Report — May 16

GOVERNOR’S MAY REVISE TO THE 2014-15 BUDGET

The Governor Releases his May Revise. The Governor this week released his May Revise of the 2014-15 Budget, reflecting a modest increase in revenue as a result of a windfall in capital gains tax revenues ($2.4 billion). The Governor’s revised 2014-15 General Fund budget now proposes to spend $107.8 billion, reduce budgetary debt from past years and provide a $1.2 billion budget reserve (“rainy day fund”). The Governor also proposes to increase spending for education, the environment, public safety, public works, affordable health care, and CalWORKs.

The Governor indicated that the May Revision maintains his Budget principle of paying down debt and reducing long-term liabilities. He warned, however, that there remain a number of major risks that threaten the state’s fiscal stability, including the overhang of fiscal debts, growing long-term liabilities, and lingering uncertainties regarding the costs of the federal Affordable Care Act.

CALIFORNIA STATE LEGISLATURE
Assemblymember Toni Atkins Sworn in as New Speaker of the California State Assembly. Assemblymember Toni Atkins, a Democrat from San Diego, was sworn in May 12 as the new speaker of the Assembly. She replaces Assemblymember John Pérez in the leadership post.

Speaker Atkins also announced her leadership team:

* Speaker pro Tempore – Assemblywoman Nora Campos.
* Assistant Speaker pro Tempore – Assemblyman Kevin Mullin.
* Majority Floor Leader – Assemblyman V. Manuel Pérez.
* Assistant Majority Floor Leader – Assemblyman Christopher Holden.
* Majority Whip – Assemblyman Jimmy Gomez.
* Assistant Majority Whip – Assemblyman Matthew Dababneh.
* Assistant Majority Whip – Assemblywoman Cristina Garcia.
* Democratic Caucus Chair – Assemblyman Phil Ting

School Finance; Broadband Infrastructure Fund. Assembly Bill 2319 (Bonilla) would provide K-12 schools with adequate Internet capacity to support new content standards and assessments, and support the integration of common core academic content standards in instruction for grades K-12 for the purpose of improving the academic performance of students. Specifically, the bill would create the Broadband Infrastructure Fund to provide K-12 school districts with the financial resources to install, lease, or purchase “last mile” fiber connectivity to their schools. The California Department of Education would allocate the funding to areas with limited broadband capacity.

The Author has worked closely with the Corporation for Education Networks in California (CENIC) and the K-12 High Speed Network (K-12 HSN) in the development of the bill. According to the K-12 HSN, roughly 40 percent of California schools in both rural and urban counties do not have adequate Internet connection speeds to support 21st century learning. However, upon closer review, the 40 percent figure used by the K-12 HSN actually represented what bandwidth speeds California schools were actually contracting for, not what was actually available to schools today.

CCTA and member companies support ensuring that adequate technology is available to schools, but we question the validity of the information describing the problem. We believe that in some cases the infrastructure and technology may be available to provide the service, but for many reasons, the schools are not utilizing the technology. There needs to be a true assessment of the problem, before government funding is provided to build broadband infrastructure in area where it already exist. CCTA is working with Assembly member Bonilla to clarify this point.

This week, the Governor released his revisions to his proposed January state budget (May Revise). Consistent with the direction of AB 2319, the May Revise included a $26.7 million augmentation for “K-12 High Speed Network to help schools secure Internet connectivity and infrastructure.” This funding is to be used to conduct a statewide report of school’s Internet connectivity needs by March 1, 2015 and create a grant program to improve Internet connectivity in K-12 schools.” The proposal includes “budget bill language” (“BBL”) which would provide little guidance to Department of Education for having the K-12 HSN distribute grants to local school districts.

While we continue to work on amendments for AB 2319, it appears legislative vehicle to ensure that there is a comprehensive assessment of available infrastructure for broadband projects and for broadband grants may be a budget trailer bill. The May Revise BBL includes $26.7 million augmentation for the K-12 HSN for this purpose. The Office of the Legislative Analyst, the non-partisan fiscal and policy office of the Legislature, is recommending approval of the funding to support the statewide assessment, but recommends that funding of the infrastructure grant program be delayed until the completion of the statewide assessment.

The legislative budget committees will be meeting next week. CCTA will be working with leadership, budget and policy staff, to stress the need for a comprehensive assessment of available broadband infrastructure to support schools. AB 2319 continues to be held in the Assembly Appropriations Committee on “Suspense.” It is unclear if the Assembly member will attempt to advance that bill.

Split-Roll Tax. Assembly Bill 2372 (Ammiano), as initially introduced, would have redefined a change in property ownership, for purposes of property tax reassessment, as 100 percent cumulative change of ownership over a rolling three-year period. The bill also initially defined a “single transaction” as cumulative transactions, like transactions of stock purchases, occurring in a three-year period. This version of AB 2372 was overwhelming opposed by the business community and taxpayer groups.

This week, the Assembly Revenue and Taxation Committee adopted significant amendments to AB 2372 with very little advance vetting or public discussion. Now, as to be amended, the bill would require property tax reassessments at market value for any real property held by legal entities (i.e. businesses) when 90 percent or more of ownership interests are sold or transferred in a rolling three-year period. The new amendments eliminate the stock churning provision of the original bill but only for publicly traded corporations and partnerships.

