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Important: the analysis below has changed and is reflected in the Nooner of Sunday, February 10.
TAXING MATTERS: Just about a week ago, a reader asked me if I knew why there were so many TV and online ads (at least in Sacramento) by the oil and gas industry, primarily featuring labor voices. I made sure there were no ballot measures for an oil and gas severance tax currently in the formal pipeline and, seeing none, I speculated that legislation might be forthcoming.
Yesterday, Senator Bill Wieckowski (D-Fremont) introduced a bill to impose an oil and gas tax at the rate of 10% of the average current price per barrel. The bill is SB 246, which wasn't online at the time I wrote this morning.
The idea has been around for years both in the form of ballot measure and legislative proposals. I think the last legislative proposal was SB 241 (Evans) had several prominent co-authors yet didn't make it past the Senate Approps suspense file. Governor Jerry Brown was eager to stand by his pledge of no tax increases without a vote of the people pledge from his 2010 campaign. At the time of his campaign, it was an easy pledge, as Democrats were nowhere near having two-thirds votes in both houses, normally required for a tax increase.
Of course, on the same day of the election that began Jerry Brown 2.0, voters approved Proposition 25 (55.1% yes, 44.9% no), which changed the vote required for the budget to a simple majority of both houses. The text was "appropriations in the budget bill and in other bills providing for appropriations related to the budget bill," with the latter commonly referred to "trailer bills." For the home-gamers, the "budget bill in chief" cannot include statutory provisions. Rather, it has line-item appropriations with provisionary language, which are only effective for the year of appropriation. However, trailer bills can make statutory changes that extend beyond that year's budget.
Even after passage of Proposition 25, there was still a question about the temporal requirement of the trailer bills being passed with a simple majority vote. Now that there was a new "hard deadline" for budget passage of June 15 (with the penalty being lawmakers not being paid), did that mean that trailer bills also had to be passed by June 15 if done by majority vote?
Fast forward to today. There's one major tax proposal on the table--removing commercial and industrial from Proposition 13 assessed valuation protections, colloquially known as "split roll." It has already qualified for the November 2020 ballot. Governor Gavin Newsom has previously supported split roll although now, as governor and after the initiative qualified, he has said that he'd like to see the parties to come to agreement to avoid a bitter high-cost ballot war.
On Wednesday, the Service Employees International Union endorsed the November 2020 split roll tax, which proponents call "California Local Schools and Communities Funding Act." That's widely expected, but the union has a lot on its plate in that election.
The release announcing the SEIU endorsement arrived at 4:05pm. What most people didn't know is that reporters were already sitting on polling results from the Public Policy Institute of California that we had since 9:11am, but were embargoed until 9pm. That is standard by legit polling organizations, as it takes a long time to go through crosstabs and contextualize a story. Okay, the LA Times is legit even if it did drop polling results last year once at 3am.
Let's look at the numbers. These are all likely voters, although all adults is even worse for the split roll proponents--47% yes, 43% no.
Now, let's be clear, this is a straight question poll on the revenue side of things. Proponents of the November 2020 measure are framing it on the investment in schools and communities, which is a very different question. That's not a criticism of PPIC's poll--they do an outstanding job. The question is already long enough.
Testing both the revenue and expenditures side can't methodically be done when voters have no idea about the actual ballot measure. Halfway through a two-paragraph question, poll respondents are tuned out and reading about Bezos and Pecker on Medium and will randomly pick an answer. How many of you have even read these two paragraphs?
We saw this last year. There were many polls that said Proposition 6, the measure to sustain the Legislature's increase in the gas tax and VLF, was going down. That's because it was asked only on the revenue side. Once voters knew that the measure would repeal existing increases in funding for road and bridge construction, the measure failed with only 43.2% of the "yes" vote. And, that was before concrete was raining down on the Richmond-San Rafael bridge this week.
Political consultants independent of particular ballot measure campaigns would say that the topline needs to be over 60% at this point if there is going to be any sort of "no" campaign. I have first-hand knowledge of this--I've been a proponent of an unsuccessful ballot measure effort that polled like rainbows and unicorns until we were walloped by well-funded opponents.
