Updated Legislative Priorities for Small Business Advocates

CA-legislatureFollowing the annual legislative house of origin deadline, NFIB California reflected on our victories and challenges ahead with our “The Good, The Bad, & The Ugly” bill list. Each year we proactively identify which bills will have the greatest impact, either negative or positive, to our 22,000 small businesses across California. Throughout the year we advocate in the Capitol for these priorities in order to lower the burden and cost of doing business in this state.

It is now halftime in the Legislature, and with that comes some welcome victories for small business, but more importantly there remain significant challenges ahead in these final months of this legislative session. With this being the first year in the 2017-18 two-year session, it is important to remember nothing is ever truly dead, but below are some highlights of where small business stands at legislative halftime.

Victories:

Good Bills Passed

AB 657 (Cunningham): Requires state agencies that significantly impact small businesses to display the name and contact information of the small business liaison on the agency’s Web site, and to fill any vacancy in this position within 3 months. Passed out of Assembly, in Senate Appropriations.

AB 816 (Kiley): Requires public California Environmental Protection Agency meetings, including subordinate departments like CARB and OEHHA, to be broadcast online and interactive to the public. It also requires them to be recorded for future access. Passed out of the Assembly, in Senate Rules.

Bad Bills Stopped

AB 5 (Gonzalez-Fletcher): Requires employers with 10 or more total employees to offer more hours to their part-time employees before they can hire new workers, including temporary or seasonal staff. It creates a new right to sue your employer if you don’t get more hours. Held in Assembly Appropriations.

AB 43 (Thurmond): Imposes a 10% tax on businesses that contract with CDCR for the “privilege” of having a state contract in order to fund education programs designed to discourage future criminals. It sets a bad precedent by taxing businesses just for having a state contract. Held in Assembly Appropriations.

SB 300 (Monning): Requires all sugar-sweetened beverages sold in California to have a health warning label, and creates new civil penalties for failure to do so. This is yet another example of nanny government. Held in Senate Health.

Challenges Ahead:

Needs to Pass

AB 12 (Cooley): Requires all agencies to do a full review of their regulations to see if they are outdated, too costly, or overlap with other rules. Such a full-scale review has not happened in decades. Held in Assembly Appropriations.

AB 77 (Fong): Requires legislative approval for any regulations with an economic impact of over $50 million. Held in Assembly Appropriations.

AB 281/AB 1429/AB 1430: Create desperately needed PAGA reforms, including extending the timeframe in which a business can cure a problem before being sued, limiting the types of PAGA suits, and requiring an agency investigation before suing.

AB 1005 (Calderon): The Department of Consumer Affairs oversees the licensure of businesses and professions. This bill would allow 30 days for abatement of the violation before the administrative fine becomes effective. Held in Assembly Appropriations.

Need to Stop

AB 1008 (McCarty): Prohibits employers from asking applicants about convictions until they make a conditional offer of employment. It creates new obligations and liabilities for employers and allows for new lawsuits. It will hamstring a small business owner’s ability to quickly fill a position. Passed out of the Assembly, in Senate Rules.

SB 2 (Atkins): Creates a new $75-$225 per document fee (or tax) for the transfer of real property to fund affordable housing programs. Held on the Senate Floor.

SB 562 (Lara): Creates fiscally reckless single-payer healthcare system in California. This would cost $400-500 billion annually, and would require enormous tax increases to fund. It would hurt the quality of healthcare for our citizens. Passed out of the Senate, in Assembly Rules.

SB 640 (Hertzberg): An intent bill that will expand the state sales tax to services. Small businesses would have to collect a new tax, and also pay the tax when they contract out for services. Held in Senate Governance & Finance.

Tom Scott is CA Executive Director, National Federation of Independent Business.

This article was originally published by Fox and Hounds Daily

The California caste system

Caste system IndiaAfter the Legislature imposed billions of dollars in new car and gas taxes on Californians last month, a friend emailed me to register his disappointment and disgust: “It’s like we live in an apartheid society where the politically powerful live in luxury and laugh at the working people of our state.”

Sadly, his point is accurate. The separation between the ruling class and the rest of Californians is becoming more extreme by the day. So much so, in fact, that California is beginning to resemble a society based on a caste system, meaning a formal structure of social stratification (usually associated with India) deriving from the hereditary division of the population into the highest caste (Brahmins) and various castes below.

California’s high cast Brahmins reside primarily in coastal enclaves including the San Francisco Bay Area, Santa Barbara, Malibu and the west side of Los Angeles but they are also numerous in the Silicon Valley and Hollywood. These elites tend to be high income or wealthy and can afford to separate themselves from the trials and tribulations suffered by average citizens. This immunity from “real world” problems allows them to obsess about issues like bathroom access, climate change or the president’s hair. They lack respect or compassion for less fortunate citizens and, if truth be known, they find those outside their caste to be annoying.

