BILL ANALYSIS �
SENATE COMMITTEE ON VETERANS AFFAIRS
LOU CORREA, CHAIRMAN
Bill No: SB 1505
Author: Desaulnier
Version: As amended April 16, 2012
Hearing Date: April 24, 2012
Fiscal: Yes
Consultant: Donald E. Wilson
SUBJECT OF BILL
Single Sales Tax Factor
PROPOSED LAW
1. Mandatory Single Sales Factor tax calculation for
corporations in California.
2. Establishment of a "Keep Our Promises Fund" within the
state treasury.
3. Establishment of a veteran's assistance grant program
EXISTING LAW AND BACKGROUND
1. Until 1993 businesses in California corporations
calculated their taxes with a formula calculated with three
factors - property, payroll, and sales.
2. In 1993, the tax formula was shifted by changing the
tax calculation to double-weight the sales tax - property,
payroll, sales, and sales.
3. In 2009, large corporations with a significant property
and employee presence in California but with many
out-of-state sales were given a tax break that relieved
them of the need to calculate the value of property,
payroll, and out-of-state sales. This advantage given to
those companies who make a small percentage of their sales
here in California is called "the single sales factor."
4. The single sales factor went into effect on January 1,
2011.
5. Several promises have been made to California's
veterans that have been broken.
a. In 2003, California was the last state in the union to
enact an education benefit for its national guard unit.
When California finally passed the National Guard
Assumption Program of Loans for Education (NGAPLE) or NG
Apple as it was commonly known, the program was to benefit
100 soldiers annually. Then the legislature did not make
an appropriation for the program until 2006 and capped the
amount of money, which effectively limited the people to
100 people total before the program was eliminated through
its sunset provision.
b. In 2004, the legislature passed SB 1193 (Soto) that
created a death benefit of $10,000 for those California
National Guard families that had lost a soldier in the war
on terror to help defray the cost of burial. However the
legislature did not pass the appropriation to actually fund
the benefit until later legislation fixed the problem. In
the meantime guard families mourning a loved one were left
holding the bag containing an empty promise.
c. In 2004, the state made agreement with the counties to
fund half the cost of County Veterans Service Officers
(CVSO) to help relieve the backlog of veterans who could
not get their rightfully earned benefits. The state to
this day has never funded that commitment.
d. After many years of work to finally get the state to
honor its commitment on behalf of veterans, the CVSO money
was budgeted for FY 2011-12. The money was one of the
first things cut in January 2011, meaning that once again -
in spite of many years of promises- the state again reneged
on its promises to veterans.
The pattern of California reneging on its promises to the
new generation of veterans is well established.
COMMENT
1. There is no way this bill can be considered veteran
friendly when it supplants almost guaranteed general fund
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revenues with unknown, potentially unstable revenues.
This bill "supplants" money to CDVA with promises of money
from this bill in spite of the fact that bureaucrats are
notoriously bad at projecting the economy because they view
it as static, whether it was viewing the Reagan tax cuts of
the 1980s as revenue losers when they in fact doubled
government revenues in eight years, or as evidenced by the
continual budget shortfalls in the California budget over
the last few years.
In short, this bill asks California veterans to forgo the
money that right now politicians are reluctant to cut in
exchange for promises of possibly more money by people who
have continually failed at their jobs for the last three
decades. The effect could be potentially devastating to
veterans.
One in the hand is worth two in the bush.
AMENDMENT - Any revenues generated by this bill shall be
additional to, and shall not supplant, existing funding for
the California Department of Veterans Affairs or any of its
programs.
2. The single sales factor has been tried before, but as
pointed out as far back as 2002 by the California Budget
Project this sort of legislation picks winners and losers
in the business world. Veterans' supporters should be very
leery of setting the precedent that controversial
legislation can get a free ride, or put over the top,
simply by making potentially empty promises to veterans.
To get this tax increase passed takes a 2/3rds vote, but
under Proposition 25 to take the money away from veterans
and redirect it in future years will take only a majority
vote.
3. Proposed section 90.5, subsection (b)(1) of this bill
dictates that CDVA "shall" achieve full staffing at its
veterans' homes. This, in effect, does nothing. By law
CDVA already has full staffing required from a myriad of
federal and state laws.
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If what the author intends is to have every home filled to
capacity, then the issue is budgeted beds. Budgeted beds
are fully staffed, but our homes are not filled to their
capacities because the state does not budget enough beds to
fill up the facilities.
If the author's intent is to budget enough beds to fill all
facilities, then it will not be enough to simply state that
the department shall do it without an additional funding
source. So page 3, lines 31-33 of this bill either do not
do anything, or if amended correctly, need a funding source
on top of what the department already receives.
AMENDMENT- SEE RECOMMENDATION IN COMMENT #1
4. Proposed section 90.5, subsection (b)(2) states that
CDVA shall allocate money to "complete construction" of the
veterans' homes in Redding and Fresno starting in fiscal
year 2013-14. Both Redding and Fresno are due to finish
construction by April 20, 2012. So, in effect, this
section of the bill does not accomplish anything for
veterans.
5. Proposed section 90.5, subsection (3) would allocate
$100,000,000 to the California Capital Access Fund for
funding small business loans to veterans.
One of the dynamics that has become apparent in the
disabled veterans business enterprise (DVBE) program is
that just because one has carried a rifle in combat does
not mean that individual knows how to run a business or get
a state contract. The author may wish to also allow that
money to be used to train veterans on how to run a business
or, at a minimum, be trained on how to acquire state
contracts.
