An unexpected wave of disease has exacerbated increases brought on by Golden State policymakers. “While the avian flu outbreak this spring that resulted in the killing of 48 million domestic chickens and turkeys, mostly in the Midwest, continues to have a ripple effect across the country, a perfect storm of additional factors in California, namely the rollout of Proposition 2 and higher chicken feed prices, are wreaking havoc on Bay Area supermarket egg prices and limiting the supply of eggs to local restaurants, ice cream shops and bakeries,” the San Francisco Chronicle reported.

Citing data from the Department of Agriculture, KGO San Francisco noted that prices for a carton of large eggs jumped from $1.45 last August to $3.61 this month. Meanwhile, since last May, California has produced nearly 20 percent fewer eggs, according to USDA figures.

Costly chickens, costly eggs

According to the egg industry, that dip in production numbers should be attributed primarily to the passage of Prop. 2. Passed into law by voters as the Prevention of Farm Animal Cruelty Act, the Chronicle recalled, Prop. 2 “requires that all eggs sold in California come from farms that allow chickens to move around freely. Because each egg-laying hen must have 116 square inches of space, rather than the standard 67 inches of space in battery cages, there are fewer hens overall, and farms had to be upgraded.”

Those upgrades imposed costs passed along to consumers, industry advocates observed. “The costs of having to build new structures and new facilities were incurred by the egg farmers, and those costs have to get passed along,” said John Segale, spokesman for the Association of California Egg Farmers, in comments to the Associated Press. What’s more, the limitations imposed by Prop. 2 worsened the impact of the avian flu outbreak. Ken Klippen, president of the National Association of Egg Farmers, told AP that some of the big Iowa farms that meet Prop. 2 requirements have been knocked out completely by the disease.

More costly feed, meanwhile, has pushed egg prices higher. Klippen added that “California producers have to pay 20 cents more per dozen eggs for chicken feed because it’s mostly shipped from the Midwest.”

After hitting record prices earlier this summer, as Reason noted, consumers faced even greater sticker shock this fall.

Struggling to respond

As is often the case, the changing market has disproportionately affected small businesses; bakery owner Terri Littleton told Fox Sacramento she “survived the initial jump in prices when California’s law giving more cage space to egg laying chickens went into effect. But the avian flu epidemic and higher feed prices in drought-ridden California have made eggs even more expensive.”

Proprietors have been forced to make unattractive choices about how to compensate for the changes. Littleton stressed that “raising prices is a tough proposition for businesses that work on a small budget, and changing recipes might even be more harmful.” The experience of some larger chains appeared to underscore that point. One CNN report revealed that consumers have lashed out at Panda Express restaurants for pulling eggs from their fried rice and hot and sour soup recipes.”

In an ironic twist, not all egg merchants have found themselves in a painful bind. Anecdotal evidence suggested that specialty sellers could benefit from relatively more expensive egg prices. “We have seen people that we have not seen before at the farmers’ market, and they are saying if we’re going to pay that amount at the grocery store, we’d rather buy a fresher egg and a higher-quality egg,” one pasture-raised chicken rancher told the Chronicle. Eggs produced by so-called free range chickens now typically retail for  about $9 a dozen.

In recent weeks, attention has focused on the thousands of enrollees who may have filed inaccurate tax information “because they have been told to ignore mistakes make by Covered California and other state and federal health care exchanges,” CBS San Francisco reported.

But now, investigative reporting conducted by former CBS correspondent Sharyl Attkisson has shifted the focus to the California exchange’s internal troubles. In a two-part series published at The Daily Signal, a news site launched by the conservative Heritage Foundation think tank, Attkisson has detailed the experiences of would-be whistleblowers, officials whose attempts at oversight were cut off or diverted.

Incompetence and ignorance

Disillusioned current and former Covered California employees told Attkisson that exchange executives failed to foresee or forestall the infrastructure and management breakdowns that have plagued the system since its inception amid Obamacare’s rocky implementation.

One official, who headed the exchange’s largest call center, found it hard to explain the disconnect. “This program had to touch 58 counties, 11 federal agencies, all medical carriers and all advocates. To have a system that would be integrated seamlessly — somebody must have been smoking something if they thought that was going to happen.”

