New Assembly GOP Leader Brian Dahle.

Chad Mayes of Yucca Valley is out as Assembly Republican leader, replaced last week by Assemblyman Brian Dahle of Bieber. But the fallout may continue over the decision of Mayes and six other GOP Assembly members to provide Gov. Jerry Brown and Assembly Speaker Anthony Rendon, D-Lakewood, with the votes necessary to save the state’s cap-and-trade program on July 17.

Mayes touted the GOP support as helpful in rebranding the party with young voters worried about climate change and emphasized the concession he won from Brown and Rendon, which could make it possible for the Legislature to effectively scrap the state’s troubled high-speed rail project in 2024. But the votes infuriated many Republicans for betraying the party’s core anti-tax, anti-regulation beliefs and for allowing a handful of Assembly Democrats in swing seats to avoid having to vote to extend cap and trade until 2030.

Under the program, businesses buy permits for emission rights. Because of fears that courts would find the permit fees were tantamount to taxes, Brown wanted two-thirds votes in the Legislature to ensure cap and trade’s extension would be on solid legal ground under Proposition 13. Thanks to the votes of Assembly Republicans Mayes, Catharine Baker of San Ramon, Rocky Chavez of Oceanside, Jordan Cunningham of San Luis Obispo, Heath Flora of Ripon, Devin Mathis of Visalia and Marc Steinorth of Rancho Cucamonga, Brown got 55 votes for the extension, one more than he needed.

Harmeet K. Dhillon, a San Francisco lawyer who is one of the state’s members on the Republican National Committee, told the Los Angeles Times that Mayes shouldn’t be the only one held accountable for preserving cap and trade.

“Now, given the fact that six of these [Republican lawmakers] did vote for a massive tax increase, Republicans are going to be very vigilant about these issues,” she said. The state GOP voted earlier this month to ask Mayes to step down at Dhillon’s behest.

Another RNC state delegate – former state GOP chair Shawn Steel – also blasted Republicans who sided with Brown on cap-and-trade.

Mayes, Baker, Chavez, Cunningham, Flora, Mathis, Steinorth and state Sen. Tom Berryhill, R-Modesto – the only GOP Senate vote to extend cap and trade – are likely to face heat from conservatives in their re-election bids or in seeking other elective posts. Conversely, they could also attract support from moderate and independent voters, given the popularity of environmental causes among state voters.

New GOP leader wants no more cap-and-trade recriminations

But new Assembly GOP leader Dahle – a 51-year-old seed business owner and farmer and former Lassen County supervisor – wants to the put the cap-and-trade flap behind.

“There are 24 other members of this caucus and they all have different views,” he told reporters Thursday after Mayes stepped down. “There are people in our caucus who voted their conscience for their district, and I support those who did that. In my case it didn’t work in my district, so I was opposed to that.”

Mayes, 40, was first elected to the Assembly in 2014 and began as GOP leader in January 2016. While now under fire from conservatives, he could someday be remembered as the man who killed the bullet train – the state project that’s as unpopular among California Republicans as cap and trade.

As part of the cap-and-trade deal, Mayes got Democrats to agree to put a constitutional amendment he wrote before state voters in June 2018. Under the unusual measure, if voters gave the go-ahead, there would be a vote in 2024 by the Legislature on whether to continue to allow cap-and-trade revenue to fund the $68 billion project – with two-thirds support necessary to continue funding.

Brown and bullet-train backers are counting on cap-and-trade fees to increase in coming years and to keep the project viable. So far, the California High-Speed Rail Agency has been unable to attract outside investors to help pay for a statewide system, and federal funding dried up after Republicans took control of the House in 2010.

SACRAMENTO – California’s Legislature is back from its recess and legislators kicked off the session by focusing on two highly partisan matters.

Assembly Republicans first voted to keep Chad Mayes as Republican leader, despite pressure from activists to oust him because of his vote to extend the governor’s cap-and-trade system. But Mayes said Thursday that he will step down and will be replaced by Brian Dahle, R-Bieber. Democrats pushed new legislation that would change state election rules to help Democratic Sen. Josh Newman of Fullerton thwart a high-profile recall effort.