And a gas tax? This tax to them is nothing when they can avoid paying it by plugging in their $120,000, taxpayer subsidized Teslas. And if their cars do run on gas, they never even bother to check the price. These are folks who wouldn’t be caught dead in a Walmart.

Next in the caste hierarchy are the politicians and members of government employee unions. While the Brahmans may help to elect the politicians, as do the unions, this second tier caste is much less secure because they still have to scrounge for financial advantage. The unions — representing the highest compensated state and local workers in all 50 states — are constantly seeking more pay and benefits. And because the politicians are constantly trying to consolidate and expand their influence, they establish a symbiotic relationship with the unions to keep campaign contributions rolling in that guarantee reelection. (Some electeds, who have spent years living off the taxpayers’ dime, genuinely fear they may not be qualified for work in the private sector and so will do almost anything to keep a grip on power.)

These politicians will parrot the concerns of the Brahmins about matters like the environment, but they do not have a committed belief system. They trip all over themselves in their rush to make environmental law exceptions for projects like stadiums that are backed by wealthy interests or unions in a position to secure or advance the politicians’ careers.

The next rank on the scale of who’s who in California are the non-working poor. While the upper classes do not want to rub elbows with them, they are regarded as useful because their votes can be purchased through extensive entitlement programs that are paid for by the very lowest class.

On the very bottom rung of the stature ladder, the equivalent of the Indian’s “Untouchables,” are working Californians, and the lowest of these workers is anyone who labors at a job that requires perspiration — these are regarded as little more than beasts of burden.

When the elites bother to consider members of the working class, they regard them as a source of tax revenue and little more. Ideally, to their way of thinking, they exist to pay taxes and not make waves.

A massive new gas tax adding to the burden of working Californians? Why it is just the price of being able to share a beautiful state and great weather with their social betters.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This piece was originally published by the Orange County Register

Small Business Bills Approach Deadlines: The Good, Bad and Ugly

CA-legislatureMay is a critical month for legislation to move through various policy and fiscal committees before the house of origin deadline. Any Assembly bill which does not make it to the Senate (or Senate bill to the Assembly) by June 2 is effectively dead for the remainder of the calendar year, but can be revived in 2018, during the second year of the two-year session. These are known as two-year bills.

While NFIB is tracking and lobbying a wide range of bills and we will not know their fate for another couple of weeks, we have released an updated list of our Good, Bad, & Ugly bills. These bills represent legislative proposals which will have the greatest impact, either positive or negative, on small businesses in California.

Running a small business in a state which enacts nearly 1,000 new laws and associated fees and penalties every year, it is absolutely essential that the business community is aware of these bills before they become law, and engage in the process. This is why we always have the latest version of The Good, The Bad, & The Ugly bills available at www.nfib.com/ca/gbu

Below are a few highlights of what we are working on the coming weeks. Following the house of origin deadline, we will update our full list and continue to advocate for policies that help small businesses survive in California.

Good Bills:

AB 1005 (Calderon): DCA Penalties: Right to Cure: The Department of Consumer Affairs oversees the licensure of businesses and professions. This bill would allow 30 days for abatement of the violation before the administrative fine becomes effective.

SB 524 (Vidak): DLSE Regulatory Compliance: Creates a “good faith” defense for employers that complied with written guidance on Division of Labor Standards Enforcement regulations.

Bad Bills:

AB 43 (Thurmond): Department of Corrections Contracting Tax: Imposes a 10% tax on businesses that contract with CDCR for the “privilege” of having a state contract in order to fund education programs designed to discourage future criminals. It sets a bad precedent by taxing businesses just for having a state contract.

SB 300 (Monning): Sugar-Sweetened Beverage Warnings: Requires all sugar sweetened beverages sold in California to have a health warning label, and creates new civil penalties for failure to do so. This is yet another example of nanny government.

Ugly Bills:

AB 5 (Gonzalez-Fletcher): “Opportunity to Work” Act: Requires employers with 10 or more total employees to offer more hours to their part-time employees before they can hire new workers, including temporary or seasonal staff. It creates a new right to sue your employer if you don’t get more hours.

SB 562 (Lara): “The Healthy California” Act: Creates a single-payer healthcare system in California. This would cost $250 billion annually, and would hurt the quality of healthcare for our citizens.

Tom Scott is the State Executive Director for NFIB California, which represents 22,000 dues-paying small business members across the state.

This piece was originally published by Fox and Hounds Daily

More sleight of hand with gas tax hikes

gas prices 2If Gov. Brown and members of the California Legislature think that the backlash against the car and gas tax increases will subside any time soon, they are mistaken. The controversy continues to dominate both traditional and social media and, in fact, the more that taxpayers learn about these transportation tax hikes the angrier they get.

