Photo credit: 401kcalculator.org

Proponents of a 12-year extension of a temporary tax used to bolster education funding may ask voters to consider the measure prior to a full vetting, with critics demanding accountability.

By law, the state Controller’s office is supposed to audit Proposition 30’s Education Protection fund, which doles out the funds according to a strict formula. Although the law gave no time requirement, the audit has not yet happened and isn’t projected to be complete until around a month before the November election, which one critic says shows a lack of transparency.

“Voters were told that Prop. 30 funds would be audited, and there is a presumption among the voters that that audit would be conducted in a timely manner,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “And to be told that the audit … isn’t going to be completed until the month before the election is not exactly full transparency.”

History

Prop. 30, which passed in 2012, implemented a tax on incomes exceeding $250,000 and a quarter-cent sales tax, which were both used to stave off severe budget cuts to education and the general fund.

To quell concerns that the tax revenue would actually go to funding education and not some unrelated expense, the measure called for two levels of oversight: annual audits of spending by local agencies, like school districts, charter schools and community college districts, and a periodic audit of the state’s Education Protection Account.

The local audits are being completed, but no audit of the EPA has been performed to date, which the law says the Controller “shall” perform. To clarify, the local audits verify how schools are spending the money, while the EPA audit would verify how the state is spending the money.

When will the audit happen and is it necessary?

The controller’s office told CalWatchdog the audit would likely be completed by October. Assuming the initiative qualifies for the ballot, which it hasn’t yet, that is only a month before voters go to the polls.

Also, only the income tax provision, which expires in 2018, is part of the extension; the sales tax provision expires at the end of 2016 either way.

Proponents — primarily teacher unions and health care advocates — are asking for the extension two years early, making the timing of the audit more immediate. But they argue the audit is not necessary because two other Controller-prepared reports, both which look at the state’s finances in a general way, satisfy the requirement.

“We know how the money has been spent and the new measure has the same accountability requirements,” said Jennifer Wonnacott, spokeswoman for the measure’s committee, Californians for Protecting Public Education and Budget Stability, Sponsored by Teachers, Health Care Providers and Labor Organizations. “The law as written under Prop. 30 has been fulfilled by these two reports, so if the Controller goes above and beyond that that’s for their office to decide.”

The Controller’s office still believes an audit is required to ensure the state is adhering to the required 89/11 percent split between K-12 and community colleges, and is satisfying other funding requirements.

“While it’s reasonable to conclude that (the other reports) meets the Proposition 30 audit requirement, the State Controller’s Office still has a duty to monitor compliance and conduct whatever field audit we believe is necessary,” said John Hill, spokesman for the Controller’s office. “That’s why we plan to audit the EPA within the next six months.”

Is there even a problem?

Despite the dispute over whether another audit is required, everyone agrees that oversight of the program was warranted. After all, the extension has also included the auditing requirements. However, no one has suggested the money is being used improperly. In fact, an independent analyst suggests there’s little cause for concern.

“These rules are relatively straightforward and we don’t have any technical concerns at this point about the way the state is distributing the funds,” said Kenneth Kapphahn, an analyst with the independent Legislative Analyst’s Office.

Timing

The measure has not yet qualified for the November ballot, but it’s well-funded, making its chances good. Assuming it does qualify, voters may be forced to make a hasty decision. Coupal called on the Controller’s office to speed up the timeline, pointing to the fact that the measure passed four years ago, which gave ample time to perform the audit.

“We would urge the controller to expeditiously move on an audit and complete the audit at least three months prior to the election,” Coupal said.

It’s not even 2016 yet, but the first debate over a probable initiative on the November 2016 ballot took place in Dana Point Monday when former Board of Equalization member Conway Collis squared off with Howard Jarvis Taxpayers Association president Jon Coupal over the Lifting Children and Families Out of Poverty Act. The debate was hosted by the California Alliance of Taxpayer Advocates.

The measure, backed by charity organizations dedicated to reducing poverty, would raise property taxes on residential and commercial property valued at $3 million and more. The money would be deposited in anti-poverty programs outside the General Fund.

Collis argued that the initiative was a way for government to help relieve 2.4 million California children living below the poverty line. He said there was a moral and financial reason to do so. Leaving one-quarter of California’s children in poverty was an immoral position for the state. Lifting 50 percent of those suffering from poverty in 20 years — the goal of the initiative proponents — would reduce the dollars required for welfare programs and prisons while adding taxpayers to the rolls.

Coupal saw the measure as a direct attack on Proposition 13’s property tax protections. He asked: “Aren’t taxes high enough?” listing the state’s high tax rates in different tax categories. Coupal said voters were willing to support the Proposition 30 tax increases when the state budget was in crisis. There is no crisis now, he asserted, with the state sitting on a surplus of anywhere from $1 billion to $10 billion.