Additionally, the Department of General Services (DGS) does
not have enough personnel to continually weed out false
DVBE businesses. These businesses then take business away
from legitimate DVBEs when contracts are awarded to the
false DVBE. One way to help existing DVBEs survive is to
make sure they get the business for which they legitimately
compete.
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6. This bill creates the Veterans Assistance Grant Program
but does not fund it until fiscal year 2013-14. If this
bill passes and goes into effect on January 1, 2013, which
is fiscal year 2012-13 will CDVA be in violation of this
newly passed law if it does not have the money to fund the
new program out of existing funds? What happens in the
meantime until FY 13-14 is reached?
7. Aside from the question of how to fund the Veterans
Assistance Grant Program for FY 2012-13, how does the
department fund the program if funds are supplanted and
projections from this bill are not achieved?
AMENDMENT- SEE RECOMMENDATION IN COMMENT #1
8. Section 4 of this bill seeks to repeal part of the 2009
budget act and reset the percentages paid for by residents
of the state's veterans' homes.
It is not clear what the purpose there would be in
resetting the percentages for the domiciliary, residential
care for the elderly (RCFE), intermediate level, or skilled
nursing care levels. Unless the author wants to make the
argument to increase fees, which seems to be against the
intent of this bill, percentages for these levels of care
should remain the same as they are in code now.
Before the 2009 budget act passed, residents of the homes
were charged a percentage of their income up to a capped
dollar amount. Although a means test is a consideration
for entry into the homes, there is no absolute means test.
This created a two-fold concern.
a. Veterans who did not need to live in the home were using
the home to build their own assets as the state subsidized
them.
b. Veterans who were in desperate need of admittance to the
homes could not get in because all budgeted beds were full.
The old fee structure was as follows:
Domiciliary Care - 47.5% percent of income capped at $1,200
per month.
RCFE level of care was added in 2009 at 55% percent and
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never had a cap.
Intermediate Care - 65% percent of income capped at $2,300
per month.
Skilled Nursing Care -75% percent of income capped at
$2,500 per month.
When the caps were lifted, some senators got calls
complaining that their constituents' fees had more than
doubled or even tripled. One resident complained that his
fees had jumped from $1,200 to $3,900 per month. If this
was indeed true, that resident had to be clearing $8,200
per month (or $98,000 per annum) in retirement, which
raises the question as to why the state was subsidizing
that person in the first place - veteran or not-in order to
help him accumulate more wealth.
Another change made in the 2009 budget act was that
non-veteran spouses would pay 90% of their income to stay
in a state veteran home.
In 2005 veterans at the Yountville home brought to the
attention of the Senate Veterans Affairs Committee the fact
that certain spouses were occupying residences on the
campus that prevented -on a long-term basis- entry into the
home by veterans. Older residents of the home were
marrying second spouses much younger than themselves
meaning that a spouse that not only was not a veteran but
had never been with the veteran during his or her time of
service would occupy a residence in the home for ten,
twenty, or thirty years after the veteran passed; thereby,
denying a veteran entry into the home.
Since 2009 new veterans who want to live in the home with
their spouses must have the spouse pay 90% of his or her
income to the home for being a non-veteran. The issue of
how widowed, non-veteran spouses differs from non-veteran
spouses domiciling with a still living veteran has not been
publically discussed by this committee.
9. Section 5 of this bill defines a "qualified entity" for
purposes of the section. Veterans' advocates may wish to
give prioritization to qualified entities that actually
serve veteran populations.
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AB 1378 of 2010 (V. Manuel Perez) was authored because
workforce investment act dollars (WIA) intended to help
retrain veterans was awarded to groups that claimed to help
veterans but did not have veterans to serve and/or had no
experience serving veterans. The result was that out of
$12.7 million dollars that was purportedly intended for
veterans through WIA's gubernatorial discretionary funds
only $1.7 million went to organizations that emphasized
service to veterans.
RECOMMENDED AMENDMENT - A new subsection (b) under proposed
section 1851 that reads "Qualified entities shall be
prioritized for reimbursement according to the percentage
of veterans and veterans families in the population
served."
E.g. - A qualified entity that has a 100% veteran and
veteran family population will be prioritized for
reimbursement over a qualified entity that serves 300
people with only five veterans in its target population.
10. Section 5 of the bill references "the department", but
is placed in a new code behind the sections those that deal
with crimes against veterans, MIA/POW day, selling of
poppies, and groups like the American Legion, VFW, etc.
The Military and Veterans Code has jurisdiction over two
different state departments - the California Department of
Veterans Affairs and the California Military Department.
Clean up language is therefore needed to specify that "the
department" is the California Department of Veterans
Affairs, or this section needs to be moved in the code to
chapter six "State Benefits for Veterans."
RECOMMENDED AMENDMENT - Specify that the department in
question is CDVA and move this section to the more
appropriate chapter. At a bare minimum, clarify the
department in question.
11. Legislative Counsel advises that this bill has a
chaptering conflict with AB 1500 (J. Perez) and AB 1913
(Cook).
SUPPORT
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California Association of Veteran Service Agencies (CAVSA)
California Professional Firefighters
OPPOSE
Alliance of Automobile Manufacturers
California Asian Pacific Chamber of Commerce
California Chamber of Commerce
California Manufacturers & Technology Association
California Taxpayers Association
Compliance News (A DVBE company)
Chrysler
General Motors
Howard Jarvis Taxpayers' Association
International Paper
Kimberly-Clark
Paving Net and Contractor Supply
Proctor & Gamble
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