in the KNOW

June 16, 2017

State Capitol

State Capitol

Legislature Passes the Biggest State Budget in History

On June 15, the California State Legislature approved a $125 billion general fund 2017-2018 state budget, which is the largest budget spending plan in the history of the state. When special funds, bond funds and other funds are included, the budget soars to over $180 billion. The budget increases spending on social services and education and expands the earned income tax credit for low-wage workers, among other efforts. The budget, and its accompanying “trailer bills” that implement specific changes to state law, are now pending on Governor Jerry Brown’s desk. Upon the governor’s signature, the budget takes effect on July 1.

Budget Takes Away Much of the Board of Equalization’s Authority
Major changes are on the way for the Board of Equalization (BOE). The changes, added to the budget this week, will be a major overhaul of the BOE coming on the heels of an audit revealing problems with various practices at the BOE.

The budget moves much of the BOE’s responsibilities into two new state bureaucracies that must be created, the Department of Tax and Fee Administration and the Office of Tax Appeal. Significantly, the overhaul removes the BOE’s authority over tax appeals relating to income, sales and other taxes and fees. A panel of judges will hear tax appeals, rather than the BOE. In addition, responsibility over the application of tax laws will be moved to a new bureaucracy operated by governmental appointees, rather than elected officials. Ag Council joined with many others to oppose this major change over concerns that the new provisions undermine existing taxpayer protections.

As background, the BOE administers tax and fee programs in the areas of sales and use taxes, property taxes, and special taxes, as well as the tax appellate program. The BOE collects one-third of the state’s revenue.

The governor is expected to sign the budget and its accompanying trailer measures soon.

Democrats Change Election Rules to Impact the Outcome of a Recall Effort
The budget contains a controversial provision written by Democrat legislators to change election rules to make it more difficult to recall elected officials. The provision passed the Senate and Assembly as part of the state budget package on June 15. It was written in an effort to affect the outcome of a recall effort against Senator Josh Newman (D-Fullerton). If Senator Newman loses the race, Democrats would no longer have a two-thirds supermajority in the State Senate.

In April, Senator Newman voted for SB 1, the transportation infrastructure measure that will result in an increase in the gas tax for Californians. After the SB 1 vote, a recall effort against him was launched. If recalled, it was widely anticipated that Senator Newman would face a difficult challenge since he won the 2016 election by a mere 2,498 votes.

The change to voting rules will likely add months to the timeline to certify a recall election. In the case of the recall against Senator Newman, the legislation could move his recall to June 2018 when competitive primaries for governor and other seats will boost Democratic turnout.

Specifically, the change to recall elections allows a person who signed a recall petition to have the opportunity to ask that their name be rescinded from the recall petition. If requested, the names would have to be removed and the signature tallies would be recounted to ensure a sufficient number of verified signatures were obtained to initiate a recall election. If enough verified signatures are obtained, the change requires the Department of Finance to estimate the costs of the recall election if held as a special election or as part of the next regularly scheduled election. The signatures may not be certified until the Joint Legislative Budget Committee has 30 days to review and comment on the Department of Finance’s cost estimate.

The BOE changes and the recall election provisions were added to the budget package three days prior to passage of the budget. The budget package is now pending on the governor’s desk where he is expected to sign it.

Discussions Continue on Cap and Trade Program Extension

Governor Brown supports extending the cap and trade program by a two-thirds vote in the Legislature. At this time, the governor and his staff are actively working to negotiate a cap and trade package with various stakeholders, including Ag Council, in order to attain a two-thirds vote. Ag Council has members participating in the cap and trade program, and we are engaged in the legislative discussions to help seek the best possible outcome for our members.

Since the cap and trade extension is very important to the governor, it is widely anticipated that legislative leaders will move forward with legislation once a deal is struck to reauthorize cap and trade.

Under current law, the Air Resources Board (ARB) must reduce statewide emissions of greenhouse gases to 40 percent below 1990 levels by 2030. Existing law does not extend the cap and trade program beyond 2020, so without cap and trade as the market-based compliance mechanism, ARB has unconstrained authority to reduce emissions. This is why Ag Council is at the table in the cap and trade negotiations on behalf of our members, and we will continue to keep members updated regarding the discussions.

Ag Council Testifies on New Bovine General Order

On June 8, Ag Council testified before the Central Valley Regional Water Quality Control Board (the Board) on the proposed Waste Discharge Requirements General Order for Confined Bovine Feeding Operations (Bovine Order).

The Bovine Order would impose conditions to protect water quality and applies to commercial operations having six or more animals on site. The Board has made it clear they do not intend to regulate educational projects related to secondary schools, FFA, 4H programs, and similar endeavors where education, not commercial profit, is the primary goal–even if the animals are later auctioned at a fair.

The Bovine Order was adopted and includes the latest revisions requested by industry stakeholders. While agriculture did not get everything we asked for, the final Bovine Order as adopted is improved in many areas. The Board agreed to revise and lengthen the compliance timeline and to work with industry stakeholders to develop compliance forms that are standardized and user-friendly. These changes, along with others, will offer greater flexibility and will provide a higher chance of success and compliance.

If you have any questions, please contact Rachael O’Brien at ph. (916) 443-4887 or Rachael@agcouncil.org.

Click HERE for our comment letter.

Update on Nitrate in Groundwater

Due to various legislative and regulatory changes in recent years, the State Water Resources Control Board has threatened enforcement actions against several farmers in specific regions for contamination of groundwater due to nitrate levels. These enforcement threats essentially require growers to provide clean drinking water to impacted communities. Ag Council expects the Board to pursue these potential actions and to incorporate more farmers into this process in an effort to pressure groups to find a statewide solution for drinking water.

As a result, Ag Council is extensively engaged in a process to develop a statewide solution for impacted communities while seeking relief for farmers from threats of enforcement from the Board. Ag Council and others are working to potentially have a solution developed before the end of the legislative session this year.