Senate Bill 1, passed last year, raised the base excise tax on gasoline by 12 cents per gallon. This initiative would require a majority of voters to approve any increases on the taxes on gas – and it would apply retroactively. 

“This is a message to the millions of forgotten Californians ignored by the Sacramento political elite, help is on the way,” Republican gubernatorial candidate John Cox said in a written statement. “Let this also be a message to every special interest in Sacramento, we’re coming for you. You can outspend the people, but you can’t outvote the people, because there are more of us than there are of you.”

Cox worked with other Republican leaders in organizing and providing funds for the repeal effort.

Democrats in the state argue that the higher tax on fuel is needed to fund repairs to crumbling infrastructure in the state, while conservative opponents note that Californians are already highly taxed and that it’s unnecessary spending – like the long-plagued bullet train project – that prevents funds from reaching road repairs.

“The gas and car tax hikes will cost the typical family of four $700 more per year in higher taxes, but the roads will not get fixed because the politicians will continue to divert the funds as they always have in the past,” Carl DeMaio, chairman of Reform California and a leader of the Gas Tax Repeal campaign, explained in a statement.

For Gov. Jerry Brown, a repeal would be a major blow to his budget and legacy as he departs office, with the outgoing governor offering a blistering critique of the move.

“This flawed and dangerous measure pushed by Trump’s Washington allies jeopardizes the safety of millions of Californians by stopping local communities from fixing their crumbling roads and bridges. Just say no,” Brown said.

For Republicans nationally, having the repeal measure on the ballot is thought to be able to increase turnout and could be key in saving vulnerable congressional seats in the 39th and 49th districts, where longtime GOP representatives Ed Royce and Darrell Issa are retiring.

“While my service to California’s 49th district will be coming to an end, I will continue advocating on behalf of the causes that are most important to me, advancing public policy where I believe I can make a true and lasting difference, and continuing the fight to make our incredible nation an even better place to call home,” Issa said in a statement.

Issa, who has been in the House since 2001 and is one of the wealthiest members of Congress, called his tenure “the privilege of a lifetime.”

The 64-year-old, who represents California’s 49th district, was thought to be vulnerable heading into 2018, as the 49th District voted heavily for Hillary Clinton in 2016.

Issa is one of the most well-known Republican representatives nationally, as he regularly appears on cable news shows and is a regular panelist on HBO’s “Real Time With Bill Maher.” Furthermore, he chaired the House Oversight and Government Reform Committee from 2011 to 2015 and was a consistent critic of the Obama administration and Hillary Clinton in the aftermath of the 2012 Benghazi attacks.

“His retirement is a great loss for the institution and the American people,” NRCC chairman Steve Stivers said in a statement. “We are truly grateful for his service.”

Issa’s announcement comes on the heels of Royce’s decision to step aside from his seat in California’s 39th district, which includes parts of Los Angeles, Orange and San Bernardino counties. Royce has been in Congress since the early 1990s.

With the pair gone, Democrats see an even greater opportunity to pick up the seats, as they’re two of seven GOP-held seats in California that Clinton won.

The Cook Political Report, after the news of Royce’s departure, moved the district from “Lean R” to “Lean D,” citing demographic changes and Clinton’s success there in 2016.

Royce has endorsed former state legislator Young Kim for the seat.

The retirements only increase the attention on the Golden State heading into the midterm races. With longtime incumbents out, Democrats feel emboldened to pick up seats in purple districts, solidifying their control of the state – even in traditionally red areas like Orange County.

“California Republicans clearly see the writing on the wall and realize that their party and its priorities are toxic to their re-election chances in 2018,” Drew Godinich, a spokesperson for the Democratic Congressional Campaign Committee, said.

Additionally, California billionaire and environmental activist Tom Steyer this week pledged $30 million for Democratic candidates in an effort to flip the House in 2018.

On election day, the rest of nation may very well be watching California to find out if there’s a change of power in the lower chamber.