To Collis, a tax that touched only 1 percent of the taxpayers was worth the investment in attempting to save money in welfare programs while aiding those in poverty. He said business had a legitimate concern in annual reassessments on property (as proposed in a legislative bill to split the property tax roll) but that this plan “protects and builds” on the Proposition 13 framework and would preserve property tax predictability.

But Coupal said the economy and businesses would suffer, with more businesses packing to leave the state, especially because the great portion of the properties affected by the proposed tax increase would be commercial properties.

While Collis said the initiative has fail-safes to control programming that did not work to reduce poverty, Coupal countered that 30 programs are already in place to deal with poverty and that many suffer from fraud and abuse with recipients spending taxpayer-sponsored income in Hawaiian resorts and Las Vegas casinos.

Collis said his initiative would not simply help the poor but would boost all Californians. He said that the growing number of poor would “swallow the state budget” unless corrective measures are taken.

Collis insisted that polling and focus groups prove that voters understand that the tax was only on expensive property and would affect few taxpayers. He said signature gatherers were asking voters if they owned property over $3 million and if they answered “no” then they were told the measure would interest them. Collis said voters readily signed.

However, Coupal had a message for those voters should the initiative qualify for the ballot. The initiative breaks Proposition 13 by going after residential property. Once that door is opened other tax increase activists will want to charge through and all residential property owners would be at risk. That message will not be lost on voters, Coupal said. It is a concern that would be expressed in a political campaign.

The campaign messages are already being shaped and a long political campaign season has unofficially begun.

(Disclosure: I am associated with the committee that opposes the Lifting Children and Families Out of Poverty Act.)

Only about one-third of Californians can afford to realize the American dream of owning their own home. The homeowners’ property tax exemption of $7,000 (worth a $70 deduction on your property taxes) has not been increased since 1972 when the median priced home sold for $28,660. Currently, an average home is selling for nearly 10 times that amount, and yet the homeowners’ exemption remains unchanged.

Increasing the homeowners’ property tax exemption from $7,000 to $32,000 will save every homeowner in California an additional $250 per year. This will help to mitigate the heavy financial burden placed on homeowners from property tax increases to repay local bonds, and provide some relief from excessive utility fee and charge increases.

By increasing the renters tax credit, this act will provide tax relief to renters, who also face severe housing affordability problems.

Details on the renters’ credit can be found on page 5 of this PDF.

Spotlights on existing CA programs

At a time when affordable housing and poverty are emerging as big issues in California, the Howard Jarvis measure is likely to have little trouble gathering signatures. The cost of housing pinches everyone.

But the measure is also likely to put the spotlight on existing affordable housing programs in the state. A 2003 report by the Public Policy Institute of California on those programs was not flattering, depicting them as helping relatively few people and as being inefficient and ineffective. I have cited this report on CalWatchdog.com and in U-T San Diego editorials. Here’s a previous summary:

The study cited profound flaws in the state’s primary affordable-housing law. It forces cities to plan for needs that are much more appropriately addressed on a regional level. It emphasizes process — laborious long-term planning — over results — more housing units.

The PPIC analysis identified high-cost states with similarities to California that had significantly more success with affordable housing. In New Jersey, the “builder’s remedy approach” gives developers concessions in return for helping a community meet its affordable-housing obligations. Giving developers a profit motive has yielded “far more housing units” than previous policies. California’s version of this approach is much more constrained.

In Massachusetts, the state radically simplified the approval process for residential projects in which at least one-quarter of the units had “long-term affordability restrictions.” To limit NIMBYism, developers can appeal permits rejected at the local level to a state board.

Assembly speaker wants to ramp up approach PPIC knocked

But instead of heeding the PPIC, Assembly Speaker Toni Atkins, D-San Diego, seeks to double-down on the approach the think tank criticized. She’s calling for hundreds of millions of dollars in new state subsidies to create a few thousand new units across California.

New York Mayor Bill de Blasio, by contrast, argues that housing prices will only come down in a significant way if there is much more housing stock. He’s seeking to add 240,000 units in his city.

The Howard Jarvis proposal is less ambitious than de Blasio’s, but it would also offer broad benefits. As the PPIC report laid out, the current California approach of providing affordable housing to a few lucky families is more comparable to a lottery than to a program offering help to a broad category of residents.

The PPIC report can be read here.

The case involved is Capistrano Taxpayers v. City of San Juan Capistrano.

In a split decision, the Fourth District State Court of Appeals ruled that tiered water rates to spur conservation in the city of San Juan Capistrano and statewide “must be based on usage, not budgets.”  But the court also ruled that the added cost of a water recycling plant can be tacked onto residential customers water bills, even though residences are “not plumbed to receive non-potable recycled water.”

