The California Legislature enters the final week of its 2017 session with ambitious measures on immigration, renewable energy and housing still up in the air.

Two of the measures have been championed by state Senate President Pro Tem Kevin de Leon, D-Los Angeles.

One – SB54 – would put relatively strong limits on how much local and state law enforcement agencies could cooperate with the U.S. Immigration and Customs Enforcement branch of Homeland Security and other federal immigration authorities.

Labelled the “sanctuary state” bill by critics and de Leon alike, it passed the state Senate in March. But law enforcement officials’ concerns have won a friendlier reception in the Assembly, where the bill appears stalled despite approvals from three committees. Some sheriffs have warned the bill would put California on a collision course with Attorney General Jeff Sessions and the U.S. Justice Department, which has already acted to withhold funds from “sanctuary cities” on the grounds that the federal government alone sets immigration policy.

Sessions’ recent announcement that the Deferred Action for Childhood Arrivals program would end in six months could give fresh fuel to the “sanctuary state” bill. Under the program, an estimated 200,000 California youths who were brought here as children have some legal rights. Protecting this group from deportation or other negative consequences has been a priority of state Democrats since Trump’s election last November.

Another high-profile de Leon bill also passed the Senate in May before facing a cooler reception in the Assembly. SB100 would set a goal for state utilities of having 60 percent of their electricity generated by renewable sources by 2030 – up from the present goal of 50 percent – and require utilities to plan to be 100 percent renewable by 2045.

While the measure has passed three Assembly committees, most recently the appropriations panel on Sept. 1, its future may depend on whether Gov. Jerry Brown provides a last-minute boost. Utility lobbyists say the state is already making perhaps the biggest gains of any large state in shifting to renewable energy and that they don’t need a further push by Sacramento.

Housing bond, real-estate fee may be packaged

Two measures to address the state’s housing crisis – including one measure long seen as a slam dunk – also await final approval.

The first – SB3 by Sen. Jim Beall, D-San Jose – won some Republican support when it passed the Senate. It would ask California voters to approve $4 billion in general obligation bonds next year to pay for construction of affordable rental housing and “smart growth” projects near transit hubs and to revitalize the state’s veteran home loan program, which is expected to use up all of its present funding at some point in 2018.

SB3 was initially expected to be approved late last month. Reports over the weekend suggested that delays may be because of the desire to package SB3 as part of a comprehensive deal that could rescue the second high-profile housing bill – SB2 by Sen. Toni Atkins, D-San Diego. To generate an estimated $250 million a year in reliable, permanent funding for affordable housing projects, it would increase fees by $75 on some real-estate transactions.

Because it is a fee hike, it needs two-thirds support from both houses to advance to Brown’s desk. In July, it passed the Senate with the bare minimum of 27 votes. But insiders have been skeptical for weeks that the measure can get the 54 votes necessary to pass the Assembly. No Republican Assembly members back the bill, meaning all 54 Assembly Democrats would have to be yes voters for it to advance.

A Los Angeles Times report last month suggested that was unlikely because some Assembly Democrats in swing districts didn’t want to vote for a measure that could be depicted as a tax hike after having already voted to raise fuel taxes earlier this year.

The first major votes on a raft of bills meant to address California’s housing crisis could come up for a vote Friday, with the Democrats who control the Legislature eager to demonstrate they know how much extreme housing costs are harming low- and middle-income families.

Gov. Jerry Brown has often been critical of plans to add new dollars to California’s traditional method of providing affordable housing – by building subsidized units that help a relatively small number of residents. He prefers to sharply streamline the housing approval process.

But after horse-trading this year with Democrats, Brown agreed to support two affordable housing initiatives, apparently in return for support for Senate Bill 35, a measure by state Sen. Scott Weiner, D-San Francisco. It would hasten approvals for new housing units in cities that aren’t creating the volume of units mandated under state law and make it significantly more difficult for local opponents to block construction.

Unlike Weiner’s measure, both the affordable housing initiatives require two-thirds support to win passage in the Legislature.

