Kersten Communications

KC Fiscal Focus has produced a brief guide that is intended to help policy makers and community members search for how American Recovery and Reinvestment Act (ARRA) funding has been used in their community. 

Specifically, this guide provides instruction on how to search the internet for ARRA funds and projects by county, search for the largest fund recipients, and search by zip codes.

To search ARRA funded projects by county click here.  To search ARRA funding by zip code, Congressional district, top recipients, and job creation statistics click here.  

The federal government has created a user-friendly website that has a variety of state and national statistics.  To visit the federal ARRA website click here. 

The State of California has also created a website that allows users to track stimulus spending by issue area, among other things.  To visit, the state recovery website click here. 

 To learn more about how ARRA provides tax relief for business, infrastructure, and individuals click here.   

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A budget forum hosted by the Public Policy Institute of California in late January illustrated that the partisan divide over the California State budget is likely getting worse, as opposed to better, and that this year’s budget standoff promises to be at least as contentious as previous years if not more so. 

The event, titled “2010 Budget Debate,” held at the downtown Sheraton Hotel on January 28^th included a panel discussion of Republican and Democratic Legislative budget leaders, including Sen. Robert Dutton (R), vice chair of the Senate Budget Committee and future Republican minority leader, Assemblymember Jim Nielsen (R), vice chair of the Assembly Budget Committee, Sen. Denise Moreno Ducheny (D), chair of the Senate Budget Committee, and Assemblymember Noreen Evans (D), chair of the Assembly Budget Committee.  To view a tape of the event click here.    

But Democrat and Republican budget leaders appeared to reach a consensus on one issue—the deep partisan divide over the state’s structural budget gap would continue long into the future.  Towards the end of the debate when the partisan divide became more apparent, the panel was asked if the state’s structural budget gap would continue into the future–the entire panel agreed that it would but did not elaborate much. 

Republicans Advocate for Spending Cuts to Close Budget Gap, Criticize Governor for Not Making Enough Spending Cuts

“Some way, somehow, we have to get this thing to zero by cuts,” Sen. Dutton said.  Asm. Nielsen agreed adding that the Legislature should “rein in the excesses of government.”

Both Dutton and Nielsen called on the Governor to do more to help the economy by easing environmental regulations to hasten construction projects and promote growth in the private sector.

Republican leaders, Sen. Dutton and Asm. Nielsen, criticized the Governor for not going far enough in making cuts to close the budget gap.  They also criticized the Governor for supporting climate change and said it was preventing economic growth in the private sector. 

In early January the Governor released his 2010-11 budget proposal which proposes $8.5 billion in budget cuts, $4.5 billion in alternative funding and fund shifts, and $6.9 billion from the federal government to close the $20 billion budget gap projected for 2010-11.  The Governor described the cuts as “painful” and “difficult” but said he “would not raise taxes” to help close this year’s budget gap. 

Last year the budget approved by Legislature included both cuts and a series of temporary tax increases to close the budget gap, but Republicans have stepped up their anti-tax rhetoric this year, saying that additional tax increases are out of the question.

Democrats’ Oppose “All Cuts Budget”

Democratic lawmakers on the panel, Sen. Ducheny and Asm. Evans, described the Governor’s January budget proposal as an “all cuts budget” that serves to protect Republican tax cuts. 

Asm. Evans advocated for “a mixture of solutions” and that the Legislature should look at cuts, fees and tax increases as possible solutions because “recessions are temporary, but the elimination of programs is permanent,” alluding to the Governor’s proposed elimination of the CalWORKs, healthy families and In-Home Supportive Services programs.

Sen. Ducheny also questioned the Governor’s decision to unilaterally decrease state workers’ compensation by 5% by Executive Order S-01-10.  “We’ve taken down 25 restaurants here in Sacramento because of those furloughs,” Ducheny said, noting that she thought the furloughs could actually be costing the state money in lost revenues as opposed to saving money.  

Evans declared that her support for education was “the highest priority, next to jobs”, while Sen. Ducheny insisted that jobs and the economy were important but stressed that investing in education was the way to improve California’s economy.