Thus, the court evenly ruled both for higher water rates for all customers for recycled water; and against charging higher water rates only on big water users, which are not based on the actual cost of service for that price tier.

Nonetheless, the ruling caused a firestorm of news headlines that contradicted the judges’ ruling as a “blow to water conservation,” as ruling that tiered water rates were “unconstitutional” and as favoring “big users.”

Gov. Brown called the ruling a “straightjacket” on conservation efforts. Kelly Salt, an attorney with the water law firm of Best Best and Krieger, representing the State Association of Counties, League of California Cities and Association of California Water Agencies, said, “It is unfortunate that this decision came down during the worst drought in California history.” Even Tim Quinn, head of the California Association of Water Agencies, called the decision a potentially major blow to water conservation efforts. But it was unclear if their reactions were pointed at the court ruling or Proposition 218.

Judge: Tiered pricing allowed, but based on actual costs

Acting Judge P.J. Bedsworth made it very clear that the court’s decision did not rule out tiered water rates to bring about conservation:

“…one of the benefits of tiered rates is that it is reasonable to assume people will not waste water as its price goes up.  Our courts have made it clear they interpret the Constitution to allow tiered pricing; but the voters have made it clear they want it done in a particular way” (p. 21-22).

In accordance with Prop. 218, the particular way the voters wanted it was to base each rate tier on the cost of service for the tier. The court ruled:

“…we do hold that above-cost-of-service pricing for tiers of water service is not allowed by Proposition 218 and in this case, City Water did not carry its burden of proving its higher tiers reflected the cost of service. In fact, it has practically admitted those tiers don’t reflect cost of service” (p. 28).

The city did not try to calculate the extra cost of providing water for each tier and used revenues from the top tiers to subsidize below cost rates for the bottom tier.

Benjamin Benumof, who filed the lawsuit for the taxpayers, said there is no conflict between the court’s ruling and water conservation. “The court simply invalidated ‘arbitrary tiered rates,’” said Benumof.

Brown looking for water rates to finance water tunnels

Jon Coupal of the Howard Jarvis Taxpayer’s Association stated in an email:

“Methinks Governor Brown doth protesteth too loud, to paraphrase Bill Shakespeare. First, the court did not reject out of hand tier water rates. However, the court did make it clear that water rates must be based on the cost of service. That is as it should be. The reality is that water districts and cities have many tools (fines, penalties, termination of service, voter approved special tax) to enforce conservation.”

Gov. Brown and the California Association of Water Agencies are still looking for a financing mechanism for its controversial Delta water tunnel project. State water contractors will pay the largest share – 68 percent – of the bill for the tunnels, which would be passed on to water rate payers. The Association of California Water Agencies filed a “Friend of the Court” brief on behalf of the city in the case. The cost of the water tunnels, without wetlands restoration, which has been dropped, would be $42 billion.

Brown’s Delta Water Tunnels Project has not been making much progress because of apparent difficulties in its financing. In December 2014, Brown dropped the huge pumps from the Delta water tunnel plan in favor of a gravity flow system, which is how the Sacramento Delta operates today. And a week ago, Brown dropped the Delta Restoration guarantees from the project as well.

An appellate court decision that would have invalidated the cost of local water service test for water rates from Prop. 218 would have made financing large state water infrastructure projects through local water rates a viable option.

Last week, the California Chamber of Commerce, known simply as CalChamber, announced a preliminary draft of its “job killer” bills, an annual list of proposed legislation that will hurt the state’s business community and economic competitiveness.

This year’s list includes 16 bills that, the chamber says, will make it harder to do business in California by increasing labor costs, litigation costs, health care costs and taxes. Notably excluded from the chamber’s list is a $10 billion sales tax on services that is being proposed by State Senator Bob Hertzberg, D-Van Nuys.

“Although we will be opposing a number of bills throughout this year, the ‘job killer’ list represents the worst of the worst,” said Allan Zaremberg, president and CEO of the California Chamber of Commerce. “These proposals will unnecessarily increase costs on California employers that will likely lead to a loss of jobs.”

“Job Killer” Bills: 93 percent defeated since 1997

Although organized labor and environmental groups provide major financial and grassroots support to legislative Democrats, they’ve largely been unsuccessful in passing bills branded “job killers” by CalChamber.

Since 1997, the not-for-profit business advocacy group has identified 631 bills as “job killers,” of which only 46 have made their way into becoming state law. That’s a 93 percent success rate for the organization that represents 13,000 members, including Fortune 500 companies such as Microsoft and Walt Disney.

