Legislative debate to revolve around fiscal crisis
SACRAMENTO, Calif. (AP) – California’s budget deficit appears more manageable than in past years, but the state’s ongoing fiscal crisis will continue to dominate debate over other matters in the Legislature during the coming session.
Whether to delay a vote on an $11 billion water bond, approve online poker, reform public employee pensions, keep state parks from closing or scuttle a bond sale for the state’s high-speed rail project are among the issues that will be considered against a backdrop of lower state tax revenue. Lawmakers will reconvene on Wednesday.
Legalizing online poker and perhaps other forms of gambling as a way to bring more revenue to the state is shaping up as one of the more contentious legislative questions for 2012.
“I’m not a huge fan, but if there really is the potential for hundreds of millions of dollars for education, higher education, health care, then I’m open to it,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento.
He previously put a hold on Senate consideration of two competing bills, including one that would allow online betting on games beyond poker.
Sen. Lou Correa, D-Anaheim, said his SB40 would bring the state an immediate $250 million by requiring upfront payments from online poker operators. Former state finance director Tim Gage projected it would create more than 1,300 jobs and $1.4 billion in new state revenue over 10 years.
Correa’s bill would let every Indian tribe and state-licensed card room operate its own Internet poker site, using the state’s existing card room regulations. It would ban other online gambling, aside from pari-mutuel wagering on horse racing. He has the backing of many gambling tribes and card rooms.
Sen. Rod Wright, D-Inglewood, has a competing bill, SB45, that would allow poker and other forms of gambling online.
His bill would authorize three operators who would give 10 percent of their gross revenue to the state. Online gambling operators backed his bill, but early versions were opposed by tribes and card rooms. An early analysis created for Wright estimated his plan could bring the state between $2.4 billion and $6.1 billion over eight years.
Wright chairs the Governmental Organization Committee, which plans hearings in January with the intent of advancing a bill.
Supporters estimate more than 1.5 million Californians play online poker each week, making the state the nation’s largest online poker market. They want California to act quickly out of fear that Congress could restrict states’ interest in Internet-based games.
Assembly Speaker John Perez is skeptical that expanding gambling would significantly help with the state’s budget problems and said his chamber will wait to see how the legislation develops in the Senate.
While online gambling would add money to the state’s general fund, two other hot-button topics require billions in spending and are being criticized as too expensive for a state facing a $13 billion deficit over the next 18 months.
Lawmakers might consider reducing the cost of what is currently an $11 billion water bond measure scheduled for the November ballot, or even remove it from the ballot altogether. Gov. Jerry Brown is among those who think voters will balk at borrowing that much money, even for water projects and conservation programs.
Steinberg, however, worries about upsetting the bipartisan compromise that was negotiated in 2009 between legislative Democrats and Republicans and Brown’s predecessor, former Republican Gov. Arnold Schwarzenegger. He said doing so would be particularly problematic because any new deal would need a two-thirds vote in the Legislature, requiring some Republican support, at a time when the two parties are finding it virtually impossible to compromise on major issues.
Lawmakers already shifted the bond measure from the 2010 ballot because of the state’s precarious fiscal condition, and Perez said they could delay it again. But he also said the state would benefit from construction jobs that would be created if the bonds were approved.
Some lawmakers from both parties and the nonpartisan legislative analyst also say the Legislature should reconsider spending the $9 billion voters have approved for building a high-speed rail system. The total cost estimate has more than doubled since voters approved the bond in 2008 and now stands at $98 billion.
Lawmakers must approve selling the bonds if the project is to continue. Brown and both Democratic legislative leaders support high-speed rail, but a Field Poll released in December found about two-thirds of California voters want to rethink the borrowing while a majority would reject the spending if given another chance to vote on it.
Meanwhile, state Sen. Noreen Evans said she will challenge Brown’s plan to close as many as 70 of the state’s 278 parks starting July 1, a step intended to save $33 million over two years.
The Santa Rosa Democrat said the targeted parks were chosen without an economic or environmental analysis. She plans to introduce legislation halting the closures until officials analyze the costs and benefits and consider alternatives to closing them.
Lawmakers also will take up Brown’s proposals to reform California’s public employee pension system. Brown wants to increase the retirement age, require local and state government workers to pay more toward their pensions and retiree health care, and place new workers into a hybrid plan that includes 401(k)-style accounts.
Republicans say his plan doesn’t go far enough, while Brown’s fellow Democrats were lukewarm during a joint Assembly-Senate committee hearing this month.
Steinberg called the governor’s plan “a pretty provocative proposal” and said he is reluctant to swap the state’s defined-benefit plan for a hybrid model. Perez said the majority of problems are with local governments, and that most public employees earn a reasonable retirement income.
California provides a guaranteed pension for life for its state government workers and most local government employees, but the system has too little money for the benefits promised to current workers. The California Public Employees’ Retirement System has estimated its unfunded future pension liabilities at $75 billion, although critics say it is actually far higher. A Stanford study says the actual liability is closer to $500 billion.
The state also has $52 billion in unfunded retiree health care costs.
Brown has urged his fellow Democrats to make sweeping changes to the employee retirement system, in part because he wants to ask voters to approve tax hikes next fall.
The distressed economy and struggles for the middle class and working class also are acting as prompts for legislation in the coming year.
Steinberg, the Senate leader, is trying to both improve oversight of banks related to home foreclosures and limit some higher education costs.
He is introducing bills to create an online library of free college textbooks that professors could use to customize their own teaching materials. The savings will help offset recent fee increases that California’s public universities imposed in response to state budget cuts, he said.
“We need to do everything we can with the tools that we have to help middle-class families and students. People are getting squeezed on every end,” Steinberg, D-Sacramento, said in an interview.
He also wants to give distressed homeowners more time to arrange alternatives to foreclosure, such as restructuring their mortgage payments or arranging for short-sales of homes.
Sen. Mark Leno is working with Steinberg to advance legislation that could require lenders to exhaust borrowers’ alternatives before they begin foreclosure proceedings. It would ban the practice of “dual tracking,” in which lenders pursue foreclosures and alternatives at the same time. Borrowers could go to court if the process is abused, where they currently have no recourse, Leno said.
“Millions of Californians are suffering,” said Leno, D-San Francisco. “We won’t see a revival of construction until we see an end to the foreclosure phenomenon because we have not yet hit bottom.”
Michael Belote, a lobbyist for the California Mortgage Association, said erecting barriers to foreclosure would discourage lenders from making real estate loans at a time when the housing market is struggling.
Other legislative debates expected to draw attention in 2012 include:
– Attempts to clarify the state’s 15-year-old medical marijuana law after a federal crackdown of dispensaries. In a letter to lawmakers, state Attorney General Kamala Harris said they must decide if dispensaries and delivery services are legal or if patients must form collectives to grow their own marijuana.
– Plans to protect children from sexual predators after the Penn State University child molestation scandal. Two bills would require coaches, administrators and athletic directors to report suspected abuse, while another would end nonprofits’ tax-exempt status if they conceal the sexual abuse of children.
– Reviewing oversight of the California Department of Transportation after a technician was fired amid allegations that he had faked safety test reports on California bridges and freeways. Lawmakers said they want to examine whether Caltrans cultivates a culture in which workers turn a blind eye to internal problems.
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