Rocky Road Ahead

The Legislature is currently in an emergency special session on the budget and has until late February to come up with a proposal for making $6.6 billion in reductions in the current budget year to help close the $20 billion budget gap projected for 2010-11. 

The Legislative budget battle will then resume in May 2010 with the release of the Governor’s May revise.    

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A recent public opinion poll by the Public Policy Institute of California found that the vast majority of the public lacks a very basic understanding of how the State of California raises and spends its money, however, 72% of Californians believe that they—not their political leaders—should make reform decisions at the ballot box.

To illustrate, only 16% of California residents correctly identified K-12 education as representing the area of the most state spending and 49% of all residents said the most money goes to prisons and corrections—despite the fact that prisons and corrections represents a mere 10% of the state budget, while K-12 education composes just over 40%. 

Only 28% of Californians correctly identified the personal income tax as the area representing the most revenue in the state budget, while 30% named the sales tax.  In the 2009-10 budget, the state’s personal income tax accounted for 55% of the state’s general fund revenues, followed by the sales tax at 31% and corporate tax at 10%. 

Perhaps the most shocking finding of the poll is that 72% of the public, despite their lack of a basic understanding of budget and tax issues, the public believes that they should make reform decisions at the ballot box, not the Governor and Legislature. 

The poll asked:  “And when it comes to long-term issues of reforming the state budget process, both in terms of changing the way the state taxes and spends money, which approach do you most prefer:  the Governor and Legislature should pass new laws; or the California voters should decide at the ballot box?”  Some 72% of all adults said California voters should decide at the ballot box, while only 22% said the Governor and Legislature should pass laws. 

Public’s Misunderstanding of Budget and Tax Issues Leads to Flawed Perception of Political Discourse on These Issues

The public’s lack of an understanding of these issues inevitably leads to a flawed perception of the political discourse on these issues in the media and in other public forums.  One can only speculate about the depth of the public’s lack of knowledge on other more complicated budget issues such as the causes of Legislative gridlock and impact of the 2/3 vote requirement in the Legislature to pass a budget and close even the most egregious tax loopholes.

Furthermore, when asked “how would you prefer to deal with the state’s budget gap—mostly through spending cuts, mostly through tax increases, through a mix of spending cuts and tax increases, or do you think that it is okay for the state to borrow money and run a budget deficit?”  Some 41% of adults said through a mix of spending cuts and tax increases, while 37% said mostly spending cuts, 9% said mostly tax increases and only 6% said that it was okay to borrow money and run a deficit. 

However, in two separate questions asked later 66% of adults said they would pay higher taxes for K-12 education and 82% of adults said they opposed cutting K-12 education.  If more California voters knew education composed nearly half of all state spending, as opposed to prisons, they would likely be more adverse to severe spending cuts as an option, and likely prefer for the Legislature to examine tax loophole closures or other tax increases to fund education. 

If voters knew more about the budget process it is likely that more than 51% of voters polled by PPIC would believe replacing the 2/3 vote requirement with a 55% majority vote is a good idea.  Increased education on tax issues could also increase the 13% of adults who believe the state and local tax system is fine the way it is. 

Political Leaders Need to Step Up to the Challenge  

California voters will not be likely to make responsible, informed decisions on future budget and tax-related proposals, and the leaders who advocate for them, until they acquire a basic understanding of state tax and budget issues. 

Reform advocates, including the California Teachers’ Association and Repair California, have filed a series of budget and tax ballot measures–of which at least a handful are likely to appear on the November 2010 ballot—but any successful public education campaign will take years as opposed to months to achieve significant results.      

Political leaders and advocates for reform must improve the public’s education of these issues to have any real chance of achieving meaningful reform at the ballot box—the most likely place for reform to occur given the gridlock in the Legislature.

Governor Sets Bad Example for Political Leaders

Governor Arnold Schwarzenegger has continued to obscure the magnitude of the state’s budget crisis proposing a misleading and flawed budget trigger in his January budget proposal, while calling on the federal government to help close the state’s $20 billion budget gap by providing $7 billion in additional federal spending for California.     

