California Farm Bureau Federation Friday Review

July 11, 2008

The Budget Conference Committee accomplished phase-one of its role by reconciling the Assembly and Senate versions of the 2008-09 Budget Act. Prior to adjourning on July 8^th and sending the budget bill conference report to the respective floors of the Legislature, the committee also adopted $8.2 billion in new taxes and accelerated collections. It was essentially a pro forma action to move the budget process into the so-called Big 5 negotiations (the governor and the two party leaders of both houses) because both houses of the Legislature are expected to summarily reject this version of the budget. This is due to the fact that the Republican Caucuses in the Assembly and Senate, and the governor for that matter, have firmly rejected the Democrats’ call for new taxes as a means for closing the estimated $17.2 billion dollar budget gap.

Most of the proposed tax increases would be permanent with the exception of the suspensions and the accelerated fee collections on limited liability companies (LLC). The committee also proposed a new tax amnesty program to raise an estimated $1.5 billion. The tax increases include the following:

• Reinstate 10% income tax rate on the portion of couples' incomes above $321,000 a year and 11% on the portion of income above $642,000 for an increase of $5.6 billion.
• Adopt a 1% surcharge for incomes in excess of $1 million, thus creating a new a 12% marginal tax rate.
• Suspend the net operation loss carryforward (NOL) deduction for three years for an increase of $1.5 billion.
• Suspend indexing of margin income tax brackets for $815 million increase.
• Raise corporate tax rates from 8.84% to 9.3% for a $470 million increase.
• Accelerate fees for LLCs for $350 million one-time revenue.
• Phase out the dependent exemption credit for individuals making $150,000 or more for an increase of $215 million.

Other actions of interest by the committee included rejecting the Assembly’s proposal to adopt “in concept” the Legislative Analyst’s proposal to levy a $125 million fee on structures and possibly landowners in the state responsibility area (SRA) to help fund the wildland fire protection budget of the Department of Forestry and Fire Protection. Instead the committee adopted the governor's "Emergency Response Initiative," i.e., fire insurance surcharge on commercial and residential structures statewide. The conference committee doubled the surcharges proposed by Governor Schwarzenegger in the May Revise so it would now raise approximately $280 million per year. The committee proposed 2.8 percent per $1000 of premium paid in high fire, earthquake, and flood hazard zones and 1.5 percent in low-hazard zones. Since homeowners, on average, pay $900 per year to insure their home, the average cost would be $25.20 per household in a high-risk zones, and $13.50 per household in a low-risk zones. These zones would be delineated by zip codes.

The Conference Committee also funded the Williamson Act subventions at $34,739,000, adopting the 10 percent cut proposed by the governor. The committee also restored $2.5 million to the CDFA’s Agricultural Plant Health and Pest Prevention Services budget to partially fund the ongoing Diaprepes Root Weevil detection and eradication efforts ($1.77 million), survey and eradication activities for Red Imported Fire Ant ($500,000) and Pierces Diseases Program ($230,000). The committee also fully funded CDFA’s Border Inspection Stations at $7.5 million.

AB 2921 (John Laird, D-Santa Cruz) that would close several loopholes in the material breach provisions of the Williamson Act was also approved by the Senate Judiciary Committee on a vote of 4 to 0. The bill was amended in committee to remove the provision that would have given the Department of Conservation reasonable attorney’s fees and costs if they were the prevailing party in a civil action brought to enforce a material breach of contract. This measure is also headed to the Senate Appropriations Committee.

CFBF recently offered support for AB 1107 (Juan Arambula, D-Fresno), as amended. AB 1107 will allow farm workers in counties covered by the Governor’s recent drought disaster declaration (Kern, Kings, Tulare, Fresno, Madera, Merced, Stanislaus, San Joaquin and Sacramento) to earn as much as $200 a week without losing any unemployment compensation benefits they may otherwise be entitled to.                            AB 1107 is pending in Senate appropriations.

The Senate Labor and Industrial Relations Committee passed several bills of interest to CFBF out of committee on June 25th:

AB 1988 (Sandre Swanson, D-Oakland) which would require an employer to abate hazards alleged by Cal/OSHA immediately unless the employer indicates, by verified petition in its notice of appeal to the appeals board, that it seeks a stay of abatement and the reasons why abatement is not necessary to protect employee health or safety. A quick hearing would follow. Under current law, if an employer contests a citation, he need not abate the hazard until Cal/OSHA and the employer settle the matter, or the employer’s appeals are exhausted. Current law encourages settlements and rapid abatement, while the proposed change would discourage constructive dialogue between Cal/OSHA and employers, thus hampering cooperative efforts to reach reasonable and effective resolutions of workplace hazards. CFBF joined a chorus of business groups in opposition to the bill at Labor and Industrial Relations, and discussions with the bill's sponsors have been productive so far and may result in a compromise.

AB 2076 (Felipe Fuentes, D-Sylmar) would prohibit counties or municipalities from requiring use by employers of the federal E-Verify system for employment eligibility verification, if use of that system is for the purpose of obtaining a contract or business license. CFBF has supported AB 2076 in the hope of discouraging legislation to require California farmers to use the E-Verify system, which we believe could leave farmers in a very difficult position in trying to secure adequate numbers of legal workers. AB 2076 is scheduled for a third reading in the Senate.

AB 2716 (Fiona Ma, D-San Francisco), which would require employers to furnish one hour of paid sick leave for every 30 hours worked for use in the event of the employee's illness, illness of a family member or instances of sexual assault or domestic violence, was approved by the committee. An employee would be eligible to accrue leave after 7 days of employment; the employee would be eligible to use this leave after 90 days service, and leave would carry over from year to year and from one instance of seasonal employment to the next. Counties and municipalities have actively opposed AB 2716, as has the mainstream business community and CFBF. Assemblymember Ma has shown no inclination to engage the opposition to her bill, and the Labor and Industry Committee passed it without amendment.   

At a Senate Rules Committee hearing on June 25, CFBF joined the rest of the business community in support of the nomination of long-time Cal/OSHA staffer Len Welsh to head the agency. Welsh’s nomination received no opposition, and was passed in the Rules Committee by a unanimous vote.

The Governor signed SB 1436 (Denise Ducheny, D-San Diego) into law this week. CFBF is co-sponsoring this bill with the California Cattlemen’s Association. SB 1436 allows farmers and ranchers implementing routine and ongoing agricultural practices to accidentally take species listed under the California Endangered Species Act. Prior to this bill being signed into law that provision was set to expire January 1, 2009. Accidental take coverage for ongoing and routine activities is now allowed through 2011.