Assembly Standing Committee on Revenue and Taxation

All right. Good afternoon and welcome to the final hearing of the Assembly Committee on Revenue and Taxation. Before we take up the bills on our agenda today, I again remind everyone in the audience and Members of the public that the Committee is not accepting remote testimony. As always, we are accepting written testimony through the position letter portal on the Committee's website. A couple of quick announcements. File item one, SB, 588, Allen, has been pulled from today's hearing by the author.

Additionally, file item nine, SB, 89, by the Committee on Governance and Finance is a proposed consent item. We have reinstituted our Suspense file this year. Bills with a fiscal impact of plus or minus $150,000 will be referred to the Suspense file at the end of their presentation. We will start today's hearing by taking up bills under regular order of business. Then we will take up the Suspense file, including bills that were referred to Suspense in the first portion of today's hearing.

In addition to the consent calendar, three bills on today's agenda are eligible for a vote during the regular order of business. File item five, SB, 335, Cortese. File item seven, SB, 869, Laird. And file item eight, SB, 82, Seyarto. Looks like we have a quorum. Mr. Ref, please call the roll.

Irwin. Here. Wallace, Here. Baines, Here. Grayson, Here Pacheco, Here. Patterson. Petrie Norris. Rivas. Ta, Here. Valencia. Zbur.

All right. Do we have Alvarado-Gil? Here. Do we have Senator Alvarado-Gil Here? Oh, there you are. Good afternoon.

Good afternoon. Thank you, Madam Chair and Members of the Assembly. Senate Bill 624 is a critical piece of legislation that will provide California Fairgrounds the financial relief that they so desperately need. The Bill would increase a percentage of the Department of Food and Agricultural's budget dedicated to Fairgrounds from 34 of 1% to 3.5%. As currently written.

Senate Bill 624 would cap the CDFA's administrative costs associated with the allocation of funds generated by the Fairs and Exposition Fund at 2.5 million or 5% of the total funds, whichever is greater. However, should this Bill pass Committee, it will be amended to strike that provision because CDFA recently received permanent additional funding through the budget which they intend to use to cover these costs.

California's network of fares are critically underfunded and are in need of repairs to their infrastructure and emergency management facilities to support projects involving public health, safety and deferred maintenance. Here to testify and support are Sarah Cummings from the Western Fairs Association and Marianne Warmerdom from RCRC. The Rural County Representatives of California.

Hello, thank you for having us, Chair and Committee. We appreciate the opportunity to speak with you today. Our Fairgrounds are assets to the State of California and the local communities in which they serve. They provide a statewide network in times of crisis and in times of celebration. This funding will allow infrastructure improvements that are so desperately needed and General upkeep on our aging Fairgrounds across the state.

The ability to properly upkeep, in turn, allows us to prevent potential liability and to create desirable and fully functional Fairgrounds across the State of California. This increased functionality and desirability also allows to serve our local communities in increased ways and allows for sustainable business models for our Fairgrounds moving forward.

It supports and encourages incubation of small businesses across these Fairgrounds, many of which serve as incubator communities, incubator properties for small businesses to get their start throughout the State of California, which is an important element of our annual year round Fairgrounds business. The increased funding will also allow for ongoing revenue generation on Fairgrounds, which will sustain this funding mechanism moving forward and again bring strong economic impact to our local communities and the state.

So with this funding, we can work on getting back on our feet after the pandemic and continue to serve the State of California and our local communities to the best way possible. Thank you.

Madam Chair Members. My name is Mary Ann Wermerdam. I'm with RCRC. We represent 40 rural counties in the State of California, and I think that we would reiterate everything that my colleague Sarah has stated here today. Just wanted to reiterate a couple of points. One, the importance of these facilities is community facilities. Whether they're cansoras or local crab feeds or the FFA trying to provide a home for their animals for a minimum period of time during the Fair itself. It's really a community resource.

And I think the thing that we don't always appreciate in normal times is the role these facilities play in meeting natural disaster. They serve as operational centers for rural counties or rural communities where they have horses and other livestock as part of their way of living. It provides a place to house those animals during a fire or other natural disaster. So they're very, very important to the community.

SB 624 is of great interest to us in that it will help continue to provide some level of financial support to these community assets. That has gone by the wayside since about 2011, when we made some very drastic changes to how we funded our Fair facilities. So we think this is a good start to providing some level of consistent funding to our Fair facilities.