The chamber’s success has remained constant under both Republican and Democratic governors. During the past decade, 357 bills have been dubbed job killers with just 14 becoming law. It’s also scored major legislative victories while Democrats maintained a super-majority in both houses of the legislature.

Gov. Jerry Brown delivers for CalChamber

And the chamber’s best years have come with Jerry Brown in the governor’s mansion.

“Over the past four years, the Chamber has marked 129 bills as job killers. Only 8 of these measures have been signed into law,” points out Joel Fox, publisher of Fox and Hounds Daily, the state’s leading business blog.

Fox also credits the chamber’s success at defeating “job killer” bills with the state’s improving economic climate. California’s unemployment rate has dropped from 8 percent in February 2014 to 6.7 percent in February 2015. According to the state’s Employment Development Department, California added nearly a half-million jobs, a year-over-year increase of 3.1 percent.

Although California’s unemployment rate is higher than the national average of 5.5 percent, the state has been the country’s most improved economy. In February, the Golden State added 29,400 jobs, the nation’s best over-the-month increase, according to the Bureau of Labor Statistics.

“If many of the defeated bills passed,” Fox asks, “would California’s job creation number be so strong?”

“Part of the credit for this success goes to the California Chamber of Commerce’s effort to rally against bills that would hinder job creation and hurt the economy,” he said.

So, what’s included in this year’s list of “job killer” bills?

2015 “Job Killer” Bills

AB357 (David Chiu, D-San Francisco): Requires retailers and restaurants to give employees at least two-weeks’ notice for their work schedule.

SB3 (Mark Leno, D-San Francisco): Increases the minimum wage by $3.00 over the next two and a half years and imposes future automatic increases tied to inflation.

SB406 (Sen. Hannah-Beth Jackson, D-Santa Barbara): Eliminates the small business exemption from the state’s family and medical leave law.

SB350 (Kevin de León, D-Los Angeles): Forces the state by 2030 to reduce petroleum use by 50 percent, increase the current Renewable Portfolio Standard to 50 percent and increase energy efficiency in buildings by 50 percent.

SB684 (Sen. Loni Hancock, D-Berkeley): Raises taxes on publicly-held corporations and financial institutions.

ACA 4 (Jim Frazier, D-Oakley): Lowers the vote threshold from two-thirds to 55 percent for new local tax measures.

SCA 5 (Hancock): Lowers the vote threshold from two-thirds to 55 percent for new local tax measures.

AB356 (Das Williams, D-Santa Barbara): Imposes new regulations and water monitoring restrictions on oil and gas drilling projects.

AB1490 (Anthony Rendon, D-Lakewood): Imposes a de facto ban on oil fracking and oil well stimulation activities by halting any activity after a nearby earthquake of a magnitude 2.0 or higher.

SB32 (Fran Pavley, D-Agoura Hills): Raises California’s greenhouse gas emissions limits to 80 percent below the 1990 level by 2050 and gives the State Air Resources Board authority to set interim standards for 2030 and 2040.

SB546 (Leno): Requires health insurance companies to comply with new regulations before increasing their premiums.

AB359 (Lorena Gonzalez, D-San Diego): Bans grocery stores from laying off workers during a transfer in store ownership.

SB576 (Leno): Prevents mobile applications from collecting or sharing a user’s location data without consent.

AB244 (Susan Talamantes Eggman, D-Stockton): Makes changes to the state’s foreclosure rules with respect to successor in interest.

AB465 (Roger Hernández, D-Baldwin Park): Prevents workers and employers from reaching agreements that include any waiver of labor protections as a condition of employment.

SB203 (Bill Monning, D-Carmel): Singles out sodas and some sugar-added drinks for health warning labels, but excludes other unhealthy beverages.

State Senator Bob Hertzberg, D-Van Nuys, who has ruffled the feathers of taxpayer groups with his proposal for a $10 billion sales tax on services, has introduced legislation to aid taxpayers in their battle with the state tax agency. Senate Bill 540 would extend and make permanent the Franchise Tax Board’s Taxpayer Advocate Relief Program, which has helped taxpayers obtain speedy tax relief since 2009.

Under current law, the Taxpayers’ Rights Advocate relief program is set to sunset on January 1, 2016. Hertzberg’s office says that would dissolve much-needed protections and benefits afforded to taxpayers.

Taxpayer Advocate offers free help to taxpayers

Back in 1988, the California Legislature enacted the “Katz-Harris Taxpayers’ Bill of Rights Act,” which among other provisions, created the position of Taxpayers’ Rights Advocate. Since that time, state taxpayer advocates have provided free assistance to taxpayers and businesses struggling to comply with the state’s complicated tax code.

