Newsom slaps down Senate Democrats’ tax hike
From CalMatters Capitol reporter Alexei Koseff:
Tax increases are sensitive business in politics. So it didn’t take long Wednesday — all of two hours — for Gov. Gavin Newsom to swiftly and decisively reject the latest idea from Democratic lawmakers to balance California’s budget by pumping businesses for more cash.
Ahead of Newsom’s revised budget proposal that he will unveil in mid-May, Democrats in the state Senate put forward their own plan Wednesday setting out their priorities for the upcoming negotiations. It included a bold provision that immediately ruffled some feathers: Suspending a major business tax credit and hiking the tax rate on the highest corporate earners to raise billions of dollars.
Under the proposal, California would pause the net operating loss deduction, which allows businesses to carry forward their losses to future tax years, whenever there is a “budget emergency,” raising about $5 billion annually — though only temporarily, because companies could claim those credits again once the emergency ended.
The Senate Democrats’ plan would also increase the tax rate by more than 2 percentage points on taxable corporate income above $1.5 million, bringinging in an additional $6 billion or more per year from the 2,500 largest companies operating in California. This would be partially offset by lowering the tax rates by more than 2 percentage points on those first $1.5 million in profits, benefitting smaller businesses.
Sen. Nancy Skinner, the Berkeley Democrat who leads the Senate budget committee, said this approach would avert many potential cuts that Newsom laid out in his January budget and even enable some critical new spending, despite a deficit the governor has projected to be $22.5 billion in 2023-24.
- Skinner: “The types of investments we made are things that have been needed in California for a very long time.”
Corporations that got a huge federal tax cut under then-President Donald Trump would “begin to pay their fair share,” Skinner said, allowing California to increase school funding, tax credits for low-income residents, payments to child care providers and programs to combat homelessness.
Don’t count on it.
Newsom, who frequently declines to comment on legislative proposals, almost immediately swatted down the idea as bad for California’s business climate and its budget stability. In a statement, spokesperson Anthony York said the governor could not support the tax increases or “massive ongoing spending.”
- York: “It would be irresponsible to jeopardize the progress we’ve all made together over the last decade to protect the most vulnerable while putting our state on sound fiscal footing.”
Even with the governor’s support, raising taxes is a heavy lift, requiring a two-thirds vote of both houses of the Legislature. A spokesperson for Assembly Speaker Anthony Rendon, a Lakewood Democrat, did not respond to questions about whether his caucus is open to the Senate Democrats’ budget proposal.
Discussions over a state spending plan will begin in earnest next month, and legislators must pass a balanced budget by June 15 or forgo their paychecks.
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1 A big step for legislative union
From CalMatters’ state Capitol reporter Sameea Kamal:
Is this the year the Legislature will finally allow staff to unionize?
On Wednesday, the effort moved one big step closer as it cleared the Assembly’s Public Employment and Retirement Committee. That’s the committee where the bill died on the last day of the 2022 session despite passing the state Senate.
Assembly Bill 1 is helped this year by the fact that it is authored by the committee’s chairperson, Inglewood Democrat Tina McKinnor, who is a former staffer herself, and has the support of Assembly Speaker Rendon.
McKinnor also agreed to amendments that may boost its prospects among some Republicans. The provisions by Assemblymember Tom Lackey, a Republican from Palmdale and member of the committee, would ensure minority party staffers aren’t placed into separate bargaining units.
- Lackey, to CalMatters: “This is a big deal….Political differences need not be a barrier when it comes to negotiating representation.”
- McKinnor: “We’re setting an example for the rest of the country, by working together — both Democrats and Republicans.”
But the bill is still likely to meet resistance from some, including James Gallagher, the Assembly Republican Caucus chairperson from Chico.
Besides the potential of higher pay and better benefits, supporters of the unionization effort point out that the Legislature has supported labor and argue that legislative staffers deserve the same workplace protections.
Organizers of the union effort said the testimony at the hearing, plus staff members wearing red in support, “show that the right to unionize is what staff want and what they deserve. They are no longer settling for less.”
- Assemblymember Pilar Schiavo, a member of the committee and labor movement veteran, through tears: “It’s so critical for our staff to have advocates, to have people who have their back when they’re in really difficult positions…. I know a lot of people have sacrificed a lot to speak up. And they should have protections doing that. And that is exactly what a union will do.”
- Lorena Gonzalez, head of the California Labor Federation, a co-sponsor of the bill and a former Assemblymember who helped shepherd past versions: “It was the brave voices of current and former legislative staffers today that finally forced progress on this issue. Today’s victory belongs to them. We will continue to stand in solidarity with these staffers and the author to get this bill across the finish line this year.”