Aiden Hill, a consultant hired as a call center project manager, raised allegations of waste and abuse after five months on the job. “Covered California quietly launched an independent investigation into Hill’s grievances. Nine months later, the results were summarized in four sentences stating that evidence did ‘not support’ Hill’s complaints. Hill calls the probe a sham and says the inquiry didn’t include interviews with many witnesses he suggested.”

A third employee, involved in implementation, noted that even executives’ expectations for enrollment were off base. “It’s a tiny fraction of the growth they were expecting,” Attkisson was told.

Although Covered California has seen its share of successes, insiders confirmed for Attkisson, its exhaustion of federal subsidies has put pressure on the exchange to exaggerate its achievements and downplay its failures. Kevin Knauss, a certified Covered California insurance agent, “says the agency is masking its shortfalls because it is, in essence, a sales organization. ‘I know their enrollment numbers aren’t right. They’re marketing themselves [to] generate fees,’ he said.”

Small business struggles

The difficulties now coming to light have underscored how far Covered California — one of Obamacare’s largest and most important exchanges — has to go in meeting its own goals. Exchange officials have struggled to make good on their promises to small businesses. After a disappointing first year marred by delayed commissions to the agents largely responsible for funneling enrollees into the Small Employer Health Options Program, or SHOP, Covered California executives opted to rebrand the effort as “Covered California for Small Businesses.” Officials hoped the name change would help press the figurative reset button, giving them time to prepare another public relations campaign around boosting enrollment yet again.

“We don’t think there will be a lot of enrollments in next few months, but October through December will be very important for the program,” Lee said, the Sacramento Business Journal reported:

“That’s due, in part, to the fact that many small business owners renewed in December 2014 in order to nab lower rates. They may — or may not — get the same offer for 2016. But there’s another factor: Gov. Jerry Brown signed legislation last July that gave small employers the option to keep plans through 2015 that do not comply with the Affordable Care Act. Unless there is an extension, there will be changes in 2016.”

Pete Peterson, the Republican candidate for Secretary of State, plans to use the entrepreneurial qualities of Californians to reignite the greatness of the Golden State.

By Katy Grimes

A new survey of 500 small businesses claims that a majority of small business owners want high income earners to be taxed more. This is difficult to believe, and amazing timing with the election less than two weeks away.

I participated in an early morning conference call on Thursday with Small Business Majority. They just published the survey titled, “Scientific Opinion Poll Finds Majority of Small Businesses Support Letting Tax Cuts for High Income Earners Expire.”

But during the conference call, when I heard the CEO claim that the majority of entrepreneurs “see a productive role for government in helping small businesses achieve success,” I nearly flipped.

John Arensmeyer, the founder and CEO of Small Business Majority, also claimed nearly six in 10 small business owners “agree that government can play an effective role in helping small businesses thrive.”

The Small Business Majority is a liberal Democratic group based in San Francisco.  They backed Obamacare and AB 32, California’s Global Warming Solutions Act of 2006, and  enthusiastically support government subsidized green energy.

Putting an end to tax breaks

“Entrepreneurs agree no one likes to raise taxes, but because of the budget crisis, 52 percent believe we should let tax cuts for the wealthiest 2 percent expire at end of year,” the subtitle of the survey said, referring to President Bush’s national tax cuts.

The Small Business Majority CEO claimed numerous times throughout their press release that their survey was “scientific.”

Survey says…

The Small Business Majority website reports:

“The majority of small businesses support raising taxes on high-income earners; nearly 9 in 10 oppose raising taxes on the middle class: Small business owners recognize the gravity of our budget crisis: 52% agree that while no one likes to raise taxes, we should raise taxes on the wealthiest 2%, given the budget situation, and 4 in 10 strongly agree. Only a 39% minority believes raising taxes on the wealthy means raising taxes on job creators and small businesses. A sweeping 86% oppose raising tax rates on household income below $250,000, and 71% strongly oppose it.”

And they offered this graphic as an example:

“Figure 2: When probed about tax cuts, the majority believe tax cuts on the top 2% should expire because it’s the right thing to do given our budget crisis

“Despite rhetoric claiming otherwise, scientific opinion polling shows they simply don’t believe it’s in their best interest to extend tax cuts for high-income earners as a way to do it,” the survey reported.

