State Legislative - Week of May 21, 2010

On Friday, May 14, 2010, Governor Schwarzenegger presented his final revised state budget which addresses a $19.1 billion deficit.  The Governor’s proposal calls for no new taxes and proposes $12.4 billion in program reductions primarily in social welfare programs, assumes the receipt of $3.4 billion in federal funds, $1.3 billion in alternative funding, and $2.1 billion in fund shifts and other revenues.  The Governor also announced that he will not sign a final budget package that does not include some budget and pension reform.

 

Not surprising, the Legislature immediately criticized the Governor for not including any new revenue while drastically cutting social services.  Both houses in the Legislature will begin to holding budget hearings to add their changes to the Governor’s budget package.

 

 

Mandatory Single Sales Factor (SSF) Apportionment.  AB 1935 (De Leon), which would require all businesses in California to apportion their income pursuant to a single sales factor methodology, was heard in the Assembly Appropriations Committee and held on “suspense” this week.  The Assembly Appropriations Committee will reconsider this proposal next week, on Friday, May 28, 2010.

 

Cable Television Industry Procurement Practices.  Assembly Bill 2758 (Bradford) would require any cable television corporation with annual revenues exceeding $25 million to submit an annual plan to the California Public Utilities Commission (CPUC) describing how the cable television corporation will increase its contracts with women, minority and disable veterans businesses.

 

The CPUC currently imposes the same requirement on electrical, gas, water, and telephone corporations.  The committee analysis estimates the fiscal impact to the state to impose this procurement requirement on the cable industry would be “minor absorbable costs.”  This bill is scheduled to be heard in the Assembly Appropriations Committee next Friday, May 28, 2010.

 

Distribution of Telephone Directories.  Senate Bill 920 (Yee) would require a telephone corporation to allow a telephone subscriber to opt out of receiving a telephone directory.  The latest amendment would also require a third-party vendor, as a contractual condition for receiving subscriber information from the telephone corporation, to not distribute their directories to any subscriber who has opted out of receiving directories.  This bill is scheduled to be heard in Senate Appropriations Committee on Monday, May 24, 2010.

 

Ballot Initiatives Update (November 2010)

Signatures to qualify the following initiatives measures have been submitted to the Secretary of State for verification.  Once the needed number of signatures has been verified, the measures will appear on the ballot in the November 2010 election.

Stop Hidden Taxes (Initiative 09-0093.  California’s Constitution requires the Legislature to approve any new tax or a tax increase with a two-thirds vote.  However, the legislature has been able to get around this constitutional requirement by calling simply calling new taxes “fees” which only require a simple majority vote to pass.  Most local tax increases require a public vote.  However, local governments have also avoided this requirement by also calling these tax increases “fees.”  Fees have been applied to such items as car registrations, gas, cell phones and grocery bags.

 

Stop Hidden Taxes, a broad based coalition co-sponsored by Cal Chamber, is supporting Initiative 09-0093, which would stop the politicians at both the state and local level from imposing hidden taxes on Californians just by calling them fees.  The coalition has submitted over 1.1 million signatures to qualify this measure for the November 2010 General Election ballot.

 

Majority Vote Budget and Majority Vote Tax (Initiative 09-0057).  In California, for more than thirty years, both the state budget and taxes have required a two-thirds vote of the state legislature for approval.  However, the California Federation of Teachers, the California Nurses Association and public employee firefighter unions are backing an initiative (09-0057) that would authorize the legislature to approve the state budget by a simple majority vote.

Although the group has publicly stated that the initiative does not allow the legislature to increase taxes by a majority vote, in their review of the language, Cal-Tax believes the initiative does if the taxes are included in a budget appropriations bill.  This proposal also restricts the right to referenda fees and tax-like fees.

 

Repeal of Corporate Tax Incentives.  The California Teachers Association (CTA) has been campaigning against last year’s bipartisan business and economic stimulus package as a “corporate loophole” and is sponsoring an initiative to repeal it.  It appears that the CTA has submitted more than enough signatures to qualify the initiative for the November ballot.
 

The incentives targeted by CTA were part of the 2009 budget package that provided businesses with a number of tax credits and included the elective single sales factor (SSF) methodology for calculating corporate income tax liability.  The legislation authorizing the stimulus package will take effect at the beginning of 2011.