BILL ANALYSIS �
SENATE COMMITTEE ON VETERANS AFFAIRS
LOU CORREA, CHAIRMAN
Bill No: SB 1505
Author: DeSaulnier
Version: As proposed
Hearing Date: April 26, 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. Proposed amendments by the committee to the bill state
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that California Department of Veterans Affairs (CDVA)
funding shall not fall below present funding levels even if
the shortfall needs to be backfilled from the general fund.
Without these amendments, there is no way this bill can be
considered veteran friendly when it supplants almost
guaranteed general fund revenues with unknown, potentially
unstable revenues. This amendment is meant to at least
stabilize CDVA funding at a minimum level.
Without amendments this bill supplants money to CDVA with
promises of money 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, as is, 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.
2. Proposed amendments by the committee would clarify that
federal per diem payments, Medi-Cal insurance payments, and
member fees are paid into the keep our promises fund.
Without these amendments, there is a question of whether or
not CDVA would endanger its non-general fund monies. Since
this bill creates a special fund within the treasury, and
federal per diem payments and Medi-Cal payments are
reimbursements meant to go to the department for veterans,
it is unclear how the new fund changes these things if it
does at all.
3. The single sales factor has been tried before, but as
pointed out as far back as 2002 by the California Budget
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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.
If passed this bill will take effect on January 1, 2013,
but funding will not be made available until July 2013 for
the 2013-14 fiscal year. Due to the need of passing a
budget in June and changing legislative priorities, it is
conceivable that veterans may never see this money.
4. Proposed amendments by the committee would more
appropriately address the author's concern for filling
veteran home facilities by changing the language of the
bill from "full staffing" to "full licensed occupancy."
Without these amendments 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.
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 California's veterans' 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.
5. Proposed amendments by the committee would strike the
section on construction of the veterans' homes as the
veterans homes were completed on April 20, 2012.
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Without amendments 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.
6. 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. Money directed to DGS for enforcement should be
taken into consideration.
7. Proposed amendments by the committee relieve CDVA of
fiscal responsibility for the new programs in this bill
until the start of the fiscal year if funding actually
comes to the department.
Without amendments 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 it raises the
question of whether or not CDVA will 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?
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8. Proposed amendments by the committee to this bill
relieve CDVA of the financial responsibility for the
veterans grant program if the money for that program does
not materialize.
Without amendments, 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?
9. 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 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
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
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$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.
10. Proposed amendments by the committee in Section 5 of
the bill clean up the language by clarifying that the
department in question is CDVA.
Without amendments the bill is ambiguous as to whether or
not the military department or veterans affairs department
will administer the program. Section 5 of the bill
references "the department", but is placed in a new section
behind those sections that deal with crimes against
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veterans, MIA/POW day, selling of poppies, and groups like
the American Legion, VFW, etc.
The California 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."
11. Legislative Counsel advises that this bill has a
chaptering conflict with AB 1500 (J. Perez) and AB 1913
(Cook).
12. Proposed amendments by the committee chair would
remove the mandatory nature of the single sales factor and
replace it with an option for a company to make a seven
year commitment to either the single sales factor or the
double weighted sales tax formula.
SUPPORT
American Legion, Department of California
AMVETS, Department of California
California Association of Veteran Service Agencies (CAVSA)
California Professional Firefighters
Reserve Officers Association
Vietnam Veterans of America - California State Council
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
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Proctor & Gamble
Senator George Runner (Ret.) Member State Board of
Equalization
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