The Governor sets a bad example for the state’s political leaders by saying it is OK to distort the state’s budget crisis by shifting the focus to what the federal government can do, as opposed to accepting responsibility for the need to balance the state budget through realistic means.  The Governor’s actions do not honestly represent the state’s budget situation and the tough choices needed to close the $20 billion budget gap for 2010-11. 

Political leaders need to stop playing political games with the budget and instead begin a true and honest education of the public on budget issues.  Only then will voters truly understand the need for budget and tax reform and be able to make informed decisions among potential reform options.  

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To help cope with the state’s impending cash crunch, the California Department of Finance (DOF) has proposed controversial trailer bill language that would give the DOF complete discretion to defer payments to state programs, vendors and taxpayers including payments to California taxpayers for tax refunds, the University of California, Medi-Cal payments to providers, SSI/SSP welfare payments, CalWORKs welfare payments, K-12 education and more. 

The trailer bill language was submitted to Legislative Counsel last week and presented to lawmakers in an Assembly Budget Committee hearing on February 3, 2010.  DOF representatives said they needed the authority to act quickly to realize cost savings. 

“We think it’s way too broad,” said Legislative Analyst Mac Taylor, who encouraged the Legislature to narrow the authority granted to the DOF and make it more discrete. 

Taylor said giving the DOF such authority would create a problem for K-12 schools and other state programs that depend on state funding by not allowing them to plan ahead.  “What are the schools supposed to do if they know the Dept. of Finance can take money at any time?” Taylor said.    

Taylor said he thought the Legislature should make choices about intra-year payment deferals to meet cash obligations and grant specific authority under certain windows of time. 

Assembly Budget Committee chair Noreen Evans (D) was also skeptical.  She asked if the DOF had ever been given this type of authority and DOF representatives said no.  Evans described it as a “historic request” and said she was “skeptical” because it was essentially a “blank check.”  Evans was not comfortable with the DOF having the authority to decide which programs to not fund. 

KC has requested the trailer bill language but it is not clear if it has been made public yet or not.

Yesterday Senate President Pro Tem Darrell Steinberg (D) and the Senate Democratic Caucus introduced a 27 bill package to help create an estimated 140,000 jobs for Californians.  Below is a summary of the jobs package released yesterday by the Pro Tem’s press office.  Click here for a summary of the fact sheets for each bill.  For additional information visit the website for the package, titled “Agenda 2010″, by clicking here.   

SENATE DEMOCRATS INTRODUCE JOBS AGENDA  (Tuesday February 9, 2010)

(SACRAMENTO)– Senate President pro Tem Darrell Steinberg (D-Sacramento) and the Senate Democratic Caucus have introduced a 27 bill package to help jumpstart our stalled economy by creating 140,000 jobs for Californians.   

This comprehensive bill package invests existing state and federal funds for targeted projects, expands jobs in the new economy, prepares Californians for jobs in growth industries, and provides working families with sorely needed relief. 

The bill package proposes to create 140,000 jobs without raising taxes or waiving any environmental, consumer, or workplace protection laws.  Further, all of the bills need only a majority vote for approval. 

The California Research Bureau has concluded that a jobs package which creates 100,000 jobs creates $6.7 billion in economic activity per year, saves the General Fund approximately $2.3 billion in increased revenue and avoided costs, and results in a net increase in employment of approximately 300,000 jobs- reducing unemployment by 275,000.  

“I have been through enough budgets to know that the only way to increase and sustain the tax base is to create high wage jobs,” Steinberg said.  “Of course, the entire country is talking about job creation, but its importance can’t be overstated in California.  There is no more important barometer of economic struggle and family suffering than a 12.4 percent unemployment rate.  Agenda 2010 represents a real, nonpartisan, empirically supported effort to help create jobs for Californians.”  

Agenda 2010 Overview

1.   Investment of Public Funds to Create Jobs;
2.   Expansion of Jobs in the New Economy;
3.   Prepare California’s Workforce
4.   Value California’s Working Families

I –INVESTING PUBLIC FUNDS TO CREATE JOBS Agenda 2010 proposes quickly investing federal funds and already approved state bond funds wisely to expand in-state job creation.  If the U.S. Senate passes the pending “Jobs for Main Street Act of 2010,” the total job creation estimate for this package climbs to 200,000. 

