IN THIS ISSUE – “…the Robin Hood Initiative….”
- Fueling the Gas Tax Battle
- Californian Leads US in Campaign Cash
- “Dirt is Flying in the Central Valley” – High Speed Rail Lays Track, But Remains in Doubt
TAXES & HIGHER ED
- State’s New Business Tax System is…Taxing for Users
- Community Colleges Moving Out of the Shadows
BACK TO THE LAND
- Cannabis Failing Quality Control
- How America Uses Its Land
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
FOR THE WEEK ENDING AUG. 3, 2018
READ ALL ABOUT IT!!
Whether or not voters this November approve an initiative to repeal recent increases to California fuel taxes and vehicle registration fees, its proponents are already planning a sequel.
The campaign is preparing to introduce a ballot measure in September that would ensure fuel taxes, car sales taxes and truck weight fees are spent on transportation projects. Supporters hope to begin collecting signatures in November, shortly after the vote on Proposition 6, for the 2020 election.
The proposal expands on Republican arguments that the gas tax increase, passed last year by Gov. Jerry Brown and Democratic lawmakers, was unnecessary because the state already has plenty of money to pay for a backlog of road repairs and maintenance.
It has three main components:
▪ Create a “lockbox” so that gasoline and diesel taxes are spent only on road projects
▪ Steer sales taxes from automobile purchases to regional transportation agencies
▪ Enact cost-saving changes to infrastructure planning and construction.
Its architects estimate the plan will generate at least $14 billion per year, mainly for streets and highways, far more than what the tax and fee increases are projected to bring in over the next decade.
“I call it the Robin Hood initiative – stealing our money back,” said Carl DeMaio, chairman of the gas tax repeal campaign.
But a Sacramento Bee analysis determined that the prospective initiative would require major spending cuts to other programs across state and local budgets. Opponents say it is unrealistic.
“It’s silly. It’s unworkable. It’s unconstitutional,” said Michael Coleman, fiscal policy adviser for the League of California Cities, which is campaigning against Proposition 6. “It’s not a serious proposal.”
Voters in November will consider reversing a transportation spending plan that includes a 12-cent-per gallon increase on gasoline, a 20-cent-per-gallon hike on diesel and a new “transportation improvement fee” based on the value of a car. It is expected to bring in $54 billion over the next decade, mostly for repairing and rehabilitating local streets, state highways, bridges and culverts.
About 18 percent, or nearly $10 billion, is budgeted for public transit, commuter rail, bicycling and pedestrian projects, parks and agriculture, research or workforce training. DeMaio said that is a misuse of money generated by drivers.
His next initiative would mandate that all gasoline and diesel taxes be spent on contracts for road maintenance and improvement projects.
Tom Steyer has set plans to spend at least $110 million in 2018, making the billionaire investor the largest single source of campaign cash on the left and placing him on a path to create a parallel party infrastructure with polling, analytics and staffing capabilities that stand to shape and define the issues the party runs on in November.
Steyer is building out an operation that’s bigger than anyone’s other than the Koch brothers’ — and the billionaire and his aides believe the reservoir of nontraditional voters he’s already activated could become the overriding factor in House and other races across the country.
Yet Steyer’s oversize role also stands to position him squarely against Democratic Party leadership, which has shown little appetite this fall for pursuing one of his signature causes: impeachment.
Unlike the $80 million being spent by Michael Bloomberg, Steyer will put his cash toward building out NextGen America and Need to Impeach, his two growing political organizations, as well as funding clean-energy ballot initiatives in Arizona and Nevada. Steyer has already doubled his initial $20 million investment in Need to Impeach to $40 million and has not ruled out adding more.
Steyer has also already dropped over $5 million into his For Our Future PAC, and he is expecting more outlays on behalf of individual candidates — such as the $1 million he put behind Florida gubernatorial candidate Andrew Gillum — though likely not in any of the remaining primaries.
Between the two organizations, he’ll have close to 1,000 people on staff, in addition to over 2,000 volunteers. The Need to Impeach email list alone has already topped 5.5 million, which their research — anyone who signs up with the effort has their information run through a series of voter files and other databases — shows includes a very exact 697,780 infrequent voters in the 63 most competitive House districts.
“Our list is bigger than the NRA’s — and we’re going to make sure that it votes that way in 2018,” said Kevin Mack, lead strategist for Need to Impeach.
In just the last decade, Steyer skyrocketed to become the Democratic Party’s biggest donor, only to leave that behind to invest instead in his own organizations and causes, to the irritation of party leaders — particularly those who worry that he’ll hurt them politically by talking up impeachment. That pushback seems to encourage him, while also encouraging talk that he’s interested in a 2020 presidential run, though he tends to push back on that by pointing out that many people first interpreted his spending in this cycle as the prelude to a 2018 campaign for California governor or senator.
