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Jon Fleischman

Democrats Reneg On Their Deals, Making It Pointless To Try And Cut One

Last week I wrote a tough column extremely critical of the votes cast by Republican Assemblyman Brian Nestande and Republican-turned-Independent Nathan Fletcher for Assembly Bill 1500, legislation by Speaker John Perez that would arbitrarily shift about a billion dollars from the private sector into the coffers of California state government by hitting with a big tax increase multi-state companies that that sell services and products to Californians, but don’t have a lot of real estate assets or employees in the state.  Californians depend on reliable and predictable availability of the services and goods which they consume in order to keep costs low and quality high.  It is pretty a pretty established economic reality that when you increase the costs of goods and services, you create a scarcity and thus drive up the costs.  Simply put, a billion dollar (plus) tax increase ultimately hurts the California consumer.

To the extent that the liberals running California state government continue to make it more expensive and difficult to create goods and deliver services while based in California, it increases the importance that California consumers be able to depend on out-of-state companies to occupy a key space in our marketplace.  We actually want the barriers as low as possible to those who would bring products to California consumers.  It’s worth adding that if you want to encourage more businesses to invest in hard assets in the state – buying land and hiring local employees, you need to do this not by penalizing them if they don’t, but by improving the business climate here in California so that such business decisions pencil out.

I have written extensively on why AB 1500 is poor public policy here, and will write more on this subject in the days ahead.

In this column I wanted to address statements made by both Assemblyman Nestande, as well as Rob Lapsley, who heads up the influential California Business Roundtable (CBRT), where both talk about Nestande’s vote being an important step in seeking bipartisan reforms.

To be more specific, Nestande put out a statement subsequent to his vote saying,  “I put forward my vote in good faith that, in its final form, this bill will be part of a comprehensive regulatory reform package to put Californians back to work.”

The CBRT put out a statement from Lapsley, praising Nestande, saying, “…we appreciate Assemblyman Nestande’s leadership and bi-partisan support that opens the door for continued discussions with members from both parties to develop those critically needed reforms…”

Putting aside for the moment that the by and large the members of the CBRT are California-based companies who do not get hit with tax increase if AB 1500 is signed into law, I want to address this idea of negotiating bi-partisan reforms to public policy.  It doesn’t work.

What is a deal?  A deal is when two sides (or more) come together and each compromise on something and find a middle ground.  In the State Capitol, where Democrats control a majority of both legislative chambers, deals would involve Republicans either putting up a two-thirds vote for some tax or fee increase in exchange for some other desired policy objective, or when there was a Republican Governor, it meant that the Governor would not veto legislation desired by Democrats in return for some sort of consideration.  These days there is no Republican Governor, which means the only deals that there are to be made are if Republicans are willing to increase taxes in exchange for some trade-off on other policy.  This is clearly what is envisioned by Nestande and Lapsley here — the big tax hike on out-of-state companies, requiring a 2/3 vote, in exchange for…  For what?  Rumors abound on exactly what the deal points would be — CEQA reform has been bandied about as a likely target (in a bit of irony, one rumor to hit me was that the Governor wants to lighten or eliminate CEQA reqs on high speed rail construction as part of a deal).

The critical problem here is that, frankly, the track record of Democrats actually keeping the deals that they make — stinks.  In almost every case, except when a deal includes some sort of tax cut or credit, that would require a two-thirds vote to undo, all of the items in a deal between Republicans and Democrats that are the “gets” by Republicans, with no Republican Governor in office, can be undone without a single Republican vote.  And it happens, a lot.