It allows our Fair managers to start looking at how they can upgrade the facilities and truly make them long term assets for the communities. So with that, Madam Chair Members, we respectfully ask for your aye vote.

All right, thank you. Do we have any other witnesses to speak in support?

Catherine Freedman with the California State Association of Counties in support. Thank you.

Any other witnesses in support? Witnesses in opposition? Are there questions or comments from the Committee? All right, so this Bill increases the percent of gross receipts significantly. How did you get to this number?

Well, I have in Senate district four. I represent 13 counties. So you can imagine that's a whole lot of rural county fairs. So I have been on the campuses throughout my tenure here and have met with the boards, with the fair managers, with Members of the community. And simply the amount that was allotted in previous legislation just simply is not enough. So in post pandemic normal, the facilities became the hub for emergency services. And as we're seeing more of extreme weather patterns, the need for upgraded facilities and just basic infrastructure has been underscored.

Thank you very much. Senator, would you like to close?

I just want to thank all of you, encourage you to visit your local county fair. There are some young people doing great things through the four H program and through FFA catch that Livestock option. Encourage our young people to continue getting connected in their communities. A lot of fun, fair food. But the most important thing is you see community come together. You see families come together to celebrate once a year, but the community does so much more at those facilities.

So I encourage you to stay connected with your county fair boards and learn some amazing things about your community. Thank you. I urge an Aye vote when appropriate.

Thank you very much. And without objection, this Bill will be referred to our Suspense file.

Thank you.

Thank you. All right, do we have Senator Becker here? Yes.

Next up is file item three, SB 49 by Senator Becker. Sure. Okay, that's file item four, SB 512. Good afternoon, Senator Bradford.

Thank you.

Thank you, Madam Chair. I'm here to present SB 512, which would exclude the state's cannabis excise tax as well as other local taxes from the definition of gross receipts under the Sales and Use Tax law. Additionally, this Bill would prohibit local jurisdictions for the purpose of their own local tax from including the state's excise tax in their definition of gross receipts.

High taxes, excessive regulatory hurdles, and various difficulties that cannabis businesses experience have done little to help grow the market of legal cannabis and help them succeed in a way voters had intended when they passed and voted for Prop 64 in California. Today, two out of every three cannabis purchases are made on the illegal market, and the numbers are only getting worse.

As the Committee analysis notes, cannabis tax revenues have been going down even prior to the tax restructuring we did last year with AB 195. In May of last year, there were close to 1500 brands in the market. Now they're less than 1000. Taxes remain incredibly high, and the relief provided by AB 195 does little to help the consumers and drive out the listed market.

Compounding these taxes leads to an overly inflated price and incentivizes consumers to buy illicit cannabis that is unsafe, untasted, and untaxed. This only exacerbates the continued struggles of cannabis retailers who are trying to do the right thing, but are facing what many in this industry are warning is extension event by making these clarifications SB 5112 I'm sorry SB 512 will help remedy the situation by ensuring taxes are calculated on the actual goods being used. And so this Bill has received bipartisan support.

And with me today to provide testimony is Jared Kilo, President of the United Cannabis Business Association, and Kika Keith, owner of Gorilla RX Wellness in Los Angeles. I thank you and I respect that for your vote.

Thank you everyone for the opportunity to talk today. Jared Kylo UCBA the saddest part about today's Committee hearing is the cannabis industry is begging for crumbs today. We should be demanding more equitable taxation that's commensurate with the representation we receive and the services that could support and uplift public safety. We are pleading for people to listen that this is an unsustainable path for California cannabis.

$1.0 billion a year is collected in taxation and the fact that we still don't have the proper enforcement tools to reduce the growth of the illicit industry is one of the biggest problems today. You will see that there is a one pager here that you may have received. The fact that 37% more retailers is now bringing in 42% less tax revenue is showing you that we are not going in the right direction, that we are not seeing a flood of demand for existing retailers.

We tinker with a seriously flawed Prop 64 every year and we keep coming back here nipping at the edges of what needs to be done. AB 195 changed the collection calculation, the participants in the taxing structure and in doing so it changed the definition of the state's 15% excise tax from a wholesale tax, which was 26% in 2022, to a gross receipts tax which now has a 30% wholesale tax in 2023.

