Sacramento Summary Q1 2020

By Michael J. Arnold & Michael Belote, Esq.
Legislative Advocates

What a Difference a Month Makes

There is evidence that at the highest levels of government, some planning has occurred in the past for potential epidemics. At the same time, there is evidence that both the state and federal systems partially reduced funding for their preparedness units, at precisely the wrong time. There is no level of planning, however, for a true worldwide pandemic. California has fared better than much of the world, at least thus far, but we are working overtime to catch up on testing, hospital beds, and the like.

There also is no civics textbook on how to run governments in time of pandemic. Far from a student’s understanding of our three-branch system of government, California is now running on about a branch and a half. The legislature has been on joint recess since March 19, and the state courts are mostly closed, so Governor Newsom is in charge. The Governor has been receiving quite positive reviews from members of both parties, but it will soon be necessary for the legislature to resume its oversight and budget roles. Here is a brief rundown of where things stand as of the writing of this column.

Legislature: By joint action, the California Assembly and Senate are in recess until Monday, May 4. Realistically, that date is probably about 50-50, since a return to Sacramento seems unlikely if the state remains under a stay at home order. Interestingly, the two houses in our bicameral legislature are taking slightly different approaches to the recess. The Senate is continuing to amend bills through the recess for example, while the Assembly is not. Senate consultants are analyzing all bills as if they will be heard in the normal course upon a return to Sacramento, while the Assembly committees have been more open about jettisoning non-essential bills for the year. And the Senate seems more open to potentially pushing the envelope on remote hearings and voting, while the Assembly has pretty much concluded that such actions are not permitted under the state constitution.

At the end of the day, it seems quite clear that 2020 will not be “business as usual” in Sacramento, and the odds of a truncated session obviously increase the longer the session is in recess. Members are quietly being told to reduce their bill packages by perhaps 75-80%, taking the total from around 3000 bills to potentially 600-700. The best guess is that only bills dealing with COVID, other urgent matters, expiring sunset dates, and perhaps truly noncontroversial items will be considered, with everything else put off until next year. It will be interesting to see how if bills dealing with AB 5/Dynamex will be considered; these issues are very controversial and both sides of the independent contractor fights are arguing that COVID proves the validity of their positions.

Budget: There really are only two deadlines on the legislature imposed by the state constitution: adopting a balanced budget by June 15, and adjourning the two-year session by midnight, August 31 of even-numbered years. Every other deadline on the legislature is self-imposed, and may be modified or waived by the Senate and Assembly. Adoption of a state budget for fiscal year 2020-2021 is going to be particularly daunting this year. The Governor has indicated already that the proposed budget he released in January, which was very ambitious, is now “inoperable.” Typically the Governor releases a “May Revise” to the January document to reflect tax receipts from April. With the tax filing deadline extended to July 15, however, the state will not have accurate revenue information until a month after the June 15 deadline. What has been clear in Sacramento was acknowledged recently by the Assembly Budget Committee: the legislature will have to adopt some form of pro-forma budget in June based upon this year’s spending plan, and then adjust in August when revenue figures are in. And because state revenue tends to lag the economy, and because California is dangerously dependent upon capital gains taxes, it will put enormous pressure on not just the 2020-2021 budge, but at least the next one as well.

An issue of great significance to CMA is a proposed trailer bill creating a state level-CFPB in California, housed within the Department of Business Oversight, which would be renamed the Department of Financial Protection and Innovation. The 34-page draft of the proposed trailer bill makes clear that virtually all providers of financial products and services would be covered by the new program, even if the person or entity already possesses a state license, such as a real estate broker. CMA has been involved with a host of meetings in the Capitol on this proposal. It is unclear at this point whether the Newsom administration will continue to
pursue this proposal when the legislature returns.

Initiatives: Not surprisingly, virtually all signature-gathering efforts ceased upon the state and local stay at home orders. It now appears that unless sufficient signatures were collected prior to the orders, the proposed initiatives are dead, at least for 2020. Signatures submitted after the deadline for 2020 could still qualify an initiative for 2022.

With regard to the “split roll” proposal, the first version submitted by proponents has already qualified for the November ballot, and recently proponents submitted signatures for a second version which they believe has a better chance of passage. Presumably the first version will be withdrawn from the ballot, but it certainly appears likely that at least one split roll initiative will be placed before voters in November.

As to the proposed initiative to modify the California Consumer Privacy Act (CCPA), it is unclear presently how many signatures have been gathered. With little time left to gather signatures, and a statewide stay at home order in place, this proposal may not “make the cut” for 2020. Your CMA staff will continue to keenly monitor public policy developments during these difficult times and will keep the CMA Board and CMA membership closely apprised.