Real-estate fee struggles to win two-thirds support

One of the measures – SB3 by Sen. Jim Beall, D-San Jose – appears to have sufficient support. It would put $4 billion in general obligation bonds before state voters next year to fund construction of affordable rental units and to fund “smart growth” projects near transit centers and other housing projects. It would also provide $1 billion to the state’s veteran home loan program, which the San Francisco Chronicle reported would otherwise run out of money next summer.

The other affordable housing initiative – SB2 by Sen. Toni Atkins, D-San Diego – appears to be in trouble. It would add fees of $75 on some real-estate transactions to provide ongoing permanent funding for affordable housing, estimated at $250 million a year. The Los Angeles Times reported that in a bid to boost support, Atkins had made changes this week to her bill to provide some of the funds it would generate to local governments. But it is unlikely to win any GOP votes in the Assembly, meaning all 54 Assembly Democrats would have to support it.

Many of the 54 have already voted this year to raise gasoline and diesel taxes and to approve a continuation of the state’s cap-and-trade emissions trading program, which also makes fuel more expensive. For those in swing districts, backing SB2 may seem risky.

“My concern is that it looks and smells like a tax,” Assemblyman Al Muratsuchi, D-Torrance, told the Times.

Prevailing wage mandate in Weiner bill questioned

Weiner’s proposal reflects the Republican view that regulatory relief is the only way to build enough housing to stabilize rents and home prices. With two-bedroom apartments renting for more than $2,000 a month in most big cities – and double that in parts of the Bay Area and Silicon Valley – there’s a growing fear among California business executives that housing costs will drive off talented workers and make it difficult to recruit new ones.

But in recent days, a new GOP talking point has emerged that takes dead aim at the idea that Weiner’s bill would accomplish much. It notes that by requiring projects that win quick approvals to use “prevailing wages” – union-level pay – those projects would be far costlier than those built with non-union crews.

Earlier this year – in a fight over another bill before the Legislature seeking to require “prevailing wages” on construction projects – the Building Industry Association estimated the mandate would add $90,000 to the cost of building a 2,000-square-foot home in California.

State housing officials say California has added about 800,000 housing units over the past decade – 1 million less than needed.

A number of large business organizations have offered support for funding sources to be used for transportation infrastructure purposes on one hand, while on the other strongly opposed both general and specific tax measures such as a property tax increases on commercial property (SCA5) and making it easier to raise local taxes (ACA4).

Some in the business community probably hope that support for transportation revenue may be balanced with other tax measures and other bills meeting a dead end.

The focus on the minimum wage issue, so recently debated in cities and counties, will come back to the state capitol (Senate Bill 3) along with concerns for rising workers compensation costs. Capitol-centered business interests will argue a double whammy on the economy with minimum wage increases and rising workers comp costs. They will try to find a solution to workers comp increases while leaving the politics of minimum wage to local jurisdictions.

The saga of environmental regulations and the resulting costs imposed on businesses will continue to be played out, especially focused on fuel costs if petroleum reduction measure SB350, and an increased greenhouse gas regulation (SB32) become law.

The California Chamber of Commerce is monitoring its list of Job Killer bills as it does every year.

Business is not a monolith, however. Small business and big business may express different views and even within these broad business categories there are differences of opinion. That could complicate the drive to find common ground with the Legislature and governor.

Business often survives on the art of the deal – a negotiation that leads to a gain for both sides of the negotiation. Similarly, government is said to advance on the art of compromise. So will broad business interests achieve certain goals while satisfying the powers-that-be under the capitol dome?

You can bet the discussions are already taking place. As to the results — we shall see.

It was only a year and a half ago that Assembly Bill 10 was signed into law. It raised California’s minimum wage from $8 an hour to $9 in July 2014 with another increase to $10 scheduled to take effect in January 2016.

SB3 would supersede that bill, increasing the minimum wage from the current $9 to $11 in January 2016 with another $2 bump to $13 in July 2017. Thereafter the minimum wage would increase with inflation.

Leno lays out argument for higher minimum wage

The bill’s author, Sen. Mark Leno, D-San Francisco, and its supporters spent more than an hour telling the committee that the wage hike is needed to lift California’s minimum wage workers out of poverty. They assured that doing so would not hurt businesses and would benefit California’s economy and the state budget.