I invite you to watch this short floor speech by Assemblyman and Budget Committee Vice Chairman Jim Nielsen, on this very topic…

Now that you have heard Nielsen’s prescient comments on this topic, let me take a few minutes to detail, in no particular order, some of the many broken promises and reneged deals in recent years (most of which were gained at the expense of taxpayers, and many Republicans legislators like Dave Cogdill and Mike Villines traded their future political careers for them…):  Of course we here at the FlashReport opposed nearly all of these deals, just on policy grounds.  Nevertheless, the renegs are glaring and instructive…

  • Let’s start with ACA 4 — As part of the bipartisan 2010 budget deal, ACA 4 was scheduled to be on the ballot last June — which, if passed, would have strengthened the state’s rainy day fund.  When the Democrats moved all measures off of the June ballot, they could have moved this one to November, but instead kicked it to 2014 and presumably will keep kicking it into the future, reneging on that deal.
  • In 2007, a bipartisan agreement produced AB 900, revenue lease-bond authority for 16,000 in-fill beds to alleviate over-crowding and prevent the early release of inmates.  In budget a budget trailer bill this year, Democrats reneged on this deal by reducing the amount to be spent on in-fill beds by close to $3 billion.
  • In the 2010 budget there was a bipartisan agreement to a complex gas-tax swap.  It was agreed that it would be a temporary measure.  In the 2012 budget Democrats reneged, and made this swap permanent, to the financial detriment of cities, counties and other local government entities.
  • In 2011 a bipartisan deal imposed a tax on nursing homes for certain considerations.  In this years budget, those considerations were reneged upon by Democrats.
  • In 2011 a bipartisan deal imposed a tax on hospitals to last for two years.  In this year’s budget, Democrats reneged on the deal by forcing hospitals to take deeper cuts than what was negotiated.
  • Significant to this current discussion, in the 2009 bipartisan budget deal, it was negotiated that an annual election for corporations to choose their income tax apportionment formula would be created.  AB 1500, if passed and signed into law, would reneg on that budget deal.
  • In the 2010 bipartisan budget deal there was $10 million for the Williamson Act.  In March of 2011 (about five months later) Democrats passed a bill and reneged.
  • In the 2009 bipartisan budget deal, various efforts to prevent and detect fraud in the IHSS program were enacted.  In 2011, those efforts were repealed by the majority party.

I could literally go on and on.  To be honest my various inquiries to assemble a comprehensive list of handshake deals that were they unilaterally undone by Capitol Democrats yielded much more than I have listed, but some of the issues are quite complex and don’t lend themselves to inclusion in a column.

I really should add, because it goes to the character of the officeholder, it is worth noting that Governor Brown has himself reneged on his pledge to take all tax increases to the voters (most notably with his support of AB 1500).

Watch this video excerpt of Assemblyman Nathan Fletcher addressing the issue of whether it is appropriate or not to abrogate deals made in previous legislative sessions.  I think you will find it instructive as it goes to the core of whether you really can make bi-partisan deals, big or small, in the legislature and expect them to be honored for any period of time.

Assemblyman Fletcher misses the point – which is not that you cannot change policies negotiated in good faith with buy in from both parties — but that you need to once again have that bipartisan agreement to make the changes, or you are reneging.

The very reality here, which some Republicans and business groups may not want to hear, is that the only way to have meaningful reforms in California is to increase the number of legislators wearing a Republican jersey.  Because there simply is no deal, whether it be on CEQA reform or anything else, that will not likely be unraveled as soon as the ink is dry, and whatever tax increase they sought has been enacted.

At best it is naïve on Assemblyman Nestande’s part to seriously talk about achieving negotiated reforms from Democrats, and at worse on the part of the CBRT, is it disingenuous because for them, it is a win to see a tax hike on their members’ out-of-state competitors.  Instead of trying to cut a deal, the CBRT should be rallying with negatively impacted companies to fight off both AB 1500 as well as Prop.39 (which would also implement this tax billion dollar plus tax increase) — as Benjamin Franklin said just before signing the Declaration of Independence, “We must, indeed, all hang together, or most assuredly we shall all hang separately.” — if those that the liberals in Sacramento seek to overtax and over regulate do not stand with each other on every battle, eventually we all will lose.

I will conclude with a reminder that the majority party in Sacramento have as their public policy goals the expansion of the size and scope of state government.  Any “deal” — for it to make sense to Democrats — has to further that goal.  Which really means that every deal includes Republicans agreeing to sign away the liberty or property of some constituency group, in order to make a deal.  This is just bad news all around.