California Legislation Update - Mike Belote
Summary
TLDRIn this California legislative update, Michael Belot discusses the state's legislative process, budget challenges, and housing policy debates. He highlights the state's revenue issues, including temporary tax measures affecting large taxpayers, and the ongoing struggle between state housing mandates and local control. Belot also previews the upcoming November elections and the potential impact of various tax-related initiatives on state and local governance.
Takeaways
- 🗓️ The legislative process is moving quickly with only six and a half weeks left of activity for the 2023-2024 legislative year in California.
- 🏛️ The state budget is a significant issue, with a large deficit requiring both spending cuts and new revenue sources.
- 💼 Business and legislative leaders have reached a deal on the Private Attorney General Act (PAGA), which is expected to improve California's business climate.
- 🏢 There is a major struggle between state and local control, particularly in the area of housing policy, with cities considering becoming charter cities to retain more control.
- 🏫 Public education and higher education funding are key issues that the state budget must address.
- 🏦 The state is considering temporary measures to address the budget deficit, such as pausing net operating loss carryovers and limiting R&D tax credits for large tech and biotech companies.
- 🏦 The state's economy is doing well, but there is still a multi-year deficit projection, suggesting potential structural problems with the budget.
- 🏛️ The legislature is working on 'Budget bills Jr' to make the hard decisions needed to balance the budget by the fiscal year's start on July 1.
- 🗳️ The November general election will not change the deeply blue political landscape of California, but it will feature a variety of significant ballot initiatives.
- 🗳️ Three separate initiatives on taxation are on the November ballot, which could have substantial impacts on local and state government and the architectural profession.
- ✍️ The governor will have until the end of September to sign or veto the bills passed during the legislative session.
Q & A
Who is the speaker in the video script?
-The speaker is Michael Belot, the immediate past president of California Advocates.
What is the primary purpose of the video script?
-The primary purpose is to provide an update on the California legislative process and discuss various issues related to it, including budget, housing, and taxation.
What is the significance of June 18th in the context of the legislative process mentioned in the script?
-June 18th is a critical point in the legislative process where deals come together or fall apart, and it is when the legislature is 'putting for dough,' meaning making important decisions.
How much time is left of legislative activity in the 2023-2024 legislative year as of June 18th?
-As of June 18th, there are only six and a half weeks left of legislative activity in the 2023-2024 legislative year.
What is the deadline for the state budget to be enacted?
-The state budget must be enacted by June 15th, after which legislators forfeit their pay if it is not passed.
What is the fiscal year start date according to the script?
-The fiscal year starts on July 1st.
What is the current economic situation in California as described in the script?
-Despite a strong economy with capital gains being reported, stock markets at an all-time high, and low unemployment, California is still in a deficit position.
What is the ongoing struggle between the state and cities regarding housing policy?
-The struggle is about who gets to decide housing policy, with the state wanting to drive housing creation and cities wanting to retain local control.
What is the significance of Charter cities in the context of state housing policy?
-Charter cities are considering becoming Charter cities to avoid state housing policy laws, leading to a debate on local control versus state policy.
What are the three separate initiatives on taxation that are mentioned in the script?
-The initiatives include lowering the vote threshold for local tax and bonded indebtedness, raising all tax thresholds to 2/3 and subjecting legislative tax increases to popular vote, and a creative proposal that any proposal to raise a vote threshold for taxes must pass by the threshold it proposes.
What is the expected outcome of the initiatives on taxation if they are approved?
-The initiatives could have a substantial impact on local and state government, potentially leading to more infrastructure spending, changes in tax thresholds, and the need for legislative tax increases to be subject to popular vote.
What is the deadline for the legislature to act on the Private Attorney General Act (PAGA) reform to avoid it appearing on the ballot?
-The legislature must act on the PAGA reform by June 27th for the proponents to take their initiative off the ballot.
What is the speaker's opinion on the PAGA reform deal?
-The speaker believes that the PAGA reform is a major change in California law and will allow California to claim that its business climate has taken a step for the better.
Outlines
🗓️ Legislative Update and Process Overview
The speaker, Mike Belot, provides an update on the California legislative process as of June 18th, emphasizing the urgency of the situation with only six and a half weeks left in the legislative year. He compares the legislative process to a construction project, highlighting the importance of deadlines and the final stages where deals are made or broken. He notes the legislative session will end on August 31st, with no bills carrying over to the next year. The speaker also touches on the state budget, which must be balanced by June 15th, and the ongoing negotiations for the 'Budget bills Jr' to address significant issues like public education and prison closures.