Our political elites are learning that taxes on cars and gasoline remain very unpopular because they fall disproportionately on the working Californians — which is where the majority of voters reside. And the resentment might only grow when the taxes actually kick. Just wait until the bills from the DMV start showing up in the mail starting in January of next year and the gas tax increase starts even earlier in November of this year.

There are times when Californians are simply resigned to pay higher taxes imposed by Sacramento, but this might not be one of those times. Many are calling for a referendum of the tax hikes only to be disappointed with the news that, under the California Constitution, a tax increase can’t be repealed via a referendum. Nonetheless, it is possible that the tax package can be rolled back via an initiative and some groups are pondering that course of action. Other interests want more immediate action and are openly discussing recall efforts against some legislators who supported the tax package. …

To read the entire column, please click here.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

Proposed CA Bill Would Cause Massive Tax Increase and Potential International Trade War

TaxesDespite multiple tax increases being adopted by voters just last November, SB 567 (Lara) was introduced that, if enacted, will result in another multi-billion dollar tax increase on businesses and individuals. And, the bill could once again raise the ire of major international trading partners, including Great Britain and Japan.

With the newly acquired super-majority status of Democrats in both the state Assembly and state Senate, the business community has been concerned about potential tax increases brewing in the Legislature. SB 567 represents the biggest threat so far.

SB 567 would make four major changes to California tax law. According to the bill’s author, this measure “will close four popular loopholes that benefit millionaires and ensure high income earners making above one-million-dollars annually, pay their fair share in taxes.” Senator Lara also claims, “Millionaires have mastered our tax code to take advantage of popular loopholes. As a result, the super-rich and the largest corporations in California do not pay their fair share in taxes.”

The approach of seeking new sources of revenue, such as that contained in SB 567, seems counter-intuitive after the electorate adopted multi-billion tax increases just a few months ago by passing Prop. 55 (12-year extension of the Prop. 30 personal income tax increases), Prop. 56 (a $2 tax imposed on each pack of cigarettes), and Prop. 64 (which includes several tax increases on marijuana and marijuana products).

What is different for the 2017 session is that Democrats have achieved the necessary 2/3 majorities in the state Senate and Assembly to pass tax increases without any Republican involvement under the requirements of Prop. 26 (amending Article XIIIA, Section 3(a) of the California Constitution), assuming signature by the governor – or enough votes to override a gubernatorial veto. California is one of just a handful of states that requires a 2/3 majority for increasing taxes by a vote of the Legislature.

What does SB 567 propose? As introduced, the bill contains four significant tax increase provisions. First, for tax years beginning January 1, 2018, SB 567 would require charitable remainder trusts (CRTs) to be at least 40 percent of the initial fair market value of all of the property placed in trust. Existing state law exempts from state tax any charitable remainder trust including that the value of the trust must be at least 10% of the initial fair market value of all the property placed in trust.

A CRT is an irrevocable trust that generates an income stream for the donor to the CRT with the remainder of the donated assets going to charity. Unfortunately, proponents claim CRTs benefit charities but allow taxpayers to avoid paying taxes. The bill would raise the amount going to the charity by 300 percent. It would make a CRT less attractive and adversely impact charitable giving. It would also take California out of conformity with federal law, which creates administrative burdens for both taxpayers and the Franchise Tax Board in administering the law.

Second, for persons who died on or after January 1, 2018, SB 567 would revise the law so that no adjustment is allowed where the person who acquires the property has an adjusted gross income or net income over a specified amount. Existing state law, for the purpose of calculating the gain or loss upon the disposition of property, generally the basis of property acquired from a decedent is the fair market value at the date of death.

California conforms to federal tax law on the “step-up in basis” for appreciated property that has been inherited. SB 567 would eliminate this provision of federal law for those with income above $1 million, once again targeting those upon whom the State of California is ever dependent upon financially. As a result, the bill would create different rules for California taxpayers complying with federal law and force those individuals to pay capital gains on inherited property that has appreciated in value.

Third, SB 567 would retroactively to January 1, 2017 eliminate the deduction for compensation paid to CEOs for pay based on commission or on meeting certain performance goals. Retroactive tax law changes are fundamentally unfair to taxpayers as they change the rules midstream. This creates undue hardship and confusion for residents.

Existing state law, in conformity with federal tax law, provides that a publicly held corporation may not deduct remuneration paid to the CEO to the extent the amount of compensation exceeds $1 million, except where the amount is based on commission or on meeting certain performance goals. As such, a deduction for that compensation is permitted on that basis even if it exceeds $1 million. This change in law would take California out of conformity with federal income tax law by disallowing the deduction for publicly-traded corporations.