The "Yes on 6" campaign was anemically funded compared to the "no" side championed by Governor Brown.
Voters are willing to approve tax increases on other people--generally smokers and the rich. Even Proposition 30 "Temporary Taxes To Fund Education. Guaranteed Local Public Safety Funding." passed with only 55.37% of the vote after an extensive campaign with little funded opposition.
The ballot title of the "California Local Schools and Communities Funding Act" is officially "Requires Certain Commercial and Industrial Real Property to be Taxed Based on Fair-Market Value. Dedicates Portion of Any Increased Revenue to Education and Local Services. Initiative Constitutional Amendment." Certainly not a bad ballot title from the Attorney General's Office, but not great.
Back to an oil and gas severance tax. Governor Newsom has stated that he wants comprehensive tax reform and a deal on the split roll. Voters just gave a big "okay" to increased gas taxes for the "right" purpose. Few policy experts believe that California can go back to the well for more "millionaire" taxes. They have been hit hard, particularly with the changes to the federal State and Local Tax (SALT) deduction, as discussed by CALmatters's Dan Walters this week.
Is Bob Wieckowksi's SB 246 an opening volley to obtain an oil and gas severance tax as part of the budget this year dedicated to public transportation and other projects, particularly targeted for the state's clean energy goals?
Industry and some labor groups will lobby hard against it, but with new transportation funding, it would bring other labor groups on board.
It is very likely it can be done as a budget trailer bill with a simple majority vote. That means that Democrats could give "passes" to 19 members in the Assembly and 8 in the Senate, assuming all Republican members vote against it.
That doesn't mean that it's a done deal. The oil and gas industry are huge players in politics on both sides. However, much of the refined oil is from imported crude product. In 2017, only 31.7% of California's crude oil supply was from the state, while 12.33% was from Alaska and 56.66% was from foreign sources. Of that, 49% was combined from Saudi Arabia and Ecuador. Similarly, most of the natural gas in California is imported domestically.
Did I mention that Wieckowski is chair of Senate Budget Subcommittee #2 on Resources, Environmental Protection, Energy and Transportation?
However, to the south of Senate Budget chair Holly Mitchell's district is the Wilmington Oil field that stretches from Wilmington to offshore. That district will be filled this spring in the SD33 special election. However, Wilmington's reserves are dwindling and there is a lot of community pressure to cap it off under economic justice.
The biggest loser in the imposition of an oil and gas severance tax? House Minority Leader Kevin McCarthy (R-Bakersfield), as the state's largest oil production is in Kern County. While Democrats might want to kick McCarthy while he's already down after missing out capturing the speakership and losing half his California delegation, the biggest oil field in California is Midway-Sunset in the district of freshman TJ Cox (D-Fresno), who won the closest pick-up for California Democrats in 2018. Freshman State Senator Melissa Hurtado (D-Fresno) can likely escape the situation with a passionate floor speech and a "no" vote--actually would probably help her 2022 re-election.
This will be a very interesting fight in the year ahead and it could all happen behind the scenes.
More and #CAKEDAY after the jump...
POLICE RECORDS--PAGING IRON MOUNTAIN: Contra Costa County Superior Court Judge Charles S. Treat ruled yesterday against police unions that argue that the new police records law only applies only on a going-forward basis, tweets UC Davis Law professor Elizabeth Joh. Judge Treat writes in his opinion:
"It makes little sense to suppose that the Legislature saw these serious problems and concerns as applying strongly to police personnel records dating to 2019 -- but that it viewed the same problems and concerns as categorically inapplicable to police personnel records dating to 2018 or earlier."
The City of Inglewood has been actively shredding "obsolete" police records.
CAMPAIGN FINANCE: Since we're talking King Hall, Assemblymember Jim Gallagher (R-Yuba City) introduced a bill to require cities and counties to post campaign finance information online, instead of providing them only in hard copy and charging for the records. Capitol Public Radio's Chris Nichols reports on AB 322.
#CAKEDAY: Happy birthday to Joanne Bonner Leavitt, Jackie Smith, Assemblymember Phil Ting, and Juan Torres!
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