REPORT ON BILLS FAVORABLY REPORTED BY COMMITTEE

TITLE OF BILL:

AN ACT CONCERNING ELIGIBILITY FOR THE APPRENTICESHIP TRAINING TAX CREDIT.

SPONSORS OF BILL:

REASONS FOR BILL:

To allow trade unions and non-union (merit) equal access to tax credits, thus leveling the playing field and creating more skilled job opportunities in the state

RESPONSE FROM ADMINISTRATION/AGENCY:

None Expressed

NATURE AND SOURCES OF SUPPORT:

Albert & Patrene D' Amico/ D'Amico Electric, submitted testimony: ”Electrical apprenticeship training is so vital to our electrical trade in Connecticut. At this time Connecticut does not have enough electricians and it imperative that we promote apprenticeship training to provide future electricians”…“IEC has a comprehensive four year apprenticeship program approved nationally by the Bureau of Apprenticeship and training and by the State Apprenticeship Council. Tuition to this school is paid wholly by the employer and students, and it is becoming increasingly expensive to operate. There is no funding from the state level for this apprenticeship training. A tax credit for training would encourage employers to expand their work force and provide Connecticut with more trained electricians. As Union shops receive a tax credit for apprenticeship training, it is totally unfair that an open shop does not have the same tax credit offered to it as we incur the same training expenses”.

Richard Martin, Project Manager /Select Energy Contracting Inc. Submitted testimony: “I, as a member of the Independent electrical Contractors of New England, strongly support HB-5023, An Act Concerning Eligibility for the Apprenticeship Training Tax Credit”…”It is unfair to deny merit shop employers the same credit as union shops. No other tax credit on the books in Connecticut is limited to union employers. According to Mr. Martin “The cost of providing apprenticeship training and the tremendous need for more skilled workers in construction trades is the same whether you are a union employer or a nonunion employer.”

Lelah Campo, President of Associated Builders and Contractors of Connecticut, Inc. testified: “Merit Craftsmen comprise over 80% of Connecticut's construction workforce…HB 5023 addresses a discriminatory tax credit for companies with four year apprenticeship training programs…In order for an employee to be considered an apprentice in the eyes of the state, several steps must be followed…All of these steps cost employers; both union and non-union (merit) considerably more than a thousand dollars a year to in order to create a new, skilled apprentice position in their company. Currently Statue 12-217g allows a manufacturer, construction company or plastics company to take a tax credit for every employee who is going through a four year apprentice program with a maximum tax credit of one thousand dollars per apprentice, per year. However one of the requirements for the tax credit dictates that only a program overseen by the union will qualify a company for the tax credit…This current statue is fundamentally unfair. The myth that trade unions incur a greater cost to train and that merit training is subsidized by the state is false. This is the only tax credit in the entire tax code that distinguishes between union and merit shop companies. “

Warren Horton, Vice President of Arthur A. Horton, Inc. submitted testimony: “We feel very strongly about the importance of this Act, as do many others. It is important to maintain apprenticeship training for individuals in our field of electrical. It is also vital to our employment strategies and important to the trade as whole.”

Jeff Leone, President, Air Temp Mechanical Services. Submitted testimony: “As a business owner in Connecticut, I strongly believe that all contractors in Connecticut deserve an equal opportunity for the apprenticeship training tax credit. By not having this credit we are unable to put forward the necessary funds for training and job placement in an already scarce market...By allowing all contractors to benefit from this tax credit we will be able to train more apprentices and develop a secure pool of highly trained techs.”

Eric M. D'Eramo, Director of Business Operations and Resources for Environmental Control, Inc submitted testimony: “I would like to express my strong support for the raised House Bill 5023…You should be eligible for this tax credit if you have a state of Connecticut qualifying apprenticeship training program. Organizational affiliation or type of work performed should not be the deciding factor…Expanding the eligibility of the apprenticeship training tax credit to all companies will return $1000 per registered apprentice to the respective employer. These funds will then be available for hiring additional employees or increasing the educational training of existing employees. Income tax revenue from job creation will far exceed the cost of funding this credit.”