“We help taxpayers who have been unable to resolve their tax problems through normal channels,” the Taxpayers’ Rights Advocate at the Franchise Tax Board explains on its website. “Our goal is to protect your rights and ensure that your tax problems are handled promptly and fairly.”

Although the office has assisted taxpayers for more than two decades, for much of its history, the office has lacked the power to issue refunds or waive penalties — even when the tax agency was clearly in the wrong. That’s why in 2008, the Assembly Committee on Revenue and Taxation, under then-Assemblyman Charles Calderon, amended the state Taxpayers’ Bill of Rights Act to give the office the authority to waive penalties, fees, additional taxes or interest when there was an error by the Franchise Tax Board.

The bill was extremely limited in scope and only applied in cases in which there was either:

1. Erroneous action or inaction by the FTB in processing documents or payments;
2. Unreasonable FTB delays; or
3. Erroneous written advice that does not otherwise qualify for relief.

According to a 2012 legislative analysis, “The advocate could only provide relief if no part of the error or delay could be attributable to the taxpayer, and when relief is not otherwise available.”

Sunset date on taxpayer assistance

If there weren’t enough caveats and limitations to that original legislation, Assembly Bill 3078 also included an automatic sunset date on January 1, 2012, which was later extended another four years with subsequent legislation in 2011.

Rather than extend the sunset date again, Hertzberg believes it’s time to make the tax relief program permanent. His office points to multiple cases in which taxpayer advocates have helped deliver speedy tax relief to taxpayers. In one case, 50 taxpayers received $1.1 million in tax relief due to bad advice contained in tax form instructions. Other taxpayers have received thousands of dollars worth in forgiven interest because of cases involving erroneous actions by the Franchise Tax Board.

“This program allows the Taxpayer Advocate to abate a taxpayer’s penalties, interest, and fees that occur because of erroneous actions by the Franchise Tax Board’s staff,” said Ray Sotero, Hertzberg’s communications director. “This bill would make improvements to the current program by removing a burdensome application process for taxpayers, removing the dollar limitation on the abatement amount, and by clarifying that the Chief Counsel approves each request.”

One improvement proposed by Hertzberg is the elimination of the $7,500 cap on the amount of relief that may be granted. In lieu of a limit, the bill requires the chief counsel and executive officer to sign-off on claims of more than $500. Those claims, which would include an explanation of the agency’s mistake, would be public records retained by the tax agency for a year.

Senate Bill 8: Hertzberg’s plan for sales tax on services

Hertzberg’s proposal to provide tax assistance may come as a surprise to many taxpayer groups. As CalWatchdog.com has previously reported, the former Speaker of the Assembly has introduced Senate Bill 8, which would extend the state’s sales tax to services. The new tax on services would generate $10 billion in revenue by applying the sales tax to accountants, lawyers, hair stylists and yoga instructors.

“Taxing services is a bad idea for California,” Jon Coupal, president of the Howard Jarvis Taxpayers Association, wrote in opposition to Hertzberg’s sales tax on services. “First, such a levy would have a depressing effect on California’s service economy. It is a simple fact of economics that when you tax something you get less of it.”

Hertzberg says the changing global economy requires a reevaluation of what’s considered subject to sales and use taxes. He believes California needs a permanent solution to raise revenue when Proposition 30, a temporary sales and income tax increase of $7 billion passed by voters in 2012, begins to expire next year.

Unlike the sales tax on services, Hertzberg’s legislation to permanently extend the taxpayer relief program is expected to sail through the Legislature.

For any taxpayers in need of assistance, the Taxpayers’ Rights Advocate has more information on its website, where you can also obtain a copy of “Your Rights as a Taxpayer.”

But for three reasons, I don’t think the prospects for this reform are dead at all. I dealt with the first two in a U-T San Diego column today.

The first: My apologies to Jon Coupal and company, but I really think they were too clever by half with their measure last year:

” … the last time reformers brought paycheck protection before California voters — via Proposition 32 on the November 2012 ballot — they didn’t trust voters enough to just give them a straightforward up-or-down vote on whether union members should have a say on the use of their dues. Instead, the initiative included legally dubious provisions restricting corporate campaign spending that gave critics ample ammunition to depict it as a deceptive power play.

“The measure lost in a landslide. But state voters came fairly close to passing cleaner, simpler versions of paycheck protection in 1998 and 2005.”

The second: There has never been a more egregious case of union power trumping public sentiment than in this year’s Legislature:

“The appalling story of former Los Angeles Unified elementary schoolteacher Mark Berndt would make a simple version of paycheck protection much easier to pass in 2014 or 2016. After evidence turned up indicating Berndt had been feeding sperm to his students, district officials had no choice but to pay Berndt $35,000 to get him to quit because of job protections demanded and won by United Teachers Los Angeles.