Put Federal Funds to Use to Get Californians back to work: Senate Democrats have introduced legislation to ensure the state can invest federal funds efficiently and quickly to create jobs in California.  The bills identify the state agencies responsible for administering federal funds and include accountability and reporting provisions to ensure the funds are spent efficiently.  

• SB 965 (DeSaulnier): Authorizes the High Speed Rail Authority (HSRA) to receive and expend federal money it receives to further the development of High Speed Rail in California.  Creates 50,625 jobs.  
• SBX8 33/SB 205 (Hancock): Authorizes the state Superintendent of Public Instruction (SPI) to administer $773 million in federal Qualified School Construction Bond funds available to California schools that would expedite public school construction, rehabilitation and repair projects to improve schools. Creates 11,400 jobs.
• SBX8 27/SB958 (Lowenthal): Designates the Multifamily Housing Program at the Department of Housing and Community Development to distribute the anticipated $193 million in federal funds received from the National Housing Trust Fund to build affordable housing in California.  (Requires passage of federal jobs bill before state legislation can be enacted.) Creates 2,965 jobs.          
• SBX8 36 (Correa): Distributes as much as $3.6 billion in federal transportation funds between state and local agencies for shovel ready projects for improvements to highways, streets and roads, and public transit systems from the “Jobs For Main Street Act of 2010,” which passed the U.S. House of Representatives and is now pending in the U.S. Senate. (Requires passage of federal jobs bill before state legislation can be enacted.)  Creates 54,000 jobs.                

Appropriate Approved State Bond Funds for Innovative Programs: The package targets unspent state bond funds to innovative new programs that create jobs, improve infrastructure or make California more sustainable. 

• SB 964 (Alquist): Appropriate $25 million in High-Speed Rail bond funds (Proposition 1A) to finance a the first phase of a workforce training program jointly managed by the rail authority and the state’s community colleges to construct maintain and operate a high-speed rail system in California.  The program will train 5,000 Californians for jobs.
• SBX8 35 (Lowenthal/Hancock): Redirect $80 million in Proposition 1D bond funds stalled in the bureaucracy to expedite shovel-ready “green school” energy efficiency projects that create jobs and save energy.  Creates 1,680 jobs.
  SBX8 28 (Yee): Accelerates up to $105 million in Proposition 1C housing bond funds by redirecting funds from ineffective programs to those that can fund shovel-ready projects to create jobs and build affordable housing and parks.  Creates 1,590 jobs.
• Special Session Budget Bill: Fix the Governor’s proposed “Gas Tax Swap” to maintain the state’s investment in transportation infrastructure, continue a state commitment to public transit, provide a growing source of transportation funding and maintain thousands of transportation related jobs, and make debt service payments on transportation bonds.  This will preserve about $1.2 billion for transportation infrastructure saving some 18,000 jobs. 

II – EXPANSION OF JOBS IN THE NEW ECONOMY
The package seeks to expand on California’s successful market for innovative jobs in energy efficiency and renewable projects.  To continue the state’s economic gains in the new economy, Agenda 2010 includes the following bills:

• SB 722 (Simitian/Padilla): Enacts a workable 33% Renewable Portfolio Standard in California to promote in-state job development and renewable energy resources.  Creates 20,000 jobs.
• SBX8 34 (Padilla/Pavley): Expedite planning, permitting, and approval of large scale renewable energy projects in California.  It will give priority to projects that can quickly create jobs and meet federal ARRA incentives within the next year including at least eleven projects awaiting action by state energy agencies.    
• SBX8 26 (Pavley): Creates a state program to standardize Property Assessed Clean Energy (PACE) programs to lower financing cost, enhance investor receptivity of the PACE bonds, and make PACE improvements more attractive to home and business owners.  Authorizes a $50 million reserve fund available as credit enhancements for qualified PACE financing programs to further lower financing costs.  Creates 10,500 jobs.
• SBX8 31 (Cedillo): Move $20 million in unspent ARRA funds out of the bureaucracy at the California Energy Commission (CEC) and to the California Community Colleges for energy efficiency projects that reduce energy consumption, increase skills training opportunities and increase the sustainability of community college campuses. Creates 488 jobs.   
• SB 675 (Steinberg): The bill would use existing Public Interest Energy Research (PIER) funds for the construction or reconfiguring facilities or schools for career technical education that prepares students for employment related to clean technology, renewable energy or energy efficiency.  Creates 7,500 jobs.
  Three bills to appropriate $60 million in available state funds for job creation in environmental restoration, increased recycling and litter reduction, water supply and flood protection, and clean air.  Creates 900 jobs.
• SBX8 30 (Oropeza): Appropriate $20 million from Proposition 84 for immediate job creation for local community conservation corps in urban inner-city areas. 
• SB 991 (Wolk): Appropriate $20 million from Proposition 1E to commence immediate repairs of levees and other flood control investments in high-risk flood areas of California. 
• SBX8 37 (Cedillo): Appropriate $20 million from the Carl Moyer Program, the Air Quality Improvement Program (AQIP), and Proposition 1B to provide immediate jobs and incentives to clean up diesel pollution from trucks adjacent to ports and goods movement facilities. 
• SB TBA (Leno): Expand the “Work Share” program at the Employee Development Department (EDD) so more employees can maintain employment and receive partial UI benefits.  Requires a more aggressive outreach plan.
• SB 967 (Correa/DeSaulnier): Reward companies that hire California workers by providing a bid preference or contract credit for companies committing to employ Californians on contracts with the state.
• SB 959 (Ducheny): One-Stop Shop to Permit Projects: Re-establish Permit Assistance Centers at Cal-EPA to provide businesses with assistance in getting projects permitted, sited and approved for development. 
• SBX8 32 (Wolk): Conform California tax law to federal law to, among other things, ensure renewable energy project developers can access and use ARRA funds available for projects in California that provide some 7,600 jobs, and ensure homeowners who sell their homes in a “short sale” do not have to count as income the amount of money the banks “forgive” on outstanding loans.   

III – PREPARING CALIFORNIA’S WORKFORCE
Senate Democrats are committed to maximizing opportunities for Californians to acquire the necessary job skills to gain and keep employment with focus on jobs in high-growth, high-wage sectors of the economy.   

• SB 957 (Price): Refocus Cal Grant C awards, which are used to pursue short-term occupational or technical training, to students training in high-need, high-growth or high-wage industries in California.  Prepares 8,000 students for high-growth jobs.
• SB 956 (Romero): Redirect a portion of federal workforce training funds to expand training to the California Paraprofessional Teacher Training Program (PTTP).  The primary purpose is to recruit school paraprofessionals (commonly referred to as classroom aides) to participate in local career ladders that enable them to become certificated classroom teachers in public schools.  
• SB 974 (Steinberg): Swap out inefficient Enterprise Zone tax credits with new tax credits to encourage California businesses to invest resources, time and expertise in middle and high school “career pathways” to train students for their future careers
• SB 968 (Negrete-McLeod): Prohibit EDD from eliminating an individual’s UI benefits solely because that individual is pursuing additional education or training at a community college or four-year institution.   

IV – VALUE CALIFORNIA’S WORKING FAMILIES
Making sure working families are fairly compensated for their jobs, can keep shelter over their heads, and reasonably plan to afford their children’s college education will help struggling Californians get through this economic downturn.   

• SBX8 29 (Steinberg): Restructure the current furlough policy to exempt special fund agencies.
• SBX8 38 (Corbett): Establishes a “Homeowner’s Bill of Rights” to better protect distressed homeowners and ensure those homeowners receive a decision on their loan modification application before their financial institution can foreclose on their homes. 
• SB 969 (Florez): Rationalize student fee structure at UC, CSU, and Community Colleges, establish predictable fee level so families can plan to pay for college education  by setting a baseline fee and capping the extent to which student fees could rise in any one year to no more than 5%.

For more information contact Alicia Trost, (916) 651-4188.

The California Teachers Association (CTA) has given $500,000 to a campaign committee to support the “Repeal Corporate Tax Loopholes Act”–an initiative filed by CTA that would repeal the estimated $2.5 billion in corporate tax loopholes that were passed by the Legislature as part of the 2008 and 2009 budget deals.  The contribution was reported today.   