Bruce J. Brown, Project Manager, Southern New England Region, Cianbro Companies submitted testimony: “Union firms receive a $1,000 tax credit for every apprentice that they employ. This is not only a fairness issue, but a jobs creation bill as well. Cianbro Corporation feels that this tax incentive would allow for the creation of new jobs. In our case alone, if we had the very same tax deduction, it would allow us to hire 2-3 more apprentices. In a time of global economies pushing work out of state, we feel that passing HB 5023, would go a long ways into keeping jobs in our state, where they belong.”

Masters Heating & A/C, Inc. submitted testimony: “Eighty percent of the Connecticut Companies in the HVAC trade are non–union shops; we feel that our companies should be afforded the same tax deductions as the union shops. This tax deduction of $1000.00 per apprentice provides a monetary boost to the recipient company which enables them to hire more apprentices, boosting the economic atmosphere of Connecticut…Connecticut is a state that is made up of many small non-union independent businesses ranging from one to fifty employees. We are the heart of employment in this state; take us away and we all lose. Connecticut loses revenue and population; small business will be lost.”

Arthur Cocchiaro, Owner and Manager of ART~CO SERVICES, LLC submitted testimony: “Within the construction industry, current research shows that approximately only 13%-20% of the trade is union. By enacting and supporting the HB, you would be providing the training incentive to the other 80% of the companies in the construction trade like ours that are currently excluded.”

John Yusza, Jr., CONNECTICUT ALARM & SYSTEMS INTEGRATORS ASSOCIATION (CASIA) submitted testimony: “Apprentices learn 90% of their craft on the job. That means that the employer must expend significant resources, including time and manpower, to effectively train its apprentices to help fund the state's apprenticeship training program. The state also recently imposed a user fee on apprenticeship sponsors and apprentices to help fund the state's apprenticeship training program. These fees, in addition to the increasing cost of doing business, can make it difficult for employers to provide apprenticeship training…

The cost of providing apprenticeship training and the need for more skilled workers is the same whether you are a union employer or a non-union employer. “

CONNECTICUT HEATING & COOLING CONTRACTORS ASSOCIATION, INC. submitted testimony: “On behalf of the 200 plus member companies, representing thousands of workers and construction industry business owners, the Connecticut Heating & Cooling Contractors Association, Inc. would like to express our strong support for raised bill HB 5023…The $1,000 tax credit is offset by the creation of new jobs in the state of Connecticut, which translates to new tax revenue sources for the state.”

CONNECTICUT PLUMBING, HEATING & COOLING CONTRACTORS of Connecticut (CT-PHCC) submitted testimony: “Under current law, the apprenticeship tax credit for construction trades is limited to union contractors. This has been a disappointment for those of us in the construction trades who have been trying to work toward encouraging more young people to enter the skilled trades. All contractors should be eligible to receive a tax credit to offset the cost of providing apprenticeship training and to open up more rewarding opportunities for today's young people. Apprenticeship training is the only way of bringing more people into the industry – an industry that is expected to generate significant growth in jobs, according to projections by the U.S. Department of Labor.”

Independent Electrical Contractors of New England, Inc. submitted testimony: “The Independent Electrical Contractors of New England (IEC-NE) strongly supports HB-5023…According to the state Department of Labor's Occupational Employment Projections the demand for electricians will increase by 13.1 % between 2000 and 2010. To meet this demand, Connecticut must take steps to encourage the development of skilled workers through apprenticeship training. As Connecticut has recognized, tax credit can be a powerful incentive for encouraging employers to expand their workforce through apprenticeship training. The rationale that construction trade unions incur additional expenses relative to apprenticeship training because they operate their own schools and non-union apprentices are trained at state funded vocational schools is simply incorrect. IEC-NE has operated a self-sustaining, state and federally approved, apprenticeship training program for electricians for a number of years.”

