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Investing in Space
By Jack O'Connell

Investing is popular.

One cannot have a conversation today without talking about stocks or mutual funds.

A new generation of job seekers is being lured with (or asking for) stock options that represent a personal investment in the success of the company.

By the same token, California is again in a position to invest in the backbone of its success - its infrastructure. We are considering or have embarked upon huge new investments in roads, schools, water conveyance, and commercial aerospace, to name a few.

Aerospace as infrastructure? Certainly.

Beginning in 1994, California exempted from sales tax those items used in the state on commercial space launches. It was a key component of an innovative package of cash and tax incentives California implemented to attract and retain commercial space development in the state.

Since then, we have witnessed 22 purely commercial space launches at Vandenberg Air Force Base, where previously there had been three. Fifty-two million private dollars have been invested in space-related facilities at Vandenberg, and more than 18 firms have set up shop to develop commercial applications at over a hundred of the base's facilities. All this has occurred during a time of shrinking federal space and defense spending.

In the next three years, more than $120 million more will likely be invested privately at the base.

But that investment pales in comparison with efforts at other potential launch sites and in nearly every community - from the Silicon Valley to the high desert - where small and large companies produce myriad high-tech components to launch or be launched into space. What is more, a vibrant industry has generated ancillary investment in educational, amateur and non-profit space applications.

Some companies' commercial space workforces have doubled in the past five years, so one can easily see the direct economic benefit to California in increased sales and income tax revenues this investment has generated. It stands to reason, therefore, that every dollar we spend on future investment should net California many out-year dollars in income derived from increased employment and sales.

I introduced Senate Bill 1582 this year to expand the sales tax exemption on space-related components. This targeted tax cut will help keep California competitive in the aggressive global commercial space marketplace, thus keeping and attracting jobs and income to this state.

As we saw with the first incentives, the potential is huge. Unfortunately, California is not alone in recognizing this; all of our main competitors - Florida, Alaska, France, Russia, and China - have stepped up their efforts and their subsidies. California must step up as well, or risk losing out on a very lucrative market.

Since the state will never directly subsidize launches, as foreign players do, it must be creative in bringing the costs of launch services down. California has always competed strongly in its workforce, expertise, facilities, and convenience. It now must compete a bit more strongly on the cost side of the ledger.

SB 1582 is an ongoing investment that is not only prudent for California, it is a crucial component of the state's economic infrastructure.

State Senator Jack O'Connell, first elected to the Legislature in 1982, represents the 18th District, including counties of Santa Barbara, Ventura and San Luis Obispo.