November 6, 2023
NFIB California Main Street Minute, November 6-10
Welcome to the November 6-10 edition of the Main Street Minute from your small-business-advocacy team in Sacramento.
A Return to Familiar Times- The brief days of getting semi-trailers-full of cash from Uncle Sam (CARES, ARPA) and an even briefer day of the state having a budget surplus are truly gone as this news from last week confirms:
— “Gov. Gavin Newsom and California lawmakers may likely need to address a larger deficit next year than previously forecast due to an ‘increasing likelihood’ that state tax revenue will be significantly below projections, according to the state Department of Finance. The department projected that, because of an unprecedented six-month extension in the state’s tax filing deadline earlier this year, California would collect $42 billion in October … But, as of Oct. 25, California collected just $18 billion, according to new disclosures from the agency,” reported the Sacramento Bee.
- Feel nostalgic no longer, California is back to its days of annual budget deficits and the delicate Kabuki dance of telling people ‘No, we’re broke.’
- So, what does it all mean for small business? Most importantly that ‘No’ the state will be telling everyone has been upgraded to a ‘Fat Chance’ when it comes to doing anything about the state’s $20 billion loan obligation with the federal government over its unemployment insurance trust fund imbalance, meaning higher UI taxes will be recurring into the foreseeable future.
- As the Legislative Analyst’s Office reported in July, “… the state took on about $20 billion in federal UI loans to continue paying UI benefits during the pandemic after running through all of the state trust fund reserves. Under longstanding federal law, when the state has outstanding federal loans, employers pay a payroll tax surcharge that increases each year until the loans are repaid. The surcharge revenue goes into the state UI trust fund where it is first used to pay benefit payments. Any remainder repays the principal on the federal loan. Surcharge revenue are expected to be about $400 million in 2023 and $900 million in 2024, less than the anticipated gap between regular tax contributions and benefit payments.
— “…Meaning State’s Outstanding Federal UI Loan Set to Increase. As the administration expects the underlying gap to worsen faster than the federal surcharge revenues increase, the annual fund imbalance is expected to continue despite federal payroll tax surcharges. Consequently, the administration expects the outstanding federal UI loan balance to increase by more than $1 billion over the two-year period, from $19 billion in 2022 to $20.3 billion in 2024. The state pays the interest on these loans from the General Fund. This interest payment is expected to be about $300 million in 2023-24.”
- So how did we get into this mess? As reported by the California Globe last Tuesday (October 31) “… unlike almost every other state that had unemployment debt at the end of the pandemic, California did not use its ‘leftover’ federal COVID money (remember the $72 billion surplus?) to pay back the debt, a debt that is now costing $867,392 each day in interest alone … The state is continuing to add to the pile of debt because it is not bringing in enough unemployment insurance tax revenue to cover claims being currently paid. So while businesses are paying the increased federal portion of the tax, the state is immediately borrowing that back – and then some.
— “The state will continue to borrow more money for years to come with the surcharge money only going to actually start paying down the debt (maybe) in about three years when the surcharge shoots up to about $273 per employee per year.”
- And to think the Legislature wanted to exacerbate the crisis by extending unemployment benefits to workers who already have a job but wanted to go out on strike. Governor Newsom’s veto of Senate Bill 799 was, debatably, the biggest victory NFIB California, a leading voice in a coalition’s opposition to it, has had in the past decade.
- Don’t forget California has the third highest workers’ compensation costs in the nation, up from fourth highest in 2020. Oregon’s Dept. Of Consumer and Business Services provides this chart ranking the costs in all 50 states. And, speaking of Oregon, the DCBS also announced that pure premium rates for workers’ compensation coverage in that state would drop for the 11th year. Show-offs!
- We’re 48th! All right, it’s not a motivating cheer. It’s where the Tax Foundation ranked the Golden State on its 2024 State Business Tax Climate Index, released October 24. Our tax rates (individual, business, sales, and property) are the feet on Superman’s cape that, along with the third highest workers’ compensation rates and a $20 billion deficit in our unemployment insurance trust fund, are keeping us from soaring in a single bound.
- There will be only one initiative on the March 5, 2023, ballot: Proposition 1, dealing with behavioral health funding and which NFIB most likely won’t take a position on for this reason.