A number of business organizations, including Cal Tax, the California Association of Realtors and the California Manufacturers and Technology Association, opposed the adoption of the bill without proper public discussion or debate, and recommended that the bill be placed in the Committee’s “Suspense” file until it is in print and has been properly analyzed by interested stakeholders. The Committee ignored the advice and approved the measure (6-2). It was referred to the Assembly Appropriations Committee for consideration. The bill is still not in print as of today. CCTA is working with member companies to determine the impact on the California cable industry.

Privacy; Personal Information; Use of Credit Cards and Debit Cards. As introduced, Assembly Bill 1710 (Dickinson) would have significantly restricted how businesses could collect and maintain customer information when using a credit or debit card for payment. However, the bill has been amended to remove some of the more onerous provisions, including eliminating the applicability to paper records, reinstating provisions that exempt some encrypted data from the breech notice requirements, eliminating the requirement that breech notifications be provided to customers within 15 days of a security breech, and eliminating the mandate that businesses provide customers with two years of identity theft mitigation services when a security breech has occurred under all circumstances. The bill was also amended to clarify that this proposal would not apply to the “incidental” use of Social Security Numbers when its use “is necessary to identify the individual in order to accomplish a legitimate business purpose.”

While the amendments have significantly improved the measure, the California Chamber of Commerce has identified several outstanding issues that need to also be addressed, including (1) the reference to a specific encryption standard which would become outdated as technology and standards improve; and (2) the requirement to notify “major state wide media” of a breach. In addition, the bill was amended to eliminate the requirement to provide identity theft mitigation services to customers when a security breech has occurred. However, if those services are provided they must be provided for two years. And while most security breaches occur with government agencies, the provisions of this bill only apply to private businesses.

AB 1710 is currently on the Assembly Floor for consideration. Joining the Chamber of Commerce opposition coalition, CCTA worked to oppose the measure on the Assembly Floor this week. As a result of our opposition, the Author did not take up the measure this week for further discussions. It may be taken up for a vote again, next Monday, May 19th on the Assembly Floor.

Property Crimes; Disconnecting Communications Services. Assembly Bill 1782 (Chesbro) would increase the criminal fine up to $10,000 for any person who “willfully and maliciously” disconnects or obstructs any communications infrastructure, including the backup power supply or removal of deep cycle batteries, or electrical lines. Pursuant to current law, the penalty is $500 or up to one-year in the county jail.

The cable industry has seen a dramatic increase in the number of incidents of willful damage to its broadband networks. Historically, cable networks primarily provided multichannel video service, but today provide advanced residential and business communications services and broadband bandwidth for large data centers and cellular towers (backhaul). Cable networks also support critical services like E-911, and are the basis for enabling telemedicine, emergency alerts, energy efficiency monitoring and home security services and other innovative technologies.

The California Cable & Telecommunications Association supports AB 1782. Dependable communication services are critical for public safety, national security and California’s economic sustainability. The measure is also supported by a number of communications service providers, electrical utilities and law enforcement agencies.

AB 1782 will be heard the Assembly Floor next Monday, May 19th for consideration. CCTA has been educating Assembly Members on the importance of this bill to the cable industry.

For CCTA Tracked Legislation by Subject use this link CCTA Legislative Report *

*These links are not for public distribution and are real-time. If you have any questions about these links or the information located at the links, don’t hesitate to contact Richelle Orlando .

CALIFORNIA REGULATORY UPDATE

CCTA and NCTA file Joint Comments in the California Energy Commission’s (CEC’s) Energy Efficiency Proceeding. On May 15th, CCTA and NCTA filed Joint Comments in the California Energy Commission’s (CEC’s) Energy Efficiency proceeding which proposes to adopt new energy efficiency standards for small network equipment, including cable modem, routers and other networking equipment. CCTA and NCTA argue that the proposals before the CEC fail to meet the requisites of the Warren-Alquist Act which governs the standard by which the CEC must review and adopt new regulations. Because the regulatory approach to small network equipment does not, and cannot, meet the requisites of the Warren-Alquist Act, it must be rejected. CCTA and NCTA specifically argued that the CEC cannot show that the regulatory proposals before it will not result in added costs for consumers or to the broadband industry, and no technologically feasible efficiency levels have been proposed by the utilities or energy advocates. The proposed regulatory approach to small networking equipment is based on legacy technology that does not accommodate competition in broadband services or the current and future functionalities of broadband equipment, and rather than assuring product efficacy, the proposals will undermine the current and new features required for the devices today and for the future of broadband There is no compelling case, indeed, no case at all, to assert that the benefits of regulation outweigh the potential harms that could arise from state regulation. Nevertheless, the cable industry in California and nationally is committed to energy efficiency, and rather than pursuing a regulatory approach that could significantly impact the industry and the economy, the CEC should encourage the parties to the Voluntary Agreement to achieve the energy efficiency goals sought for California. A copy of the Joint Comments is here: CCTA/NCTA Joint Comments CEC Docket #12-AAER-2A

California Public Utilities Commission Votes to Open Investigation on Intrastate Rural Completion Issues. At its May 15 meeting, the California Public Utilities Commission voted to issue and begin an investigation to address intrastate rural completion issues (I.14-05-012). While the FCC has already addressed call completion failure issues for both intrastate and interstate calls, the CPUC now seeks to better understand rural call completion failures, evaluate how the failures can be addressed, and potentially, revise, amend its rules, or adopt new rules. The Investigation will include an inquiry into net neutrality and the Commission’s authority over VoIP providers and services. A copy of the OII is here: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M089/K633/89633932.PDF

Upcoming: Docket No. 11-11-007, Rulemaking to review the California High Cost Fund A: Workshops in this proceeding are scheduled to take place May 28 and 29 in San Francisco.

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