Twelve of the 13 GOP no votes on the House tax plan came from the three states, with three from the Golden State: Dana Rohrabacher of Costa Mesa, Darrell Issa of Vista, and Tom McClintock of Elk Grove. There were fears of more defections because both the House and Senate plans would only allow tax filers to take up to a $10,000 deduction in property taxes, only a little more than half the average $18,000-plus deduction in California. The House plan would also only allow deduction of mortgage interest on up to $500,000 on a home loan, down from the present $1 million.

But a compromise was reached allowing individual filers to take a deduction of up to $10,000 on any combination of combined income, property and sales taxes. The allowable deduction of mortgage interest on a home loan rose to $750,000.

To cover the revenue lost because of the changes, the 20 percent corporate tax rate approved in both the House and Senate bills rose to 21 percent – still down sharply from the present 35 percent.

It is not clear whether the concessions would stem defections from GOPers representing high-tax stakes. The House bill passed 227-205 last month, meaning Speaker Paul Ryan doesn’t have many extra votes to spare.

Two New York Republican House members – Peter King and Dan Donovan – were rebuffed in their bid to retain the present complete deductibility of state and local taxes for families earning less than $400,000 per year and to gradually phase out the deduction for higher-income earners in coming years.

Rep. Lee Zeldin, R-New York, was one of the few on-the-fence lawmakers to offer immediate comment on the compromise.

“Many middle-income taxpayers … were promised a tax cut and won’t being seeing the tax relief that they’re expecting,” he told the Los Angeles Times.

State Democrats, housing advocates see likely tax change as devastating

Two tax proposals that drew withering fire from California Democrats and higher education leaders, including UC President Janet Napolitano, were scrapped. One would have eliminated the deduction for interest on student loans and the other would have classified graduate-school tuition waivers as taxable income.

But changes to the tax code that California Democrats and advocates for the poor say will ravage construction of affordable housing appear on track for adoption. The changes make low-income housing tax credits that businesses use to reduce their tax liability less attractive. The credits have defrayed the cost of 40 percent of some major housing projects in Northern California, according to a Bay Area News Group report last week.

“All the work that we did this year, the hard work of advocates working for years, if not decades on this, could be wiped out overnight if Donald Trump and his Republican allies are successful in passing the so-called tax reform,” Assemblyman David Chiu, D-San Francisco, told a BANG reporter.

Chiu is chairman of the Assembly’s Housing & Community Development Committee.

The latest update of Roll Call’s

Rep. Darrell Issa, R-Vista, is rated as a toss-up to win a 10th term. His 49th District covers north and northwest San Diego County and south Orange County. Last election, Issa defeated lawyer and retired Marine Col. Doug Applegate by 1,621 votes – the smallest margin of victory of any House race in 2016.

Applegate is running again and is joined by at least three fellow Democrats: San Juan Capistrano environmental lawyer Mike Levin, Rancho Santa Fe businessman Paul Kerr and Del Mar native Sara Jacobs, a former official in the Obama State Department and the granddaughter of Qualcomm founder Irwin Jacobs. Levin has a solid lead in fundraising, according to the most recent reports.

Issa has sought to distance himself from Trump and to present himself as more of a moderate, but his Vista office has been the target of dozens of protests over the past year.

Rep. Dana Rohrabacher, R-Huntington Beach, is rated as being in a “tilt GOP” race – defined by Roll Call as an essentially even race in which Rohrabacher may have a very small edge to win his 16th term in the House. Rohrabacher’s 48th District covers most of coastal Orange County and some inland communities.

Rohrabacher won 58 percent to 42 percent in 2016 over Democrat Suzanne Savary, a retired USC professor and business owner. But he’s since had a rough year in the national media over his unusual enthusiasm for Russia and friendships with Russian officials. A Nov. 21 New York Times story noted that “the Kremlin likes him so much it gave him a code name.”

Several Democrats are expected to challenge Rohrabacher in 2018. The one who appears to have generated the most excitement among national party officials is Hans Keirstead, a Laguna Beach resident who is a stem cell pioneer and entrepreneur. But Keirstead trails Laguna Beach businessman Harley Rouda in fundraising, according to the most recent reports.

