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Aug 14 2012

Flap’s California Morning Collection: August 14, 2012

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Mission San Francisco de Asís

Good Tuesday morning!

The California Legislature is in session.  Today’s schedule is here.

The California Assembly’s Daily File is here and the California State Senate’s here.

On to today’s California headlines:

Judge orders changes to Prop. 32 language

A Sacramento County Superior Court judge on Monday ordered the secretary of state to change language on the November ballot describing Proposition 32, the initiative that promises to eliminate special-interest money in politics.

According to the new ballot label, the measure “prohibits” unions and corporations from contributing directly to candidates, as well as using payroll deduction to raise political cash. The label initially used the word “restricts.” The backers of Proposition 32 had argued that the original language, as determined by the attorney general’s office, was misleading.

“Voters deserve to be informed that Prop. 32 doesn’t just reduce direct contributions from corporations and unions to politicians, it eliminates them entirely,” said spokesman Jake Suski.

Judge Michael P. Kenny, however, denied another request by Proposition 32’s supporters to strike key language from the measure’s title and summary in state-printed voter materials. Backers had targeted a phrase that notes: “Other political expenditures remain unrestricted, including corporate expenditures from available resources not limited by payroll deduction prohibition.”

That’s the argument at the heart of the union-backed opposition campaign, which has been running statewide radio ads denouncing the initiative as “a deceptive proposition stuffed with special exemptions” for businesses.

Unions lost a separate challenge to ballot language that they said could mislead voters into thinking payroll deductions can be used with workers’ written permission. All payroll deduction is barred under the measure

ONLINE POKER: Legislation faces tough odds before deadline

Divisions among tribes with successful casinos have stacked the odds against legislation to legalize and license online poker in California, with less than three weeks left in the two-year session.

Some tribes support the proposal co-authored by the Senate’s top Democrat. Others support the concept but want changes to the legislation. And some tribes oppose the idea, saying it risks eating into the business of bricks-and-mortar casinos legalized by voters in 1998 and 2000.

Bill to close corporate tax loophole moves forward

Middle class Californians will get relief from soaring college costs if a bill passed by the Assembly Monday becomes law.

AB1500 would eliminate a $1 billion tax break for out-of-state corporations and use the expected windfall to reduce tuition.

It is the second component of Assembly Speaker John Perez’s “Middle Class Scholarship Act.” The Assembly previously approved the other part, which would reduce tuition by more than half for families whose annual household income exceeds the cap for getting a free ride at California’s public universities ($70,000 a year for the California State University system and $80,000 for University of California system) but is less than $150,000.

The Legislature approved the tax loophole in 2009 as a way to get a handful of Republican lawmakers to vote for the state budget.

On Monday, Republican Assembly members objected to what they described as an attempt by Democrats to undo the previous budget deal.

“This wasn’t a loophole, it was a product of careful, extensive negotiations and promises,” said Assemblyman Don Wagner, R-Irvine. “Promises made by one side of the aisle to secure the votes that they needed from the other side of the aisle. Promises that have now been completely undone.”

But Perez, D-Los Angeles, said there was no use preserving a two year-old status quo where “you are getting kicked in the head by other states.”

“This will help California businesses remain competitive while ensuring that California’s middle-class families have the same opportunities to succeed as our generation had,” he said.

The 2009 tax loophole deal allowed companies operating in multiple states to choose the cheaper of two formulas for calculating their tax liability in California. They can use an option that considers sales, property and payroll, or a formula that considers only sales.

Perez’s bill would force corporations to use only the sales factor. At least 11 other states, including Texas and New York, require that corporations calculate their tax obligations this way.

Last year, Gov. Jerry Brown, a Democrat, passed a single-sales requirement through the Assembly, but his measure failed to get GOP support in the Senate. Republicans say the change could drive job creating corporations out of California.

AB1500 passed the Assembly 54-25, barley meeting the two-thirds threshold. Assemblyman Brian Nestande, of Palm Desert, was the lone Republican supporter.

“I’m putting forth my vote to say we need to come together and work on some of these issues to bring businesses back to California,” he said.

Assemblyman Nathan Fletcher, an independent, also voted yes.

California scrambles to pay its bills with more borrowing

Embedded in a Monday report from the California controller is a statistic showing just how much the state is straining to pay its bills before November’s vote on higher taxes.

Controller John Chiang, who manages the state’s cash flow, finished July with more than $18 billion in outstanding loans after using high-speed accounting to cover day-to-day expenses. That means he would borrow some money from the state’s 500-plus “special” funds, used it to pay a bill and promised to repay it later when more tax revenue rolls in.

It’s a standard maneuver, especially at the beginning of the fiscal year, when expenses outpace revenues. But the controller leaned more heavily than usual on this tactic last month, tapping 81% of the money available for short-term borrowing, up from 48.4% in July 2011.

A spokesman for the controller, Jacob Roper, had a matter-of-fact explanation for the borrowing: “That’s the amount of special fund borrowing necessary to carry out the state’s budget.”

The $18 billion in outstanding loans includes $9.6 billion left over from June, as well as $8.5 billion in new borrowing in July.

Cities refuse to hand over redevelopment money

Twenty-seven cities have not forked over all of the redevelopment money the state says they owe, according to Gov. Jerry Brown’s administration.

The state says the cities owe $129 million total, but they’ve only returned $6.7 million.

The dispute involves an accounting shuffle that helps close the state’s $15.7-billion budget deficit. Because redevelopment agencies are being dissolved this year, Brown wants to shift $3.1 billion to schools, helping offset the state’s obligation to fund education.

Right now the state is trying to secure the first wave of money -– local tax revenue that officials say was mistakenly paid to redevelopment agencies in the first six months of 2012.

The Brown administration set a target of $685 million and has threatened financial penalties if cities don’t pay up, but they may not meet their goal.

“It may be half of that amount. It may be a third of that amount,” said Marianne O’Malley of the Legislative Analyst’s Office, which has repeatedly warned that there may not be as much redevelopment money available as expected.

Enjoy your morning!

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