Sen. Bob Huff

2016 started with a bit of a bipartisan bump with Senate Pro Tem Kevin de León and former Senate Republican leader Bob Huff at center stage.

When the Senate reconvened two weeks ago, de León of Los Angeles and other Democrats unveiled an initiative to provide housing for the homeless. Huff, of San Dimas, was by his side, along with Costa Mesa Republican John Moorlach.

On Monday, de León joined fellow Democratic Senator Fran Pavley and others in Los Angeles to unveil legislation in response to the Porter Ranch gas leak. And again, Huff was right there.

While California politics are nowhere near approaching a post-partisan utopia, the two bipartisan events, plus the unanimous election of Anthony Rendon, D-South Gate, to be speaker of the Assembly started the election year off with a spirit of cooperation.

“People are sick of hyper-partisan politics — the average person,” Huff told CalWatchdog in his Senate office on Wednesday. “They want to see people solve problems, they don’t care whether you’re R or D.”

Win-Win

Besides achieving policy goals, there are mutual benefits to working together. De León — who was not available for comment — can show his pragmatic side by reaching across the aisle to address a Democratic priority. And Huff can expand his appeal and the Republican brand, which could help both his party in 2016 and himself in his race for Los Angeles County supervisor — where the homeless population has increased 12 percent over the last two years.

“It’s a win-win for both of them, with the added benefit of accomplishing sound policy,” said Democratic political consultant Steve Maviglio, noting that the 40-member Senate is often chummy. “Personal relationships matter. You’re seeing an extension of that cordial relationship play out now with these initiatives.”

With Democrats outnumbering Republicans in both chambers by a wide margin and with Republicans steadily losing registered voters every year, any gains achieved through bipartisanship would aid Republicans greatly.

“I think it’s a recognition that there has to be something more to Republicanism than opposition to tax increases,” said John J. Pitney, a Republican operative-turned-academic at Claremont McKenna College. “That’s all well and good, but if you want to expand the party’s appeal, you have to frame it in a way that voters outside the base are going to respond to.”

Walking the Line

And that’s the fine line Republicans must delicately walk — balancing bipartisan legislating with fealty to principles. According to Huff, the homeless initiative — which would repurpose existing funds to provide housing for some homeless — could help people while saving money and providing an opportunity to examine existing regulations and policies that may contribute to the rise in homelessness. “But in the meantime, you’ve got to deal with the reality that you’ve got tents popping up everywhere, and those are the ones fortunate enough to have tents,” Huff said.

Huff said that he hadn’t seen the details of the proposal yet, but liked the principles and said he’d like to work with the majority when possible.

“When you are the minority party and you can agree with the majority party, it’s easier to shape things and get things done then to say no,” Huff said, adding “I was a part of the party of ‘no’ in the beginning and I wanted to become more of a part of the party of solutions.”

Moorlach, who stood with Huff at the unveiling of the homeless initiative, is interested in solutions that don’t increase spending, but he is also reluctant to fully embrace the initiative until more details are provided. For him, the press conference was about learning about the proposal.

“The Senator helped repurpose similar funding in Orange County to improve homeless housing,” said Moorlach spokesman Tim Clark in an email. “For him, its a way to ensure that funds already appropriated are actually producing a measurable result.”

“We are about to begin a new chapter in the history of the Assembly,” Mayes said on the Assembly floor. “Why would we want to make the very first action in this new era an empty partisan exercise? Doing so would not serve the house or the state well. It would just be more of the same.”

Although he’s yet to be sworn in, Republicans are hoping that Rendon is someone they can work with, said Pitney, adding that a “purely partisan stance isn’t going to work,” given that in the last eight years, Republicans have slipped from 34.2 percent of registered voters to 28 percent.

“Without abandoning principles, they have to find a way of making sure the ‘R’ is not the scarlet letter,” Pitney said. “Working with someone like Rendon, who’s liberal but also a thoughtful and practical guy, that’s something that makes sense.”

