Legislators’ Job Creators Efforts? Not So Good Yet…

The legislative season is now over.  You are safe for a while before California legislators reconvene to “fix” your lives, businesses, and wallets.

The good news: Governor Brown formalized his Office of Business and Economic Development into statue. GO ED was established in April 2010 via executive order but this action ensures that California now has a permanent and highly visible single point of contact for economic development and job creation efforts. Governor Brown also signed into law a bill that, among other things, requires a standard economic impact analysis for major regulations at the beginning of the regulatory process.

The bad news: Governor Brown vetoed a requirement that the state begin “performance-based budgeting,” forcing each state agency to provide lawmakers its goals, targeted outcomes and performance data. This bill was strongly supported by the business community.

Survey after survey ranks California at the bottom for its business environment in part due to its aggressive and hostile regulatory environment. While much more needs to be done, this bill is a signal that the state is ready to work on this issue.

SB 617 (Calderon) will create more transparent rulemaking, improve oversight of agencies and encourage policymakers to implement the most cost-effective regulatory option. Currently, any evaluation of a proposed regulation’s fiscal impact comes at the end of the process and there is no uniform standard of analysis, if it is done at all. With SB 617 in place, agencies will be held to new standards that require a robust economic analysis of proposed major regulations.

One of OCBC’s advocacy pillars for economic growth has been to urge lawmakers to support a process that evaluates the impact of proposed regulations on the private sector similar to what is done for bills that impact the state budget.

As for budgeting, the Governor saw fit to veto SB 508 (Wolk), which would have required corporate and individual tax breaks enacted after January 1 to automatically end in ten years. There is no converse bill requiring taxes to be sunset in ten years. The Governor’s veto message stated, “While I agree that we should consider sunset clauses for personal income and corporate tax credits, one size does not fit all.” The Governor exhibited common sense by further stating, “The legislature should examine all its bills to determine how long they should exist or, indeed, whether they should exist at all.”

Unfortunately, the Governor also saw fit to veto SB 14, which would have required the state to begin “performance-based budgeting,” forcing each state department to provide lawmakers its goals, targeted outcomes and performance data. Despite being strongly supported by the business community, it is hard to argue with the logic of Governor Brown’s veto statement in which he suggested the state examine whether certain departments or programs should exist at all before requiring them to develop performance metrics. However, the Governor did say he will issue an executive order within weeks using some of the ideas in the bill.

Perhaps the most troubling action the Governor took was in signing legislation restricting California ballot initiatives to November elections. The bill, passed by legislative Democrats in the final hours of the legislative session, could help labor unions defeat a pending measure to, in part, make it harder for unions to raise campaign funds from members. The measure was expected to qualify for the June 2012 ballot, when overall turnout is likely to be far lower than in November, but proportionately higher for Republicans.

In his signing message, the Governor stated that the “idea of direct democracy is to involve as many voters as possible.” However, this action could have just as easily been applied to future elections, rather than to measures that are currently in the qualification phase. A request for title and summary for a referendum on the bill has already been submitted. The bill would not affect two initiatives that have already qualified for the June 2012 ballot, one related to term limits and the other to tobacco taxes.

The bill is also controversial because it would delay until 2014 a “rainy-day fund” measure approved as part of a budget agreement last year. Republicans characterized the legislation as a take-back by Democrats. Brown said the state, in its financial crisis, cannot afford to divert money from programs to a reserve fund.

Restricting measures to November could dramatically alter the initiative process in California. Though initiatives will be decided by significantly more voters, the number of measures confronting them may become overwhelming. If previous elections are an indication, when there are too many initiatives on one ballot, the public tends to vote “no” on everything.

Brown allowed ballot initiatives to go on primary ballots four decades ago, when he was Secretary of State, and he sponsored a political reform initiative on the ballot in June 1974, the year he first ran for Governor.

Ultimately, OCBC advocated on over 60 bills throughout the session. The legislative scorecard and detail of the bills tracked, including SQUIRREL legislation will be available on the OCBC website within the next week. For more information contact Kate Klimow, Vice President of Government Affairs.

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