believe that Genentech’s lobbyists have a lot of explaining to do these days.

The company’s action has pretty much trounced the common argument that tax breaks automatically result in job growth. And while Genentech’s leader can say that they’re in an industry separate from most businesses, this is one drug that is no longer selling.

And it makes no difference if you’re a Republican, Democrat or independent. Democratic leaders in Sacramento were the ones leading the budget negotiations to try to chip into the massive deficit last year and since a two-thirds majority was needed to reach a budget deal, party officials had to succumb to a demand from their GOP colleagues to include a number of corporate tax breaks. (Voters thankfully dumped the two-thirds rule in November, which, in theory, should make future budgets easier to pass.)

To be fair, Genentech’s layoffs were ordered by its Swiss parent company, Roche Holding, as part of a global “operational excellence” program that will see the firm cut nearly 5,000 jobs. But still, it seems fairly clear that the corporation knew layoffs were imminent while it was shelling out money against the measure under the guise of new job creation. Jean Ross, executive director of the California Budget Project, was so upset about the inherent hypocrisy of the company’s stance, that she termed it “payoffs for layoffs.”

But the underlying theme in all this is that the state has regularly extended tax breaks to big corporations and received nothing in return. The action by Genentech is certain to change the debate over the merits of tax breaks in that lawmakers are sure to insist on proof that they will actually result in job growth.

It’s hard to read the tea leaves with Brown — his Zen approach to all things big and small tends to leave onlookers perplexed. Yet there’s no drug available right now that’s going to magically change California’s immediate fortune.

But if anybody should be working on one, I think all paths lead to Genentech’s gleaming campus.

Ken Garcia appears Thursdays and Sundays in The Examiner. E-mail him at

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