As divisive political wrangling settles down, legislators do plan to address some substantive policy issues. At the top of the list is housing. Before the recess, Gov. Jerry Brown and the Democratic leadership promised to introduce a package of bills to help boost housing supply, given that escalating home prices have reached crisis levels.

Keep an eye on Senate Bill 35, which would create “a streamlined, ministerial approval process for development proponents of multi-family housing” in localities that have “not produced enough housing units to meet its regional housing needs assessment.” A ministerial approval would spare developers from a drawn-out process before planning commissions and city councils.

Local governments are opposed to the bill because it limits their authority, but backers say the measure is needed to jump-start some types of housing projects, given that local growth controls and environmental lawsuits have slowed housing construction.

The bill recently was amended to expand its application beyond big urban centers to include smaller cities and suburban locales. It’s a rare instance where Republicans and Democrats have some common ground, with the former wanting to encourage private companies to build more and the latter hoping to see the construction of high-density housing. The building industry opposes provisions that would require paying union wage scales.

There’s more controversy over two other housing-related measures. Senate Bill 2 would impose $75 to $225 fees on property transfers (excluding home sales) to fund government-subsidized affordable housing. Senate Bill 3 would put a $3 billion housing bond on the November 2018 ballot, which also would fund housing subsidies.

Another top Capitol priority is passage of Assembly Bill 1250, which essentially would ban 56 of California’s 58 counties from outsourcing certain services to private contractors. It is backed by a vast array of public-sector unions.

“While cheaper services and employee layoffs may appear to save dollars in the short term, the savings are often illusory with hidden costs that are not accounted for and diminished services or contractor failures that require cities and counties to ultimately re-hire and/or re-train staff to provide the outsourced service,” argues author Reginald Jones-Sawyer, D-Los Angeles.

But county governments, and companies that provide myriad services to them, argue that the bill will dramatically raise costs for taxpayers and will lead to diminished services. Given increasing costs of pensions, medical care and other employee benefits, these governments say they can’t afford to hire permanent employees. This is likely to be one of the most contentious bills to make its way through the Legislature during the final month of session.

On Wednesday, activists promoting bail reform held an event on the Capitol grounds, thus highlighting a growing reform movement. Senate Bill 10 — by Sen. Bob Hertzberg, D-Van Nuys — would replace the current system of money bail with a judicial-based pre-trial system, whereby defendants are released or kept in custody based on an assessment of their flight risk and the nature of their alleged crimes.

Opponents of the current bail system argue that it’s unfair to keep people in jail, as they await trial, based solely on their ability to post a bond. Studies show that low-income people are more likely to accept plea bargains – largely so they can get out of jail and get back to work and caring for their children. The bail-bonds industry sees the legislation as an existential threat, and Republicans fear that the new system could make it tough to keep dangerous people behind bars.

Senate Bill 54, which would turn California into a so-called sanctuary state by limiting “the involvement of state and local law enforcement agencies in federal immigration enforcement,” is another hot-button issue in the waning days of the session. As the Sacramento Bee reported, the measure “sailed through the Senate and appears likely to pass the Assembly with a majority vote,” but “it’s unclear where Brown stands on the issue.”

Its passage would put the state on a collision course with the Trump administration, which has threatened to halt crime-fighting funds to cities — and presumably, states — that refuse to cooperate with federal immigration officials.

Legislators and activists have talked about other, less-substantive but highly controversial issues, as well. Senate President Pro Tempore Kevin de Leon promised in a speech this week to hold hearings on white supremacists in California, which he called “a cancer on our nation.” Silicon Valley entrepreneur Tim Draper, who had failed to qualify for the November 2016 ballot a measure to break up California into six states, filed a new measure to split up California into three states.

There’s plenty to watch as the legislative session winds down – and as political battles heat up for the 2018 election.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

Assembly Republican Leader Chad Mayes, R-Yucca Valley, survived

Nevertheless, anger over Mayes’ decision to work with Gov. Jerry Brown last month and lobby fellow Republicans to help secure an extension of the cap-and-trade program established by AB32 – the state’s landmark 2006 anti-climate change law – remains intense among some lawmakers and many conservative activists. Another challenge to Mayes’ leadership is expected at an Aug. 29 caucus at which an election will be held to determine who leads the Assembly GOP.