Fourth, SB 567 would retroactively to January 1, 2017 remove the water’s-edge election and specify that all existing electors would be unable to file using the water’s-edge method for tax years beginning on or after January 1, 2023, thereby forcing all corporations to file on a worldwide unitary basis. Existing state law allows corporations to elect whether their income is determined on a water’s-edge or worldwide unitary basis.

While the U.S. Supreme Court upheld California’s use of “worldwide combined reporting,” the state allowed a “water’s-edge election” beginning in 1987 due to pressure from foreign governments and multinational corporations, as well as sound tax policy. SB 567 would re-open this debate and cause countries like England and Japan to again propose retaliatory measures against U.S. corporations.

The claim by proponents of this tax law change is that corporations stash money in tax haven countries and worldwide combined reporting is the only way to tax those revenues. SB 567 would repeal the water’s-edge election and force all corporations to pay much more in corporate taxes to California. Under this approach, California companies would end up paying taxes on foreign income earned outside the U.S. which would be inappropriately apportioned to California. The bill would represent a massive tax increase disguised as “fairness” in taxation.

Moreover, SB 567 would grant California the ability to tax income earned outside of the water’s-edge of the United States, a practice which is not followed by any other state in the nation. The practical effect would be to allow the state to tax income that has already been subject to taxation by a foreign jurisdiction. And California-based companies would be subject to retaliatory tax measures by other countries in which they are conducting business.

As the Legislative Counsel has correctly determined, SB 567 makes multiple changes in state statutes that would result in a taxpayer paying a higher tax within the meaning of Article XIIIA, Section 3 of the California Constitution and thus requires a 2/3 majority vote of both houses of the Legislature in order to reach the governor’s desk. Hopefully, the Legislature will reject this measure.

Chris Micheli is a lobbyist with the Sacramento governmental relations firm of Aprea & Micheli, Inc. He can be reached at cmicheli@apreamicheli.com.

This piece was originally published by Fox and Hounds Daily.

Gun Groups Should Be Allowed to Put Lawmakers’ Home Addresses on Internet Says Fresno Judge

As reported by the Sacramento Bee:

Attorneys for the California Legislature are weighing whether to appeal a federal court ruling that could allow gun rights advocates to publish the personal information of individual lawmakers.

Diane Boyer-Vine, the state’s legislative counsel, said Wednesday that her office was reviewing the preliminary injunction issued by U.S. Chief District Judge Lawrence O’Neill of Fresno.

O’Neill had moved to halt a California law that restricts the internet publishing of home addresses or phone numbers of elected or appointed officials who feel their safety is threatened, or if the elected officials or their representatives demand that they not be published.

“At its core, plaintiffs’ speech is a form of political protest,” O’Neill wrote, giving the parties until March 10 to decide how to proceed. “The court therefore finds that the legislators’ home address and telephone number touch on matters of public concern in the context of plaintiffs’ speech.”

The case, brought last fall with the help of the Firearms Policy Coalition, was filed after the Legislature’s lawyer blocked a blog post from listing what its author described as the home addresses of 40 legislators who voted for gun control legislation signed by Gov. Jerry Brown. …

Click here to read the full story

 

Understanding California Legislative History and Intent

CA-legislatureAttorneys, lobbyists, legislative staff and others examining California statutes should understand the basics of legislative history and intent research. Unfortunately for attorneys, the subject of legislative intent is not a particularly well covered aspect of the typical law school curriculum where heavy emphasis on the case method of studying law tends to restrict the discussion of legislative purpose to what the courts say on the subject.

However, because California courts have a long tradition of relying upon bill analyses and other evidence of legislative history in the same manner as they do case law – to clarify the meaning of a statute and properly apply the Legislature’s intent – practitioners would do well to know how to discover and apply the Legislature’s intent with respect to the statutes that at are issue in their cases.

For others, such as lobbyists, staff or the media, the focus is typically upon the proposed solution contained in a particular piece of legislation, and not upon the accompanying expressions of legislative intent. However, both are important. At minimum, it is a good idea to confirm one’s understanding of a proposed legislative solution with the statements of legislative intent from the bill’s legislative history. Here are at least three reasons why:

(1)  Our codes are rife with ambiguities that the courts will look to the legislative history to clarify.

(2) The courts will overlook a statute’s plain reading if it collides with evidence of the Legislature’s actual intent or to avoid an absurd application.

(3) Courts will also look to legislative history to confirm their own plain reading of a statute.

Both attorneys and Sacramento Capitol watchers would do well to understand that evidence of California legislative history and intent serves as an important aid for interpreting statutes and understanding what was intended by the Legislature in enacting a particular new law or amending an existing law.

