LEGISLATIVE UPDATE: California Legislature Will Impact Your Business More Than The Washington Noise


All of the noise and chaos coming from Washington, D.C. and the Federal Government in the past 4 months, has made it very difficult for businesses to focus and know what steps to take to plan for their future. However, if you will take a breath and step back you will see that what is really happening is that Congress will continue to move slowly and that any major legislative changes will take significant time. In fact, if any significant measures are to pass I expect it will be the result of COMPROMISE, the word the partisans on both sides of the political spectrum hate. Yes, President Trump will continue to attempt to make significant changes through the issuance of Executive Orders. However, these are limited and some of them are already facing serious legal challenges.

Instead of focusing on the Washington D.C. circus, I would suggest that California businesses focus their time and effort on how California State Government will impact their business. I venture to guess it will be far more than Federal Government.

Since the 2017-2018 two year Legislative Session began in January, the California Legislature has the business community, and economic development, in its cross hairs. If you own a business, want to start a business, or want to develop housing and job centers, the Legislature is targeting you.

In spite of the fact that the Democrat Party regained 2/3 majorities (the Super Majority) in both the Assembly and State Senate in the November, 2016 election, the issues of economic growth and job creation should be bi-partisan issues. Unfortunately, they frequently are not.

Since this is the beginning of the 2 year Legislative session, new legislation is just beginning to work its way through the State Legislature. Any bill must pass its house of origin (either the Assembly or State Senate) then pass the other house before returning to its house of origin for agreement on any changes which had been made. This process will include at least 2, but frequently 4, policy committees in each house along with their respective Appropriations Committee. If a bill makes it through this gauntlet, then the Governor can sign, or veto, the bill and it will become law on January 1 of the next year.

Due to this process, there are many opportunities for you and your business to participate in advocating for or against a bill. Let me highlight just a few of the potential bills which are likely to have the most serious impact on your business and the economy.

AB 199 (Chu D San Jose) would have imposed the requirement to pay prevailing wages on all development projects whether public or private. Prevailing Wage adds at least 30% to the cost of a project and is already applicable to most public works projects. AB 199 would have extended this requirement to private commercial and development projects. Fortunately, due to the mobilization of California businesses, AB 199 was amended on April 6 and no longer poses such a threat to business.

SB 224 (Jackson D Santa Barbara) would potentially require developers to not only mitigate the impacts of a proposed project, but also historical activities which the applicant has no legal liability or control over, by establishing new California Environmental Quality ACT (CEQA) guidelines regarding the baseline for CEQA analysis. This bill is strongly opposed by the Chamber of Commerce, Building Industry Association and the California Association of Realtors. It passed the Senate Environmental Quality Committee on April 19 with a vote of 5 to 2. It is currently on the Senate Appropriations Suspense File until the cost of the program and the source of the funding can be determined.

SB 562 (Lara D Bell Gardens) Creates a new single-payer government run, multibillion-dollar health care system. Currently the financing for this "revenue Plan" is unspecified and undeveloped. Many employers expect that the business community will be looked at to fund a great portion of this plan as it is developed. With the State already dealing with billions of dollars of long term debt, and the increasing cost of our Medicaid expansion, it is hard to understand how this proposal could be sustainable. The Non-Partisan Legislative Analysist's office has calculated that this would cost $250 billion per year and require significant tax increases on businesses and individuals. In spite of very strong opposition from business and health organizations, the bill passed the Senate Health Committee with a vote of 5 to 2; however, 2 Democrat Senators abstained. SB 562 is now in the Senator Appropriations Committee and due to its high cost will not move until specifics on the financing of this program are amended into the bill. Although California voters have twice voted against a similar plan during the last two decades, the uncertainty of the Affordable Care Act will continue to provide the impetus behind this proposal.

AB 1356 (Eggman D Stockton) Proposes increasing the personal income tax rate to 14.3 % on the highest individual earners, including sole proprietorships. Currently this group of taxpayers pay over 50% of the income tax received by the State's General Fund. If this measure passes, this group of taxpayers will find ways to decrease their burden, which could include leaving the State, resulting in the State losing long term revenue stability. While currently being held in the Assembly Higher Education Committee, this bill could be resurrected at any time.

SCA 6 (Wiener D San Francisco) Would allow local governments to enact special taxes, including parcel taxes, on commercial, residential and industrial property by decreasing the voter requirement from 66.67% to 55%. It passed the Senate Governance and Finance Committee on April 4 with a 5 to 2 vote, and the Senate Transportation and Housing Committee on May 9 by with a 8 to 3 vote, with 2 abstentions.

As indicated above, these bills are just a few of the bills that may have a significant impact on your business and/or the local economy. The California Chamber of Commerce has even gone so far as to label these bills "Jobs Killer Bills." For more information on these and other bills that may impact your business visit www.calchamber.com. The best way to make you voice heard is to get more involved with your local business organization, such as the Santa Clarita Valley Chamber, Valley Industrial Association or Valley Industrial and Commerce Association as these organizations work to help educate your legislators and fight these types of measures.

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