Most of those voters, based on their analyses, skew older and female, while the NextGen America effort is focused on younger voters in 11 states that are likely to be important both in 2018 and 2020.
Those voters and others, according to new internal polling and focus group data commissioned by Steyer and described by people familiar with its findings, are very eager to hear Democratic candidates talking more about impeaching President Donald Trump. Just 32 percent of Democrats said that they wanted their candidates to avoid the topic, while 59 percent said that they didn’t want Republicans dictating the terms of the campaign “so of course Democrats should talk about impeaching Trump if the Democrats win big in November.”
Steyer’s team also polled Republicans, and it found that at least for now, they’re not motivated by impeachment backlash — a concern that House Minority Leader Nancy Pelosi and other Democrats in D.C. have been pressing for months. Asked to rate how much they were concerned about the effect of a Democratic takeover on top issues, 55 percent said they were “extremely worried” about weakness on immigration, 52 percent said they were extremely worried Pelosi as speaker would push “an extreme, liberal agenda,” and 48 percent said they were extremely worried Democrats would raise taxes. Only 21 percent said they were extremely worried that Democrats would impeach Trump, and 43 percent said they were not worried at all.
“There’s all this concern in Washington that impeachment is going to rile up Republicans, but our numbers show the opposite. … It’s time to get past the establishment talking points and get to what’s really going to win elections,” Mack said, urging Democrats not to avoid impeachment “in fear of bothering 21 percent of Republicans who aren’t going to vote for us anyway.”
FRESNO — It is vigorously opposed by Republicans, including President Trump. It has been plagued by escalating costs and delays. Californians are mostly against it. And a central question — how is it going to be paid for — remains unresolved.
But here in the Central Valley, far from the debates in Washington and Sacramento, the $100 billion Los Angeles-to-San Francisco bullet train has moved off the drawing board and onto 21 construction sites spread across five Central California counties.
Work began two weeks ago on one of the more ambitious pieces of the project — an overpass that will carry trains over a major highway in Fresno — and ground will be broken on three more viaducts in the next few months. Nearly 2,000 workers are on the job, starting as early as 5 a.m. to avoid the 110-degree afternoon heat. “Simply put, dirt is flying in the Central Valley,” the High-Speed Rail Authority declared in a recent business plan.
Yet for all the cranes, crews in orange vests, beeping trucks and fresh concrete, it remains far from certain that this project will ever be completed. In addition to the lack of funding, it faces opposition from both Mr. Trump and Kevin McCarthy, the Bakersfield Republican who is the House majority leader.
The continued delays and rising costs have fueled criticism that California, perhaps the most prosperous state in the nation, is squandering money on a transportation project that critics describe as a prime example of big government waste in a state controlled by Democrats.
“This is going to be the most expensive and slowest form of fast rail imaginable,” said Jim Patterson, a former Fresno mayor who is now a Republican member of the Assembly and a critic of the project.
For all the construction, the project faces the ever-present threat that a future governor may decide that state resources would be better used dealing with, to name one example, the housing crisis. Gov. Jerry Brown, a big proponent, is leaving office at the end of the year.
For advocates of high-speed rail, California under Mr. Brown has been a rare bright spot, while other ambitious government-funded bullet train proposals across the nation have struggled in the face of opposition from Republicans who are concerned about the costs and disruptions.
Gov. Rick Scott of Florida rejected Federal funds to help build a high speed rail line from Tampa to Orlando, saying it was too expensive for taxpayers. Attempts to upgrade rail service between New York and Boston on Amtrak’s Northeast Corridor have repeatedly faltered because of community opposition.
A high-speed rail line is moving ahead in Texas, connecting Dallas, Fort Worth and Houston, but it is being financed by private industry.
The high-speed train in California, championed by Mr. Brown, a Democrat, and Arnold Schwarzenegger, his Republican predecessor, is the most ambitious public transportation project underway in the nation today. It is moving ahead while other mass transit improvement ambitions — for the subway system in New York City, for an innovative elevated train line in Honolulu — have also been hamstrung by costs and opposition.
Mr. Brown’s enthusiastic backing has been crucial to the project’s advances. Gavin Newsom, the Democratic lieutenant governor and the leading contender to succeed Mr. Brown, has offered conflicting views of the project over the years; he has at times come close to opposing it outright, though in this campaign he has said he supported it, while expressing concern about costs and engineering challenges. By contrast, his Republican opponent, John Cox, has pledged unequivocally to abandon the project if elected.
The 800-mile line from Los Angeles to San Francisco is scheduled for completion by 2033. There is no shortage of obstacles to what even the project’s biggest boosters call an ambitious timetable, including the engineering challenge of tunneling through the Tehachapi Mountains, a barrier between the Central Valley and Los Angeles.