Multiple Democrats line up to challenge each incumbent

Three other California House GOP incumbents are rated as having 2018 “lean” in their direction – meaning that while a very close race is likely, they appear to have a slight advantage.

Rep. Ed Royce, R-Fullerton, is seeking a 14th term. His 39th District is centered in central northeast Orange County, with some communities in south Los Angeles County and a sliver of San Bernardino County. In 2016, he won by 14 percent over Democrat Brett Murdock, a former Brea mayor.

He’s also likely to face several Democratic challengers. The list includes former Obama administration official Sam Jammal, philanthropist Gil Cisneros, pediatrician Mai Khan and Villa Park health insurance executive Andy Thorburn, who has a huge lead in fundraising because he loaned his campaign $2 million.

Rep. Steve Knight, R-Palmdale, is seeking a third term. His 25th District covers northern Los Angeles County and a chunk of Ventura County. In 2016, he won by 6 percent over Democratic attorney Bryan Caforio, who is running again. There are several other Democrats running, but it is Caforio and anti-homelessness activist Katie Hill who have gotten the most financial support. Caforio raised more funds than Knight over a recent three-month stretch, and Hill raised nearly as much.

Rep. Jeff Denham, R-Turlock, is seeking his fifth term. In 2016, he won his seat in the 10th District in the northern San Joaquin Valley by 2.4 percent over farmer Michael Eggman. At least eight Democrats, including former House candidate TJ Cox, are running against Denham. Josh Harder, a venture capitalist, has a huge early lead in fundraising, with Cox a distant second.

Denham has already been targeted with harsh TV ads paid for by a super PAC linking him to bankers associated with the Great Recession, which hit the Central Valley particularly hard.

The current MID – which allows taxpayers to deduct interest on up to the first $1 million of mortgage debt – has been a boon to the state’s homeowners. The median price of a California home is home nearly $510,000, according to Zillow. In Los Angeles County and Orange County, it’s even more: $574,400 and $691,600, respectively. However, the median price in the booming Inland Empire remains significantly lower: $347,700 for Riverside County and $314,000 for San Bernardino County.

The state and local tax deduction disproportionately benefits those with higher incomes in states with higher tax burdens. According to the Tax Foundation, with an average gross income (AGI) of $73,938, 33.9 percent of filers in California take advantage of the deduction, which amounts to almost 8 percent of AGI.

Meanwhile, the median value of this deduction is less than 4.5 percent, and, per the Tax Foundation, California, New York, New Jersey, Illinois, Texas and Pennsylvania “claim more than half of the value of all state and local tax deductions nationwide.”

As to be expected, many of California’s political representatives have chimed in. Here are a few of their responses:

Jerry Brown penned a letter to Rep. Darrell Issa, R-Vista: “I implore you to vote NO or to ask for more time so that Californians can have a chance to find out about the real impact of this proposal. Getting rid of an individual’s ability to deduct his or her California taxes is a horrible idea, but it is made far worse when you preserve – at the same time – the right of corporations to take those same deductions. Can you tell me how much your neighbors and fellow citizens will have to pay because of this proposal?”

Darrell Issa defended himself and the GOP plan in a letter of his own: “It seemed only fitting to take this opportunity to highlight your expertise on – as your letter states – ‘horrible ideas’ on tax policy. I recognize the role of the state and local tax deduction to reduce the tax burden on many Californians, but let’s be clear: it has only become of such importance as a direct result of the tremendous weight that your misguided policies have put on California taxpayers.” Issa concluded, “Rather than sending contrived letters pretending to care about the burdens placed on taxpayers in our state, I implore you to turn away from the era of ever-increasing taxes that have continued under your administration and instead seek policies that actually lower the tax burden on all Californians.”

House Majority Leader Kevin McCarthy, R-Bakersfield, defended the plan: “Today, we moved closer to enacting reform that will encourage American companies to bring American jobs back to American towns, allow people to spend minutes, not days, doing their taxes, and help increase wages by $4,000 for the average family because of faster economic growth. We’re moving forward at a fast pace because America has so much to gain when we get this done.”

