Program to encourage hiring of welfare recipients sputters

July 30, 1995|By Peter Jensen | Peter Jensen,Sun Staff Writer

State officials are finding relatively few takers for a program that grants businesses thousands of dollars in tax credits for hiring welfare recipients.

Three months ago, Maryland became one of only a handful of states to adopt the tax incentive, a measure some regard as a key provision of the welfare reform movement. But since the program went into effect July 1, employers have sought to certify fewer than 40 prospective workers -- a tiny fraction of the estimated 70,500 people who could qualify for the benefit, state officials said.

"It concerns me," said Sen. Ulysses Currie, a Prince George's County Democrat who introduced legislation creating the program. "We have to push this. It's going to require a sales job."

Maryland's program, called the Employment Opportunity Credit, permits companies to receive a tax credit of 30 percent of an employee's annual wages up to a maximum credit of $1,800. The new hire must have received welfare benefits for at least the previous six months.

An employer who retains the worker for more than one year can continue to receive a tax credit -- 20 percent of wages or $1,200 total in the second year and 10 percent ($600) in the third year.

The goal is to encourage businesses to hire and keep people who previously received benefits under Aid to Families With Dependent Children (AFDC). In addition, there is a companion tax credit available to companies offering child care services to those workers -- $600 per employee the first year, $500 the second and $400 the third.

While the state will collect less in taxes from companies receiving the credits, legislators reasoned that decreased costs of government benefits would largely offset that loss. The average AFDC family of three receives $373 per month or $4,476 per year, not including food stamps or subsidized medical care.

But the program garnered little attention during the General Assembly session. It was overshadowed by the politically sensitive debate over a welfare reform pilot project that is set to begin next year.

The state agency that supervises the program has not yet printed a brochure or even completed the forms necessary to grant the tax credit. The legislation creating the program did not authorize funds to promote it.

"I think a lot of companies are just not aware of it," said Gene L. Burner, executive vice president of the Maryland Chamber of Commerce. "There's not been a lot of talk about it."

"We have to get the word out that the law exists," said Paul A. Tiburzi, a Baltimore attorney who lobbied for the legislation. "It was something of a sleeper during the legislative session."

Mr. Tiburzi and other advocates said they remain confident that Maryland employers soon will show enthusiasm for the tax credit. A coalition of 51 companies and business associations supported the legislation last winter in Annapolis and most likely will jump on board the program.

David J. Ghee, who administers the program for the state Department of Labor, Licensing and Regulation, predicted that at least 3,000 workers will benefit by June.

"We will aggressively pursue this," Mr. Ghee said. "Maryland employers tend to respond to these kinds of incentives."

Since 1978, thousands of Maryland businesses have taken advantage of the federal Targeted Jobs Tax Credit, a program that offers tax incentives for hiring welfare recipients as well as Vietnam veterans, ex-convicts, disadvantaged youths and the disabled.

Last year, an estimated 30,000 jobs were eligible for the federal tax credit. About 17 percent of those came from the AFDC rolls, Mr. Ghee said.

But that program was allowed to expire in December by the Clinton administration. U.S. Labor Secretary Robert B. Reich said the program didn't really create jobs, but did provide a tax windfall to businesses that would have hired the disadvantaged anyway.

That criticism apparently did not deter Maryland lawmakers who modeled Maryland's program after one that has existed in Pennsylvania since 1982. That program involves an average 5,000 to 6,000 workers each year from a pool of 250,000 potentially eligible AFDC recipients.

"Tax credits always seem to have more potential than success," said Frank Yake, who administers the program for the Pennsylvania Department of Public Welfare. "It takes time to get word of it out to employers."

Supporters said the real savings for Maryland are in job training programs that can cost as much as $7,000 per worker. Businesses must take the responsibility for training the welfare recipients they hire because workers trained under state programs can't qualify for the tax credit.

"Employers will have to learn to recruit in a nontraditional way," said Jane McDermott of APG Inc., a Columbia-based personnel consultant. "Public service also has to be a component. This can't be purely a financial decision for a company."

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