“AB339 is designed to ensure consumer access to vital medications,” said the bill’s author, Assemblyman Rich Gordon, D-Menlo Park, on the Assembly floor June 3. “Californians with cancer, HIV/AIDS, hepatitis, multiple sclerosis, epilepsy, lupus and other serious and chronic conditions, need high-cost, specialty drugs. Today, consumers with these serious health conditions can be asked to pay as much as $6,600 for a month’s prescription for a single drug. AB339 limits what a consumer pays to $275 per 30-day prescription.”

The updated version of the bill reduces that to a $250 copay limit for a 30-day supply, with the exception of those with bronze insurance plans who would be liable to pay up to $500 for a 30-day drug supply.

“The California Health Benefits Review Program, which analyzed AB339, found that there’s a preponderance of evidence from studies that persons who face higher cost sharing for prescription drugs are less likely to maintain meaningful levels of adherence than persons who face lower cost sharing,” said Gordon. “And poor adherence to prescription drug therapy for chronic conditions is associated with higher rates of hospitalization and emergency department visits.”

Actual Effect of Cost Sharing

The actual effect of cost sharing may be more nuanced, according to the legislative analysis prepared for the Senate Health Committee’s July 15 hearing: “[T]here is some evidence that the effect of cost sharing may differ depending on the specific disease and specific specialty drug. There is a preponderance of evidence that cost sharing has stronger effects on use of health care services by low-income persons compared to high-income persons. However, this was not observed in a recent well-done observational study from Massachusetts.”

Gordon responded to the concern that his bill would increase insurance premiums by pointing out that CHBRP “found that premium increases are estimated to be only 0.3 percent for enrollees with group insurance and 0.7 percent for enrollees with individual market policies. As demonstrated by this data, the benefits of this bill increasing medication adherence far outweigh any negatives. Join me in supporting these important consumer protections, which ensure that Californians are better able to afford their prescription drugs and that drug benefit designs are not discriminatory.”

He was in fact joined by most of the Democrats in the Assembly where the bill passed, 48-30, with no other discussion. It also passed along party lines in the Senate Health Committee, 7-2, after witnesses testified to its pros and cons.

Advocacy Organizations Tout Effectiveness of Medicinal Improvements

“This is a bill about basic consumer protections,” said Sawait Seyoum, representing the advocacy organization Health Access California. “A recent study found that the average consumer has about $2,300 in liquid assets in their checking or savings account. Today we expect the average constituent to pay over half of what they have in their account for a single prescription in the first month.

Touting the effectiveness of medicinal improvements was Anne Donnelly, representing Project Inform, which advocates for those with HIV and hepatitis C.

“Over the years since we started working on HIV, people with HIV have started moving from a life expectancy of about 43 days to a normal life span, and we have ended the transmission of HIV from HIV-infected moms to their babies,” she said. “And that’s in large part due to the effectiveness of HIV drugs. Now we have an HIV drug that when used appropriately can stop new infections.

“So the hope of ending this epidemic really depends in large part on these drugs being accessible and affordable to Californians living with and at risk for HIV. We need AB339 to ensure that everybody with a serious health condition or at risk for one, not just people living with HIV but including people living with HIV, have access to the drugs they need at a price they can afford.”

Opposition to Bill Focused on Increased Premiums

But the bill might actually have the opposite effect, according to Nick Louizos, representing the California Association of Health Plans.

“Our opposition to this bill is fairly simple,” he said. “Legislatively designing health benefits increases premiums. We can legislatively create the best benefit packages in the world, but if no one can afford them, that’s pretty useless from our perspective. This has been demonstrated time and time again. The independent analysis of the introduced version of this bill does show premium increases of close to $400 million on individuals and employers.”

That analysis, which was done before the bill’s scope was reduced to include only prescription drugs providing essential health benefits, estimated it would result in a $162 million increase in employer-funded premiums in the private insurance market and a $216 million premium increase by individual purchasers.

But there may be big costs associated with the current version of the bill. The analysis states that it may include “unknown, potentially significant fiscal impact on the private health insurance market. By requiring coverage of single-tablet regimens and extended release prescription drugs, carriers lose negotiating power, leading to unknown higher drug costs.”

