Critical initiatives on November 2 ballot

As boring as it may seem initially to read the official version of what these propositions will do if passed, most of them are important enough to your business, your wallet, your
industry and/or your future that they deserve a closer look so you can make an informed
decision at the ballot box. Probably the most important to our industry and your business is Proposition 23.

Suspend AB 32
If passed, Prop 23 basically suspends AB 32, the law that sets limits on greenhouse
gas emissions from cars, trucks, construction equipment and a myriad of other industries.
AB 32, California’s own version of “cap and trade” will increase the cost of housing, energy, transportation and food, and is estimated to cost every family in the state $4,000. Some estimates put the increased costs to businesses resulting from AB 32 at $50,000.

While Proposition 23 doesn’t do away with AB 32, it would delay implementation of any laws written to meet AB 32 until unemployment in California drops to 5.5 percent or less for four consecutive quarters. Specifically, Prop 23 requires the state to delay comprehensive greenhouse gas-reduction programs that legislate cleaner fuel requirements, mandatory emissions reporting, and fees.

Governor Schwarzenegger has vowed to fight the move to suspend AB 32 with everything he has and the state’s powerful environmental organizations will undoubtedly join the fight, likely accusing “evil oil companies” of trying to stop alternative energy production.

While supporters of AB 32 say it has spurred a large market for solar, wind and other clean energy sources, a study commissioned by California’s state auditor concludes that “California’s economy at large will likely be adversely affected in the near term by implementing climate-related policies that are not adopted elsewhere.”

The study also found AB 32 will raise energy prices, “causing the prices of goods and services to rise; lowering business profits; and reducing production, income and jobs.” Businesses and jobs are already fleeing the state and the study says many other companies ”may significantly reduce their business activity in California” as a direct result of AB 32. Southern California Contractors Association (SCCA) recommends a ‘Yes’ vote on Proposition 23 to delay implementation of AB 32.

Raising taxes, passing budgets Currently, passing a state budget requires approval by two-thirds of the legislature (called a super majority). If passed, Proposition 25 would drop that to only 51 percent to approve a budget. Under Prop 25, if the legislature does not pass a budget bill by June 15 of any year, all members of the legislature permanently forfeit any reimbursement for salary and expenses for every day until the budget bill passes.

Opponents of Proposition 25 say the language of the proposition could be used to enact tax increases with just a simple majority, rather than the two-thirds now required. "This is not a check and balance on the Legislature," says Teresa Casazza, president of the California Taxpayers Association. “This is a carte blanche for more taxes.”

Prop 25 allows appropriations related to the budget, except those related to schools, to be approved by a simple majority. Opponents say tax increases and other changes requiring a super majority vote, such as increasing the legislative per diem, could be added to appropriations bills in the budget and passed by a simple majority.

Both the budget and the attached appropriations could then take effect immediately, eliminating the public's right to overturn taxes and fees via referendum.

Stop hidden taxes
Opponents of Prop 25 are supporting Proposition 26, under the Stop Hidden Taxes Campaign. Proposition 26 would raise the vote requirement for approving some fees to two-thirds. The intent of Proposition 26 is to stop the Legislature from imposing tax increases by calling them levies, fees and miscellaneous charges. If passed, Prop 26 would extend the two-thirds requirement for tax increases to levies and fees, as well. SCCA recommends a ‘Yes’ vote on Proposition 26 to require a two-thirds super majority vote to approve fees and taxes.

Stop raids of transportation funding
The state regularly seizes, borrows or restricts the use of tax revenues that have been dedicated by law to fund transportation projects, local government services and community redevelopment projects. If passed, Proposition 22 would prohibit the practice and stop the state from the distribution of tax revenues for these purposes even when the Governor deems it necessary due to a severe state fiscal hardship.

This proposition could potentially free up billions of dollars for transportation and other projects.

Establishing districts
Two years ago, California voters determined it was a conflict of interest for lawmakers to draw their own district boundaries and passed Proposition 11, establishing an independent 14-member redistricting commission – five Democrats, five Republicans, and four voters registered with neither party – after the 2010 census results are made available. However, after House Speaker Nancy Pelosi vowed she would spend heavily to defeat Prop 11, Congressional districts were omitted.

Proposition 20: Redistricting of Congressional Districts, called Voters First Act for Congress, would require the 14- member redistricting commission to establish Congressional districts, as well.

As soon as Proposition 20 was written, a group of Southern California Democratic congressmen headed by Howard Berman wrote Proposition 27, which would abolish the voter-approved independent commission entirely. While it returns redistricting authority to the Legislature, Proposition 27 does allow voters to reject district boundary maps approved by the Legislature and requires populations of all districts for the same office to be exactly the same.

Millions of dollars will be spent to promote both propositions. Schwarzenegger and business are expected to support Prop 20 as a means of changing the current Legislature, which is dominated by liberals. The Democrats and even some Republicans are likely to work hard to pass Proposition 27 so they can regain control of redistricting and maintain the status quo in Sacramento.

It’s not clear what will result if both propositions pass, although a post-election battle is likely.

Increasing taxes on business
Recently passed legislation allows businesses to shift operating losses to prior tax years and extends the period permitted to shift operating losses to future tax years. Other legislation enacted recently would allow corporations to share tax credits with affiliated corporations and allow multistate businesses to use a sales-based income calculation, rather than a combination property-, payroll- and sales-based income calculation. Proposition 24 would repeal that legislation and increase business taxes of approximately $1.7 billion beginning in 2011-12.

Add $18 vehicle license surcharge
Proposition 21 would increase the cost of annual state vehicle licenses by $18 and grant free admission to all state parks to surcharged vehicles. The revenue would be set aside in a new trust fund to be used solely to operate, maintain and repair the state park system, and protect wildlife and natural resources. Commercial vehicles, trailers and trailer coaches are exempt. The surcharge is expected to raise about $500 million annually to be used mainly to fund state parks and wildlife conservation programs. Proposition 21 would not preclude increases in other types of state park user fees and revenues.

by Pam Gruebnau, Editor, Southern California Contractors Association magazine