HOME BUILDERS ASSOCIATION OF CONNECTICUT, INC submitted testimony: “We strongly support RB 5023. Residential builders remodelers and land developers do not participate directly in apprenticeship training programs and, accordingly, our association does not currently offer apprenticeship training courses. However, many of our associate members are in the licensed trades and our builder and remodeler members routinely hire the licensed trades to construct new homes or renovate existing homes. All of these licensed trade employers require apprentices to grow their workforce. Importantly for consideration of this bill, the residential construction industry consists of almost entirely non-union workers…HB 5023 would place all licensed trades on an equal footing and foster competition. The bill will help all construction employers grow their workforce.”

NATURE AND SOURCES OF OPPOSITION:

David Moakley, on behalf of Benedict Cozzi, President of The Connecticut State Building Trades Council testified: “The Trades Council represents over 30,000 journeymen and apprentices in the construction industry, is against HB5023 as it is written. HB 5023 means to remove the language that require an apprentice program be administered by management and labor trustees. The issue is being presented as unions vs. taxpayers, as an inequity punishing open shop employers. The CSBTC does not believe that this accurately portrays the situation. Jointly administered plans can be set up by any entity that is willing to include trustees from a “labor organization” in the planning and oversight of the program. The definition of “labor organization” is ”Any organization of any kind, or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.” (29 USC)…What we feel is the actual crux of this issue…This type of fund falls under the purview of ERISA, the Employee Retirement Income Security Act, and must file reports yearly to the Federal government, obey laws meant to safeguard the people the fund claims to train, and submit to having it finances audited. In general, be much more transparent than the people speaking in favor of this bill wish their apprentice programs to be. If the State of Connecticut is giving tax incentives to train employees, should not they be able to fully monitor the program claiming to do the training?

CSBTC believes removing the requirement for the joint administration of apprenticeship programs will reduce the overall quality of training by removing ERISA oversight of apprenticeship programs taking this tax deduction. The decrease in oversight occurs due to the lack of Federal regulations that non-ERISA programs are subject to. This decrease in oversight will allow some apprentice programs to claim they are training apprentices, legally pay them reduced rates on state projects, take tax deductions for training the people, and produce an extremely low journeyman to applicant graduation ratio. We also feel HB5023 would decrease the number of women and minority apprentices in the industry at a time when the need to include such underserved groups is greatest.

A study using DOL database showed that 54% of the people enrolled in an employer association plan in 1989 and 1990 had dropped out of the program by 1995. No school that fails to graduate over half of their students would be accredited in any other sector of the American education system. In fact, most schools already have trustees that oversee their operations to assure quality of product…We ask that you leave the section on jointly administered plans alone, and look to strengthen the statute by requiring any apprentice program to report their graduation rates to the state on a yearly basis.”

International Brotherhood of Electrical Workers and the National Electrical Contractors Association submitted testimony in opposition to House Bill 5023:

“The International Brotherhood of Electrical Workers and the National Electrical Contractors Association ask that this bill be reconsidered and altered to ensure that the tax credit should go to those who have truly earned it, contractors that have apprentices that achieve full licensure. While we understand the desire to expand eligibility for apprentice training tax credit, we feel that this particular bill will open a Pandora's Box. This bill would allow unscrupulous contractors to recruit apprentices, pay them at a reduced rate, and then terminate their position prior to graduation. Unfortunately, this is a vicious cycle that we have encountered all too often in this industry. This bill would only provide an additional financial incentive to those who abuse this program. By linking the tax credit to graduation one ensures that these young men and women working towards their license are not victimized by unprincipled contractors, and that they are given the training and provided the environment needed to succeed. If you which to expand the program we ask that you also include those programs that are both four and five years long. Often times due to uncontrollable factors, these apprenticeships last longer than four years and thus are ineligible for the tax credit. Anything from an illness, required additional training, to a lack of work may extend an apprenticeship and penalize the contractor…We can not support this bill, but would be happy to do so if these suggested changes were incorporated.”