“When the Berndt case triggered a public backlash, the state Legislature earlier this year passed a teacher-discipline measure that was billed as a smart way to keep perverts away from students. Instead, it actually gave teachers even more job protections.

“Nothing better illustrates the unions’ chokehold on Sacramento than this. If the CTA and the CFT had less money for political fights, maybe, just maybe, the public would have gotten its way — and parents wouldn’t have cause to think that state lawmakers worry more about protecting predatory teachers than the students of such teachers.”

The third reason is that quite a few veteran state journalists no longer have illusions about how unions have turned governance, especially at the local level, into something akin to looting. It’s no longer just Dan Walters and his occasional contrarian refusal to accept the surface motives claimed by Jerry Brown, Darrell Steinberg and John Perez. Instead, it’s the Bay Area News Group’s increasingly radicalized columnist and editorial writer Daniel Borenstein and a wave of younger reporters at the San Jose Mercury-News, the Sacramento Bee and many online sites.

Even L.A. Times knows which way the wind blows

And even though their concern is always muted, there’s plenty of evidence that the editorial board of the Los Angeles Times is worried, too.

Consider this editorial from last week, headlined “Spend money on the students it’s meant to help.” It makes the same basic point as my CalWatchdog story from three weeks ago about Gov. Jerry Brown’s bid to direct more funds to struggling students being hijacked to put more money in operating budgets for teacher compensation:

“Under the draft rules, if administrators spent all the extra funding on teacher raises, middle-class students would be receiving more of the benefit than needy ones. If those students’ scores rose even slightly, the district could claim it had fulfilled the requirements of the third option.”

If anything puts the spotlight on the gap between union Democrats and real, honest-to-God social-justice Democrats, it is this.

If unions follow up on their Mark Berndt scandal power play by hijacking what’s billed as the most socially progressive education reform in California history, I think opposition to a clean “paycheck protection” bill fades in the newsrooms around the Golden State.

If it doesn’t, God help California. There will be nothing unions can’t get away with.

Last month, Democratic Gov. Jerry Brown signed into law a $2.3 billion tax extension. The measure, authored by a Central Valley Democrat, passed both houses of the legislature with overwhelmingly Democratic support.

Yet, the multi-billion dollar tax extension, a Democratic creation, couldn’t have passed the legislature without the help of Republican lawmakers.

Nine Republican legislators, a majority of whom have signed the no-tax pledge, delivered critical votes to ensure that the $2.3 billion tax extension reached Brown’s desk.

Assembly Bill 8 by Assemblyman Henry Perea, D-Fresno, extended the sunset date on various vehicle taxes and fees. The additional revenue will go toward programs for the construction of hydrogen fueling stations and the Carl Moyer Memorial Air Quality Standards Attainment Program, which provides taxpayer-funded grants for businesses to buy new eco-friendly engines and equipment. It also postpones new regulations by the Air Resources Board, a move which is praised by businesses and criticized by environmental groups.

According to the bill analysis, it extends until January 1, 2024:

• $8 increase of the smog abatement fee;
• $0.75 fee increase on tire sales;
• $3 increase of the annual vehicle registration fee;
• $2 surcharge for local air districts on vehicle registrations;
• $5 increase of the fee for special identification plates for construction equipment, farm trailers, cotton trailers, logging vehicles and cemetery equipment;
• $10 and $20 increase for vessel registration.

“This is horrible news for taxpayers because California motorists will now be paying $2.3 billion in additional taxes and charges,” writes Jon Coupal, president of the Howard Jarvis Taxpayers Association. “Adding insult to injury, taxpayers will find their hard earned dollars being used to subsidize programs such as the purchase of all electric cars, like the Tesla that, even with the taxpayer provided discount, can be afforded only by a handful of wealthy individuals.”

GOP votes for AB8

In the State Assembly, Republican Assembly members Katcho Achadjian of San Luis Obispo, Frank Bigelow of Madera and Kristin Olsen of Riverbank voted for AB8, giving Speaker John Perez the 54 votes needed to pass the bill off the Assembly floor. If any of the GOP Assembly members abstained in that floor vote, the bill would have failed. Both Olsen and Achadjian voted for an earlier version of the bill in June.

The vote wasn’t nearly as close in the state Senate. But that didn’t stop Senate Republicans from delivering more votes for the controversial tax extension. Senate GOP Leader Bob Huff was joined by his Republican colleagues Anthony Cannella of Ceres, Bill Emmerson of Redlands, Jean Fuller of Bakersfield and Andy Vidak of Hanford in voting in favor of the multi-billion tax extension in the September 11 floor vote.