The cost was originally supposed to be split among the state, the federal government and private business. But that arrangement faltered, as hopes for federal dollars faded with Republicans in power in Washington and businesses shied away from such an uncertain venture. As of now, the rail authority has come up with less than $30 billion of the necessary $100 billion, and the project’s costs are expected to continue to rise.
“The rest has to be found,” said Martin Wachs, an emeritus engineering professor at the University of California at Berkeley and a member of a committee appointed by the Legislature to review the project. “At the moment, 100 percent of the cost is going to be absorbed by the taxpayers.”
Beginning construction without all of the financing in place represents a strategic gamble by the rail authority, and by Mr. Brown, that once enough work is completed, future leaders will be loath to walk away from the project and leave a landscape of unfinished pillars, viaducts, bridges and track beds. Faced with reduced resources, the authority has altered its plans, and is now focused on finishing a 119-mile stretch of track from Bakersfield to Madera by 2022.
Brian P. Kelly, the head of the authority, argued that when this stretch of train is completed, people will rally around the project and the business community would become convinced of its viability.
“If I can get trains on the ground, Californians will start to see that this is something that we want,” he said. “There’s a lot of attention paid to what we don’t have. But we have significant fund-raising to get done what we have to get done.”
“Yes, the project has challenges,” Mr. Kelly said. “And the primary challenge for this same project is the same today as it was the day the voters passed the bond: And that is, we don’t have enough money to build what we want to build.”
California’s brand new $290 million system for collecting sales tax is off to a rocky start with a key filing deadline just days away.
A customer service center for the California Department of Tax and Fee Administration is swamped with complaints. Small business owners are leaving snarky comments online, and Gov. Jerry Brown’s administration is preparing to waive penalties for people who file their returns late because of technical errors.
The quickly approaching deadline on Tuesday for businesses to report their second quarter sales tax is the first significant test for the department’s Centralized Revenue Opportunity System (CROS), a program that’s designed to modernize tax collection and to make it easier for the state to allocate revenue to various agencies.
The state has been developing the program since 2010, when the Board of Equalizationsought to better manage the 36 taxes and fees it collected at the time. The agency contended it would increase tax revenue by creating an easier-to-use system.
It hired contractor Fast Enterprises to build it in August 2016, and the California Department of Tax and Fee administration took over the project last year when the Legislature stripped the Board of Equalization of almost all of its powers.
Tax department Deputy Director Stacie Spector said the tax collection program launched on-time and on budget in May. The department tried to notify users to expect changes with emails, mail, banner advertisements on its website and messages that people heard when they called the department.
Spector said the department is learning fast and responding to feedback. It anticipated that the change could be difficult for some of the roughly 1 million taxpayers who use the system, and it added customer service staff to work through some of those challenges.
So far, the tax department is hitting its revenue collection targets
“We’re incredibly happy with the performance. At the same time, we have a lot of work to do. We understand there are some issues and we’re facing them front and center,” she said.
Some tax attorneys and accountants were still surprised by what they found when they tried to use the new system over the past few weeks. They said the alerts they saw about the new program did not convey to them how different CROS would be from the department’s previous system.
“Nothing. No training. No education,” said Jesse McClellan, a Sacramento sales tax attorney and former Board of Equalization auditor.
People who have used the program describe it as difficult to navigate.
“The new website is like a choose your own adventure,” said Lonny Harris of Fair Oaks, whose company Ablegov sells software to government agencies. “How you answer gives you options on how to proceed, but some questions are very unclear. There are a lot of businesses that are doing pretty simple functions. Presenting them with a simple form will get them to pay accurately and timely. This more complex system, it’s not as easy.”
“It should not be as confusing as this,” Alexander, the Carmichael accountant, added.
Two professional accountants said it takes them 90 minutes to file a return in the new system, up from 30 minutes in the old program. Taxpayers complain that they have to manually enter information in the new program that used to be calculated automatically for them in the old program.
“A majority of my clients have complained that the new system is difficult and not as user-friendly,” said accountant Marc Brandeis.
The Legislature last year seemed to anticipate that taxpayers might have trouble with the new program. It unanimously passed a bill by Sen. Ted Gaines, R-El Dorado Hills, and Republican Board of Equalization member George Runner that would have allowed the state to waive late-filing penalties if the new system did not work smoothly.
Gov. Jerry Brown vetoed the bill, writing that the state already has “an existing mechanism to relieve taxpayers of unwarranted interest and penalties due to website disruption. Therefore, this bill is unnecessary.”
Spector said the department would use that power to waive penalties if a taxpayer files a complaint. The department plans to post a video on its website describing how someone could petition to have the department drop late penalties.
Gaines, who is running for a seat on the stripped-down Board of Equalization, said taxpayers would be better served by preemptively waiving penalties until the tax department sorts out its new system.