House Minority Leader Nancy Pelosi, D-San Francisco, in a press release published on Halloween, stated, “The GOP plan to double tax middle class families’ incomes shows the fundamental rottenness at the core of their tax bill. Middle class families get tricked, billionaires get treats. Republicans should abandon their broken middle-class tax hike bill, and work with the Democrats for real bipartisan tax reform that puts the middle class first and delivers A Better Deal to the American people.”

Rep. Ted Lieu, D-Torrance, decried, “The GOP tax plan is absurd. Their proposal to eliminate the state and local tax deduction will lead to a massive tax hike for middle class families in California.” He also “double dare[d]” the state’s moderate Republicans – who “should know better” – to vote for “this ridiculous tax plan.”

Issa leading bipartisan push for high-skilled visa overhaul

Good morning. Happy Martin Luther King Jr. Day! It’s a holiday, so we’ll keep it short.

With contending pieces of legislation now up for consideration in Congress, California has returned to the national spotlight on one of the most contentious immigration issues — special visas granted by the federal government to attract foreign talent.

Long critiqued by economic nationalists, including some Democrats, the H-1B visa program has been accused of undercutting qualified candidates in key industries who are U.S. citizens.

Leading a bipartisan effort to overhaul the program: Rep. Darrell Issa, R-Vista.

CalWatchdog has more. 

In other news:

• “California’s bullet train could cost taxpayers 50 percent more than estimated — as much as $3.6 billion more. And that’s just for the first 118 miles through the Central Valley, which was supposed to be the easiest part of the route between Los Angeles and San Francisco.” The Los Angeles Times has more. 

• “Education spending rises under Gov. Jerry Brown’s proposed state budget, but some California schools are bracing for cuts,” reports the Los Angeles Times. 

• California lawmakers are preparing to wage war with the Trump administration, but what exactly is at stake? The San Francisco Chronicle explains. 

• “California union dues case dies, but another rises up,” reports The Sacramento Bee. 

Legislature:

• Back tomorrow.

Gov. Brown:

• No public events announced. 

Tips: matt@cawatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @MarinKat

With contending pieces of legislation now up for consideration in Congress, California has returned to the national spotlight on one of the most contentious immigration issues — special visas granted by the federal government to attract foreign talent.

Long critiqued by economic nationalists, including some Democrats, the H-1B visa program has been accused of undercutting qualified candidates in key industries who are U.S. citizens. “The H-1B program offers 65,000 visas each fiscal year, with an additional 20,000 reserved for foreign workers who have advanced degrees from U.S. colleges and universities,” according to Ars Technica. “The visas are awarded by lottery each year. Last year, the government received more than 236,000 applications for those visas.”

With the prestige, economic importance and compensation level attached to those jobs, they have become a focus of reform for allies of President-elect Donald Trump. “Rep. Darrell Issa, one of the highest-profile Republicans in Congress and a supporter of Mr. Trump, said Wednesday in a statement on his website that he is reintroducing a bill designed to ‘stop the outsourcing of American jobs’ and ensure laws are not ‘abused to allow companies to outsource and hire cheap foreign labor from abroad,'” The Wall Street Journal reported. The bill would seek to achieve that outcome by hiking “required salaries for positions granted under the H-1B scheme that replace American workers from $60,000 to $100,000 per year,” according to the Journal.

Bipartisan frustration

In a sign of the cross-cutting partisan interests shaking up some established battle lines on immigration, Issa boasted a Democrat, fellow Californian Rep. Scott Peters, as the co-sponsor of the Protect and Grow American Jobs Act. Silicon Valley, where political allegiances at the end of the Obama era have begun to shift in new ways, has come under attack for its use of H-1Bs. “In 2013, the top nine companies acquiring H-1B visas were technology outsourcing firms, according to an analysis by a critic of the H-1B program,” Ars Technica recalled, noting that Microsoft rounded out the list’s top 10. “The thinking goes that if minimum H-1B salaries are brought closer to what high-skilled tech employment really pays, the economic incentive to use it as a worker-replacement program will drop off.”