In other labor news: On Wednesday, the U.S. Senate committee on health, education, labor and pensions advanced Julie Su’s nomination as Secretary of Labor on a party-line vote. The embattled Su will now face a confirmation vote in the full Senate, where the support of all Democrats is not guaranteed. If she loses, AP News notes, she would be the highest-ranking nominee of President Biden to be rejected.
Since February, when Biden nominated the former California labor secretary, Republicans and business organizations have campaigned against the nomination, citing California’s controversial labor policies on gig workers and wage theft, plus the state’s multibillion-dollar fraudulent unemployment benefit payments during the pandemic. Her supporters include Democratic legislators, unions and a few business groups, including the Los Angeles Chamber of Commerce and Small Business Majority.
2 Rallying for higher wages
From Jeanne Kuang of CalMatters’ California Divide team:
Though inflation is cooling, California workers say they’re still feeling the pinch, and calls are growing for the state to raise wages to account for its high cost of living.
At a rally outside the state Capitol on Wednesday, worker organizers with the group One Fair Wage said this year’s inflation-triggered $15.50 minimum wage is too low to afford basic living expenses — even in the state’s cheapest counties.
They pointed to the MIT Living Wage Calculator, which found two adults working full-time in Modoc County still need to make more than $18.50 each if they have a child to afford necessities such as housing, food, transportation and clothing.
The activists are pushing a bill authored by Assembly Labor Committee Chairperson Ash Kalra, a San Jose Democrat, to have the state’s labor agency convene a working group to produce a report to the Legislature on raising the minimum wage. Part of that would include studying minimum-wage workers and how often they use the state’s safety net programs.
A similar bill, authored by Chula Vista Democratic Sen. Steve Padilla, would have the state produce a calculation of the wage it would take to cover housing in each county.
One difference between the bills: Kalra’s proposal also nudges the state toward ending the subminimum wage for prisoners. Lawmakers last year rejected a proposed constitutional amendment that would end a requirement for most prisoners to work.
Neither bill would actually raise the state’s minimum wage. But business groups including the California Chamber of Commerce are opposing Kalra’s bill, arguing they should be included in any state-led discussions, “given the significant financial impacts that raising minimum wage has on the economy, including employers’ ability to afford to hire and do business in California.”
The proposals come alongside a flurry of other measures this year addressing pay for low-wage workers, including a controversial bill to require a $25 minimum wage for health care workers, another to allow In-Home Support Services workers — who provide home care for the elderly or disabled — to bargain with the state for higher wages. Meanwhile, voters will decide in November 2024 on a ballot measure that would boost the state minimum wage to $18.
Also Wednesday, members of the California Federation of Teachers were at the Capitol, alongside Assemblymember Al Muratsuchi, to support his bill that intends to raise teacher and other school employee salaries by 50% over the next seven years. The Democrat from Torrance cited a 2022 Economic Policy Institute report, which found that teachers earned 23.5% less than their similarly educated peers nationwide. (In California that gap shrinks to 17.6%.)
Critics of the bill, which include school district management organizations, according to EdSource, argue that the proposal is unrealistic, or that teachers are fairly compensated when accounting for retirement and other benefits. Nevertheless, the Assembly Education Committee endorsed the bill today.
3 Local redistricting bills move ahead
From CalMatters’ state Capitol reporter Sameea Kamal:
There are five different bills this session that seek to change how local elections districts are drawn in California. Wednesday, four of them moved forward.
Two bills requiring that independent groups decide districts for large cities — similar to the statewide commission that draws legislative and congressional districts — passed initial committees in the Assembly and Senate.
Assembly Bill 1248 by Assemblymember Isaac Bryan, a Democrat from Culver City, would require any district (including counties, cities or school districts) with populations of 300,000 or more to form fully independent redistricting commissions. Senate Bill 52 by Maria Elena Durazo, a Democrat from Los Angeles, covers charter cities with a population of at least 2.5 million.
Bryan’s bill is opposed, unless amended, by the California State Association of Counties, the Rural County Representatives of California and the Urban Counties of California. The groups expressed concerns over local control. Bryan said the bill language aims to preserve local control over the specifics of the commission setup.
Durazo’s bill is opposed by the city of Los Angeles, where there is a local effort to force independent redistricting.
AB 34, which would require independent redistricting in Orange County and is authored by Assemblymember Avelino Valencia, a Democrat from Anaheim, also passed through the Assembly committee.
So did AB 764, also by Bryan, and co-authored by Assemblymember Sabrina Cervantes, a Democrat from Corona. The bill doesn’t require independent redistricting, but seeks to revise the FAIR Maps Act, which governs how districts are drawn. The changes include clarifying that maps can’t take protecting incumbents into account.
CalMatters columnist Dan Walters: While California’s overall tax burden is high, its alcohol taxes are among the lowest. Is it time to raise them?
California investors care about environmental and social risks, but it isn’t about politics, writes Christopher Ailman, chief investment officer of CalSTRS, the public pension fund for teachers.
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