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Well, it's one of those days when I rewrite yesterday's long-form piece because I had errors. My mind was on food gluttony after finishing January Whole30--bacon paella for Sac Bacon Week at Selland's and hot pot for Tet at the home homes of friends of a friend. Chúc mừng năm mới!
Sellands sold out the two four-foot diameter paellas within an hour (those of us with second pan tickets for to wait about 90 minutes). It was the fastest they have ever sold out that fast at the annual event and it meant long waits in a cold, light rain. Being a transplant to SacTown, I know many Californians look down on the CowTown and don't think of it for its culinary scene. I'll tell you that things have changed over my 25 years here, the food is great, and people here love to eat. And, did I mention 1" cubes of slab bacon/pork belly mixed with mussels and shrimp? Yes, I will have a very conscientious Meatless Monday this week.
You may have noticed that I referred to Senator Wieckowski as both "Bill" and "Bob." It is the latter.
More importantly, Proposition 25's title and summary indicates that it would not change the two-thirds requirement to raise taxes, although the plain language does not actually read that way. The LAO's official analyst wrote "This measure’s constitutional provisions do not specifically address the legislative vote requirement for increasing state tax revenues, but the measure states that its intent is not to change the existing two-thirds vote requirement regarding state taxes."
SUNDAY SCHOOL: As I acknowledge "my bad," we're going to take a trip back to some class in law school, and no, I don't recall which one it was.
In statutory interpretation, we start with plain reading. The relevant actual language is:
(e) (1) Notwithstanding any other provision of law or of this Constitution, the budget bill and other bills providing for appropriations related to the budget bill may be passed in each house by rollcall vote entered in the journal, a majority of the membership concurring, to take effect immediately upon being signed by the Governor or upon a date specified in the legislation. Nothing in this subdivision shall affect the vote requirement for appropriations for the public schools contained in subdivision (d) of this section and in subdivision (b) of Section 8 of this article.
(2) For purposes of this section, “other bills providing for appropriations related to the budget bill” shall consist only of bills identified as related to the budget in the budget bill passed by the Legislature.
The question is what "other bills providing for appropriations related to the budget bill" means. Because of the "notwithstanding" clause, if there is a line-item in the budget, pretty much anything goes. We have frequently seen $1,000 appropriations inserted simply to open the door for statutory changes in budget trailer bills.
But, because there can be reasonable arguments on both sides of the language, we move on to legislative history. Basically, what did the decision-making body rely on in voting on the measure? For bills, that would include intent language, committee analysis, and in some cases, letters by the author to the legislative chamber's Daily Journal. For ballot measures, it would include intent language, title and summary, and the official analysis by the Legislative Analyst's Office printed in the ballot pamphlet phone book mailed to all voters.
On all three accounts, any reasonable judge would find that voters--the "decision-making body" in the case of ballot measures--reasonably relied that the measure did not affect the two-thirds requirements for increases in taxes. The language was vague, but judges must consider those legislative history items, particularly when the legislative body is the electorate.
So, my bad as I stopped at plain reading as I focused on getting over to Selland's to beat the line for porcine paella. I've tried to make changes to the write-up below. The conclusion is the same, but the number of legislative Democrats who can vote no or abstain on an oil and gas severance tax is significantly reduced.
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 Bob 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.
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.
That doesn't mean that it's a done deal one way or another. 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.
So, assuming all Republicans vote against an oil and severance tax, 2 Democrats could be given a pass on casting an "aye" vote as could 6 Assembly Dems. A much higher hurdle, but possible. However, I wouldn't expect Governor Newsom to embrace it without part of a broader connection to overall tax reform or a compelling tie to the state's greenhouse gas goals as part of the overall "going our own way" message to Washington.
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...
ROLLIN' ROLLIN' ROLLIN' In his Sunday LAT column, John Myers writes that the state is finally considering ending the annual deferral of state worker salaries by one day that was used in 2009-10 State Budget to spend $1 billion "less" in that budget year. Of course, like the school deferrals (which I argued for on behalf of community colleges), you had to keep repeating the action each fiscal year. The school deferrals have been "paid back" because of growth in Proposition 98.
Now, with the state "flush" with one-time funds, the Newsom Administration proposes it as an opportune time to do a double-payment to end the roll-over. Of course, lawmakers don't gain any political capital of using $1 billion to end the state-pay rollover, and can point to a laundry list of state needs where $1 billion would go a long way. The challenge of undoing these deferrals in schools, state pay and otherwise were well known when we did them.
As Myers notes, other budget gimmicks remain.
WHAT A CONTRIBUTOR WANTS: For the Bee, Sophia Bollag looks at Gavin Newsom's largest contributors for his 2018 campaign and what the interests might be looking for during his governorship.
JOURNALISM TODAY: In the Columbia Journalism Review, Amanda Darrach reports that, amidst buyouts of older employee, McClatchy's board has increased the CEO's housing allowance to $35,000 per month:
"In 2017, [CEO Craig] Forman’s take-home pay from McClatchy was $1.7 million, excluding restricted stock. His newest contract with the company, dated January 25, 2019, includes a base pay of $1 million, a bonus of $1 million, and an additional $35,000 monthly stipend. According to Segal, this stipend will be used to pay for Forman’s travel, housing, office, and security expenses. This monthly stipend alone, which is up from $5,000 in his previous contract, could fund several reporters’ salaries every year."
In California, McClatchy publishes the Sacramento Bee (its "home"), Fresno Bee, Modesto Bee, and Merced Sun-Star. John Myers tweets "The McClatchys were once to Sacramento what the Otis/Chandler family was to Los Angeles, the Ochs/Sulzberger family still is to New York. From that storied past to now...where their company cuts staff while giving a $35K/mo. housing stipend to the CEO."
#CAKEDAY: Happy birthday to Courtney Baxter!
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