🏦 State Budget Challenges and Revenue Strategies
This paragraph delves into the complexities of the state budget, which is facing a significant deficit of $30-50 billion. The speaker explains that the budget was balanced last week but with many tough questions remaining. He discusses the role of revenue in constructing the budget, mentioning temporary measures such as pausing net operating loss carryovers for three years and limiting research and development tax credits for large tech and biotech companies. These measures are seen as the state asking large taxpayers to provide no-interest loans to help with the deficit. The speaker also expresses concern about the state's long-term budgetary health despite a strong economy.
🏠 Housing Policy and Local Control Conflicts
The speaker addresses the contentious issue of housing policy in California, where there is a major struggle between the state's desire to increase housing creation and cities' desire to maintain local control. A recent court decision has complicated matters by ruling that some state housing policies do not apply to charter cities, leading to more cities considering becoming charter cities. The conflict centers on who should determine housing policy, with the state insisting on a uniform policy and local governments arguing for their constitutional right to local control.
🗳️ Upcoming Elections and Initiatives Impacting Business and Taxation
The final paragraph discusses the upcoming general election and the potential impact of various initiatives on business and taxation. The speaker mentions that despite the election, California's deep blue political landscape will not change significantly, and major issues like the budget and housing will continue into the next year. He also highlights three separate initiatives on the November ballot that could alter tax thresholds and the process for tax increases, which could have substantial effects on local and state governments and the architectural profession. The speaker concludes by reflecting on his long-standing collaboration with the organization and expresses his pleasure in working with them.
Mindmap
Keywords
💡California Legislative Update
💡AIA Cal
💡Legislative Process
💡State Budget
💡Revenue
💡Housing Policy
💡Charter Cities
💡Taxation Initiatives
💡Private Attorney General Act (PAGA)
💡General Election
Highlights
Introduction of the California legislative update with Michael Belot, the immediate past president of California Advocates.
Discussion on the legislative process's progression from deadline to deadline, akin to a construction project or mortgage application.
The analogy of driving for show and putting for dough in golf to describe the importance of the legislative process's final stages.
The legislative process's current phase, with only six and a half weeks left of the 2023-2024 legislative year.
The state budget's requirement for a simple majority vote and the implications for legislators' pay if the budget is not enacted by June 15.
The ongoing negotiations between the legislature and the governor's office on the state budget, known as 'Budget bills Jr.'
The significant revenue shortfall in the state budget, estimated between $30 to $50 billion.
The state's approach to addressing the deficit by temporarily pausing net operating loss carryovers and limiting R&D tax credits for large companies.
Concerns about the structural problems in the state budget that may require addressing in the coming years.
The ongoing struggle between the state's desire for housing creation and cities' desire to retain local control.
The impact of recent court rulings on state housing policy laws and the potential for more cities to become Charter cities.
The end of the legislative session on August 31st and the historical practice of 'stopping the clock' to continue work.
The governor's upcoming decision-making period on the approximately 1,000 bills that will land on his desk.
The upcoming November general election and its implications for the state's deeply blue political landscape.
The announcement of a deal on reforming the Private Attorney General Act (PAGA) to take it off the ballot.
The presence of three separate initiatives on taxation on the November ballot and their potential impact on local and state government.
The complexity of the taxation initiatives and the likelihood of legal challenges following the election.
Closing remarks expressing the pleasure of working with the organization for approximately 50 years.
