A bill sponsored by Senate President Pro Tem Kevin de Leon, D-Los Angeles, would have added three members to the South Coast Air Quality Management Board, which regulates air quality in Los Angeles, Riverside, San Bernardino and Orange counties.

And while that probably seems as dull as watching paint dry to nearly everyone who just read it, the measure had major implications for Republicans, local governments, business interests, environmentalists and residents of the broad district that has some of the most toxic air in the nation.

De Leon introduced the board-packing plan shortly after Republicans engineered a takeover of the board, swinging the focus from environmentalists to business interests. In December, the board disregarded SCAQMD staff recommendations and instead adopted rules on refineries backed by the oil industry, and in March it ousted the the longtime director who had been seen as anti-business.  

Representatives to the board are local city council members and county supervisors, appointed locally. De Leon’s bill would have added three seats to the 13-member board, appointed by the the Senate Rules Committee (which de Leon chairs), the Assembly speaker and the governor.

During floor debate, proponents argued that the measure was about adding diversity to the almost all-white board that had no Latinos, which defies the demographics of the heavily-Latino region. 

“Needless to say, I’m disappointed,” de Leon told CalWatchdog on Thursday. “Any time people of color are excluded from decision-making processes directly tied to their health and wellbeing, fundamental change is needed. This is a textbook example of institutional racism.”

De Leon added that Los Angeles County Supervisor Mike Antonovich, a Republican who also sits on the SCAQMD board, is termed-out and will soon be replaced by “someone far more progressive on the matter,” likely shifting the balance of power back to the environmentalists. 

However, of the current board’s ethnic composition, and the persistent lack of diversity, belies the fact that it’s largely been in Democratic, or environmentalist, control for years. De Leon did not say whether he’d reintroduce similar measures in the future.

Local control

Many opponents of the measure argued that the bill was a power grab by state policy makers at the expense of local control. And the large bloc of Democrats who either voted no or abstained suggest that the matter is not purely partisan.

“State versus local, that’s what this is about,” said Mike Madrid, a GOP strategist who helped devise the SDAQMD takeover. “It happened to be Republicans, but it was a state/local fight.”

But it was still a big win for Republicans, who are steadily slipping in their share of voter registration throughout the state, face the very real possibility of a Democratic supermajority in the Legislature next year and are not considered a consistent threat in any statewide election. For Republicans, local offices are where they can have a policy impact.

And despite several major policy victories for environmentalists, the defeat of the de Leon measure is a big win for the advocates of economic development. 

John Husing, the chief economist of the Inland Empire Economic Partnership, has been studying Southern California’s economy since 1964. His research suggests a correlation between the rise of poverty and the rise of environmental regulations in the state. Husing argues that while the policies have had a positive impact on air quality in the region, the policies are imbalanced in relation to business development and subsequently drive poverty, which affects health. 

“The whole air-quality, green initiative is having detrimental effect on moving people out of poverty and into the middle class,” Husing said of the SCAQMD region and the neighboring central valley.

Environment v. economy

Environmentalists have often said that any job loss associated with these air-quality policies would be offset by job creation in green sectors. However, Husing says statistics say that isn’t true, at least not in areas with high unemployment, like many communities in the SCAQMD.

Citing data from the California Employment Development Department and the U.S. Bureau of Labor Statistics, Husing said from 2010 to 2016 the U.S. added 836,000 manufacturing jobs, compared to California which added 42,500 — a mere 5.1 percent. While the growth rate is on pace with with the national average, it lags by over 50 percent behind the state’s share of gross state product.

Husing said that the sluggish growth of manufacturing jobs in the state is attributed to three factors: Companies leaving, companies growing beyond the state’s borders and out-of-state companies refusing to grow in the state.

“Whose affected by that? It’s not the companies,” Husing said. “They’re doing fine some place else. It’s workers whose jobs are never created. … So you’re basically cutting off routes to the middle class for those workers.”

The vote

The measure failed just before the stroke of midnight on Wednesday, 30-36. And while it is seen as a victory for Republicans, the measure was largely defeated by the 14 assemblymembers, all Democrats, who didn’t vote.

Those who didn’t vote were Luis Alejo of Watsonville, Joaquin Arambula of Fresno, Kansen Chu of San Jose, Jim Frazier of Oakley, Rich Gordon of Menlo Park, Adam Gray of Merced (who was not present), Kevin Mullin of South San Francisco and Shirley Weber of San Diego. The six who didn’t vote and live in the region were Ian Calderon of Whittier, Eduardo Garcia of Coachella, Mike Gipson of Carson, Roger Hernandez of West Covina, Chris Holden of Pasadena and Patrick O’Donnell of Long Beach.

