Capitol Alert

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After a day of back and forth negotiations with Gov. Jerry Brown, Senate Republicans issued a statement this evening that includes a list of their requests, including pension reductions for current and future employees. Assembly Speaker John A. Pérez said earlier today that the list had moved the parties "further away" than before.

Senate GOP Leader Bob Dutton and Sen. Bob Huff, R-Diamond Bar, vice chairman of the Senate Budget Committee, issued the following statement tonight:

"Governor Brown challenged Republicans to be engaged in the budget process. Republicans have been engaged for months. Today he was presented with a thorough outline, which reiterates our priorities, including: getting our state back on track by reining in runaway spending; controlling unsustainable public employee pensions; getting people back to work; protecting and improving our state's public education system; and making critical adjustments to the governor's flawed budget."

"Republicans were accused of being the party of 'no' and now Republicans are accused of being the party of 'too much yes.'"

They also issued the following list, with notations of where Brown and Republicans disagree:

DUTTON/HUFF KEY POINTS FOR MEETING WITH GOVERNOR BROWN
3/25/11

BIG PICTURE
REFORMS
PROPOSALS REJECTED:
TORT REFORM, CIVIL SERVICE REFORM, & TAX REFORM

PENSION REFORM - STATE & LOCAL EMPLOYEES
Starting Point:
o Applies to both future and current employees (severability for existing) - (Admin: NO)
o Equal share of pension costs between employer & employee (50/50 split) - (Admin: NO)
o Increase retirement formulas (Little Hoover Commission) - (Admin: NO)
o Uniform standards and definitions for disability benefits- (Admin: NO)
o Reduce growing state payroll & salaries (LHC) - (Admin: NO)
o Voter approval for future increases (Admin: No)
o And all of the items below:

CURRENT PROPOSAL:
Anti-Spiking - Current and Future Employees (as legally achievable)
o No purchases of Air-Time (Admin: OK)
o Highest 5-year average. (Admin: Highest 3 year average, with CalSTRS exception for 25 years of service)
o Base pay [salary only - no vacation, overtime, car allowance, uniform allowance, etc.] used for determining final retirement benefits. (Admin: Base benefits on regular, recurring pay)
o No Double-Dipping /Revolving Door (Admin: Allow retired annuitants (cost effective for state), but forbid drawing a full-time salary and a pension from the same employer)

Cost Control- Current and Future Employees (as legally achievable)
o Cap Final pension amount (Admin: Ok w/Cap of $106K w/COLA - same as Social Security - and additional 12.4% for non-SS employees.)
o Increase employee cost sharing for health and pension benefits. (Admin: NO)
o Increase vesting time for health care.
o Disallow employer making employee's contributions/no pension "holidays" for employers or employees (Admin: Ok. Limit going below normal cost).
o No retroactive benefit increases (Admin: OK)
o Incentive-based 401-k style option for current employees in a manner that guarantees cost-saving

Future employees
o Permit public employers to change (lower) of future unaccrued retirement benefits (Admin: Maybe)
o Mandatory hybrid pension plan. (Admin: Require creation of hybrid option, based on federal government model, to be offered by systems by July 1, 2012.

Oversight
o Governing board conflict of interest and greater transparency (Admin: Add 2 public members to each retirement board. For CalPERS, switch SPB representative to DOF)

Other
o 2/3 Legislative approval required for changes to salaries & benefits (Admin: Maybe)
o Strengthen standards for revoking or reducing pensions of public employees and elected officials convicted of certain crimes involving the public trust. (Admin: Ok)
o Legislature to set actuarially-sound rate for CalSTRS and fund within Prop 98
o SUMMARY OF WHAT WE THINK GOVERNOR AGREED TO: Little Hoover Commission's recommendations - minus existing employees and no mandatory hybrid for current employees.

REGULATORY REFORM
Starting Point
o Federal OMB model (Blakeslee)

CURRENT PROPOSAL
o Cost effective analysis of proposed major regulations and legislation
o Improve the process for economic analysis of regulations
o Improve the process for alternatives analysis of regulations
o Improve economic analysis of legislation
o Improve oversight of economic analysis and alternatives analysis requirements
o Improve accountability by requiring retrospective review of regulations
o Provide the capacity to undertake this review and oversight by dedicating a fee exclusively to pay for this function, paid by employers.

CEQA
Attorney Fees
o Starting Point:
§ When awarding attorney's fees, the percentage of successful claims will be used to determine the attorney's fees award.
§ Fees only for reasonable costs incurred for successful claims
§ Prohibit courts from applying a multiplier which generally make awards excessively large
o Gov Proposal: Increase fine for frivolous lawsuits from $10k-$20k
o Pro Tem: level of discretion for courts instead of proportional awards

Document Dropping
o Starting Point:
§ Provide that a lead agency is not required to respond to a comment after the closure of the public comment period (unless in response to changes made to the project)
o Gov Proposal: Limit to 50 pages

CEQA Exemption for Urban Infill
o Starting Point:
§ Allowable projects can be residential, commercial, or mixed-use.
§ Reasonable limitations on the size of the commercial project.
o Pro Tem: Instead of exemption for Urban Infill, Require New Short Form EIR. Mandate development of new "short-form EIR" for specified projects to reduce paperwork and streamline process.
o Pro Tem: Pro Tem mentioned: Exemption for retrofit of abandoned "big box" stores (SB 620)

GHG
o Starting Point:
§ Legislated that a zero-emission threshold is not required and that if best management practices are used and if the project meets any adopted threshold, then the project is deemed to have less than a significant impact.
o Gov Proposal: Buchanan bill from last year

Fair Argument
o Starting Point:
§ Stated that an EIR was not necessary (could prepare a negative declaration or mitigated negative declaration) if a lead agency showed substantial evidence that there was no significant (mitigated or otherwise) impact to the environment
o Gov's Response: Rejected proposal
o Next step: Increasing the threshold from "fair argument" to "preponderance of evidence" for filing claims.