Transcripts
hello everyone and welcome thank you for
joining us for this California
legislative update today you'll hear
from code advocacy and legislation
experts within the architectural
profession Michael belot the immediate
past president of California
Advocates well thank you Sarah uh I'm
Mike belot as you've noted been my
privilege and our firm's privilege to
represent AIA Cal for decades uh and so
we go back uh but we a long way but we
so value our relationship with the
organization and we have worked in
wonderful collaboration with your
leadership over the years with Paul and
now with Nikki uh but also with your
legislative people with Mark and now
Scott who's doing a terrific job for the
association and profession I'm told it
is my job to just give a sense of where
things are in the legislative process
here on uh what is it June
18th if I might mix my metaphors just a
little bit
uh the legislative process moves from
deadline to deadline not unlike a
construction project or a mortgage
application uh and to and to further uh
layer metaphor upon metaphor in golf a
game I absolutely do not excel at
there's an old saying that you drive for
show and you putt for dough meaning uh
that the the drive may look great on TV
but it's the pets that matter and inches
matter and in our world days uh and
words matter and we are coming to that
point in the legislative process where
we're putting for dough now where deals
come together or fall apart before my uh
10 or 15 minutes up I'll talk about a
deal which has apparently come together
today uh which I think is uh noteworthy
uh for all of us as business
people so here we are uh on June 18th
there are only six and a half weeks left
of legislative activity in the entire
2-year 2023 2024 legislative year the
legislature will work until July 3rd uh
whereupon they will enter into the
summer recess for a month and they will
come back August 4th until uh they must
adjourn at midnight August 31st under
our state constitution that will end the
session the two years are up no bill
will carry over from this year to next
year we'll start a brand new legislative
session in December and I'll get to that
uh in a few
minutes so this this is for all the
marbles this is when the hard decisions
get made legislative and human uh nature
being what it is the hard decisions get
put off uh till late and we're late now
so you are now beginning to hear about
hard issues being
debated and the the the first one uh
well let me say there's only uh really
two and a half weeks left of policy
hearings on bills
uh all the policy committees will have
heard their bills by the time the summer
recess begins on the 4th of July so the
legislature is scrambling deadline to
deadline to hear 14 15600 bills uh
basically this month but at the same
time the overarching issue of the state
budget is still pending uh some years
ago the legislature uh presented to the
voters an option which they took to go
from a 23 majority vote uh requirement
to adopt a state budget to a majority so
a simple majority can now pass the state
budget which then must be signed by the
governor and to uh entice voters to vote
for the measure uh there was Provisions
put in the initiative which caused
legislators to Forfeit their their pay
if a budget is not enacted by June 15
for that reason June 15th is the is the
budget date and of course legislators
meet that deadline every year and it may
it became easier to meet it when it
became a majority
vote but nothing says it has to be the
one and final budget it simply means
that the legislature must adopt a budget
which is balanced so the debits and the
credits equal at the bottom of the page
which they did last week on Thursday but
everyone knew that some of the hard
questions still remain and so the
legislature is now working with the
governor's office on what they call
Budget bills Jr that is budget acts that
follow and have the real hard decisions
made uh in them uh by the beginning of
the fiscal year July 1 so there are big
big issues pending now uh and things uh
that really matter to the state and to
all of us as Citizens like uh public
education and higher education it's
state support for that uh like should we
close prisons which pits uh uh Criminal
Justice Reform Advocates against the law
enforcement community and I'll talk
about that because also has an election
component to it so sometime between now
and uh July 1 the legislature will pass
another budget uh act which answers some
of these hard questions the governor
will sign it and we will commence our
fiscal year on July
1 one of the things though that is um uh
major of course in constructing a budget
is revenue and this year the budget was
a wash in red in to the tune of
somewhere between 30 and 50 billion
dollar with a
B uh which obviously cannot be closed
entirely with cuts or with new Revenue
you got to have both uh in the new
Revenue
category
uh many many many billions of dollars
are being generated not with structural
changes to the tax laws but with
temporary infusions of capital in
particular uh a pause in the ability on
your tax return a business tax return to
report a net operating loss carryover uh
it's not like the net operating loss
goes away but for three years tax years
24 25 and
26 uh there will be a pause and those
can be picked up again in tax year
2027 another uh big tax issue though
especially to large Tech Pharma
biotech uh companies is a limitation on
research and development tax credits
that alone is worth five or six billion
reportedly and the those two will be
severely limited for three years and
then picked up again on a refundable
basis and I won't go into the details of
that uh in tax year
2027 so basically what the state is
doing is asking uh large taxpayers to
float uh noin interest loans to the
state for the next few years to help get
through this uh deficit position
uh what I would worry about uh where I
voting on a budget or constructing it is
this regardless of what we see in the
debate uh at the federal level and the
presidential debate uh where one person
is claiming the economy is Rosy and
another claiming that it's a shambles in
fact at least in California the economy
is doing very well uh capital gains
continue to be reported the stock
markets at an alltime high unemployment
is low by General metrics the economy is
doing very well and we're still in a
deficit position it's true that we don't
have quite the IPOs that might have been
occurring a few years ago and those will
come back I'm sure but for right now we
have a multi- uh year deficit projection
in spite of a very strong economy so
it's possible that we have structural