State Sen. Mark Leno

“Wages are growing at the very slowest rate relative to corporate profits in the history of our country,” said Leno. “The median wage has been stagnant over the last 30 years. Sixty-five percent of workers are working paycheck to paycheck. Millions of Californians impacted by our minimum wage are living in poverty, and will continue to live in poverty even when we get to our incremental success under AB10 to $10 an hour next year.

“And they all by definition qualify for public assistance. That means that the taxpayer is subsidizing the private employer’s responsibility for his or her workers’ basic human needs: housing, food and medical care.”

A $13 minimum wage equates to about $26,000 per year, he said, which is above the federal poverty level of $24,250 for a family of four.

Leno argued that businesses will benefit from increased consumer spending. “When workers have more dollars in their pockets to spend on their daily needs, there’s an increase in demand for goods and services,” he said. “That’s when employers have to hire more employees to meet that demand. And that’s what economists call a virtuous upwards cycle.

“Currently, though, we’re in a stagnation, if not a vicious cycle downward, where we’ve put such constraints on the middle class that it’s shrinking and shrinking, putting more people into poverty.”

Higher wages will also benefit businesses by reducing turnover, attracting higher-skilled workers and increasing employee satisfaction, which leads to better customer service, said Leno.

Effect on unemployment rates and income inequality?

California’s experience with raising the minimum wage last July has shown that it doesn’t hurt employment, he said. The state’s unemployment rate, which was 7.4 percent in July 2014 when the minimum wage increased $1, dropped to 6.5 percent in March.

“I’m not stating that there’s causation here,” said Leno. “But there is minimally correlation and proof positive this is not a job killer bill. These numbers become even more impressive when considering them on a national scale. California jobs added in January accounted for 28 percent, almost a third of all jobs created in the United States of America were created here in California – though we represent only 12 percent of the population and we just increased our minimum wage.”

The bill’s coauthor, Sen. Connie Leyva, D-Chino, who said she has spent the last 20 years in the labor movement, said the minimum wage hike is needed to reduce income inequality.

“Right now the income gap is enormous,” she said. “It’s the biggest it’s ever been. CEO pay is at an all-time high while workers are falling further and further behind. And while we certainly respect our CEOs and we love to see companies do well and be successful, sometimes they forget that the people who show up and do the work day in and day out are the ones that are making them successful and are the ones that are making them the profits that they have.”

Teenagers no longer make up most of the minimum wage workforce, she said. Today 88 percent are 20 years or older and 55 percent are women. And most are part-time, averaging 28 hours a week.

“You don’t even have enough money for your rent, let alone eat, pay your utilities and drive your car to work,” said Leyva. “We really can’t have it both ways. We can’t keep people working in poverty and then be unhappy that they are using the social safety net. So either we make sure people can earn a living and support themselves and their families, or we’re going to continue to put more money into the social safety net.”

Effects on CA businesses

UC Berkeley economics professor Michael Reich told the committee that more than a third of all California workers will get a pay raise under SB3, but businesses will be able to absorb the increased labor costs.

“We find that the most affected industries are going to be restaurants, hotel and retail,” he said. “And that businesses will mainly adjust to these increases by reducing turnover costs. Workers won’t quit as often, they’ll stay longer, they’ll be more productive. This will save employees recruitment and retention costs, which would themselves absorb the savings of about 15 percent of the increased payroll.

“The rest of the cost that businesses face will be primarily absorbed, we think, through price increases, small price increases, about half of 1 percent overall, based on our Los Angeles study.”

Although higher prices tend to result in decreased spending, that will be offset by the increased dollars in workers’ wallets. The net effect, based on preliminary calculations, is that California’s gross domestic product would increase by about one-tenth of 1 percent, said Reich.

Similarly, although the state budget will take a $2 billion hit over two years due to paying higher wages for social service workers, that will be more than offset by reduced state Medi-Cal payments, he said. The health care costs for those workers would instead be borne by the federal government’s Medicaid coverage through the Affordable Care Act. And the federal costs will be offset by reduced food stamp payments.

“So when you add up the increased cost of the salaries, the lower expenses for Medi-Cal and increase in income and sales tax revenue … then the state budget would realize net gains of about $2.1 billion in 2016 and 17 under SB3,” said Reich. “When I mentioned this at a private meeting with Gov. Brown he said, yeah, he’d like a free billion dollars too.