Assemblywoman Melissa Melendez, R-Lake Elsinore, perhaps Mayes’ most critical colleague over his decision to help Brown round up seven Republican votes for AB398, is running. Assemblyman Jay Obernolte, R-Big Bear Lake, is considered likely to run as well. There’s also been speculation about Assemblyman Vince Fong, R-Bakersfield.

Mayes’ decision to vote for the cap-and-trade renewal, and to work to bring several GOP lawmakers with him, came after weeks of negotiations with the governor. He believed he had won a major concession from Brown and Democratic legislative leaders that could eventually throttle the state’s costly, problem-plagued bullet-train project. Here’s a description from CalWatchdog coverage last month:

The concession ….  places a constitutional amendment drafted by Mayes before state voters in June 2018. If passed, it would lead to a one-time up-and-down vote in the Legislature in 2024 on whether to continue allowing the use of cap-and-trade revenue to fund the project. But the threshold wouldn’t be a simple majority. A two-thirds vote would be required to allow continued use of the funds – presumably giving GOP lawmakers a prime chance to pull the plug.

But the complexity of the concession and its distant possible payoff didn’t enthrall many Republican lawmakers, whose opposition to AB32 is a core element of their political platform. There was also fury that Mayes rounded up so many Republicans that Democrats didn’t have to pressure two of their Assembly members in swing districts to vote for a cap-and-trade extension that is unpopular with their constituents. AB398 passed 55-25, with one vote more than necessary to meet the two-thirds threshold for adoption.

Meanwhile, an argument that Mayes has increasingly made in recent weeks – that AB398 provided state GOPers with a chance to rebrand themselves and broaden their appeal – has faced ridicule from those who say the party’s core values are opposition to higher taxes and overregulation.

State GOP board issues harsh rebuke

Mayes’ rough month continued last Friday, when the board of the state Republican Party voted to urge Mayes to step down. The vote was 13-7, with one abstention. State GOP chair Jim Brulte was among the yes votes.

More than 20 local Republican organizations have also issued formal denunciations of Mayes.

Mayes, 40, has worked as a financial planner. He entered politics on the Yucca Valley Town Council and also worked as a top aide to a San Bernardino County supervisor. He was first elected to the Assembly in 2014.

Will news about the California bullet train’s cost overruns and

These are the key questions prompted by a concession that some Republican state lawmakers gained in return for helping Gov. Jerry Brown keep alive the state’s greenhouse-gas emissions cap-and-trade program until 2030. The provision could eventually end the state’s high-speed rail project, leaving a massive white elephant in the agricultural fields of the Central Valley. Or the concession could end up yielding a second vote validating a project first approved by state voters in 2008.

The concession – secured by Assembly Republican leader Chad Mayes of Yucca Valley – places a constitutional amendment drafted by Mayes before state voters in June 2018. If passed, it would lead to a one-time up-and-down vote in the Legislature in 2024 on whether to continue allowing the use of cap-and-trade revenue to fund the project. But the threshold wouldn’t be a simple majority. A two-thirds vote would be required to allow continued use of the funds – presumably giving GOP lawmakers a prime chance to pull the plug.

So far, the funding has been substantial in one sense but marginal in the big picture of trying to pay for a $64 billion project. After the fifth year of cap-and-trade distributions, about $1 billion has gone to the California High-Speed Rail Authority, with another $500 million expected this fiscal year. But it is considered crucial because it is the only new funding source Brown has found for the project, which has been unable to gain outside investors because of rules banning public subsidies for bullet-train operations.

Rail authority chair Dan Richard says he isn’t worried about a public veto in seven years: “By 2024, we’re going to be deep into construction. We’re going to be on the verge of opening the first service. We’ll be seeing Google and others making massive investments in areas around high-speed-rail stations. The case will be there for the importance of continued funding,” he told the San Francisco Chronicle.

The authority’s 2016 business plan said the state expected to have $21 billion in hand from state bonds, federal grants and cap-and-trade funds to build a segment from San Jose heading south.

Feds expect cost overrun of 48% or more on first segment

But Mayes and other GOP lawmakers are betting that from here until 2024, the bad news about the project will never stop.

Lawyers for the Central Valley farmers and the government and civic officials they represent in lawsuits against the state government like to point out that – apart from court victories allowing the project to continue to spend public monies – there has been no substantial encouraging news about the project in years.