Sir Francis Bacon is attributed with the statement “knowledge is power.” Applying that wisdom here, lobbyists and others should be well versed in the legislative history and intent of the code sections that their clients have hired them to “watch” and or/amend. Attorneys should utilize a well-established area of legal research that can shed light on the meaning of statutory terms at issue. And solid news reporting should include relevant aspects of the story surrounding how and why the bill of interest was passed.

In California, the primacy of legislative intent has long been established by both statute and case law. For example, Code of Civil Procedure Section 1859 (enacted in 1872) provides this mandate to the courts: “In the construction of a statute, the intention of the Legislature … is to be pursued, if possible.” Also, the judicial notice statutes identify admissible legislative history materials in Evidence Code Section 452(c). The cases cited under those sections identify various records with which the courts have a high comfort level.

In general, evidence of legislative intent can be derived from two primary sources: An intrinsic analysis of the statute and its surrounding statutory context according to standard principles of statutory construction, and the use of extrinsic aids to reconstruct the legislative history of a statute.

The wider historical circumstances surrounding the adoption of a statute can yield extrinsic evidence of legislative intent that is outside the statute itself, such as relevant historical background, the chronology of events and the presumption that the Legislature is aware of prior law. Again, such evidence may even contradict any so-called “plain reading” of the statute which contradicts persuasive, extrinsic evidence of legislative intent.

In properly researching legislative history and intent, interested persons should ask the following questions to guide their efforts:

  • What is the plain meaning” of the language in the statute? To what extent is the meaning self-evident?
  • Why was the statute adopted? What needs prompted it? What problem or evil was the Legislature trying to correct?
  • What happened in the Legislature during the process of adoption? What is the statute’s legislative history?
  • What was the law prior to the adoption of the statute?
  • What has happened since the statute was created? What has been the response of the courts, the agency charged with administering the statute, the legislature, the public, scholars, etc.?

The California State Archives has a vast collection of original legislative papers that can be accessed by source and session year (e.g., authors’ files, committee and study files, Governor’s Chaptered Bill Files, party caucus files, Senate Floor analyses files, agency files, Law Revision Commission Study Files). Interested persons can phone in research requests to the State Archives at (916) 653-2246, but be prepared to wait as they often have backlogs. “Walk-ins” receive priority treatment and the $.25 per page cost must be paid in advance.

In addition, a wide variety of state legislative offices have insightful materials (i.e., legislator offices, committee offices, partisan offices, floor analysis offices), especially when it comes to more recent legislation, as well as agency analyses and bill files. Access to records held by these offices varies widely depending on the personalities involved and their willingness to make their files available to members of the public. The Legislative Open Records Act, Gov’t Code Sections 9070, et seq. assures public access as specified.

Finally, there are numerous sources to help determine the legislative history and intent of a bill’s provisions such as:

  • The Legislature’s own online databases. They provide committee and floor analyses, bill versions, the final calendars, votes and governor’s vetoes, past session laws, journals, etc. It is not recommended that you rely upon the minimal collection of legislative history materials that Westlaw provides. In the main, it merely provides materials that you can obtain for free from the Legislature’s websites.
  • Previous related, failed legislation. The history of predecessor failed bills can be considered relevant when the legislative effort spans multiple sessions.
  • Interim hearing study and/or transcript and related files. Excerpts from testimony at public legislative hearings which preceded the enactment of a statute may be of some relevance in ascertaining legislative intent.
  • Other formal studies and/or recommendations, such as those published by the California Law Revision Commission or a state agency.
  • All versions of the bill, as introduced, amended, enrolled and chaptered along with Legislative Counsel’s Digest on the face of the bills. Always note when your language of interest came in and relevant amendments.
  • Legislative Journal entries addressing substantive matters. Letters of intent by the author, committee reports, and similar information contained in the Journals.
  • Bill Background Worksheets, which are requested by the committee and filled out by the author’s office, sometimes with attachments.
  • Policy and fiscal committee analyses (both partisan and nonpartisan versions).
  • Department of Finance fiscal reports.
  • Floor analyses for third reading (both partisan and nonpartisan versions).
  • Statements by the author for committee and floor purposes.
  • The legislative author’s letter to the governor. Note that the courts can be more friendly toward such letter if they cast light on the history of a measure and are a reiteration of legislative discussion and events, and not merely as an expression of personal opinion.
  • Statements by proponents and opponents, such as letters, testimony, position papers, etc.
  • Analyses by state agencies.
  • Opinions by the Legislative Counsel and the Attorney General.
  • Enrolled Bill Reports to the governor from various state entities, such as the Legislative Counsel, agencies and departments and the governor’s staff.
  • Contemporaneous, unpassed legislation may be a significant indicator of the intent underlying legislation passed during the same session.
  • Online research manuals can be helpful. For example, Legislative Research & Intent LLC, which is a commercial provider of legislative history research, supplies numerous complimentary research assistance and resources at www.lrihistory.com.