Who is Small Business Majority?

Arensmeyer is also an entrepreneur. “John Arensmeyer has used his long experience as a business owner to build Small Business Majority into a nationally recognized small business organization…,” according to his biography. “John was the founder and CEO of ACI Interactive, an award-winning international e-commerce company. Information Week named ACI’s signature product one of the nation’s top 100 e-business innovations, and the company was cited by the San Francisco Business Times as one of the top 100 fastest growing private companies in the Bay Area.”

Reading through the biographies of the staff, nearly every one of them is tied to liberal causes. The “strategic” partnerships with other non-profit organizations are also highly suspect.

Not everyone is buying these claims

“Arensmeyer sold ACI Interactive, a $3 million Sausalito (Calif.) online-financial-services company, in 1999,” according to a story about business buyouts from 2005.

The New York Times’ small business blog apparently had difficulty swallowing some of Small Business Majority’s unusual claims, particularly about small business support for Obamacare.

“As far as the we know, the Small Business Majority research is the only research that has found that small businesses buy in to pay-or-play,” NYT blogger Robb Mandelbaum wrote in a 2009 story. “All of the other small-business advocates claim the opposite, and by greater margins — even the National Small Business Association, whose moderate leanings seem practically radical, at least compared to those of its larger rivals, the U.S. Chamber of Commerce and the National Federation of Independent Business.”

“The group has gotten a lot of press this spring, first as one of two small-business invitees to the White House health care summit meeting in March,” Mandelbaum reported.

There’s nothing like being invited to the White House to solidify support for presidential policies.

Mandelbaum discovered Arensmeyer’s political bias for Democrats, and even questioned just how “scientific” the surveys are. “Informally, however, it is allied with the Democratic Party,” Mandelbaum wrote. “Mr. Arensmeyer serves as a board member of the Bay Area Democrats, which describes itself as ‘a network of private citizens active in national Democratic Politics.’ Since 2002, Mr. Arensmeyer has given generously, and exclusively, to Democratic candidates, according to F.E.C. records.”

“Small Business Majority is nonpartisan only in the most technical sense, in that it is not formally allied with any party,” Mandelbaum wrote. “Informally, however, it is allied with the Democratic Party. The whole project, frankly, seems fundamentally ideological, and clearly liberal. It’s received a leg up from Demos, the advocacy group that counts among its objectives ‘a more equitable economy with widely shared prosperity and opportunity’ — no initiatives to foster Ayn Rand-style self-reliance here. (Demos serves as a fiscal agent, which allows the group to raise money as a 501(c)(3) nonprofit.).”

Maybe I’m just a little too suspicious. But when a survey of small business owners finds that they support higher taxation on wealthier people, and policies which redistribute wealth, it doesn’t feel scientific, or even rooted in basic economic principles. Claims like this feel  very unscientific, and very partisan.

Read the survey HERE.

The Small Business Majority website is HERE.

And be sure to read Mandelbaum’s story HERE, on the NYT blog.

Katy Grimes: The news that another small Sacramento business is closing its doors seems only to draw yawns these days.

The famed Fords Real Burgers, a local Sacramento burger joint since 1987, is being forced out of business by increasing costs, higher taxes, strict regulations, and a local disability lawyer/activist.

“Between a thin margin of profit and increasing costs, we were on a pretty tight edge,” said former owner Pete Vereschzagin, in a Sacramento Bee story.

“The ‘last straw,’ he said, was when Carmichael attorney Scott N. Johnson, who is quadriplegic, wrote a letter to the restaurant about two months ago citing its failures under the Americans with Disabilities Act, including its lack of a disabled parking space and a restroom that could accommodate wheelchair access,” the Bee wrote.

By Katy Grimes

As the Legislature crammed to clear their plates this week so they could take their summer break, one atrocity after another oozed from the committees in the form of legislation.

One of the worst was SB 1431, which will add to the already heavily regulated health insurance market by prohibiting the sale of stop-loss policies to employers with fewer than 50 employees.

It sounds like a lot of inside baseball, but this group of small employers is already the easy target of heavy regulations and insane California laws. SB 1431 will further penalize this group of innovators, risk takers, and entrepreneurs. Lawmakers have deluded themselves into believing that it’s a good thing.