But other big California corporations have not been left out of the criticism. “It’s specifically required that there be a shortage” in qualified candidates, Issa said of Southern California Edison, which he attacked for asking “employees being laid off to train their replacements,” as U-T San Diego noted. 

“Edison said at the time of the layoffs that it was ‘not hiring H-1B workers to replace displaced employees. Any H-1B visa workers SCE does hire for its own workforce are paid a wage comparable to SCE’s domestic workforce. Disney and a handful of other California companies have been criticized in recent years for similar moves.”

Dueling drafts

Issa and Scott’s path forward has been complicated, however, by legislative competition from one of his fellow California delegates to Congress. “Rep. Zoe Lofgren, a Santa Clara County Democrat, warned Thursday that she believes Issa’s bill could undermine Silicon Valley’s job market,” the San Jose Mercury News reported. “That’s because tech companies in a location such as Silicon Valley, where software engineers can command a starting wage of $140,000 a year, might still have incentives to use foreign workers for $100,000, Lofgren said.”

Casting her alternative as a return to the original intent of U.S. visa laws to attract the so-called best and brightest, Lofgen recently announced the details of a draft bill that will circulate formally in several weeks’ time. “Under her plan, employers who pay as much as 2.5 times to three times the prevailing wage in their metro area would get first preference to hire people through the H-1B visa program,” according to the Mercury News. Lofgren has suggested that Issa’s intended fix could leave some problems intact. “Raising the wage from $60,000 to $100,000 would do nothing to prevent the sort of outsourcing abuse we’ve seen under the H-1B visa program,” she warned, according to the paper.

CA cities’ pension costs rise to meet CalPERS expectations

Good morning! TGIT. We begin this morning with pensions.

After two years of minuscule investment returns, the nation’s largest state pension fund – the California Public Employees’ Retirement System – has once again lowered its expected rates of return.

Even some CalPERS officials and consultants argue the lowered financial expectations don’t go far enough to shore up the fund’s financial position, as it now only has 68 percent of the assets needed to pay all its future retirement promises.

This end-of-year board vote to reduce expected investment returns from 7.5 percent to 7 percent portends difficulties for local agencies that provide pensions to their public employees through the CalPERS system.

Lowered earnings estimates mean these agencies will have to contribute significantly higher payments to the pension fund to defray the costs of these benefit packages. 

California local governments already have faced 50-percent hikes in their CalPERS payments over the past several years, which has led local officials and pension reformers to increasingly fear a continuing cycle of service cut-backs and tax increases.

Indeed, there was some pressure at CalPERS to push the expected return rates down to the 6 percent range, but some officials expressed concern about what this would mean, cost wise, for member agencies.

CalWatchdog has more. 

In other news: 

• “San Diego Mayor Kevin Faulconer has quietly started discussing a potential run for governor with advisers and prospective donors, according to a former Los Angeles mayor and sources familiar with Faulconer’s deliberations.” Politico has the story. 

• “California’s presidential primary could find itself squarely in the middle of the Super Tuesday political sweepstakes in 2020 under a proposal being introduced this week at the state Capitol.” The Los Angeles Times has more. 

• “The University of California will seek to raise undergraduate tuition and fees next year by nearly 3 percent, ending a six-year tuition freeze that followed steep rate hikes during the economic recession,” reports The Sacramento Bee. 

• “U.S. Rep. Darrell Issa, R-Vista, wants companies that recruit highly skilled foreign workers to follow new standards aimed at making it more difficult to exploit the visa program that allows them to work in the U.S. Issa on Wednesday introduced legislation backed by multiple Democrats and Republicans that changes the requirements for the visa program known as H-1B, which was designed so foreign workers with specialty skills can fill jobs in the U.S. when qualified Americans aren’t available.” The Los Angeles Times has more. 