It is important for attorneys and others to possess a basic understanding of what legislative history research consists of and where to look for insights into what the Legislature intended when it enacted a new law or amended an existing statute. An insistence upon going beyond simply reading the statute allows one to consider valuable extrinsic evidence of what was intended by the Legislature in the adoption of the particular legislation of interest.

Carolina Rose is the President and Founder of Legislative Research & Intent, LLC which has provided legislative history research since 1983, and provides related expert witness services. Chris Micheli is an attorney and lobbyist with the firm of Aprea & Micheli, Inc. For more information contact carolina.rose@lrihistory.com or cmicheli@apreamicheli.com

Dem-on-Dem Contests Cost the Party $90 Million in 2016

democrat supermajority sacramento californiaA new report tallying the costs of running against members of your own party revealed that Golden State Democrats spent big in 2016 on races without a Republican.

This year, “Democrats raised or spent a total of $90.8 million on same-party races — a 67 percent increase from 2014 when Democrats spent $54.3 million,” according to the study, citing data from the California Secretary of State, California Fair Political Practices Commission and Federal Election Commission, and issued this week by Forward Observer. “The average budget for a same-party race between Democrats was $3.95 million in the 2016 cycle, up 30.7 percent since 2014,” the last year in the Congressional election cycle.

That means Democrats are now spending massive sums of money against other Democrats in political races due to the passive of Proposition 14, the California top-two primary law which went into effect in 2012.

Those figures struck a sharp contrast to spending for similarly situated candidates in the California GOP, which spent far less over the same two-year period. Those state Republicans “raised or spent $2.76 million on same party races in 2016,” Forward Observer observed. “This is a sharp decline (approximately 84 percent) in spending on same-party races since 2014, when Republicans spent $17.2 million.” One key to the big divergence between Democrats and Republicans, the report noted, was the lack of any Republican-on-Republican competition for a seat in the state Senate or the U.S. House of Representatives.

Jungle primaries

Intraparty fights between Democrats attracted more outside spending this year. $339,000 went “to support Assemblywoman Nora Campos, D-San Jose, who is running against state Sen. Jim Beall, D-San Jose, in the 15th Senate District,” as the Sacramento Bee reported earlier this year, while “several hundred thousand dollars” went to “help former Assemblyman Raul Bocanegra or oppose the incumbent, Assemblywoman Patty Lopez, D-San Fernando, in Los Angeles County’s 39th Assembly District.”

“And in the Inland Empire, a campaign committee funded by the grocery workers union has spent $75,000 to support Eloise Gomez Reyes, the Democrat running to unseat Assemblywoman Cheryl Brown, D-San Bernardino, in the 47th Assembly District.”

For Democrats, the shifting political sands have complicated what was seen by some as an implicit advantage in the so-called “jungle primary” system California voters ushered in six years ago through Proposition 14. That initiative inserted a constitutional amendment to afford Californians a single, nonpartisan primary election, pitting the top two vote-getters, regardless of party, against one another in the general election. But instead of making candidates’ lives easier — and the Democratic party’s — Prop. 14 has appeared to have cost them, demanding higher expenditures. “Democrats have spent a total of $194.2 million on same-party races since Prop. 14 first went into effect in 2012,” Forward Observer concluded. “Republicans have spent $34.5 million over the same period. Thus, for every dollar spent or raised by Republicans, $5.64 was raised or spent by Democrats.”

Ideological Fights Within the Democratic Party

Another effect of the new system, harder to quantify but possibly more serious, has been a sharpening differences between the more moderate and more progressive wings of the party, sparking sometimes thorny disagreements that could have been soften had all candidates vying for office run against Republican opponents. In some cases, such as Kamala Harris’ race against Loretta Sanchez, the challenger was too weak to force a bruising battle over political agendas. In others, however, a more moderate non-incumbent drew a clear line on policy and was rewarded at the ballot box. Last year, for instance, Orinda Mayor Steve Glazer — a former aide to Gov. Jerry Brown who pitted himself against the BART strike and won support from Chuck Reed, the ex-San Jose Mayor spearheading public pension reform — bested Assemblywoman Susan Bonilla, D-Concord, the far more liberal Democrat who initially had been widely expected to win the race to replace outgoing state Senator Mark DeSaulnier.

This piece was originally published by CalWatchdog.com

Pay Hikes Result in a Happy New Year for State Workers

Money

In a recent column, I commented on how joyous the holiday season would be for members of the state Legislature and our constitutional officers who are seeing a 4 percent increase in their pay. California lawmakers were already the highest paid in the nation.

