Around The Capitol

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THE NOONER for March 7, 2012


  • CD21 (Kings) - added Fresno councilmember Blong Xiong (D)
  • CD52 (San Diego) - added consultant John Subka (R)
  • AD05 (Foothills) - added Timothy Fitzgerald (D)
  • AD20 (Hayward) - added educator Luis Reynoso (R)
  • AD25 (Santa Clara) - added consultant ArLyne Diamond (R)

WARNING: I'm diving deep into a budget and tax initiative discussion. If you haven't had enough coffee or are more of a political reader, feel free to continue after the ad block!

The Legislative Analyst's Office presented to Assembly Budget Sub 2 (Education Finance) yesterday and provided a bit more details about the revenue picture and its interaction with the school funding guarantee. You may recall that last week the LAO projected that revenues were $6.5 billion below the governor's January projections, even after assuming $2 billion over the current and next fiscal years from a Facebook IPO. The report, however, stopped short of identifying a larger deficit problem, because lower revenues equal a lower Proposition 98 guarantee for schools and community colleges.

In yesterday's report, the LAO identified that the lower revenues and other factors result in a Prop. 98 guarantee in 2012-13 that is $951 million than proposed by the governor, even with the tax measure passing.  While there are lots of factors that will determine the deficit at May Revise, one can infer that the budget hole left from the lower revenues is around $5.5 billion, even with Facebook and the governor's tax passing.

Meanwhile, the jousting over tax ballot measures continued. Governor Jerry Brown sat down with the Chron's edit board, while do-gooders held a conference call to describe the flaws in the Millionaires Tax, which they argue will artificially cap social services spending. Josh Pechthalt, president of the California Federation of Teachers, acknowledged there might be drafting issues in the Millionaires Tax, but argued that the Legislature can fix them with a 55% vote. CFT and allies continues to assert that the Millionaires Tax is more likely to pass and will last permanently, and are promising a new poll this afternoon.

The governor argues instead that Millionaires does little to fix the state's budget problem and will subject programs to even more budgetary yo-yos as people with incomes greater than $1 million are among the most volatile.

The chatter continues about how everyone can save face. The most likely scenario is that CFT and allies continue to collect signatures, but don't submit them until June. This would allow the governor's initiative to go forward in November and would result in the Millionaires Tax going on the November 2014 ballot. In 2014, the personal income tax rates in CFT's measure would overlay the governor's PIT rates, and the governor's sales tax would continue through December 31, 2016.

By virtue of the way Millionaires is written, the "millionaires' surcharge" is written as a separate code section on top of whatever brackets exist at the time, whereas the governor's initiative temporarily changes existing brackets for folks making over $250,000. From my read, if the governor's passes this year, and Millionaires were to pass in 2014, millionaires would be paying both for through tax year 2017 (or, as others would argue, fleeing the state).

The flaw with this plan is that the Millionaires is written to impose the surcharge "for each taxable year beginning after January 1, 2012." The measure was designed to be retroactive through the entire year, rather than changing tax rates prospectively. Thus, if the initiative were delayed until 2014, my read is that millionaires would owe taxes all the way back through 2012 and 2013, or about $8-12 billion in back taxes, on top of the $4-6 billion owed for tax year 2014. Oh, and the initiative would impose interest and penalties, since the retroactive taxes would not have been paid by January 15, 2013.

It's unclear whether the relatively narrow legislative amendment authority (see end of initiative) in the initiative would allow the Legislature to avoid this from happening. It surely is a wrinkle in the goal of some to separate the two initiatives by a couple of years.

SIDE-BY-SIDE: The California Budget Project has a chart comparing the three initiatives.


The Engineering & Utility Contractors Association is now UNITED CONTRACTORS.

California’s best union-affiliated contractors association just got better. Effective March 1, EUCA will become United Contractors. With more than four decades of service, United Contractors will maintain their position as the largest union-affiliated contractors association west of the Mississippi, continuing to provide the same tradition of excellence in industry representation and advocacy and leading the way for California’s union-affiliated contractors.

Contact: Emily Cohen, United Contractors Director of Government Relations at 925-855-7900 or Kevin Pedrotti, United Contractors Government Advocate at 916-441-3111.

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NO DINERO: Proponents of the spending cap initiative (Cal-Tax, Howard Jarvis, Small Business Action Committee) have dropped the initiative for this year.

NO GO: Former Lite Gov Cruz Bustamante decided against a bid for CD21. That leaves Blong Xiong and John Hernandez on the Dem side and David Valadao for the Republicans.

OTHER ELECTIONS: Kaptur beats Kucinich, Joe the Plumber wins primary to get another 15 seconds, and Davis approves another school tax.

I'M MELTING: Gingrich at AIPAC...

SPEEDY RECOVERY: Senator Sharon Runner is home from the hospital 10 days after undergoing a double lung transplant.

Schools Chief Tom Torlakson Backs Brown Tax Plan - And His Rivals
Tom Torlakson, the state superintendent of schools, took a stand Tuesday on the three-way political wrestling match over asking voters to raise taxes - sort of.

Plumbers, Private Prisons Contribute To Brown Tax Initiative
Gov. Jerry Brown continues to raise money for his tax measure at an aggressive clip, reporting more than $630,000 in new contributions Tuesday. Support for the initiative comes from a variety of labor, business and tribal groups, reflecting the political...

