Thanks to a special state tax credit, Alba and Francisco Pineda developed a thriving furniture manufacturing business in economically distressed South Los Angeles instead of getting swamped by low-cost furniture from Asia.

For the last four years, the Pinedas have received tax credits worth tens of thousands of dollars for hiring more than two dozen local workers and investing in equipment at a recently expanded facility near their original plant.

“It’s too expensive to hire new workers here without the tax credits. They have helped us stay afloat as imports from China have impacted the rest of the industry,” said Alba Pineda, co-owner of Cisco Bros. Furniture.

But now, those enterprise zone tax credits – the state’s primary economic development tool – are under attack in Sacramento as a drive to reform the 20-year-old program gathers steam.

That drive could jeopardize the renewal of 18 enterprise zones throughout the state that expire later this year, including the one where Cisco Bros. is located. It also could kill an attempt by Long Beach city officials to offer tax incentives to keep Boeing Co.’s aerospace operations – and 6,500 jobs – in that city.

“You look at what has happened to manufacturing in Los Angeles County and then realize that the enterprise zone is the only state program we’ve got here to support manufacturing and the good middle-class jobs that it brings,” said Robert Swayze, manager of economic development for the City of Long Beach.

The program gives companies within defined and economically depressed areas tax credits for investing in plant and equipment and hiring disadvantaged workers who live in the zones. The zones are administered by the local governments. Los Angeles County has eight of the state’s 42 enterprise zones, including five run entirely or in part by the City of Los Angeles, one in Long Beach, one in Altadena/Pasadena and one for the cities of Lancaster and Palmdale.

But while the program is popular with businesses and local economic development officials, critics say it has spun out of control as tax breaks often go to companies that don’t really need them. They say many of the zones no longer target areas of severe economic depression and cite cases in which companies shop around for tax credits or hire people who don’t face substantial barriers to getting a job.

Indeed, the incentives are strong. Companies located in the zone can receive a one-time, $31,500 tax credit stretched over five years for each employee they hire who lives within the zone.

Over the last several months, a state Assembly committee has held exhaustive hearings on reforming the enterprise zone system. Last month, the committee issued a report calling for “better targeting of distressed areas and serving the needs of disadvantaged persons.”

Among the recommendations to emerge: requiring future enterprise zone designations to be restricted to impoverished communities that already have their own economic development programs in place; restricting employment tax credit vouchers to people who come from low-income households and eliminating the use of vouchers for employees who have already been hired.

The recommendations also call for better monitoring of the program to ensure that companies are not gaming the system.

“The existing program does not have appropriate management and monitoring requirements for oversight. It also doesn’t measure whether the state’s objectives are being met, and there’s also no reasonable way to quantify whether the state is getting a reasonable return on its investment,” said Toni Symonds, chief policy consultant to the Assembly Jobs and Economic Development Committee.