Legislature:

• In at 9 a.m.

Gov. Brown:

• On vacation in Hawaii until Sunday, according to The Sacramento Bee. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @DaytonPubPolicy

Darrell Issa sues opponent

Good morning. TGIT. Welcome to December. The election is over, but some of the animosity remains.

Just days ago, Congressman Darrell Issa was determined the winner in a very close re-election race — by far the toughest race of his career. We wrote about the race here.

But instead of going quietly into the sunrise, Issa is suing his Democratic opponent, Doug Applegate, for what he claims were libelous campaign ads.

Issa, the richest member of Congress, is seeking $10 million in damages, and said he’ll donate to charity whatever he’s awarded by the court. The Los Angeles Times/San Diego Union-Tribune has more.

In other news:

• Teacher Shortage: “California school districts have grappled with a teacher shortage for years but the problem has worsened since 2014, with 75 percent reporting a lack of qualified instructors, according to a survey released Wednesday,” reports The Bakersfield Californian.

• San Bernardino Shooting: “But despite piecing together a detailed picture of the couple’s actions up to and including the massacre, federal officials acknowledge they still don’t have answers to some of the critical questions posed in the days after the Dec. 2, 2015, attack at the Inland Regional Center,” writes the Los Angeles Times. 

• Water: “Under a new draft plan, urban water suppliers would have to meet new conservation targets by 2025 based on a variety of factors, including indoor and outdoor water use, commercial and industrial water use, and water lost to leaks.” Capital Public Radio has more. 

• Supermajority: “Democrats who take the oath of office next week in the California Legislature will find their ranks have swelled, with the party now holding a supermajority of seats in both houses. But there are likely to be notable intraparty disagreements on economic issues, none more important than taxes.” The Los Angeles Times has more. 

Legislature:

• Gone till next week. 

Gov. Brown:

• No public events announced. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @CapitolGab

Mr. Issa goes (back) to Washington

Good morning. Happy Tuesday. The Associated Press projected winners in two of the last and most high-profile races in the state: Rep. Darrell Issa, R-Vista, and Josh Newman, a Democrat who was elected to the state Senate.

Issa was sent back to Washington for his ninth term after squeaking through what was easily the toughest race of his career. He been a constant thorn in the side of the Obama administration in recent years as chair of the House Oversight and Government Reform Committee — a position he recently rotated out of — and had just a 2,348-vote lead as of Monday afternoon. 

Newman’s name is likely not too familiar to most readers, having no prior political career. But his victory over Republican Assemblywoman Ling Ling Chang officially gives Democrats a two-thirds supermajority in the Legislature. In other words, free rein.

Here’s more on what the supermajority means — and doesn’t mean. 

In other news:

• “The presidential campaign focused some attention on the long-simmering debate over policing and the appropriate uses of force, but as is typical with national campaigns, the nuances got lost amid ideologically charged soundbites such as ‘law and order’ and ‘Black Lives Matter.’ Some advocates for police reform worry about what a new Trump administration will mean for these discussions given the president-elect’s expectedly different approach toward the matter than President Obama’s Department of Justice. But others argue the election will send reform back to where it really belongs: at the local level.” CalWatchdog has more. 

• “Critics of Wells Fargo’s scandal are raising questions about why the California Public Employees’ Retirement System — which for three decades has demanded that corporations it invests in must operate under a clear ethical code — didn’t question illicit banking practices by the San Francisco-based banking giant that were first revealed in 2013 and which resulted in huge federal sanctions in September.” CalWatchdog has more. 

• “Silicon Valley entrepreneur Steve Spinner hopes the end is near for one of Washington’s most abhorred rituals: the daily rounds of fundraising calls by elected officials trying to fill the coffers for their next campaign. He thinks it can happen with an algorithm that improves targeting, and reduces time candidates spend casting around for cash.” Politico has more. 

• The Sacramento Bee explains “How California became a blue state.”

Legislature:

• Gone till December. 

Gov. Brown:

• No public events announced. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @BinduMedia