In January, the Los Angeles Times reported that it had obtained a confidential Federal Railroad Administration risk analysis that predicted a cost overrun of 48 percent or more on the initial 118-mile segment in the Central Valley. What the Brown administration has been saying would cost $6.4 billion is instead likely to be $9.5 billion to $10 billion, federal officials warned.

The idea that voters will be pleased with what they see in 2024 could be difficult to square with what rail authority officials told a visiting congressional delegation in August 2016: that construction is expected to stop in the middle of an almond orchard 30 miles northwest of Bakersfield when the money runs out.

This is contrary to promises made to voters in 2008 to get them to provide $9.95 billion in bond seed money for the project. They were guaranteed no construction would begin until the state could guarantee its initial segment would have financial viability without any more train tracks being laid.

The Senate was less of a question, given that Democrats have a full supermajority in the upper house. As it turned out, the Senate passed the measure – and a companion bill that strengthens air-pollution reporting requirements – with all Democrats in support, as well as one Republican, Tom Berryhill of Modesto, who gained a concession (reduction of a firefighting fee for rural areas) he had sought.

But the Assembly vote wasn’t even close, as seven Republicans – including Republican Leader Chad Mayes of Yucca Valley – voted in favor of the extension. The other six Republicans were Catharine Baker of Walnut Creek, Rocky Chávez of Oceanside, Jordan Cunningham of San Luis Obispo, Heath Flora of Modesto, Devin Mathis of Visalia and Marc Steinorth of Rancho Cucamonga.

Mayes defended his vote, first by expressing how tired he is of partisanship, then noting that he supports cap and trade because “we believe markets are better than Soviet-style regulations.” He also posted on Twitter a large photo of Ronald Reagan with a recent quotation from former Reagan Secretary of State George Schultz: “Passing this bill on a bipartisan basis … is something Ronald Reagan … would be proud.” But despite his appeal to conservative icons, conservative activists and commentators were furious at the vote.

In a column Tuesday, Jon Fleischman, publisher of the Republican website Flashreport, ridiculed Mayes’ contention that the cap-and-trade system is a free-market approach to climate change: “Apparently Mayes believes that when the government creates Soviet-style limits on resources but leaves people with the freedom to exist in a world of artificial scarcity on their own terms, that is not command and control.”

Conservative former Assemblyman Tim Donnelly noted in an email blast that eight GOP legislators “voted for a (63 cents) per gallon gas tax, handing Gov. Jerry Brown another victory and a massive slush fund to spend on things like high-speed rail.” That number comes from the nonpartisan Legislative Analyst’s Office, which concluded that the cap-and-trade system could add 63 cents to a gallon of gasoline by 2021 if carbon credits sell for a high price.

Under cap and trade, established in 2012 by the California Air Resources Board and authorized by the Global Warming Solutions Act of 2006, the state caps allowable greenhouse-gas emissions by manufacturers. That cap then is reduced by 3 percent a year. Manufacturers who cannot reduce their carbon emissions immediately bid for “credits” in an auction system. The goal is to force companies to invest in low-carbon technologies, but the costs of the credits and those investments are expected to drive up costs in the meantime.

Some business groups backed the program, viewing it as a less-onerous means to achieve climate-change goals than the heavy-handed regulatory alternative. Some environmental and social-justice groups opposed the plan, which they view as going too easy on corporations. But few doubt that its passage will increase gas, food and electricity prices.

The issue is a hot button now, given that Republicans are targeting Democratic Sen. Josh Newman, D-Fullerton, because of his vote in favor of Senate Bill 1, a recently passed law that increases gasoline taxes by 12 cents or more a gallon and which also increased vehicle-license fees to pay for transportation projects. Most Republican legislators objected to a cap-and-trade driven gas-price hike so soon after this tax increase.

Because of the relatively large number of Republican votes for the cap-and-trade extension, the Democratic Assembly speaker “was able to let three of his targeted members, who are occupying seats the GOP would like to pick back up, either not vote at all or vote no,” added Fleischman. He called it a “a big strategic blunder” for the Assembly GOP.