The word on the street is that CTA has already started collecting signatures to qualify the measure for the November 2010 ballot. 

To view the initiaitve language click here. 

Below is a statement issued by CTA on February 5, 2010 regarding their support for the measure:

By unanimous vote, the top governing body of the 325,000-member California Teachers Association has decided to support two measures for the November ballot that would repeal corporate tax breaks passed by the Legislature in last year’s budget agreement and require corporate executives to get stockholder approval before spending money on politics.

The CTA State Council of Education, comprised of nearly 800 democratically elected teacher delegates, met in Los Angeles and also voted Sunday to oppose three ballot measures in circulation. Teachers oppose the “paycheck deception” measures called the Public Employee Paycheck Protection Act and the Public Employee Payroll Deduction Act for again trying to silence the voices of union members – measures that California voters have already rejected twice, in 2005 and 1998. CTA also opposes the New Public Employees Benefits Reform Act for its attacks on the secure retirements of teachers, firefighters, police officers and other public employees, which will make it harder to recruit and retain quality educators in our schools.

CTA President David A. Sanchez said teachers are supporting the Repeal Corporate Tax Loopholes Act because in these tough economic times everybody must be paying their fair share, and when big corporations are paying less, middle class families are paying more. Lawmakers approved the $2 billion in tax breaks for large corporations and oil companies without any requirements for these companies to create new jobs. The tax breaks were negotiated in secret without any public hearings.

“The state has cut more than $17 billion from public education over the last two years, and the governor wants to cut another $2.5 billion in his proposed budget,” Sanchez said. “Our classrooms are battered by cuts. Class sizes have increased and vital student programs have been eliminated. Now is not the time to be handing out tax breaks to a small number of large corporations – everybody must be paying their fair share.”

CTA also now supports the Corporate Political Accountability Act, which would require companies to get stockholder approval on annual political spending budgets.

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The 325,000-member CTA is affiliated with the 3.2 million-member National Education Association.

Kersten Communications introduces KC Blog Blast–a brand new email subscription that provides subscribers with up to the minute email blasts when new KC blogs or publications are released.  KC Blog Blast focuses on important state fiscal issues but also includes commentary on state and federal issues as well as links to important news events and resources.  To view recent posts and archives click here for our blog page.

To subscribe to KC Blog Blast click here. 

The California Institute for Federal Policy Research has prepared a summary report with some of the implications of the  President’s 2011 Budget Proposal that is available by clicking here.

On Monday, February 1, 2010, President Barack Obama released the Administration’s Budget Proposal for Fiscal Year 2011, which begins October 1, 2010.  

The Budget proposes FY 2011 spending of $3.834 trillion, with discretionary spending of $1.415 trillion. The President has proposed freezing discretionary spending for three years, with the exception of spending for the military, homeland security, the State Department and Veterans Affairs.

The budget documents outline the Administration’s recommendations for discretionary and mandatory spending, as well as its revenue proposals. Developing a reliable analysis of any budget is difficult.  (Source:  California Institute for Federal Policy Research)

State Tax Notes correspondent Lenny Goldberg reports that a measure that will legalize marijuana in California and permit the state and localities to tax it has received enough signatures to make it likely to qualify for the November, 2010 ballot.  The measure would eliminate criminal penalties for personal use, and permit cities and counties to regulate use and sale of marijuana.  It also would permit the state and localities to tax marijuana. 

According to the ballot summary, the measure will bring “unknown but potentially major tax, fee and benefit assessment revenues to state and local government relating to the production and sale of marijuana products.”   Recent estimates by the Board of Equalization approximated $1.4 billion in potential revenue.  The summary also notes savings of tens of millions of dollars relative to costs of incarceration and enforcement.  The signature drive was funded by marijuana entrepreneur Richard Lee. 

The website in support of the initiative is available here:  http://www.taxcannabis.org/. To view the initiative click here. 