Louizos said that the state health benefit exchange, Covered California, has estimated “that over a three-year period, prices could increase by 3 percent. And that’s a pretty significant percentage from our perspective, considering all the cost drivers in the health care system.”

John Caldwell, representing Pharmaceutical Care Management Association, is also opposed:

“[It} appears to require the brand pharmaceuticals that have been on the market the longest, and thus most often prescribed, would get favored status,” he said. “In some cases this would be the most expensive, in some cases it may not be. So we don’t see the reasoning behind that. We think it’s just going to require redoing the [cost] tiers on an annual basis based on what is the most popular drug.

 

“Another issue: AB339 essentially forces coverage of more expensive brand HIV pharmaceuticals that are in single-tablet form when less expensive brands or generics in multi-tablet form are available. As the Assembly Appropriations Committee analysis noted, the burden of proof to refuse coverage of these drugs, according to the bill’s provisions, appears very high, essentially meaning they would have to be covered. This provision would completely eliminate any incentive for the manufacturers to negotiate on plan formularies.”

Further Discussion Encouraged

The only committee comment came from the chairman, Sen. Ed Hernandez, D-West Covina:

“I agree that there are conditions that need to be dealt with, especially very expensive ones. I believe that we need to make sure that the consumer doesn’t have to go bankrupt.

 

“But there’s something that I think we really need to really have a discussion. There’s an underlying problem, and it still deals with overall controlling costs to the health care system – and that’s the increasing cost of prescription medications. At the end of the day what’s going to happen is that you’re going to have lower payments to the consumer, but yet if you have escalating drug costs, guess what, all of those costs are going to be passed onto the consumer in the form of premium increases throughout the entire system.”

AB339 will next be considered by the Senate Appropriations Committee.

AB567 “would allow the Board of Equalization and the local county assessor to disclose that a legal entity change in ownership statement has been filed or that the BOE has determined that the property requires a reassessment under legal entity change in ownership law,” said Gipson on his website.

Currently the BOE is prohibited from providing change in property ownership information to the public, according to the bill’s legislative analysis.

That’s despite the fact that “in recent years, media reports of the disparate consequences of reassessing property owned by legal entities and property owned by individuals have resulted in an increasing number of inquiries from the public whether specific sales, mergers, acquisitions, and buyouts reported by media trigger the reassessment of a legal entity’s real estate holdings,” the analysis said.

The bill also allows the disclosure if the change in ownership filing was prompted by the Franchise Tax Board based on information collected from the taxpayer’s state income tax return.

The analysis by Oksana Jaffee said that the disclosure would be “very limited”:

It does not require a disclosure of any factual information reported on the taxpayer’s state income tax return, such as the amount of gross receipts or sales, gross profit, the amount of credit carryovers, income subject to apportionment, or the amount of each individual credit claimed on the tax return.

 

Furthermore, no actual information reported on a CIO [change in ownership] statement, other than the fact that the statement has been filed, may be disclosed to the public. Detailed financial information reported in the state income tax return or CIO statement will remain confidential.

Currently it’s difficult to find out about a change in property ownership because “discovery relies heavily on self-reporting, which does not always result in 100 percent compliance,” the analysis said. It quotes the BOE’s analysis that “delayed transparency undermines the public trust in the current property tax system as it applies to legal entity changes in ownerships and fuels the perception that laws are inequitable and should be changed.”

Jaffee’s analysis concludes with an argument for AB567:

Transfers of real property are recorded and are already public information. Thus, it is unclear why a disclosure of the mere fact of filing a CIO statement by a legal entity, or the fact that the filing was prompted by the information collected by the FTB, would undermine public trust or should remain confidential.

Gipson made his case for the bill on the Assembly floor May 28:

AB567 will increase accountability in assessed property values by allowing the State Board of Equalization to provide timely and basic information to the public. Right now the county assessors are required to make public reassessed property values on the assessed role.

 

However, when a business files paperwork to trigger reassessment, the State Board of Equalization is required to keep information confidential – I want to underscore confidential – even though this information will eventually be made public by current law today.