It’s unclear whether the GOP legislators will suffer a political price for their vote. Berryhill is termed out of his Senate seat. “Because of the manner in which the party is currently run and funded, those legislators who voted for the bill will not be punished in any way by the party,” said Tom Del Beccaro, former California Republican Party chairman. “However, as (former Assemblyman) Eric Linder proved with his liberal voting record and loss due to low Republican turnout, Republican voters will be less likely to turn out for Republicans next fall.”

The Republicans who voted for the bill seem undeterred. Some of them joined Gov. Jerry Brown at a celebratory press conference after the bill’s passage. “We didn’t come here to Sacramento to just be Republicans and to hate on Democrats,” said Mayes. “We came here to Sacramento to make people’s lives better.”

Chávez noted that “we’re a very small component of the world on this but that doesn’t mean we shouldn’t be leaders on something that’s threatening the world.”

It remains to be seen whether the GOP, which was making political hay out of the recent gas-tax vote, can keep up its political momentum now that so many of its members voted for bill that may raise gas prices by far more than 12 cents a gallon.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

In a joint statement, Speaker Anthony Rendon, D-Paramount, and Senate President pro Tempore Kevin de León, D-Los Angeles, announced the agreement with Holder’s firm, Covington and Burling, to deal with “potential” challenges from the Trump administration. 

“The Legislature will work with the governor and our next attorney general to protect California’s economy and our sensible policies on climate change, health care, civil rights and immigration,” according to the joint statement, adding that Holder will lead a team of Covington and Burling lawyers to advise the Legislature in its “efforts to resist any attempts to roll back the progress California has made.”

The statement was short on specifics, like the terms of the agreement (including costs), the timing (prior to the swearing ins of both Trump and the presumptive CA attorney general, Xavier Becerra, who, if confirmed by the Legislature, will represent the state) and why the two leaders made the decision between themselves. Spokesmen for both leaders would not comment on these questions.

“It is all about branding and symbolism,” said John J. Pitney, Jr., a Roy P. Crocker professor of politics at Claremont McKenna College. “If Trump does take action on immigration, for instance, there are many qualified lawyers who specialize in that field. No disrespect to Holder, but U.S. attorneys general spend their time managing a bureaucracy, not arguing cases in court.”  

Republicans respond

Responses from Republicans in the Legislature trickled out throughout the day, with many arguing there are already plenty of problems facing the state that have nothing to do with Trump.

“This is a distraction from the very real problems facing everyday Californians,” said Assembly Republican Leader Chad Mayes, R-Yucca Valley. “Donald Trump did not cause California’s transportation crisis, nor did he play a role in our state’s sky-high housing costs.”

Newly-elected Assemblyman Vince Fong questioned the need for more counsel, calling the move “political.”

“The Democrat leadership’s hiring of Eric Holder to be a consultant dedicated to obstructing the Trump presidency is a waste of taxpayer dollars,” the Kern County Republican said in a statement. “The Legislature already has immediate access to legal counsel within the Legislature and in the Attorney General’s office.”

More details

The Sacramento Bee reported the contract with Covington and Burling will be initially for three months and the $25,000-per-month legal fee will be split between the Assembly and Senate, while the Los Angeles Times, citing legislative aides, reported the funds will “come out of both chambers’ operating budgets and would not require additional state funds.”

Holder served as U.S. attorney general from 2009 to 2015, under President Barack Obama. He served as a U.S. deputy attorney general under former President Bill Clinton from 1997 to 2001.

Holder was the first sitting member of a presidential cabinet to be held in contempt of Congress, in relation to the investigation into a botched federal law enforcement program, Operation Fast and Furious, where federal agents lost about 1,400 firearms, two of which were eventually found at the murder scene of a U.S. border agent. 

Jean Fuller kept on a Senate Republican leader

Good morning. Happy Hump Day. 

Senate Republicans in Sacramento unanimously re-elected Jean Fuller as leader on Tuesday. The Bakersfield Republican has led the caucus since August 2015. 

Last month, Chad Mayes, the Republican leader in the Assembly, was also re-elected. Both Fuller and Mayes will be tasked with steering their caucuses through a particularly difficult time for California Republicans. 

The November election relegated Republicans in the Legislature to mostly the role of bombthrowers and bystanders. By gaining a two-thirds supermajority in both houses of the Legislature, Democrats can approve taxes and add constitutional amendments to the ballot without Republican support.

(Of course, that requires complete Democratic unity, which is often more elusive than it may seem at first glance.) 