But as the song says, you ain’t seen nothing yet. In a state the U.S. Department of Labor rates as first in pay for state and local government workers, one of the largest public sector unions has negotiated a pay raise of up to 19 percent for many of its members. Union leaders claim that many of the jobs their members perform are in high demand and, without the increases, employees will be lured away to the private sector. Therefore, a 19 percent increase for “financial experts” currently making between $7,300 and $10,000 per month, is warranted. However, everyone has been invited to the party. Even janitors will be getting an extra 3 percent on top of the standard 4 percent that has been negotiated for all the represented workers.

Other unionized employees, now negotiating pay increases with the state, will likely see similar raises. And it is important to mention that most of these “public servants” are receiving health care and pension benefits that most in the private sector can only dream of.

In November, voters said yes to new taxes and to the continuation of the highest income tax rates in the nation. The expensive campaigns that put these measures over the top were funded primarily by public sector unions, so it is not hard to guess where the bulk of the tax revenue will be going. Instead of state government providing more and better services, most of the funds will go to paying for raises for government workers. And let’s not forget the need to fund nearly a trillion dollars in unfunded pension liabilities for which taxpayers will be picking up the tab.

This is not to lose sight of the fact that many public employees work hard and provide valuable service. Most citizens want to see these employees fairly compensated for good work.

However, because government holds a monopoly on most of the services it provides — there is no competition or alternative — much of the work actually provided is subpar. Anyone who must use government services cannot imagine that these across the board raises state employees are receiving are based on merit.

There are those who will justify the additional money as cost-of-living increases. But cost of living increases are based on inflation, which has been minimal due to the sluggish economy. Just ask Social Security recipients, who will receive an increase in their benefits of 0.3 percent (three-tenths of 1 percent) for the coming year. This translates to about a $4 monthly increase for the average retiree, or about $48 per year. Had the average recipient, who must get by on $1,355 each month, been granted a 4 percent increase (the minimum for so many state employees) their monthly checks would bump up almost $55, or $660 annually.

But we shouldn’t have to argue over how much government employees should be paid. Since union leadership worries that the private sector will hire valuable workers away unless they are paid more, why not let them go? In the private sector, they can join or establish companies that can bid on doing the work currently performed by government employees. Let them pay themselves whatever they want, but they will have to bid on doing the work they now perform on the taxpayers’ dime. Government will hire the lowest qualified bidder and if their service is topnotch, they will keep their contracts. If not, the governor and Legislature can move on and engage another bidder.

As the late New York Governor Mario Cuomo — a Democrat and father of the current New York Governor — stated several decades ago, “It is not a government’s obligation to provide services but to see that they are provided.”

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published by HJTA.org

State Agencies and Their Role in Public Policy

Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

California’s agencies, as well as the departments, boards and commissions under them, engage in a tremendous amount of public policy making through both the rulemaking process and their interpretation and enforcement of existing statutes and regulations. These agencies are the ones who generally run the day-to-day operations of state government and implement the statutes adopted by the Legislature and signed by the governor.

With over 200 of these entities in California government, these state agencies influence policy by adopting regulations and implementing statutes. Moreover, they engage in policy making when these agencies issue guidelines, legal opinions, management memos, and other written documents that interpret the laws and implementing regulations.

Practitioners should be aware of the California Constitution Article III, Section 3.5. It provides that an administrative agency has no power to declare a statute unenforceable, or refuse to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made such a determination. And agencies have no power to declare a statute unconstitutional.

This, for instance, when a Los Angeles Superior Court recently held that various teacher tenure and dismissal statutes were unconstitutional, local school districts, the Superintendent of Public Instruction, and the Department of Education were without authority to implement this decision. Without an appellate court ruling on the matter of constitutionality, local and state agencies must continue to abide by the challenged law.

When dealing with a given state agency, it is important first of all to know whether it is a plural executive, independent, or governor’s line authority agency. Generally speaking, the governor has less control over “plural executive” and “independent” agencies. These separate agencies are generally able to manage their daily affairs and conduct rulemaking without supervision or oversight from the governor. On the other hand, the governor has considerable authority to manage line authority agencies, including the ability to direct or restrict their rulemaking activities.