“So in summary, the minimum wage will help people whose standard of living has been declining and can’t meet expenses on their own. It will have modest effects on businesses, which I think will be absorbed mainly through turnover reductions and through increased prices. It will have a very small effect on the California economy, certainly not a negative effect. It won’t harm the economy. And it will have very large positive effects on the state’s budget.”

Sen. Stone argues against wage hike

But the lone Republican on the committee, Sen. Jeff Stone, R-Temecula, does not believe it. He cited the Congressional Budget Office’s estimate that raising the federal minimum wage by nearly $3 would cost 500,000 jobs. Despite that, Stone supports raising the federal minimum wage to $10.10 because it would be applied equally throughout the country.

State Sen. Jeff Stone

But California’s $13 minimum wage would “further make us more business unfriendly,” he said. “We rank at the bottom of the list. According to Chief Executive’s annual report of CEOs, California is dead last. This certainly is not going to create an asset for business.

“I appreciate the data that you’ve given about the increase in employment numbers. But one thing those numbers don’t reflect is that there have been thousands of people that have already left the state. There are businesses in droves that have already left the state, have gone to Texas, South Carolina, Nevada, Arizona. They’re gone. There are people that are stuck here in the state of California because they may not be able to afford to leave the state and are jumping at any opportunity to have a job.”

Stone said that the best way to lift people out of poverty is to provide them with the education to get better jobs. “I believe that by increasing the minimum wage – and this is where we’ll just agree to disagree – is that we’re going to be hurting those that we most prolifically want to help,” he said.

“Straw that breaks the back of CA businesses”

He warned that raising the minimum wage could be the straw that breaks the back of California businesses on top of expenses such as sick leave, taxes, worker’s compensation, Obamacare and unemployment insurance.

“If you combine all of this and now you have this higher minimum wage, I personally believe that we are pushing the state to a threshold of a catastrophe,” Stone said. “We have governors from other states now that have already grabbed the low-hanging fruit. Those are the large businesses that are leaving; businesses like Toyota, businesses like Sherwin Williams Paints. They are taking thousands of jobs with them. And now they are coming in and going after the small business man and taking the small businesses out of state.

“And with FedEx and UPS, people can ship with Amazon.com, you don’t have to have a brick-and-mortar facility to have these jobs in the state any more. And we cannot rely on the beautiful climate and the beautiful mountains and our beautiful oceans to keep people here. People have to eat, people want to have opportunities.

“And there is going to come a time – and I don’t want to see it happen – that we are just going to basically price ourselves out of business in the state of California and become nothing more than a welfare state. I believe we can do better.”

A daunting challenge

Stone was backed by several business representatives, including Jon Ross, representing the California Restaurant Association. He said that no study has analyzed the business impact of a nearly 63 percent minimum wage hike over three years.

“There is no model out there of actual experience that will tell you what the impacts will be,” said Ross. “And to us, that’s a heck of an experiment. Trying to impose that kind of a cost impact on a restaurant model where two-thirds of your costs are labor costs, to see those go up by 63 percent over that short period of time is daunting.

“The assumption is that this will be borne by price increases. But our operators, especially the small ones who are local, know that they can’t raise prices at that rate that fast. Small increases over time is the way prior minimum wage increases have been dealt with. But those have been increases in the 25, 50 cent range, and the biggest one ever in 2010 going up $2 over an 18-month period.

“So what is being suggested here is fundamentally different than anything that has been tried in this state before or tried anywhere else. And our guys are very, very daunted by the challenge that this would pose.”

Ross said that the reason teenagers are no longer predominant in minimum wage jobs is that they have been priced out of entry level employment. Six of the top 10 areas in the country with the highest rates of teen underemployment are in California, he said.

The concern about minimum wage workers living in poverty may be overstated, he said, when considering those who are receiving tips, which can raise their pay on average to $20-$25 an hour.

“One of the things that’s sort of crude about the minimum wage as applied in the typical restaurant environment is that it doesn’t take account of those disparities in the house [between tipped and non-tipped employees],” he said.

SB3 is scheduled to be considered by the Senate Appropriations Committee on April 20.