Earlier in the year, State Senator Mimi Walters, R-Irvine, voted for a companion measure with nearly identical language, SB11, but changed her vote once AB8 reached the floor in September.

Legislators repeatedly warned of tax hike

Republican legislators who backed the tax extension can’t claim ignorance. Both taxpayer groups and the Legislature’s committee staff pegged the bill as a major tax extension. In January, the Howard Jarvis Taxpayers Association warned that the total bill to taxpayers was $2.3 billion.

An April bill analysis by the Assembly Transportation Committee identified the measure as a tax increase under Proposition 26 that was subject to a two-thirds vote. “Because this bill extends the additional fees on vehicle and boat registrations and a portion of the tire fee, and because these fees are deemed taxes under Proposition 26, this bill requires a two-thirds vote,” the policy committee analysis states.

Similarly, the Senate Republicans' legislative staff cautioned lawmakers about the vote. An internal Senate Republican Caucus bill analysis obtained by CalWatchdog.com found:

“The continuation of billions of dollars of vehicle registration fees and tire taxes for eight years is a hefty price to pay. This bill would result in fee extensions of $8 in smog abatement, $18 for vehicle registrations, $10 on boat registrations, and $0.75 per tire on consumers annually until the year 2024.”

The analysis included an all-caps warning that the bill imposed “VERY MAJOR STATE COSTS AND REVENUE INCREASES.” And it quoted this analysis from the Howard Jarvis Taxpayer Association:

“SB11 has been keyed as a two-thirds vote tax increase. The cumulative impact of these exactions will result in a $2.3 billion tax extension.”

Taxpayer groups following the vote

The tax votes could haunt Republican lawmakers, especially those that have signed the “Taxpayer Protection Pledge.” In April, when CalWatchdog.com first reported on Republican votes for the tax extension, Patrick Gleason, the director of state affairs at Americans for Tax Reform, reprimanded one GOP lawmaker on Twitter:

“Looking forward to letting all of @KatchoAchadjian's constituents know that he broke his commitment to them,” tweeted Gleason, whose organization oversees the “Taxpayer Protection Pledge.”

Coupal adds that, in addition to individual legislators, the vote hurts the GOP brand.

“If Republicans can’t agree with the grassroots movement on tax hikes, what do they stand for at all?” Coupal told CalWatchdog.com earlier this year. “With several Republicans supporting AB8, a multi-billion-dollar tax increase, the Republican brand may have been tarnished.”

By John Seiler

“Hail Caesar!” Gov. Jerry Brown likes classical references. So that’s one we should salute him with every time we see him.

As I wrote yesterday about the U.S. Supreme Court’s decision on Proposition 8, which briefly banned same-sex marriage in California:

“the U.S. Supreme Court made every vote on Prop. 8 in 2008, and every vote that might have been cast in 2014 [to repeal it], utterly pointless. …

“The court decided that the case didn’t have standing because Gov. Jerry Brown, the supposed top officer in the state (actually, it’s the people of California), didn’t appeal the case, only some people who backed Prop. 8. That means any initiative now passed in the state is operative only if the sitting governor agrees with it….

“Strangely, the decision has turned governors into virtual dictators.”

Today, other writers have agreed with me.

Dan Walters, the dean of Sacramento journalists, says in this YouTube although he favors allowing same-sex marriage, the decision “leads to the possibility in the future that a governor… could basically kill a ballot measure, voted for by the people of California, simply by refusing to defend it against court challenges. Don’t wish for something  that you’re not prepared to accept.”

And this is from Jon Coupal, president of the Howard Jarvis Taxpayers Association:

“From what I’ve scanned, I think there are going to be groups on the left and right – environmental groups, labor groups — who are going to be very concerned about their ability to defend initiatives in the courts. It’s very concerning that the validity of their sponsored initiative would depend on an adequate defense by an elected official when the whole reason for the initiative process is to bypass the political structure. … The initiative process is the people’s process, and this really shifts the defense of that process to those that are, on the natural, hostile to it.”

According to the Bee, Coupal “is considering a ballot initiative to amend the state constitution to define initiative proponents as agents of the state for the limited purpose of defending ballot measures in court.”

But there’s a Catch-22: If such an initiative passed, then someone would challenge it in court. Then Brown could refuse to defend the new initiative in court, meaning it would, like Prop. 8, have no “standing,” and so die.

Hail Caesar Brown!

By Katy Grimes

SACRAMENTO — The Senate Governance and Finance Committee on Wednesday passed six constitutional amendments to make it easier for local voters to pass various tax increases on property owners.

“California didn’t knowingly vote for centralized power,” said Sen. Lois Wolk, D-Davis, speaking about the passage of Proposition 13 in 1978, as she opened the committee hearing on the bills. Wolk, the committee chairwoman, echoed longtime critics of Prop. 13 that it reduced the ability of local governments to increase taxes, requiring the state government to step in and fund programs.

