Improving California’s business climate remains a top priority for Gov. Arnold Schwarzenegger in 2005.
The governor in his State of the State speech and budget announcement earlier this month said he is eyeing cuts in spending on schools and state employee salaries and benefits in a bid to get the budget deficit under control. Legislators say they expect battles over issues such as the minimum wage.
The Business Journal earlier this month spoke with several state legislators representing Orange County. They talked about the business-related issues expected to make news this year.
Five of the seven state assembly members that represent parts of OC spoke to the Business Journal; the lone democrat, Tom Umberg of Santa Ana, wasn’t available to be interviewed, his press office said. One republican,Tom Harman of Huntington Beach,also wasn’t available, according to his press team.
All three state senators responded to the Business Journal’s interview request.
Sen. John Campbell
(R-Irvine)
I’m going to be carrying the governor’s solar energy proposal but along with that we’re trying to include some direct access energy options. That would allow businesses to buy energy from someone other than the incumbent utility, or generate their own.
I have helped author the Deficit Prevention Act that is a spending limit on state government, which business should have an interest in. If the government doesn’t spend too much then it doesn’t need to tax you. We would close a current loophole whereby a tax can be disguised as a fee and be passed with a majority vote instead of a two-thirds vote.
One example was the “diaper tax” that was proposed last year and would’ve added money to the price of a diaper. The idea was that diapers go into landfills and the state needs to be reimbursed for the cost of the landfills. That’s why they called it a fee.
Another example is the tax San Francisco is proposing for grocery bags, where people would have to pay 17 cents per bag under the same theory that it’s an environmental hazard. My proposal would, among other things, require a vote of the people to implement such taxes.
I think you’re going to see Democrats push hard for things like mandatory health insurance, which they lost on the ballot in November. They are not giving up. To return with something like that, they will probably try and tweak it some to give it more popularity. I don’t know exactly what they might do but I think you’ll probably see that.
A lot of what they are talking about is going after drug companies. The governor already is trying to blunt that.
You’ll see Democrats working on minimum wage, health insurance, prescription drugs and higher education. You’ll see huge battle lines drawn between unions and the governor. I think if you look at his major proposals, they’re going to be opposed by public employee unions.
Sen. Joe Dunn
(D-Garden Grove)
I assume there will be a minimum wage bill. I always have been and always will be supportive of an increase in minimum wage.
I’m not looking to unnecessarily burden the business community with additional costs in this highly competitive international economy. But there are times when we have to strike a balance, and I think the low wage earner has not been able to keep up.
(The minimum wage) now is lower than surrounding states like Washington and Oregon,I don’t buy the argument (from companies) that, “I’ll flee to another state because of the unreasonable minimum wage increase holds the type of water that it does in other issues.”
On workers’ compensation, most of the fight is in the regulatory arena and less so in the legislative arena. The one missing link in the reform package last year,deadly to the reform package in that it has not brought premiums down as the governor had intended,is that the carriers were able to avoid any sort of re-establishing of upside rate regulation.
Workers’ comp is the only insurance line in California that is not regulated. It was deregulated in the early 1990s. Most every expert, including those that are associated with the Chamber of Commerce, agree that the primary cause for the workers’ comp increases were not the medical costs or fraud,both categories that did need some work. Rather, the single largest contributing factor was the anti-competitive behavior of the insurance carriers between 1994 and 1997.
That was the one sacred cow for the administration: They would not touch their friends in the insurance industry. Doctors got hit from the reform, lawyers got hit, businesses got hit and the injured worker got hit. The carriers walked away scot-free. And you’re seeing the results of that by the lack of significant reduction in the premiums.
The other issue that I’m going to spend some time on this year relates to my new position as chair of the Senate judiciary committee. Under the auspices of that committee we’re going to be doing oversight hearings in a variety of different categories.
The first one we’re going to tee up relates to examining certain large markets for possible anti-competitive behavior that is giving rise to anti-competitive pricing. Telecommunications, gasoline and pharmaceuticals are a few of the markets we will look at.
The electricity crisis wasn’t about electricity. It was about economics and specifically market behavior in the newly deregulated electricity market.
The reason we have volatile gasoline prices has nothing to do with the supply of gasoline. It has everything to do with how the market is set up by the few remaining players in California. The same is true in Hawaii. It’s not necessarily as true in other parts of the country. But similar anti-competitive behavior or dysfunctional competitive behavior exists in other major markets as well.
On tort reform, there are proposals in the capitol every year. I realize that there are dysfunctional parts of our judiciary that need to be corrected. On 17200, there was absolute abuse that needed to be corrected but it was about bad lawyers and not about bad law. That one is behind us.
Sen. Dick Ackerman
(R-Tustin)
Gov. Schwarzenegger wants to cut through some of the red tape regarding housing construction. That includes some of the environmental restrictions and building restrictions and just added costs, which really don’t benefit home ownership in California, but drive the cost of even low-income housing out of everybody’s price range
His education proposals could impact business. Right now our overall results are getting worse even though we’re putting more and more money into the system. That’s not the solution for better education in California. The governor is proposing merit pay for teachers, which is very significant.
The governor has talked about having a tort reform package. We have a tort reform package that we put out every year, trying to limit punitive damages and non-meritorious lawsuits. Those lawsuits tend to have very negative impacts on businesses.
The Democrats introduced a couple hundred bills last year that would have negatively impacted business. We wrote veto levels for the governor, something like 260, and we vetoed something like 250 such bills.
The Democrats want to raise minimum wage and they want to revisit SB2, the bill that would’ve mandated health coverage for workers at small businesses. They have a laundry list that drives the cost of business up and doesn’t really do anything for the worker.
I notice the Democrats and a number of unions already are up in arms over workers’ comp. They think it is anti-worker. I think it’s pro-worker, because it will get more money to the employees that are injured, and not to non-meritorious claims.
Assemblywoman Lynn Daucher
(R-Brea)
I’m probably going to be doing a workers’ comp bill. It would restrict out-of-state travel by anyone receiving temporary disability payments.
If you’re going to be out-of-state for more than two weeks you need employer permission. It seems reasonable,teachers already have this.
I’m going to be doing a housing bill as well. I want to reward cities that build more housing than the state requires.
Each city has a housing goal from the state based on the projected need. Each city gets a divvied-up share of need with a five-year goal to meet it. If the city were to reach that goal, I’m proposing to reward them.
Assemblyman Chuck DeVore
(R-Orange)
The governor said he wants to address the issue of affordable housing. He’s calling on the Legislature to propose legislation that eliminates regulatory and legal hurdles that delay construction and increase the cost of new housing. I am completely in favor of this.
A number of years ago I worked for the Claremont Institute, and we learned that in Southern California, depending on the locality, 40% to 50% of the price of a new home was due to government regulations and taxes.
These include workers’ comp and rules that make it, for example, harder to harvest and use local timber. There are too many restrictive laws relating to things like land control, land use and zoning.
So the governor is calling on the local jurisdictions to recognize and plan for their population increase and workforce issues, making the most efficient land use patterns possible while minimizing impacts on valuable habitat and productive farmland.
This is clearly a call to action that we need to understand that the best affordable housing programs should increase the supply of competitively priced housing. We shouldn’t be content to do these band-aid approaches where you build this low-cost housing via lottery to a few lucky people, which is the way we do it now. It’s not fair and it’s not addressing the problem from a macro level.
The other issue that readers will be interested in bears on our ability to be competitive. It has to do with transportation. Gov. Schwarzenegger is concerned with the Legislature continuing to borrow money from the transportation funds like the gas tax. The legislature has been borrowing to finance the deficit. He wants to curb the ability to take these funds.
You’ve got to solve congestion problems to improve job generation by reducing congestion. I think those things are worthy of support and those are certainly two things that are going to figure prominently in the extraordinary session that he’s going to ask us to deal with in the next little while.
Already there’s a proposal to increase the minimum wage. I’m opposed to that. The logic behind the minimum wage is that somehow the free market can’t find the appropriate amount of money to pay somebody. Why don’t we set the minimum wage at a million dollars an hour? We would solve the tax revenue problem in one day and we can all retire the next.
It does a number of things. First of all, it hurts young people who are entering the workforce. It prevents many people from getting that first job. Secondly, there’s this myth about people living on the minimum wage. There are very few, if any, people whose sole and full-time occupation their whole life is a minimum wage occupation.
Assemblyman Todd Spitzer
Tort reform is a key issue. I am on the Assembly judiciary committee and was one of the leaders against frivolous 17200 lawsuits.
Clearly we couldn’t stop trial lawyers in any judiciary committee and had to go to the Proposition 64 ballot initiative.
I’ve already asked trial lawyers what legislation they plan to introduce. They met earlier this month in Sacramento.
What’s very good for business is that trial lawyers are very spooked right now about coming forward to initiate any new theories of liability or in the alternative to expand existing theories of liability. I think that’s a very good thing.
The governor and Republicans in the Legislature have stood lockstep together to protect business interests against frivolous litigation. And now trial lawyers understand if they try and come forward with new theories or expand existing theories of liability, they can end up losing the tools that they have. The initiative process is there to restrict tools they might have.
Business and Professions Code 17200 was a tool they had, but because it was abused it was partly taken away by Proposition 64. They realize now that by overusing a tool or abusing it they can end up losing it. They are reluctant to take on Republicans and the governor.
I support legislation that makes it easier to conduct business in California. I subscribe to the idea that it’s business that is going to drive California into the future. Government is not going to save California. It’s going to be business that’s going to save California. It’s going to be job generation that saves California.
Traffic congestion remains an important issue. I’ve been chair of the Orange County Transportation Authority and the board of the toll roads. I think what you’re going to see is much greater emphasis on privatization of infrastructure.
I absolutely believe the private sector should build our roads, but I am concerned about the proliferation of toll roads as an excuse to not be spending Proposition 42 money on transportation. Since I’ve been in the Legislature, Proposition 42 money has been suspended to pay off the debt. We got a concession from the governor that that would not happen again but the administration does plan in the budget to keep using that money to pay off the debt for the time being.
I support toll roads in concept when infrastructure is not being built, but California has shamefully redirected transport dollars toward social programs when the public absolutely needs that money for infrastructure.
I plan to oppose any increase in the minimum wage. I think Democrats will introduce it again or more likely on the ballot if there’s a special election. Clearly it will be a job killer.
Assemblyman Van Tran
(R-Costa Mesa)
I would not vote to raise any types of taxes. I believe our state has a spending problem,not a revenue problem.
From a philosophical and political standpoint it’s important for me to oppose any type of legislation that would hamper or inhibit economic growth or overburden businesses.
The governor has come out with a proposal to consolidate or eliminate nearly 100 state boards and commissions. I think that’s a step in the right direction to eliminate red tape and bureaucracy.
Bills I would oppose would include anything that calls for an increase in the minimum wage. California already has a minimum wage higher than the federal requirement. At this point calling for an even higher minimum wage would hurt the economy.
I’ve also heard rumblings about legislation to bring back the lemon law,the three-day cooling-off period,for auto sales. I think that also will hurt businesses.
Some of the legislation we’re still working on as we try to flesh out some ideas is to once again reform workers’ compensation, fine-tuning the laws and eligibilities and criteria for claims. I will submit a bill towards that end.
I’m excited that the governor has presented a balanced budget with no tax increases. The only responsible way for California to recover from our ongoing deficit is to reduce spending, bringing it in balance with our revenues.
I hope the Democratic caucus works with us in a bipartisan effort to eliminate waste and excess in state government.
Assemblywoman Mimi Walters
(R-Oceanside)
First of all I will oppose any tax increases. As the governor said in his State of the State address,we don’t have a revenue problem. Rather, we have a spending problem.
I believe it’s fundamentally unfair to make all Californians pay for the spending sprees of a few tax-and-spend politicians. I also will oppose any attempts to increase the minimum wage.
California has the worst business climate in the country. And that’s because we have a huge number of regulations and fees. The politicians have made it barely possible for most businesses to operate in our state and have forced some companies to relocate out-of-state.
I will support a strict spending cap. Sen. John Campbell’s Deficit Prevention Act will help us curb spending.
I also will oppose any attempt to raise commercial property tax rates. One proposal wants to raise the rate from 1% to 1.3% and I believe that would put many small business owners out of business. I will support all regulatory reforms.
