Intriguing California Politics for the New Year

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

2014 could prove to be a wild and wooly year politically in California with many changes in the way the state does business. Or it could see many big changes thwarted. It’s an election year, after all, and legislators may be skittish when it comes to backing a big change and then facing voters.

Of course, this is California, so the voters by ballot initiatives could institute big changes themselves.

Let’s take a look a some of the potential items the political insiders will be chatting about during the course of 2014 — by no means an all inclusive list.

Health Care

The biggest policy issue, nationally, at year’s end was health care. Health care will remain a hot topic in 2014. The implementation of Obamacare, the state’s management of Covered California, the consequences on MediCal and the effects on individuals and small business will make headlines – but so too will health care issues specific to California.

Voters in the Golden State will decide on an initiative that would give the state Insurance Commissioner more power to regulate health insurance rate increases, a potentially powerful role considering some of the projected ramifications of the Affordable Care Act.

In addition, voters may also get to vote on lifting the Medical Injury Compensation Reform Act (MICRA) cap to increase non-economic damages from the current $250,000 to nearly $1.1 million, something the medical profession says will increase costs and decrease medical care.

Taxes and Spending

Despite the governor and legislative leadership’s call to hold the line on tax increases and spending both limitations will be challenged. Whether any tax increase comes directly out of the legislature remains to be seen, but there is already movement on the initiative front to raise taxes.

An initiative has been filed to increase cigarette taxes $2 a pack as well as raise taxes on other tobacco products while delivering the money for disease research.

There will be a push for an oil severance tax in the legislature and probably via initiative as well.

With California already leading the nation in income and sales tax rates, success with the cigarette and oil severance tax efforts would boost them to the top or near the top in those categories as well. While there are efforts to increase taxes, which will re-enforce California’s image of a high – probably the highest – taxed state, there is no talk yet of tax cuts despite predictions of state budget surpluses for years to come. The anti-tax side will be playing defense in 2014.

Legislative leaders say they want to watch the spending side of the ledger. There is a spending limit proposal pending for the ballot. But that could be changed. Speaker John Perez is talking about creating a rainy day fund that would funnel any funds above a 6.5% increase from the previous year’s budget into a reserve and/or debt reduction. The appropriateness of 6.5% figure will be debated if Perez moves his proposal forward.

Water

Governor Jerry Brown’s delta tunnel plan could run into a political dam. The potential cost pegged at $25 billion, but possibly jumping to two-and-half times that figure with borrowing costs, could add to the difficulties in making the tunnels a reality.

Then there is the $12 billion water bond scheduled for the ballot that could be intertwined with the delta conversation. The bond can be modified by legislative action and given the controversy that surrounds both the tunnel and the bond, expect changes to be made.

If you’re looking for bi-partisan play in the legislature this year, the water issues may be the ticket. Differences over water tend to be more geographical than ideological, although there is some of that, too, especially over the issue of dams. However, on the tunnel issue, both in the south and the north, location may matter more than party.

High Speed Rail

This is the year that the bullet train starts construction or simply derails. The money is not there to complete the project and a court ruling has set up a barrier across the tracks.

Here’s a thought – dedicate the high speed rail money, whatever there is of it, to solving the water problems of the state. There is more support for that.

Elections

Beside the aforementioned ballot measures, the possibility exists that the monster issue on the 2014 ballot is pension reform. If the proposed reform filed by a number of California’s mayors makes the ballot, an all out political war will take place and the fortunes of government budgets, public employee retirement, and taxpayers will be affected by the election’s outcome.

There also exists the possibility of a second high profile ballot measure if a split roll property tax proposal raising taxes on commercial property were to make the ballot. Many insiders are watching but are not sure that such a proposal would be put forth this election cycle.

However, what are more likely to make the ballot are constitutional amendments to lower the vote for local taxes from two-thirds to 55%. There are a half-dozen such proposals in the legislature and legislative leaders say it’s worth the discussion. Translation: the legislature likely would move the bills to the ballot for the voters to decide.

Speaking of two-thirds, the Democrats will finally have the two-thirds majority in place that they earned last election but were delayed because of politicians jumping from one office to another. Will the Democrats hold the supermajority in the 2014 election or can Republicans grab a couple of seats away?

Another question for the 2014 election is how will the top two primary affect election results? Could we have two Democrats vying for a constitutional office in November? Will the well-known (at least in political circles) Dan Schnur running as a No-Party-Preference candidate for Secretary of State start a new trend of NPP candidates breaking through if he should win?

Many intriguing questions await the California political world in 2014.

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