BallotPedia issued the following report:   

A California Marijuana Legalization Initiative (09-0024), an initiated state statute, is likely to be on the November 2, 2010 ballot in California. Supporters turned in over 700,000 qualifying signatures to election authorities on January 28, 2010, versus a requirement of 433,971 signatures.^[1]

Richard Lee, who organized and helped fund the effort to put the question on the ballot, describes the goal of the initiative as “…a reverse tax revolt – no taxation without legalization.”^[2]

Supporters of legalization are focusing on the benefits they say would flow to the state from taxing marijuana; when marijuana is illegal, it is not taxed. If it was legal, the government would be able to collect the state’s sales tax on it. This would add money to California’s coffers during a time that the budget is out-of-balance.^[3]

The domestically grown marijuana crop in California is worth an estimated $14 billion a year, making it an attractive target for taxation in a state with an unstable economy and budget deficit in the tens of billions.^[4] According to the state’s Board of Equalization study, the state might generate $1.3 billion in taxes if marijuana is legal and taxed.^[5]

In 2008, the state of California made about 78,500 arrests on felony and misdemeanor charges related to marijuana.^[6]

Three different groups submitted language to the California Attorney General for ballot titles for marijuana legalization ballot initiatives, but Richard Lee’s initiative is almost certainly the only measure that will qualify for the ballot.^[7] Meanwhile, state legislator Tom Ammiano has introduced legislation in the 2010 session of the California State Legislature that would legalize, tax and regulate marijuana in California in much the way that the state controls and taxes alcohol.^[8]

Tax Cannabis 2010 is the official advocacy group for the 09-0024 marijuana legalization initiative. Richard Lee, the executive director of Oaksterdam University helped start Tax Cannabis 2010. Oaksterdam University is “a major medical marijuana dispensary and advocacy group” based in Oakland.^[3][10]

“Control Marijuana”, sponsored by the Marijuana Policy Project, also supports legalizing and taxing marijuana.^[11]

State Assemblyman Tom Ammiano introduced a bill in the 2009 session of the California State Assembly to legalize, tax and regulate marijuana.

Retired Orange County Judge Jim Gray, a Libertarian, supports legalizing marijuana.^[12]

State Tax Notes correspondent Lenny Goldberg reports that a measure to place income from offshore tax havens in the water’s edge passed the Assembly on Thursday, January 28, by a margin of 42-28 (see Tax State Tax Notes Story that follows).  The measure, which would raise $120 million, could be passed by majority instead of the 2/3 required for a tax increase because it contained an offsetting tax cut which would lower the sales tax on college textbooks sold in on-campus bookstores.

The bill would require that income attributable to tax havens, as defined by the GAO and subsequently by the U.S. Treasury, would count as domestic income and therefore be apportionable to California.  Multi-national taxpayers can currently elect to apportion either worldwide or domestic income to California, but by making a “water’s-edge” election, only income covered by Subpart F, to which California conforms, is counted as part of domestic income.  AB 1178 would redefine the water’s edge to include all income reported in tax havens.  This income would be discoverable to the FTB by audit, if not it is not reported.

The bill would exempt legitimate activity in tax havens, based on economic presence and the presence of factors in those countries, and would allow corporations to appeal to the FTB with regard to the legitimacy of their economic presence.  It is modeled after statutes currently in place in Montana, Alaska, and West Virginia.  It is expected to raise approximately $120 million, and will sunset in 2015. 

The offsetting revenue to make the bill revenue-neutral would provide a sales tax exemption for textbooks purchased in bookstores on campuses of the University of California, California State Universities, and community colleges.  That will cost a roughly equal amount of revenue in the 4-year period, and the bill was sunsetted to make sure that the revenue projections are correct and the result will in fact be revenue neutral.

In floor debate, Democrats argued that this bill only affected the very small number of bad actors using tax havens, not the 99% of businesses paying their taxes and not using tax havens.  They pointed to the recent election in Oregon, noting that voters want businesses to pay their fair share of taxes.  They cited federal information that one building in the Cayman Islands included over 18,000 businesses registered there.  Republicans called the bill anti-business, argued that this will drive business out of the state, and that it is a runaround of the 2/3 vote requirement for increasing taxes. 

 –Lenny Goldberg, State Tax Notes