CalWatchdog has more.

In other news: 

• “Close to 30 percent of the Bay Area’s residents aren’t able to make ends meet as they contend with high housing costs, suggesting poverty is more widespread in the region than official reports indicate, according to a study published Wednesday.” The San Jose Mercury News has more. 

• “After failing to pass new funding to tackle the state’s housing affordability crisis last session, two state senators are trying again. Sen. Toni Atkins (D-San Diego) and Sen. Jim Beall (D-San Jose) have re-introduced legislation to add a $75 fee to real estate transactions, which is expected to generate hundreds of millions a year for low-income housing construction, and place a $3-billion bond to finance low-income housing before voters in 2018, respectively.” The Los Angeles Times has more. 

• “California lawmakers will consider a proposal next year to block the state’s pension funds from investing in a controversial oil pipeline that is planned to cross North Dakota’s Standing Rock Sioux Reservation,” reports the Los Angeles Times. 

• “In brief remarks about the subject, Brown said Monday that it would be difficult for the U.S. to ‘go rogue’ on climate change. He went further Tuesday in a broadcast discussion with former Vice President Al Gore, predicting a ‘negative and very powerful’ backlash throughout the world should Trump continue to voice his denials and impede the environmental progress of the last eight years.” The Sacramento Bee has more. 

Legislature:

• Gone till December.

Gov. Brown:

• No public events announced. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @gfolchi

“I am honored and humbled that my Republican colleagues have elected me to continue serving as Senate Republican Leader,” Fuller said in a statement. “I am committed and focused on issues that help Californians – jobs and affordability.”

Last month, Chad Mayes, the Republican leader in the Assembly, was also re-elected. Both Fuller and Mayes will be tasked with steering their caucuses through a particularly difficult time for California Republicans. 

The November election relegated Republicans in the Legislature to mostly the role of bombthrowers and bystanders. By gaining a two-thirds supermajority in both houses of the Legislature, Democrats can approve taxes and add constitutional amendments to the ballot without Republican support. (Of course, that requires complete Democratic unity, which is often more elusive than it may seem at first glance.) 

Fuller took the caucus’ reins from Bob Huff, who was forced from the Legislature by term limits in November. In fact, it was losing Huff’s seat, located mostly in north Orange County, that gave Democrats the supermajority.

Democrat Josh Newman, a political newcomer, defeated then-sitting Assemblywoman Ling Ling Chang, a Republican, to win the seat. 

The high-profile coalition of supporters — which spans the partisan divide with powerful advocacy groups and influential members of both parties — is aiming for a vote in the Assembly next week to block law enforcement from circumventing strict state law by partnering with the federal government in a program called “equitable sharing.”

On the right, Republican consultant Mike Madrid and Shawn Steel, a former chairman of the California Republican Party, are urging Republican support while California Democratic Party Chairman John Burton is working with Democrats. 

It’s uncommon for Madrid, who specializes in Latino issues, to weigh in so heavily on policy issues inside the Capitol. But, as he told CalWatchdog, Senate Bill 443 is a “no-brainer” because it upholds the core Republican values of “not preying on the poor” and the right to due process, and, politically, it could make inroads in minority communities that have been disproportionately affected by the current civil asset forfeiture system.

“If you can’t do this, you don’t have a shot at expanding the base,” Madrid said of Republican lawmakers.

Madrid said Republican lawmakers who opposed the measure lacked a “political backbone” because they are “afraid of offending law enforcement,” which is a historically strong ally on the right. 

Madrid added that Assembly Republican Leader Chad Mayes has a “unique opportunity” to help the poor, which has been a central theme of the Yucca Valley Republican’s agenda since becoming leader in January.

A Mayes spokesperson on Monday told CalWatchdog he had not announced how he would proceed. Mayes voted against the measure in September.  

Those affected

A report issued this month by the ACLU of California showed 85 percent of proceeds from equitable sharing in California go to law enforcement agencies in communities with a majority of people of color.

The study also reported that the counties with higher per capita seizure rates have below average median household incomes and that the number of California law enforcement agencies participating in the equitable sharing program increased from 200 to 232 over the last two years.

Who cares? Isn’t it just drug dealers?

