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Status Report on Important Job Producing Legislation BY: Phil Vermeulen, ECA's Legislative Advocate

Also In This Update • Budget snapshot: Spin war persists in fiscal impasse It happens every year at this time, the streets of Sacramento become safe to walk again because the Legislature is out on summer recess! What about the budget problems you ask? Well, the "Big Five"(the four legislative leaders and the governor) decided that nothing would be accomplished by keeping the legislators in Sacramento at a per diem cost of over $142 a day each, so they ordered them back to their districts with the understanding that they can be called back at any time IF the impasse on the budget is resolved. By the way, following my weekly update is an article in this morning's Capitol Weekly which accurately describes where the budget talks are at the moment. So, as we enter the summer break I thought it was a good opportunity to discuss some key legislation that I'm actively working on which will hopefully bring WORK to YOUR business! AB 552 (Solorio) Correctional facilities. Status: 06/03/2010-Chaptered by the Secretary of State, Chapter Number 22, Statutes of 2010 Summary: Will immediately provide (now that it's signed into law) approximately $2.4 billion in prison construction. Ultimately, there will be over $6 billion. AB 752 (Caballero) Safe Drinking Water and Water Supply Reliability Act of 2010. Summary: This bill would enact the Safe Drinking Water and Water Supply Reliability Act of 2010, which, if approved by the voters, would authorize the issuance of bonds in the amount of $12,250,000,000 pursuant to the State General Obligation Bond Law to finance a safe drinking water and water supply reliability program. AB 1747 (Galgiani) High-Speed Rail Authority. Summary: IF the high speed rail project is built(the first leg between LA and San Francisco would cost over $50 billion), this measure (if approved) would require the authority to make every effort to utilize California only contractors and suppliers. AB 2036 (Berryhill, Bill) Public contracts: contract document distribution. Summary: We are the co-sponsor on this measure. It would require public agencies going out to bid on a public works project to make electronic copies of plans and specs available to potential bidders and if there is a charge for a set of plans, that it is a deposit only which is refunded upon return of the plans. AB 2060 (Calderon, Charles) Sales and use taxes: exemption: fixed price contract. Summary: We are the co-sponsor on this measure. It would, prospectively, waive any future sales tax increases for contractors locked into fixed price contracts. You may recall a year ago April the state increased the sales tax by 1 cent. We introduced a bill to exempt all fixed price construction contracts entered into prior to the April 1st date however the bill failed. We are optimistic that applying the law prospectively will be signed into law this year (keep your fingers crossed!). AB 2182 (Huffman) Contractual assessments: onsite sewer and septic improvements. Summary: This bill will allow sewer and water districts to finance homeowner and businesses to convert


from existing septic systems to instead install sewer laterals into the sewer systems. This bill is also on the fast track and will generate a heck of a lot of work for our underground members!!! AB 2703 (John A. Perez) Federal transportation economic stimulus funds: 2nd round. Summary: Existing law establishes special procedures and formulas for allocation and expenditure of federal transportation economic stimulus funds awarded to the state in 2009. Under these provisions, the Department of Transportation, with the approval of the Department of Finance, may make a loan or loans from a specified portion of those federal funds for the purpose of advancing projects meeting certain criteria that otherwise would be funded from the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006, a general obligation bond measure approved by the voters in November 2006 as Proposition 1B. This bill would provide similar authority to advance those projects with loans of federal funds awarded to the state in 2010 under the 2nd round of federal transportation economic stimulus funds. In order to be eligible for an advance, a project would need to have been programmed for Proposition 1B bond funds by May 1, 2010 , and be ready to be awarded within 90 days of federal apportionment. Upon repayment of the loans, these funds would be available for appropriation by the Legislature for the State Highway Operation and Protection Program.

These are just a few highlights of important job producing bills moving through the legislative process. I will keep you posted on their progress.

Budget snapshot: Spin war persists in fiscal impasse By Anthony York, Capitol Weekly This is the time of year when the legislative leaders begin to get a little sensitive about the notion that they are standing idle as the budget stalemate drags on. To that end, Senate Leader Darrell Steinberg is trying to promote the idea that progress is being made between Democrats and Republicans in the Capitol over closing the state’s spending gap. Steinberg insists the fight between Republicans and Democrats is really over a $7 billion hole, not the entirety of the state’s $19 billion budget problem. But trying to get specifics about what is in the $12 billion of reported agreement between the two sides can be tricky. In fact, the notion itself was rejected by a Schwarzenegger spokesman this week. “Once the Democrats produce a budget bill, there very well may be some things we agree on,” said Schwarzenegger’s press secretary, Aaron McLear. “Every day they fail to do this, the problem gets $52 million worse.” Steinberg said Tuesday that in truth, Democratic leaders and the governor agree on how to close more than half of the state’s $19.1 billion deficit. It’s just that pesky last $7 billion or so that is still the problem. Assembly Democratic sources also indicate there is agreement on about 60 percent of the $19 billion budget problem. Republican leaders have dismissed the notion as Democratic spin. Even if the haggling over numbers continues, the fundamental gulf between the two


parties remains the same. Democrats want tax increases. Republicans want deeper spending cuts to state programs. Democrats have agreed to some cuts, but billions less than the $12.5 billion proposed by Schwarzenegger in May. They say they are prepared to postpone about $1 billion in payments to education - money that would normally be due to public schools in the current budget year. Of course, these cuts or delayed payments could grow depending on final revenue figures and any potential new taxes in the budget, since budget formulas dictate that schools receive about 40 percent of all new revenues. Democrats also say they are prepared to score savings of about $700 million from state worker salaries and leaving thousands of vacant state positions unfilled. That’s about half of the $1.5 billion Schwarzenegger said he hopes to save through cutting state worker salaries and asking public employees to pay more into their own pension funds. Schwarzenegger and Democratic leaders have also embraced about $1 billion in cuts to state prisons - cuts that may run into problems because the state’s prison healthcare system is in the hands of a federal judge. Federal funding is used by both Democrats and Gov. Schwarzenegger to plug the state’s budget hole. Schwarzenegger’s May budget relies on about $3.4 billion in federal dollars. Democrats say that money could increase if and when Schwarzenegger’s proposal to eliminate the state’s welfare-to-work program, CalWORKS, is rejected. Budget negotiators on all sides concede a complete elimination of CalWORKS is unlikely. Democrats are using revenue figures provided by the legislative analyst instead of those given by the governor’s Department of Finance. The LAO revenues are about $1.4 billion higher than the administration’s numbers. Again, Republicans have refused to acknowledge any piecemeal portion of the budget is settled, but Democratic proposals rely on more favorable revenue figures to help shrink the budget gap. Budgets have become more than just spending plans. They’ve become crucibles for new phrases in the lexicon of California political insiders. This year, the Schwarzenegger administration introduced the notion of “alternative funding,” which they say will make up $1.3 billion. Included in these proposals is moving $350 million from redevelopment agencies to pay for trial courts and a $160 million fee on hospitals. Schwarzenegger has also called for $2.1 billion in other fund shifts from various pots of money into the state’s general fund. Among these proposals is a $650 million loan of excise taxes on gasoline. While Democrats may differ over the details of the borrowing proposals and other budget fund shifts, they are counting on a similar dollar figure - about $3.4 billion - in such maneuvering to free up general fund revenues.


At the end of all of this, the fundamental disagreement between Democrats and Republicans remains. Both Steinberg and Assembly Speaker John Pérez want to see tax increases as part of the final budget deal. Steinberg and Pérez have both embraced a revenue package that includes delaying more than $2 billion in corporate tax breaks. Steinberg has also put forward a plan to delay a scheduled rollback in the state’s personal income tax rate. The income tax, which is set to go down on Jan. 1, 2011, is worth about $1.5 billion to the state over the first six months of 2011. Pérez and Steinberg have also embraced the concept of a tax on oil production, which could be worth about $1 billion annually. Another option being discussed is a 1/4-cent hike in sales tax which Democrats think can be done without Republican votes through a mechanism being called the “single flip.” Republicans, meanwhile, want to see deeper cuts in state spending. They are unlikely to support any plan that does not contain at least some of the $12 billion in cuts proposed by Schwarzenegger.


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