SB 1431, by Sen. Kevin de Leon, D-Los Angeles, would establish a minimum number of health claims for stop-loss policies issued to employers in the small group health insurance market. And it requires guarantee issue for all employees and dependents, and guarantee renewability of the policy for the small employer.

According to the bill analysis, de Leon said, “SB 1431 will protect consumers in California’s small group market as the Affordable Care Act is implemented.” Beware.

Obamacare

The Affordable Care Act, more commonly known as Obamacare, “puts in motion a number of significant small group market reforms and creates a competitive marketplace through the Exchange,” the bill analysis states. “However, as federal health care reform goes into full effect, there will be incentives for some small employers to self-insure and to purchase stop-loss coverage. The author states this situation could lead to a significant exodus of small employers from the small group market, specifically those employers with young and healthy employees. If this situation occurs, adverse selection could leave in its wake a majority of the state’s small businesses in an insurance pool increasingly subject to skyrocketing premiums, both inside and outside of the Exchange. The author states that even those that self-insure and buy a stop-loss product may soon end up in this pool if the stop-loss carrier decides to drop them.”

But the devil is always in the details. The concern de Leon appears to be showing for small employers should have been blown out of the water by the facts during the Assembly Health Committee hearing on Tuesday. But with State Insurance Commissioner Dave Jones at the hearing, it appeared that no one was willing to challenge the facts.

According to Craig Gottwals, an attorney and insurance expert with BB&T–Liberty Benefit Insurancces Services, Inc., if SB 1431 is passed, the sale of stop-loss policies to employers with fewer than 50 employees will be prohibited by the state if those policies do any of the following:

* Contain a specific attachment point that is lower than $95,000 (an absurdly high amount to mandate for a small employer);

* Contains an aggregate attachment point that is lower than the greater of one of the following:

1. $19,000 times the total number of covered employees and dependents;

2. 120 percent of expected claims;

3. $95,000

“This legislation also erroneously contains language referring to stop-loss carriers as providing ‘coverage’ to individual employees and dependents,” Gottwals said.  But that is not what stop loss does.  “Stop loss provides a reimbursement agreement for an employer who has undertaken the task of self-insuring his population.  The politicians wanting to further dismantle freedom and play the harp stings of victimhood undoubtedly used such Orwellian sounding terminology on purpose,” Gottwals said.

This law prohibitively restricts the most innovative and diligent of California’s smaller entrepreneurial businesses by taking away their ability to use creativity and customization to do what is best for their employees, by ramming an over-priced, one-size-fits-all Obamacare-esque approach to health coverage, all the way down to a 2-person company.

Limited choices

Gottwals said what’s left for small employers is limited. “So now a California employer who is intelligent, willing to take some risk, and be creative, will be further penalized and presented with three choices:

1) Stop offering healthcare altogether, which will already be rather enticing in 2014 when the state exchange is set up and the employer has the political cover of “encouraging” use of Obama’s governmental exchanges.

Also, remember, employers under 50 employees will not pay the employer mandate fines under Obamacare.  Hence, an employer can cease offering benefits, and encourage its employees to take advantage of the subsidies available to those making up to four times the federal poverty limit, approximately $90,000 for a family of four.

2) Move out of state to a jurisdiction that does not detest small business and entrepreneurship.

3) Buy an overpriced, first dollar benefit HMO or PPO.  But note, if the employer could afford this option, they would have almost certainly done so already as self-funding is much more difficult, takes more time and has more risk involved. So which employers are self-funding under 50-lives now — those in rural areas with no simple access to an HMO.  Those employers will be particularly harmed.”

What is really going on here?  

California already controls and highly regulates the under 50-employee insurance market for all fully insured products.

The federal government has now taken large control over the over-50 market with Obamacare.

Self-insuring is the only remaining frontier where an employer can extract itself from the myriad of state-regulation as well as some of the dictates of Obamacare (such as the medical loss ratio mandates, possible avoidance of the future Cadillac Tax, and allowance for medical underwriting).