problems with the budget that will need
to be addressed in the coming years or
else we could be in a budget deficit
position for quite some time so right
now the budget uh continues to be an
issue and will for another week and a
half uh and tax uh policy is a big part
of the solution but another issue which
I know is near and dear to archit Tex is
the housing situation and what we are
seeing and I've seen uh announcements as
recently as this morning is an a major
epic struggle between State uh desire to
drive housing creation and
cities uh desire to retain local control
and regardless of where you fall on that
that that battle is Major and is playing
out right now a court recently held that
some of the state housing policy laws do
not apply to Charter cities and more
cities are considering becoming Charter
cities as a result of that we have about
500 cities in California and
approximately a hundred are Charter
cities but the ultimate question is
who's going to decide housing policy and
the legislature and Governor are
insistent that we have a state policy
and that locals will abide by it or be
penalized for failing to do so and
locals are fighting back and saying we
are the people closest to the voters we
have uh the constitutional right to
local control especially if we are a
charter City and that battle is playing
out at we speak and it is a fascinating
legal practical housing uh
battle so uh at midnight August
31st uh we will gavel down the two uh
the two-year 2023 2024 session you might
find it interesting that in years past
uh they literally used to stop the clock
in the uh chambers of the assembly and
Senate and pretend that it had not
become midnight so that they could
continue to do work uh however when
smartphones got developed and people
could take pictures with timestamps on
them they realized that they can't very
well call 4 a.m. uh 11:59 p.m. and so
now they actually gavel the session down
at midnight and we're done for the
twoyear uh
session what happens next of course the
governor gets uh uh o uh this year
September to sign or veto the perhaps
1,000 bills which will land on his desk
you might find it interesting that all
governors get an individualized
presentation on every single bill it's
not like there's a pile that he just
does by acclamation or consent he
actually gets a presentation and all
Governor have uh on each bill uh and
he'll sign perhaps 80 to 85% of them
vetos this year are likely to be over
issues of cost no surprise if if the
money isn't there and the bill cost
money it has a far higher likelihood of
being vetoed this year than in a year uh
of of uh surpluses of course that's
September he has until the end of
September to sign or veto these thousand
bills or so that he's going to get after
that the November general election uh
and what a general election it is going
to be here's what will not change
California will remain a deeply blue
Bluer Than uh Nikki's uh sweater uh far
Bluer Than That uh we will remain
approximately 2/3 to 3/4 Democrat in
both the assembly and
Senate uh we're not going to solve the
budget situation in the election we will
continue into that next next year we're
not going to solve the Ultimate answers
on housing and and that sort of thing uh
but we are going to start a brand new
session on the first Monday in
December but also on the ballot are a
dizzying array of initiatives and I'd
like to take just a moment to talk about
uh two
subjects first what will not appear on
the ballot well big business
associations had joined together and
qualified a measure on reforming the
private attorney general act or
paga uh on employment law if any of you
have had The Misfortune as business
people to be named in a paga employment
law suit uh you know what a daunting uh
reality that presents you with uh that
you could spend so much money defending
it uh you'll feel like you lost even if
you won uh today the governor and
legislative leaders announced that a
deal had been reached on paga to take
that off of the ballot our law now now
allows uh proponents to take their
measure off of the ballot if the
legislature acts to their satisfaction
that must be done by June 27th so next
week they have to have passed a bill to
reform the private attorney general act
whereupon the proponents will take their
Initiative off of the ballot and when
your sample ballot arrives it will not
be on there but that is a major change
in California law and speaking
editorially I think it's something that
will allow California to claim correctly
that their business climate has taken a
step for the better and I apologize for
being editorial but paga is a big deal
but a second deal that is critically
important and will touch Architects is
Taxation and there are three not one not
two but three separate initiatives on
taxation on the November ballot the
first would lower the vote threshold for
local tax and bonded indebtedness from
2third to
55% you'd be amazed how many measures at
the local level passed by or get a vote
of higher than 55 but less than 2third
so by lowering the vote threshold for
local tax and bonds you will cause more
to pass thereby creating more
infrastructure spending and that sort of
thing the second one though is put on by
the Cali Business Roundtable and it says
no the problem with taxes is that we
have this weird Prop 13 distinction
between General taxes and special taxes
we should raise all of the tax
thresholds to
2/3 and we should subject legislative
tax increases to popular vote it is a an
initiative of astonishing scope so while
the first initiative would lower the
threshold the second one would raise the
threshold ah but a third initiative is
coming and this is a devilishly creative
proposal it says any proposal to raise a
vote threshold for taxes must pass by
the threshold it proposes in other words
if you want to raise a vote threshold to
2/3 you have to pass the initiative by
2/3 so pity the voter who doesn't listen
to webinars like this who tries to
figure that out when their sample ballot
arrives but regardless of what happens
and one could be approved or two could
be approved or Lord help us if three are
approved it will all go into the courts
it will have to be sorted out but it
will have very very substantial impact
on local and State uh government and
therefore your profession with that
Scott and Nikki and Sarah I uh I think I
may have gone one minute over my 20
minute allotment for that I should be
severely censured if not
reprimanded uh but it is a pleasure
working with Scott and Nikki and the
whole organization as it has been now
for approximately 50 years
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