Could the legislature pass a last-minute tax with revenue for cutting tuition? A look at the legislative sausage factory

It seemed improbable a bill of that kind could pass until recently, although we have included some reporting about one such bill in two prior posta on this blog.  (Scroll back to August 14 and 15 for those posts.)  And the story of how the legislative sausage is (or might be) made is complicated and involves a bunch of seemingly-unrelated elements.  But there appears to be at least a chance now for the bill to pass.  So let’s start with a cast of characters:

John Pérez is speaker of the state assembly.  He is the sponsor of a bill that would close a corporate tax loophole.  He wants to use the money raised from that closing to make large cuts in tuition at public higher ed institutions in California.  But because his bill involves a tax increase, it requires a 2/3 vote in both houses of the legislature.  Thus, even if all Democrats in the assembly vote for it, it still needs two more votes.  A few days ago, those two votes were rounded up from the two folks listed below so the bill passed the assembly with the required 2/3.  However, the bill would have to be passed in the state senate and – until recently – the bill seemed dead there.  Note that the legislature is operating under an August 31 deadline, i.e., the end of next week.

Nathan Fletcher is a member of the state assembly who dropped his Republican affiliation and is now officially an independent.  (As I recall, the switch occurred as part of a failed attempt to become mayor of San Diego.)  He voted for the Pérez tax bill.

Brian Nestande is a Republican member of the state assembly who became a renegade when he voted for the corporate loophole tax bill.  His party punished him for that vote.

It appears that there were two inducements for Fletcher and Nestande to support the Pérez tax bill.  First, the loophole developed out of a budget deal that goes back to the Schwarzenegger era.  Under the loophole, out-of-state corporations doing business in California get a choice of two methods of calculating their corporate profits tax – and so can pick the most advantageous.  California-based corporations, who may be competitors of the out-of-staters, don’t have the dual options.  So there is support in parts of the in-state business community to end the loophole.

Second, there is CEQA, a major state environmental law.  Developers and the business community don’t like CEQA because it allows environmental lawsuits that hold up projects.  Some elements in the labor union community – the construction trades - also don’t like CEQA for the same reason.  Republicans don’t like it.  Governor Brown doesn’t seem to like it, either, partly because it could be used to hold up his high-speed rail project.  So there was a push last week in the legislature to modify CEQA and make lawsuits more difficult to file.  Pérez may have offered the CEQA modification to Nestande to induce his vote on the tax bill.  The only problem is that the CEQA modification attempt was killed in the legislature last week.

But then there is the fire fighting fee.  As part of a past budget deal, rural residents who depend on state fire fighting services were charged a fee of $150 per year which they don’t like.  (They like the service but not paying for it.)  It passed because of the distinction between fees – which can be passed by a simple majority – and taxes – which require 2/3.  Republicans don’t like fees, just as they don’t like taxes.  So now Pérez has rejiggered his close-the-loophole-and-cut-tuition bill to include repealing the fire fighting fee.  That is, the new version uses some of the loophole money to offset the loss of the fee, but still includes big cuts in tuition.

With that adjustment, it is possible now that the bill could pass both houses.  Presumably, Fletcher and Nestande would vote for it in its modified form again.  So that would take care of passage in the assembly.  Conceivably, two Republicans in the senate from rural districts might be induced to vote for it in order to kill the fire fighting fee.  And it is conceivable that Governor Brown would sign the bill if it got to him.

You may know that on the November ballot, there is a proposition that closes the same corporate loophole but earmarks some of the resulting revenue for energy efficiency, not tuition.  I am not sure what would happen if both the Pérez bill and the proposition passed.  However, the proposition has not been polling well.

Some info about these developments is at http://blogs.sacbee.com/capitolalertlatest/2012/08/gut-and-amend-bill-links-repeal-of-fire-fee-with-corporate-tax-hike.html. 

Note: If you go to that article, you will see the phrase “gut and amend.”  The phrase and the technique stems from a legislative rule that bars new bills from being introduced this late in the session.  But there are lots of bills that went nowhere during the session lying around that technically are still alive.  So when a new bill is needed, the practice is to take some old bill from the walking dead – a bill which often has absolutely nothing to do with the new objective – and amend every word in it to be a de facto new bill.

Anyway, that's how they make the sausage in Sacramento.  Or you can try it at home: