California Legislature Mid Year Budget, Job Killer Bills and Housing

As the 2023-24 California Legislature reaches its 6^TH month into its two year term this June, it is a good time to check in and see what efforts are being considered that affect businesses and economic develop along with development and the housing crisis.

Currently, the state is primarily focused on the State Budget. It was initially projecting a 2023-24 budget deficit of over $20 billion. When Governor Newsom issued his May Revise on May 12 this had grown to over $31.5 billion. As of the writing of this article we are approaching the Legislatures’ adoption of the budget on June 15 which the Governor will need to sign by July 1. The Legislature proposal will close the deficit with a combination of revenue and spending delays with shifts and cuts to close the shortfall. It will probably restore some of the cuts that the Governor proposed in May. The budget passed on June 15 will be changed through various budget trailer bills which are continuing to be negotiated by the Governor and the Legislature. It is important to note that the Governor can redline certain spending measures when he signs the Budget. The final budget should have an approximate $37.2 billion budget reserve, including #22.3 billion in the Budget Stabilization Account.

Governor Newsom threw a curve into these budget deliberations when he proposed a series of 8 legislative bills, he wanted approved as trailer bills. These were designed to streamline project approval (CEQA reform?), maximize the federal infrastructure funds the State has received and expedite projects to meet economic and climate change goals. The Governor has stated that passage of these initiatives will speed up construction, clear delayed construction procurement processes and expedite judicial review for projects that have already passed environmental reviews. While the legislature has held informational hearings on these issues., there is no clear indication yet if the Legislature will pass the Governor’s proposals through the trailer bill process or insist that they go through substantive policy hearings.

While the State Budget gains most of the current attention in the Legislature, there continue to be numerous bills which will impact businesses and economic development through increasing regulations, fees, costs and taxes. The California Chamber of Commerce releases each year their list of Job Killer Bills which they work tirelessly to defeat or amend. In spite of the one-party super majority 2/3 rule by the Democrat party in the Legislature, the Chamber has continued to be able to defeat most of these job killer bills each year. This year some of the key bills are:

Labor and Employment

AB 524 (Wicks; D-Oakland) Expansion of Litigation Under FEHA. Exposes employers to costly litigation under the Fair Employment and Housing Act by asserting that any adverse employment action was in relation to the employee’s family caregiver status, which is broadly defined to include any employee who contributes to the care of any person of their choosing, and creates a de facto accommodation requirement that will burden small businesses.

AB 1156 (Bonta; D-Alameda) Expands Costly Presumption of Injury. Significantly increases workers’ compensation costs for public and private hospitals by presuming certain diseases and injuries are caused by the workplace and establishes an extremely concerning precedent for expanding presumptions into the private sector. Failed in the Assembly Insurance Committee.

SB 365 (Wiener: D-San Francisco) Undermines Arbitration. Discriminates against use of arbitration agreements by requiring trial courts to continue trial proceedings during any appeal regarding the denial of a motion to compel, undermining arbitration and divesting courts of their inherent right to stay proceedings.

SB 525 (Durazo; D-Los Angeles) Costly Minimum Wage Increase. Imposes significant cost on health care facilities and any employer who works with health care facilities by mandating increase in minimum wage to $25.

SB 616 (Gonzalez; D-Long Beach) Costly Sick Leave Expansion on All Employers. Imposes new costs and leave requirements on employers of all sizes, by more than doubling existing sick leave mandate, which is in addition to all other enacted leave mandates that small employers throughout the state are already struggling with to implement and comply.

SB 627 (Smallwood-Cuevas; D-Los Angeles) Onerous Return to Work Mandate. Imposes an onerous and stringent process to hire employees based on seniority alone for nearly every industry, including hospitals, retail, restaurants and movie theaters, which will delay hiring and eliminates contracts for at-will employment.

SB 723 (Durazo; D-Los Angeles) Onerous Return to Work Mandate. Imposes an onerous and stringent process for specific employers to return employees to the workforce for specified industries, including hotels and restaurants that have been disproportionally impacted by this pandemic, and removes guardrails on existing law by making mandate permanent and significantly broadening the applicability of the law.

Taxation

AB 259 (Lee; D-San Jose) / ACA 3 (Lee; D-San Jose) Wealth Tax. Seeks to impose a massive tax increase upon all forms of personal property or wealth, whether tangible or intangible, despite California already having the highest income tax in the country. This tax increase will drive high-income earners out of the State as well as the revenue they contribute to the General Fund.

SB 220 (Senate Budget and Fiscal Review Committee) Corporate Tax Hike. Increases the corporate tax rate to 10.99% for many California employers which will drive them out of the state and decrease the revenue they contribute to the General Fund.

Housing

AB 68 (Ward; D-San Diego) Quashes Housing. Worsens California’s existing housing crisis by preventing local governments from permitting new housing units in most of their jurisdictions. Failed in the Assembly Housing and Community Development Committee.

Environmental

AB 1000 (Reyes; D-San Bernardino) De Facto Ban of Warehouses. Mandates a statewide setback of 1,000 feet from sensitive receptors for all new or expanded logistics use facilities, regardless of environmental impacts, establishing a de facto ban. Also creates a new private right of action in California. Failed in the Assembly Local Government Committee.

Climate/Energy

SB 12 (Stern; D-Canoga Park) Arbitrary Greenhouse Gas Target. Arbitrarily changes the State’s GHG reduction goal from 40% of 1990 levels by 2030 to 55%. By the State’s own estimate this proposal will force 17 million gas-powered cars off the road in the next 10 years. Currently held in the Senate Appropriations Committee.

SBX1 2 (Skinner; D-Berkeley) Windfall Profits Tax. Sets an arbitrary cap on the amount of profit that a refiner operating in the state of California can earn over a quarterly basis. This measure would further diminish supply, discourages operational efficiencies, and would limit the amount of capital a refiner could reinvest into their infrastructure to support California’s long-term climate goals. Signed. Chapter 1, Statues of 2023-24 First Extraordinary Session.

You should note that since this is the first year of the two-year session, even if these bills do not move forward this year, they can be reconsidered next year.

Finally, I want to bring to your attention the continuing challenges with housing and the California Housing and Community Development’s (HCD) continued insistence that a local communities Housing element include significant increases in potential housing. HCD has been rejecting submittals by local governments at an unprecedented rate. Even the City of Santa Clarita has not received its final approval. The HCD is also suing some cities, like Huntington Beach, who have refused to make the required increases in their housing supply. Whether these efforts will increase housing, including affordable housing, remains uncertain. However they are impacting the decision making ability of local cities and counties. It is important to continue to monitor these efforts, along the continuing mandates by the State Legislature which are removing flexibility by local government to make land use decisions.