 

As a result, when the public calls upon the State Board of Equalization to ask about specific sales or merger, the State Board of Equalization cannot provide any information. AB567 will allow the State Board of Equalization to disclose only the necessary paperwork as filed and triggered by the reassessment.

 

What will be shared by AB567 is actually less than what is required to be disclosed by the county assessor’s office today. This modest bill will improve communication between the public and the State Board of Equalization, and help ensure our tax laws are fairly applied to the public’s benefit.

Assemblyman Phil Ting, D-San Francisco, also spoke in favor of the bill:

As a former assessor I dealt with this issue very specifically. Often times when there are changes of ownerships that happen, they are reported on your tax returns, which obviously are delayed for a year. That information is then transferred from the Franchise Tax Board to the BOE, and doesn’t get to the county assessor, it could be, for almost two years.

 

So that information, which is actually public information necessary for us to make sure that assessments are done properly, aren’t getting to the county assessors in a timely fashion. This will help increase transparency, help speed it up. It does not impact privacy at all. This is public information and it will just get to the right source at the right time.

But Republicans who spoke against the bill don’t consider it so benign. Assemblyman Travis Allen, R-Huntington Beach said:

Very simply, according to the author, the purpose of the bill is to allow anyone who believes that a possible change in ownership has occurred to call the Board of Equalization and inquire about the ownership of a property. And after the BOE receives the inquiry and finds that this entity has not filed a certain form, the BOE can then request that entity to file the form and then evaluate whether or not a change in ownership has occurred.

 

I know that sounds a little complex. But essentially what that means is that anybody can call up the BOE and potentially harass a business. And the reason they would be doing this is potentially to get them to pay higher taxes. This opens itself to potential abuse. The implementation could cause problems in California.

Assemblyman Donald Wagner, R-Irvine, agrees that AB567 will open up businesses to harassment:

You get to go and say to the BOE, “Hey, I think there was change in ownership in this business.” Maybe that business is a competitor of yours. Maybe that business has got some information that would otherwise appear on these forms that you’d like to dig into and find out about maybe for your own competitive purposes, maybe for nefarious purposes, maybe for purposes of harassing the business.

 

You don’t even need a good faith belief to make the allegation, as I understand the bill as it is in print, to require the form to be filed. So now your competitor is filing forms with the BOE, public forms with the BOE. The board is now tasked with evaluating whether or not there’s been a change in ownership when perhaps there’s been absolutely no underlying transaction whatsoever.

 

Why do this? You do this to harass other businesses, you do this maybe because you’re trolling for a lawsuit. You do this for all sorts of reasons that, rightly as the law exists today, you can’t do. So there’s no evidence in the hearing that I sat through that this is a great big problem and lots of businesses are escaping change of ownership filing requirements.

 

Every small business in the state has had enough of our forms. This is one more form from what is merely a fishing expedition and absolutely no explanation of the problem we are trying to solve. Let’s not go there. This is an easy no vote.

The bill passed 47-29 along party lines in the Assembly and will next be considered by the Senate. The California Taxpayers Association and a coalition of business groups sent an opposition letter to the Senate Governance and Finance Committee on June 1. It states:

There is no valid reason to begin violating taxpayers’ fundamental protection of keeping their tax information confidential. The bill would deteriorate taxpayer privacy by allowing confidential tax information to be released to the public; and would allow the information to be released without tax officials first making a proper determination regarding a property owner’s taxes.

 

This bill would not promote “transparency,” because no public interest would be served by allowing tax officials to release confidential tax information regarding changes in ownership. In fact, an erosion of trust would occur, as the public is acutely aware that tax agencies currently must safeguard their tax information, and this bill would break that trust.

 

Oftentimes, no change-in-ownership statement is filed because no change in ownership occurred. In these cases, what purpose is served in disclosing to the public that no form was filed?

 

More and more tax information that should remain confidential is indiscriminately made available to the public. The benefits to be derived from such disclosures are speculative at best, and do not warrant taking the risk of inaccuracies or other adverse consequences that may undermine public confidence in the tax system.

The bill will next be considered by the Senate Rules Committee for assignment to a policy committee.