She said Prop. 13 has been around for more than 30 years, but it was time to change the law which has held property taxes in check since 1978. “Voters today ought to have a say,” she said.

Prop. 13 limited property taxes to 1 percent of the property’s assessed value, plus annual increases of up to 2 percent. When a property changes ownership, the new owner pays 1 percent of the newly assessed value.

Despite that, California by no means is a low-property tax state; it’s ranked 14th highest nationally, according to Jon Coupal, President of the Howard Jarvis Taxpayers Association.

Parcel taxes

Senate Constitutional Amendment 3 by Sen. Mark Leno, D-San Francisco, would lower the threshold for school district per-parcel property taxes from two-thirds to 55 percent. “SCA 3 provides parents, teachers and school districts with more local control and much needed flexibility in raising local education funding,” Leno said at the hearing. “The current two-thirds vote requirements for passage of local parcel tax allows a relatively small minority of voters to block a local education funding proposal that may have support of more than a majority of voters.”

All of the support for Leno’s bill came from other government agencies, associations, schools or public employee unions.

However, Leno did not address the influx of $7 billion in new tax revenue from Proposition 30, passed by voters in November, and sold as the fix-all to dwindling state education funds. Prop. 30 increased the income tax on individuals with income of $250,000 or more, and upped the sales tax on everybody in the state.

“We live in a state with the highest marginal tax rate, the highest sales tax, and we are not a low property tax state,” HJTA’s President Jon Coupal told the committee. 

Coupal said SCA 3 is a direct assault on Prop. 13 because it makes it easier to increase property taxes above Prop. 13’s cap of 1 percent.

In a recent poll by the HJTA, more than 53 percent of voters oppose the parcel property tax vote change, and only 35 percent support it. Approximately 11 percent were undecided.

“Moreover, a majority of those against don’t just oppose the change — they oppose it strongly. The intensity of opposition to lowering the voting threshold was nearly double what it was for those in support,” the HJTA reported. “Forty percent of voters ‘definitely’ oppose the idea of lowering the vote requirement, while just 21 percent say they would definitely support the change.”

The HJTA also found that opposition to changing the voting threshold was broad-based: 68 percent of Republicans oppose it, along with nearly 53 percent of Decline-to-State voters, while 44 percent of Democrats also oppose it. Fifty percent of Democrat women also oppose the change.

“This poll mirrors what we’ve been hearing from our members who are Democrats, Republicans and Independents. They oppose any further money grab from politicians — whether from Sacramento or the local level — and they oppose it strongly,” said Coupal. “Prop. 13 was established to protect homeowners from outrageous property tax increases, and that includes parcel taxes, which local politicians now want to expand to pay for their local spending.”

“The tax-and-spend lobby has been emboldened by the passage of Prop. 30 and it’s clear that the $50 billion tax hike didn’t sate their thirst for more money,” said Coupal.

In the survey, the question was posed to voters: “Proposition 13 limits California property taxes to one percent of the taxable value of property. Parcel taxes are property taxes above the regular one percent tax and, under Proposition 13, these parcel taxes require a two-thirds vote of local voters to be passed into law. Do you support or oppose lowering the vote requirement for local parcel taxes from two-thirds to 55 percent?”

Taxes, taxes, taxes

In addition to Leno’s SCA 3, HJTA lists the following bills as major threats to property owners. As with SCA 3, the bills were passed by the Senate Governance and Finance Committee Wednesday:

* SCA 4, Sen. Carol Liu, D-La Canada, and SCA 8, Sen. Ellen Corbett, D-San Leandro: “Lowers the threshold for the imposition, extension or increase of local transportation special taxes from the Proposition 13-mandated two-thirds vote to 55%. Most transportation special tax increases consist of very regressive sales tax hikes. These add to the burden of California taxpayers who already pay the highest state sales tax in the nation.”

* SCA 7, Sen. Lois Wolk, D-Davis: “Lowers the threshold from two-thirds to 55% in order to approve a bond to fund public library facilities. Lowering the threshold for school facilities to 55% has already resulted in billions of dollars of additional property tax payments that otherwise would not have been approved by voters.”

* Senate Constitutional Amendment 9, Sen. Ellen Corbett, D—San Leandro: Lowers the threshold from two-thirds to 55% to increase special taxes to fund community and economic development projects.

* SCA 11, Sen. Loni Hancock, D-Berkeley: “Lowers the threshold to 55% to allow for voters representing ANY local government entity to approve a special tax for ANY purpose. This is far and away the broadest application, and thus the most egregious, of these constitutional amendments.”