The program was designed to seize the assets of large criminal enterprises, toppling them in the process — which the law would still allow if SB443 were to pass. But as budgets were cut, law enforcement saw it as a viable revenue stream, and the claims of abuse started piling up.

One notable example was the attempted seizure of a $1.5 million building in Anaheim because the landlord rented space to a medical marijuana dispensary (which was legal in CA).

Another case involved Bob Alexander, who had $10,788 in cash that he was about to use to purchase a car for his daughter before the money was seized in Mendocino County because he had medical marijuana on him (along with the doctor’s recommendation for the marijuana, which was shown to police).

Alexander did get his money back eight months later. No charges were ever filed.

Current law

Current California law already bars the practice of seizing property without a conviction for assets valued at under $25,000, and requires “clear and convincing evidence” of a connection to a crime for assets exceeding $25,000 in value.

Law enforcement can get around that if the seizure is done in coordination with federal law enforcement and 20 percent of the proceeds are kicked up to the federal government. Yet there’s often not even an arrest because federal law doesn’t require it. Instead, there only needs to be suspicion that the property, not necessarily the person, is attached to some criminal activity.

People often get their property back after considerable time and frustration — but sometimes they don’t. So the bill, sponsored by Sen. Holly Mitchell, D-Los Angeles, and Asm. David Hadley, R-Torrance, would close that loophole and require a conviction for seizure of assets of any amount. Proponents like Mitchell and others say the practice often violates the Fourth and Fifth Amendments.

Support builds

It’s not just Republicans whose support is being whipped. A large share of Assembly Democrats either voted against the measure or just didn’t vote, after nearly unanimous support in the Senate.

Burton — who as a member of the Legislature decades ago and authored the bill that established much of the state’s relatively strict civil asset forfeiture laws—- has been reaching out to Democrats.

“I am especially disheartened and disappointed to learn that the state reforms that I and your predecessors worked so hard to put in place have been cast aside by California law enforcement agencies in favor of less protective federal laws,” Burton wrote last week in a letter to Speaker Anthony Rendon, D-Paramount. Rendon voted in favor of the bill in September.

However, Republicans are in a tighter squeeze than Democrats, wedged between law enforcement and limited government intrusion. But the right-leaning Howard Jarvis Taxpayers Association gave lawmakers political cover on Monday when it issued a letter of support, pointing to the sharp increase in seizures from the federally-supported equitable sharing program.

“(T)here is also no denying the fact that law enforcement is largely to blame for the situation that SB443 aims to fix,” wrote David Wolfe, legislative director for HJTA. “Rather than use the federal law selectively, they have overplayed their hand.”

Law enforcement’s position

Opponents of the bill argue that law enforcement doesn’t police for profit, and asset seizure is a vital tool used to cripple criminal organizations, partially by funding costly investigations. The California District Attorneys Association claimed the bill would “deny every law enforcement agency in California direct receipt of any forfeited assets.”

“California’s asset forfeiture law will be changed for the worse, and it will cripple the ability of law enforcement to forfeit assets from drug dealers when arrest and incarceration is an incomplete strategy for combating drug trafficking,” Sean Hoffman, CDAA’s director of legislation argued in a letter against SB443.

“Narcotics investigations are costly, and the California asset forfeiture law’s dedication of forfeiture proceeds to the seizing law enforcement agencies speaks to the serious resource needs involved when drug traffickers and their ill-gotten gains are pursued,” Hoffman added.

A CDAA spokesperson on Tuesday said the group was still opposed to the measure, but did not lobby against “inactive” bills, which SB443 is at the moment. 

Actually, nearly half of the state’s personal income tax revenue comes from the top 1 percent of earners — 150,000 individual tax returns. And personal income tax revenue is 65 percent of total revenue, which means the One Percent provides 33 percent of the state’s total revenue. 

Besides volatility of the revenue stream — the One Percent’s personal income comes largely from capital gains, which are generally tied to the stock market — what happens if a Mark Zuckerberg or a Larry Ellison — #6 and #7 on Forbes’ list of wealthiest people in the world — leaves the state?

In New Jersey, another top-heavy state, one billionaire relocated to Florida, leaving as much a $140 million hole in the budget. 

Few in California dispute the over-reliance on top earners is an issue. It’s in Gov. Jerry Brown’s budget summary and even the credit rating agencies Moody’s and Standard & Poor’s have warned against it. However, there is conflicting opinions of what needs to be done. 