Katehi’s suspension was also spurred by allegations her son and daughter-in-law, who are employees of the university, got large and unwarranted raises. But Napolitano also made plain her disapproval of Katehi’s attempts at damage control, saying her decisions raised “serious and troubling questions.”

Now it has emerged that UC spent $158,000 in its own damage-control effort in a bid to counter the harsh criticism Napolitano and other UC officials faced after State Auditor Elaine Howle released an audit in March that said UC was admitting out-of-state students over more qualified in-state students solely for budget reasons. Howle also said UC officials sharply increased out-of-state enrollment rather than take even basic steps to control spending when state funding plunged because of the sharp decline in state revenue after 2007.

UC planned PR blitz before audit even released

UC officials first learned of Howle’s scathing audit in February. That’s when the UC Office of the President decided to mount a PR campaign that “included a report rebutting the conclusions of the audit; digital ads on websites, Facebook and Twitter; and sponsorships on public radio stations throughout the state,” the Bee reported.

An aide to Napolitano disputed the idea that state funding or tuition dollars were used. Instead, the aide told the Bee that the $158,000 came out of the “endowment cost recovery fund.” The fund was described as using endowment earnings for various purposes, including trying to promote university fundraising.

Some of the $158,000 was used to release a glossy 32-page report soon after the audit was published that depicted UC as reacting resourcefully and intelligently to the state funding crisis. Another major expenditure was for radio ads promoting UC on public radio stations around the California.

UC officials insisted there was a major difference between what Katehi did and what the UC Office of the President had done. They said that UC had followed standard processes and had used consultants for PR campaigns before, and that Napolitano had never objected to Katehi’s use of consultants — only to the evidence that Katehi had made  “material misstatements” about her role in efforts to scrub UC Davis’ online image.

But if these distinctions help UC avoid allegations of hypocrisy, the UC damage-control campaign still rankled some in the Legislature who said UC should take the audit seriously — not pay to try to gloss it over.

“I am in total disbelief once again,” Assemblyman Mike Gipson, D-Carson, told the Bee. “They have taken this elitist attitude that they can do whatever they want to do whenever they want to do it.”

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

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

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

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

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

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

 

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

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

Jaffee’s analysis concludes with an argument for AB567:

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

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

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

 

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

 

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

 

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

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

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

 

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

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

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

 

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

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

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

 

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

 

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

 

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

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

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

 

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

 

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

 

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

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

However, the Legislative Analyst’s Office surveyed 50 school districts around the state, including the 11 largest, and warned in a January report that not one had proper safeguards to prevent diversion of funds. In Los Angeles Unified, among other districts, the local teachers’ union last summer pointed specifically to new, incoming LCFF dollars as a kitty to tap for pay raises.

In coming months, this issue is likely to emerge as a point of contention in Sacramento because of concerns raised by the California Legislative Black Caucus about State Board of Education rules governing how LCFF funds are used. Here are three of the caucus’ main points:

— Any authority for the use of supplemental or concentration grants to schoolwide and districtwide expenditures must clearly link the services to demonstrated effectiveness in increasing student achievement and closing achievement gaps, and demonstrate that the expenditures are proven effective for “concentrations” of unduplicated children in schools in the district where concentrations exist.

— The terms “most effective” or “effective” should be defined, and at a minimum be tied to demonstrated effectiveness in meeting the “student achievement” goal and closing any persistent achievement gaps or deficiencies as it relates to the unduplicated students, and not just a generic reference to the state priority areas.

— The proposed regulations also do not provide the Board or county superintendents clear standards by which districts must explicitly demonstrate or explain, at a minimum, how expenditures of supplement and concentration grant funds will support services that will actually improve the academic achievement of unduplicated students or close persistent academic achievement gaps.

These concerns are from Assemblywoman Shirley Weber’s remarks to the State Board of Education at its Jan. 16 meeting on behalf of the Black Caucus.

Dan Walters wrote a Feb. 26 column in the Sacramento Bee noting that a “broad coalition of civil rights and education reform groups” had expressed worry about the LCFF not being implemented according to the goals cited in 2013 upon its passage. But this effort seems likely to be much stronger with the aid of state lawmakers.

The Black Caucus has 12 members — Weber, Reginald Byron Jones-Sawyer Sr., Sebastian Ridley-Thomas, Cheryl R. Brown, Autumn Burke, Jim Cooper, Mike Gipson, Christopher Holden, Kevin McCarty and Tony Thurmond in the Assembly, and Isadore Hall III and Holly J. Mitchell in the Senate.