It is also important to know that state agencies within the executive branch of government consist of three major varieties:

  • Plural executive agencies” that are under the direction of an official elected on a statewide basis. For example, the Attorney General heads the Department of Justice, the Superintendent of Public Instruction heads the Department of Education, and the Insurance Commissioner heads the Department of Insurance. There are nine of these agencies in California headed by constitutional officers that are elected by statewide voters every four years.
  • “Independent agencies” that operate outside of the line control of the governor by virtue of constitutional provision, statute or common law. Some of the major independent agencies and their governing bodies include the University of California, governed by the Board of Regents; the California State University, governed by the Board of Trustees; the California Community Colleges, governed by the Board of Governors; the Public Utilities Commission, governed by the Public Utilities Commission; and the California State Lottery, governed by the Lottery Commission.
  • “Line agencies” include all the other agencies and departments within the executive branch that are under the line control and authority of the governor. Most state agencies and departments (more than 90 percent of them) within the executive branch of government are of this type. Many of these line authority agencies and departments have been organized into a hierarchy of major agencies or departments. The heads of these major agencies and departments sit on the governor’s cabinet.

When dealing with agencies that are under the line authority of the governor, it is important to know where they fit in terms of the organizational hierarchy. Departments or agencies that are under larger agencies or departments are subject to supervision and coordination by those agencies or departments. Their interactions with the governor also tend to be limited.

However, when it comes to rulemaking (i.e., the adoption of regulations under the state’s Administrative Procedures Act), the supervising or coordinating agencies usually allow significant latitude to the agency or department that is directed by statute to adopt such regulations.

Generally speaking, the authority of state agencies to adopt policy (by their rulemaking ability) is defined and restricted by statute. State statutes usually prescribe each agency’s authority to adopt policy; and, it is an established principle of administrative law that an agency cannot go beyond its legally-prescribed authority to regulate.

On the other hand, many statutes confer broad powers to some state agencies regarding matters that directly affect the general public (such as the Department of Motor Vehicles, the Air Resources Board, and the Department of Fair Employment and Housing). The regulations and administrative practices of these agencies affect millions of Californians in their daily lives.

Interested parties have significant access to the rulemaking activities of state agencies by virtue of the California Administrative Procedure Act (APA). In addition, every state agency is required to annually adopt a “rulemaking calendar” (Government Code Section 11017.6) that describes regulatory actions the agency anticipates taking during the calendar year. The APA is overseen by the Office of Administrative Law (OAL).

The OAL website includes helpful information for interested parties to track pending and adopted regulations. OAL also produces a guidebook on the rulemaking process that is of value to those who are getting acquainted with the APA process or those participating in the rulemaking process for the first time. In either instance, it is important to understand the rulemaking process and the role of state agencies.

A list of state agencies that have adopted regulations can be found on OAL’s website, which also provides direct access to the California Code of Regulations (CCR), which is organized under various subject matter titles. The following are the 28 titles comprising the CCR:

Title 1 – General Provisions

Title 2 – Administration

Title 3 – Food and Agriculture

Title 4 – Business Regulations

Title 5 – Education

Title 6 – Governor’s Regulations (currently has no regulations)

Title 7 – Harbors and Navigation

Title 8 – Industrial Relations

Title 9 – Rehabilitative and Developmental Services

Title 10 – Investment

Title 11 – Law

Title 12 – Military and Veterans Affairs

Title 13 – Motor Vehicles

Title 14 – Natural Resources

Title 15 – Crime Prevention and Corrections

Title 16 – Professional and Vocational Regulations

Title 17 – Public Health

Title 18 – Public Revenues

Title 19 – Public Safety

Title 20 – Public Utilities and Energy

Title 21 – Public Works

Title 22 – Social Security

Title 23 – Waters

Title 24 – Building Standards Code

Title 25 – Housing and Community Development

Title 26 – Toxics

Title 27 – Environmental Protection

Title 28 – Managed Health Care

An interesting phenomenon is that businesses cannot rely in good faith upon the written determinations issued by state agencies. For example, even if a business asks for and receives written guidance from a state agency as to how a law is interpreted, the business does not have any legal protection against a liability suit. This is an instance where the state agency’s written interpretation is not given any legal weight by a reviewing court. The courts can consider these determinations, but they do not provide an affirmative defense to those receiving them.

In other words, despite being charged with interpreting, implementing and enforcing California statutes and regulations, individuals and businesses that obtain written guidance from state agencies have no protection from legal liability even if they follow that guidance. However, there are a few agencies that provide limited protections.  For example, the Fair Political Practices Commission has advice letters to requesters that provide immunity from liability. The Franchise Tax Board and the Board of Equalization each have Chief Counsel Rulings that provide protection to taxpayers.

State agencies play a key role in public policy development in California through their rulemaking activities, as well as their interpretation and enforcement of statutes and regulations. There are both public (through interested parties) and private (administration with line control agencies) influences on these agencies in their policy role.

Thomas Nussbaum is the former Chancellor of the California Community Colleges.  Chris Micheli is a lobbyist with Aprea & Micheli, Inc. Both are Adjunct Professors of Law at McGeorge School of Law.