Self-insuring in the under-50 market permits an employer to operate under one, reasonable set of federal laws, the Employee Retirement Income Security Act of 1964 (ERISA), without having to also navigate state mandates, and many of the disastrous dictates of Obamacare.

Gottwals said that it is apparent that California wants to take away the few remaining options small employers still have.  “This law will almost certainly push small employers to a place where they have to stop offering any health care plan, ultimately bringing California one step closer to a single-payer healthcare plan in our state exchange.”

By KATY GRIMES

A bill awaiting signature by Gov. Jerry Brown could hasten the spread of Internet taxation bills across the country, putting small business owners at a disadvantage with compliance of more than 7,500 different taxing jurisdictions.

Proponents of AB 153, now wrapped into budget bill AB 28X, already passed by the Legislature, claim that Internet taxation would “level the playing field” between online businesses and “brick and mortar retailers.”

Anytime “leveling the playing field” is used as justification for taxation,  we know that the proponents are really supporting the redistributing the wealth — other people’s wealth.

Ted Green, communications director for the Coalition to Protect Small Business Jobs, said that the media is only focused on what the Internet tax would do to Amazon, eBay and Overstock.com, large Internet retailers and auction sites. “Overlooked are the small business entrepreneurs who have found a way to reach customers without a geographical limit,” Green said.

Green’s organization is concerned that what happens in California will spread nationwide and would be devastating for small business operators and entrepreneurs who don’t have the staff, time or income to spend navigating the 7,500 different taxing jurisdictions across the country.

“Legislators are supporting big business with this bill,” said Green.

On Tuesday, the coalition delivered 19,000 letters to Brown, pleading with the governor to consider the consequences of the bill. “The untold story in the battle over Internet taxes is the disproportionate tax burden this bill and bills like it across the country place on small businesses and entrepreneurs,” said Green.

Killing 20,000 Businesses

More than 20,000 California affiliates stand to lose their business relationships with out-of-state online retailers. Or they could have all of their California business sales charged a sales tax, rendering them non-competitive with states that do not charge sales tax.

State Board of Equalization Member George Runner opposes the Internet tax bills. Runner explained, “Proponents of AB 28X claim it will ‘create fairness’ by ‘leveling the playing field’ between brick and mortar retailers and online sellers and generate $200 million in new revenues for the state.”

Runner has repeatedly said that supporters’ claim of $200 million in new revenues is inaccurate as the new tax will actually result in lost jobs, lower revenues and even costly litigation.

Letter to Brown

In a June 17 letter to Brown, Runner wrote:

Amazon.com and other out-of-state online retailers are not the true victims of this legislation. They have already made it clear they will terminate their in-state affiliate programs and take other steps to ensure they have no nexus and will not be subject to this measure’s provisions.

The true victims of AB 28X are California job creators, both large and small, for-profit and non-profit, who will suffer an unavoidable loss of income if they continue to do business in this state. As many as 25,000 California affiliates who pay an estimated $124 million in state income taxes will be cut-off overnight. Small businesses that currently benefit from affiliate referrals will also suffer lost revenue.

Of the 19,000 letters delivered to the governor, Green provided a letter from Judi Townsend, owner of Mannequin Madness, a small business located in Oakland where Brown served as Mayor for two terms. “Far from the answer to California’s revenue problems, AB 153 could end up costing the state precious revenues,” wrote Townsend. “It reminds me of the Oakland parking meter scheme — a revenue-raising plan hatched by the city which backfired. The increase in parking prices and hours drove shoppers away, forcing struggling businesses to close shop and ultimately reduced local revenue from taxes and parking. The Legislature needs to look carefully at the unintended consequences of AB 153.”

Killing Jobs Creators

Small businesses in California create two out of three new jobs, one-half of all private sector jobs and, surprisingly, 43 percent of all high-tech jobs, according to the coalition.

The most current U.S. Census data reports that there are more than 3.3 million small businesses in California, and 1.1 million have employees. The remaining 2.2 million are California small businesses with no employees. And these small business statistics for California do not include all of the 2 million self-employed individuals working in California, including individuals who have incorporated.

Evan Westrup, a spokesman with the governor’s office, confirmed that the letters were received. When asked about the status of the bill, he said they do not comment on legislation that has not been signed or vetoed yet by the governor.