Timeframe on Cumulative Impact Analysis
o Starting Point:
§ A project that is approved or proposed 90 days before the issuance of the EIR or from 30 days prior to the circulation of the neg dec or mitigated neg dec.

SPENDING CAP
o Starting Point:
o Hard permanent cap (Admin: NO)

CURRENT PROPOSAL:
o Hard cap (based on CPI & population) until:
-----1. Specified budgetary debt is paid down (e.g. ERBs, Loans, Prop 1A borrowing,
VLF GAP loan, Non-98 deferrals, education deferrals, maintenance factor)
-----2. A 10% rainy day reserve is obtained
o Base Year 12-13.
o Carve Prop 98 spending out of cap
o [Editor's Note: this point was unreadable]
o Revenues above the cap to be used to pay down debt, to build reserve, or other 1-time expenses
o Transition to ACA 4: At end of the hard cap, implement provisions of ACA 4 (the 2010 measure). (Some of the dates in ACA 4 would need to be changed.)

EDUCATION REFORM
Teacher Seniority [Last in, First Out (LIFO) reform]
o Allow teacher layoffs, transfers, assignments, reassignments and reappointments to be based on teacher performance instead of seniority.

Substitute Pay
o Revise compensation requirements for substitute teachers by compensating at the full time reappointment rate beginning on the 22nd day (during a 60-day period) instead of the first day of service.

March 15 deadline
o Extend deadline to notify teachers of layoffs and tenure status, giving school districts more time to evaluate their budget situation and send out more accurate notifications.

Employee Dismissal for Cause
o Give local governing boards more freedom and authority to make staffing decisions by making the Commission on Professional Competence an advisory administrative law judge.

____________________________________________________________________

BIG OUTSTANDING PIECES OF THE PUZZLE

ADDITIONAL CUTS/REVENUES
· Additional cuts in Governor's budget not adopted by dems ($1.7 billion)
· Account for higher than projected revenues - $1.3 billion
· More from Prop 10 & 63 ($1 billion - would require going back to voters)
· Current budget is at least $400 million short of Governor's level (+$500 million phony cuts)
· Additional cuts - LAO letter - $13.5 billion
· QEIA - $450 million

RDA
· Huff compromise
· Overall "hit" to budget, including compromise = $700 million - $1 billion

ENTERPRISE ZONES
· There are potential reforms
· Currently costs approx. $1 billion
· The elimination of Enterprise Zones is a permanent tax increase that the Governor is not sending to a vote by the people.

SINGLE SALES FACTOR/COST OF PERFORMANCE
· Currently costs approx. $1.4 billion
· Could move to seven-year election which does not score any budgetary savings
· Making Single Sales Factory mandatory is a permanent tax increase that the Governor is not sending to a vote by the people.

REALIGNMENT
· Bad policy implications for law enforcement
· Entire budget is based on realignment proposal and saving $5.9 billion by shifting services to the local level
· No plan for how to fund the locals providing the services after the taxes expire
· Must fix 3 crimes

LENGTH OF TAXES
Starting Point:
o 18 months

WHAT GOES ON THE BALLOT?
· Taxes
· Cap
· Pension Reform
· Starting Point:
o No measures tied
____________________________________________________________________

NECESSARY FIXES

PROBLEMS IN THE BUDGET THAT NEED TO BE ADDRESSED:
· Off-Highway Vehicle Trust Fund (siphons $10 million in user fees from designated purpose to GF)
· Maddy Fund redirection ($55 million to emergency medical services)
· Education Protection Account - does not provide equitable funding for charter schools
· K-14 education funding deferrals - any new Prop 98 revenue should first go to unwinding the deferrals (tie to spending cap?)
· Fuel-tax swap - remove hold-harmless provision which does not allow for minimum guarantee to go down despite the loss in Prop 98 revenues resulting from the swap.
· Remove proposed transfer of ratepayer gas surcharge funds to the General Fund - this fund is supposed to pay for grants and rebates, not to support programs unrelated to energy efficiency.
· Fix proposed "tax amnesty" proposal (refunds if legitimate).
· Budget currently repeals SB 863 that provides additional benefit and cover for counties that participate in Williamson Act with landowners.
· Restore Williamson Act funding ($10 million) - commitment to protect for next 4 years
· Remove water fees ($13.5 million) commitment to protect for next 4 years
· Restore funding to County Fairs

OTHER
· Consolidate & move presidential primary up to March
· Azusa Case Fix - court case that applies prevailing wage to all projects within Mello-Roos
· Fixed Price Contracts - grandfather in public work fixed price contracts entered into prior to the tax change



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