Revenue Down And Lawmakers Seek Tax Breaks?
Dan Morain @
While Brown and other advocates are asking voters to approve anywhere from $5 billion to $10 billion more in taxes this November, several legislators are seeking to enhance their political standing by offering a new array of tax breaks.

Jerry Brown Pushes His Tax Proposal
Marisa Lagos @
Gov. Jerry Brown said Tuesday that two tax proposals likely to be competing with his tax measure on the November ballot would do little or nothing to solve the state's persistent deficit and would create even bigger fiscal problems resulting in further spending cuts.

Animal Activists Step Up Campaign To Save California Shelter Law
Animal activists have pledged to continue their campaign to pressure Gov. Jerry Brown to preserve California's shelter law, enlisting state and local lawmakers and vowing to highlight their cause in Capitol budget hearings.

Davis Voters Again Approve School Parcel Tax
Hudson Sangree @
For the fourth time in five years, Davis voters on Tuesday approved a school parcel tax to make up for state funding cuts and to avoid reductions in programs and teaching staff.

Some Initiatives Flush With Cash, Others Bare | Capital Notes -- From Kqed's John Myers
comparison, the campaign to qualify a @
It's by no means a perfect way to measure the eventual outcome at the polls, but money often talks loudest in campaigns for or against ballot measures in California. And at this juncture, the money recorded in publicly filed fundraising reports has some interesting things to say.

Jack Scott To Retire As California Community College Chancellor
Jack Scott, California's community college chancellor for the past three years, announced Tuesday that he will retire on Sept. 1.

Hercules To Vote On Half-cent Sales Tax In June
The Hercules City Council, after about two hours of intense discussion, approved a resolution Tuesday night to place a half-cent sales tax on the June 5 ballot to address the citys fiscal emergency.

Judge Blocks UC Davis Pepper-spraying Report
Larry Gordon @
Oakland jurist's temporary ruling on Davis campus officers' action during an Occupy protest in November came at the request of the UC police union.

Man Killed In Honduras Prison Fire Was Deported Despite Court Stay
Anna Gorman @
Los Angeles immigration agents are reviewing why a Honduran man who died in a massive prison fire was sent back to his native country weeks after receiving a stay of deportation.

Correction: California-Education Protests story
The Associated Press @
In a story about education protests, The Associated Press reported erroneously that the California PTA supports an initiative to increase the state income tax for millionaires. The state PTA has not taken a position on that initiative, but has endorsed another proposal that would boost the tax on a sliding scale based on income levels.

Sacramento City Council Approves Arena Financing Plans
Ryan Lillis, Dale Kasler and Tony Bizjak @
In a historic vote, the Sacramento City Council approved the financing plan Tuesday night for a $391 million sports arena in the downtown railyard.

'It's good that we have old politicians around,' Jerry Brown says
David Siders @
Gov. Jerry Brown, who will turn 74 next month, found himself last night in the company of an older politician, a rare enough occurrence Brown's thoughts turned to age.

Fort Bragg OKs Sales Tax Hike To Save Aquatic Center
Fort Bragg voters have overwhelmingly chosen to raise their sales tax rate by a half cent in order to save their financially troubled, $24 million aquatic center.

Dan Walters: This year's California state budget could be bizarre exercise
Political machinations over the state budget dominate every legislative session, but this year's version of the annual budget game may be particularly bizarre due to a confluence of unusual factors, to wit:

Analyst Says Brown's Unemployment Insurance Plan Falls Short
The Legislature's budget analyst says that lawmakers should postpone action on Gov. Jerry Brown's plan to make changes in the state Unemployment Insurance Fund until "a long-term solvency plan" is formulated.

Obama campaign: Romney in 'death march' to nomination
Seema Mehta @
As the Republican presidential candidates savage one another in the GOP nominating contest, advisors to President Obama said on Wednesday that his campaign is busy laying the groundwork for their fall campaign, registering voters, opening field offices, and recruiting volunteers.

Anti-tax Groups Put Brakes On California Spending Cap Initiative
Kevin Yamamura @
Fiscal conservatives seeking a constitutional cap on state spending suggested Tuesday they likely will wait until 2014.

Budget Cuts: L.A. County Court System To Lay Off 350 Employees
Andrew Blankstein @
The Los Angeles County Court system is expected to lay off some 350 employees in June and "restructure" more than 50 courtrooms because of deep cuts in court funding by the state, according to a memo obtained Tuesday by the the Times.

When will California pay furlough back wages to state workers?
Jon Ortiz @
The State Worker has received several emails from staff in the five agencies that are paying furlough back wages, all asking the same thing: When will they get their money?

Indians' 2010 Casino Revenue Fell In California, Rose Nationally
Dale Kasler @
Red Hawk Casino in El Dorado County has suffered in the state's slump, and a $30 million lawsuit loss delivered a new blow.

'occupy' Protester Arrested For Throwing Flower Petals In Capitol
Torey Van Oot @
A 21-year-old woman who participated in Monday's "Occupy" of the state Capitol was arrested for the second time in two days after she returned to the rotunda and allegedly began throwing flower petals over a second-story balcony, according to a California Highway Patrol spokesman.