- Didn’t there used to be more initiatives on the Primary Election ballot? “Prior to 1960, initiative measures appeared on general election ballots only,” explains the secretary of state. “From 1960 to mid-2011, initiative measures appeared on primary, general, and special election ballots. As a result of Senate Bill 202 … from July 2011 forward, initiative measures once again only appear on general election ballots.”
- Why the change? According to then-Sen. Loni Hancock, author of SB 202, “Ballot initiatives have far reaching impact on our schools, the environment, and our business community. But few voters get to make that decision under the current process of allowing ballot initiatives be decided in the June Primary Elections. Most initiative states—18 out of 24—do not allow initiatives to be placed on primary or special election ballots because of low-voter turnout in these elections. The problem is clear: primary and special elections draw far fewer voters than general elections, meaning that such elections often do not accurately represent the needs, priorities, and desires of the population at large.”
- The Legislature, however, can still place measures on Primary Election ballots, which it did by combining this year’s Assembly Bill 531 and Senate Bill 326 into Proposition 1. Links to those bills and more about Prop. 1 can be found in this news release put out by the secretary of state’s office.
- For those wanting to get lost in the weeds of California’s initiative process, the University of Southern California’s Initiative and Referendum Institute is one place to start. Simply Googling the terms also reveals a treasure trove of information, but the Main Street Minute warns that further knowledge will not necessarily make you a conversational hit at cocktail parties.
- It’s the juicy watermelon Jolly Rancher editorial writers love to roll around in their mouths the most: the latest study from the Public Policy Institute of California (PPIC). Last week’s PPIC offering, Poverty in California, did not disappoint in flavor.
- “The poverty rate rose from 11.7% in fall 2021 to 13.2% in the first quarter of 2023, according to the California Poverty Measure (CPM), a research effort by PPIC and the Stanford Center on Poverty and Inequality that accounts for housing costs and safety net benefits,” the PPIC study led off.
- The Orange County Register names the culprits for the reason. “The persistently high level of poverty in California is no doubt reflective of many years of policy failings from those at the local and state level.” Click the link to read what, in OCR’s view, the state has done right and wrong.
- “American environmentalists have developed tools to help citizens delay or block development. These tools are now being used against clean-energy projects, hampering a green transition. The legal tactics that allow someone to challenge a pipeline can also help them fight a solar farm; the political rhetoric deployed against the siting of toxic-waste dumps can be redeployed against transmission lines. And the whole concept that regular people can and should act as a private attorneys general has, in practice, put the green transition at the mercy of people with access, money, and time, while diluting the influence of those without.” — Why America Doesn’t Build, The Atlantic, Oct. 27, 2023.
- Northern California Record, November 2—Tim Taylor, NFIB California’s chief policy analyst, discusses the bipartisan support two bills on the state’s water supply have received.
- The Center Square, October 31—State Director John Kabateck makes a prediction on how fast-food enterprises will now have to operate in the wake of Assembly Bill 1228’s signing into law substantially spiking the minimum wage.
- Northern California Record, October 30—Elizabeth Milito, executive director of NFIB’s Small Business Legal Center, tells the publication that Senate Bill 365, which Gov. Gavin Newsom signed into law, will place additional burdens on the courts by taking cases that should be arbitrated and letting them be litigated instead.
- September 14-November 8, signatures in lieu of filing fee period for those seeking elective office
- December 28, Certified list of candidates for the March 5 Primary Election released.
- January. 3, 2024, the Legislature reconvenes.
- February 5, counties begin mailing ballots
- February, last day to register to vote in the March Primary
- March 5, Primary Election Day
- More deadlines here
- On November 3, NFIB Federal Government Relations released the October Small Business Hill Brief.
- On November 2, NFIB Small Business Rundown featured NFIB Research Center Executive Director Holly Wade and NFIB Chief Economist Bill Dunkelberg discussing the 50th anniversary of SBET.
- On October 24, NFIB submitted comments to the House Budget Committee Health Care Task Force request for information on the cause of skyrocketing healthcare costs.
- On October 20, NFIB sent a letter in support of H.R. 906, the Right to Equitable and Professional Auto Industry Repair (REPAIR) Act. This legislation is an important step in safeguarding access to relevant vehicle data needed by independently owned auto repair shops to repair America’s passenger vehicles safely and efficiently.
NFIB is a member-driven organization advocating on behalf of small and independent businesses nationwide.
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