There could be tax reform, but is that a flattening of the tax code? Or a shift to sales tax on services? Higher property taxes? Would the solution be revenue neutral, meaning tax increases in one area are offset with decreases elsewhere? And what are the new consequences that might come with new tax dependencies? 

What requires a frank discussion has so far drawn only whispers. Many on the left feel that while this is a problem, the state is on a good path, with reduced debt, a growing reserve fund, increased education spending and moves to address the state’s unfunded liabilities.

Republicans, on the other hand, lose sleep over the more than $400 billion in debt (including unfunded liabilities), the warnings from credit agencies and outside groups saying the state will falter in an economic downturn and a proposed 12-year extension of a “temporary” tax imposed on the wealthiest of residents that they see as only perpetuating the problem. 

“I’m very concerned about where we’re at today,” said Assembly Republican Leader Chad Mayes of Yucca Valley. “You’ve got a very few people paying a vast majority of the revenue collected by the state. That doesn’t put us in a very good spot.”

A downturn is coming likely sooner than later

It’s a question of when, not if, an economic downturn will occur. In Gov. Jerry Brown’s budget introduction released earlier this year, it warned that California is in “its seventh year of expansion, already two years longer than the average recovery.”

“While the timing is uncertain, the next recession is getting closer, and the state must begin to plan for it,” the introduction continued. “If new ongoing commitments are made now, then the severity of cuts will be far greater — even devastating — when the recession begins.”

Tax reform

As a starting point, both sides agree some kind of tax-code overhaul is necessary. However, that’s about where the agreement ends. 

Senate Budget Chairman Mark Leno told CalWatchdog the state is “to a certain degree overly dependent on the highest wage earners,” and suggested increasing the vehicle licensing fee (the “car tax”) because it’s more stable, although he conceded the toxicity of the issue makes it difficult. For example, Congressman Ted Lieu, when he was in the state Senate in 2012, pitched the idea of increasing the car tax, but relented only five days later after backlash from hundreds of constituents, including his wife.

Another idea Leno, the San Francisco Democrat, pitched was extending sales tax to services, to reflect a shift in the state’s economy away from manufacturing, which he again agreed was “a difficult conversation to have.” He lauded the efforts of Sen. Robert Hertzberg, D-Van Nuys, who is sponsoring legislation to do just that. 

David Wolfe, legislative director for the right-leaning Howard Jarvis Taxpayers Association, suggested a simplified tax code — not quite a flat tax rate, but close. Wolfe said with the proper analysis sales tax on services is an idea “worth considering,” but it would require cuts elsewhere for their support.

“Of course, the overall sales tax rate would need to be lowered in order to make it revenue neutral because the base is being broadened,” Wolfe said.

Additional burdens

There are a few programs that limit the state’s flexibility, even though the individual programs may be beneficial:

• Prop. 13 capped the rate property taxes could increase annually at two percent.  
• Prop. 98 requires that a large percentage of the state’s general fund be spent on education. 
• Prop. 2, also known as the Rainy Day Fund, sets aside a certain amount of money annually to buffer the budgetary effects of an economic downturn. However, even if fully funded it would only reserve 10 percent of the general fund tax revenues.

“While a full Rainy Day Fund might not eliminate the need for some spending reductions in case of a recession, saving now would allow the state to spend from its Rainy Day Fund later to soften the magnitude and length of any necessary cuts,” according to Brown’s budget explanation. 

Prop. 30 extension

It’s likely that voters will consider a 12-year extension to Prop. 30, which is a “temporary” tax on top earners and a quarter-cent sales tax increase.

It was approved during the last downturn primarily to avoid deep cuts in education. It is set to expire in two years, but proponents saw this campaign cycle as more favorable. 

The Prop. 30 extension only perpetuates the state’s over-reliance on personal income tax, said Carson Bruno, a research fellow at Stanford University’s Hoover Institution. 

“Prop. 30 doubles down on this problem by making the income taxes even more reliant on the highest earners,” Bruno said. 

Bruno agreed Prop. 30 expiring would leave a hole in the budget, but said legislators should have been preparing for this, as it was “temporary.”

“If they haven’t been doing that then that’s kind of irresponsible,” Bruno said.