“Tell me why the taxpayer has to go through a bunch of paperwork because the bureaucracy is not working. It makes no sense. That’s why we proposed the bill, and the governor chose to veto it, which I think was a mistake. He was putting the government in front of our constituents,” he said.
McClellan, the tax attorney, has friends at the department from the years he worked he there. His former colleagues tell him they’re frustrated, too, but hopeful the program will pay off over time by providing better services for the public and better tools for them.
“From the agency standpoint, I haven’t heard a good report about it,” he said. “Once the kinks get worked out, and once the gaps get filled for the issues they’re encountering, they feel it will get better.”
Commentary from CalMatters
California’s 114 community colleges are the Rodney Dangerfields of higher education, overshadowed by the state’s four-year universities and not getting much respect.
That’s true even though the community colleges’ 2.1 million full- and part-time students are more than three times the combined enrollments of the University of California and the California State University System.
More importantly, low-cost, conveniently located community colleges are the primary gateway into post-high school job training and four-year degrees for those who would otherwise be stuck on the lower rungs of the socioeconomic ladder.
Some big changes are coming to the system; some of them from Gov. Jerry Brown, who began his political career a half-century ago as a community college trustee in Los Angeles and will end it this year.
Under his prodding, the Legislature has approved a new state-operated online community college that he says will give workers displaced by technology or other circumstances new opportunities to acquire marketable skills.
“I want people to be able to open their own imaginations whether they are 15 or 50. Now (students) have a real opportunity to not only learn but to get a certificate and get skills to earn more money, advance and pursue their dreams,” Brown told the state community college board after signing legislation for the online college.
Brown and the Legislature are also overhauling how the colleges are financed, giving them more state aid but conditioning some money on how well colleges are preparing students for jobs or transfer to four-year institutions.
It’s meant to be a carrot to encourage better performances by local colleges, who previously had been given allocations based on enrollment, but it’s also something of an anomaly.
The governor has stoutly resisted performance measures for K-12 schools, even for his program of directing more state aid to help poor and “English-learner” students raise their academic skills.
He calls that reluctance “subsidiarity,” meaning trusting local education officials to do the right thing, and has rejected pleas of education reformers for more accountability.
It’s a little odd that he would reject such accountability for K-12 schools but insist on it for community colleges.
Still another Brown-backed change is called “California College Promise.” Participating community colleges may provide financial incentives and guaranteed transfers to four-year colleges for community college students meeting certain criteria. The program also envisions community colleges partnering with K-12 schools to improve college preparation.
Brown, however, is not the only source of change for the community colleges.
This month, the state community college board approved an agreement that allows students who have completed required lower-division work in some majors to transfer as juniors to private, nonprofit colleges and universities. While students have sought such transfers in the past, the new agreement provides a more direct pathway for admission.
But perhaps the biggest change coming, albeit slowly, to the state’s community colleges is allowing some of them to offer four-year “baccalaureate” degrees in some fields.
Nine community colleges awarded 135 such degrees this year under a pilot program, involving such fields as dental hygiene, mortuary science and ranch management.
The state Senate has passed a bill to extend the pilot program, but it faces stiff opposition from faculty unions and the Assembly has killed extension legislation in the past.
California has a looming shortage of college-educated workers and if the gap is to be closed, community colleges must be full partners and not merely academic stepchildren.
One in five batches of marijuana has failed laboratory testing since new state safety requirements kicked in July 1, according to data from the California Bureau of Cannabis Control.
Failures have been triggered by inaccurate labeling or contamination from pesticides, bacteria or processing chemicals.
Those testing requirements and results have left some retailers with severely limited inventory over the past few weeks, as cultivators and product manufacturers scramble to get compliant products to market.
There was a big gap at the beginning of the month with the supply of marijuana buds in particular, according to Nick Rinella, chief operating officer of Verdant Distribution, a Long Beach-based independent cannabis distributor.
The new testing requirements have also created backlogs at busy labs.
The state has licensed just 31 testing labs, most located in Northern California, and many of them aren’t yet taking customers. As a result, Rinella said cannabis safety tests are taking between one and two weeks.
And this week the first cannabis product was recalled from store shelves because it doesn’t meet new standards regarding pesticide levels.
While that’s concerning, in the short term, industry experts believe it’s also a sign that California’s cannabis industry is maturing and starting to look like other regulated markets, such as alcohol and food.
INTERACTIVE GRAPHIC: There are many statistical measures that show how productive the U.S. is. Its economy is the largest in the world and grew at a rate of 4.1 percent last quarter, its fastest pace since 2014. The unemployment rate is near the lowest mark in a half century.
What can be harder to decipher is how Americans use their land to create wealth. The 48 contiguous states alone are a 1.9 billion-acre jigsaw puzzle of cities, farms, forests and pastures that Americans use to feed themselves, power their economy and extract value for business and pleasure.