That 4% increase in moving the collection to retail is just one of the three new tax increases that AB 195 enacted. Those changes were drastic and for an industry that sees drastic changes every year, it wasn't felt until the first quarter of 2023 when hundreds of licensed taxpayers didn't file. Was it because they couldn't afford it? Or was it because the conflicts with existing local and state tax laws left them paralyzed with fear of doing something wrong?

Because the consequences that follow are quite drastic a 50% penalty from the state if you are late on your taxes and a late fee and a loss of license locally if not paid in 90 days. SB 512 is cleanup Bill to clarify the application of our excise tax and the definition that was changed under AB 195. This should be normal cleanup duties when major overhauls are done to a system this complex, all of the tax conflicts we are discussing affect the customer directly.

Please try to imagine explaining this tax structure to a customer about why we have to charge a 16.5% excise tax. Because the state's excise taxes, the local gross receipts tax and the local gross receipts taxes the state's excise tax. So I need to charge you the customer. 12 point 99%. This is becoming arduous, to say the least. I really hope that we understand that we're just looking to clean up currently where AB 195 created local and state conflicts.

And I'm hoping to get your I vote today, or at least move this through Committee so we can have this discussion on the floor.

Thank you. Next witness.

Good afternoon, the honorable Members. Thank you for the opportunity to speak today. My name is Kika Keith. I'm the proud owner of Gorilla RX Wellness Co. The first black woman owned social equity retailer in Los Angeles. And as the co founder of the Social Equity Owners and Workers Association, my story is representative of hundreds of equity retailers across the State of California. My pathway to licensure in Los Angeles took over 1730 days and costs over $350,000 in rent before I ever opened my doors.

Unlike well funded large cannabis companies, social equity operators lack the financial resources to withstand these prolonged delays and expenses. And for those of us who are fortunate enough to open the doors, we certainly were not prepared for the uncalculated double taxation. Madam Chair, Proposition 64 has regulated retail dispensaries in a stranglehold.

It is one thing to be taxed at the highest of any industry, but the double taxation is robbing the livelihood of hardworking men and women who made a choice to abide by the laws of this land come out of the shadows and trailblaze in this industry. The very voters that came out in record numbers to legalize cannabis are now forced to go back into the illicit market to afford their cannabis.

If you take a look at this reference document that I gave you, on the back is an actual customer receipt. A customer spent $300 on their weekly medicine and had to pay $115 in taxes. Madam Chair Members, why would that customer come back to my legal store? They don't. The impact is even greater to my employees. I've created over 30 plus jobs in my underserved neighborhood in South Central Los Angeles. Now take a look at the front sheet.

These are my actual financial statements from less than one year of operations. I paid over half $1.0 million in taxes. This unfair tax burden has direct consequences to my employees who come from my community who are already underserved. I'm not able to pay them living wage taxes, 401 KS, health care. With these taxes, I cannot afford it. We are here before you today with one simple request eliminate the double taxation. The State of California and local jurisdictions are taxing the tax.

Just take a look when you have a moment at the numbers in red. You'll see how the tax is being compounded one after the other. So if we don't have some time for some type of relief, our customers will be driven back to the illicit market. More legal dispensary doors will close this year, and the destiny for social equity retailers like myself is even more daunting. Please provide retailers a little relief and eliminate the double taxation. Support SB 512.

Thank you very much. Do we have any other witnesses in support in the room? The.

Understand. Greetings. Ignite Daniel, representing Life Development group Gorilla RX. Go Verde Incubator. It is an incubator for social equity applicants, flower Policy Equity United, and a host of other social equity applicants that is in support of this Bill.

Sheila Barome here on behalf of Life Development Group and COA. I'm here in support of SB 512.

I'm Dale Geringer for California Normal, representing California cannabis consumers for 50 years, in strong support of ending double taxation.

Thank you, Madam Chair Members Random Martin, on behalf of the parent company, in very strong support of this important Bill. Thank you,

Madam Chair Members, Eddie Franco, Director of Policy for Nabbis Distribution here for my company, as well as the Vice President of the CCIA, in support. Also here as a board Member of the Cannabis Distribution Association, in support. And I will just quickly relay some other organizations who I am not part of, but have sent their support.

And I wanted to relay on their behalf the United Cannabis Business Association, Long Beach collective Association, San Francisco cannabis retailers alliance, Coachella valley cannabis alliance network, California minority alliance, Angeles emeralds social equity, Los Angeles Silicon Valley cannabis alliance, and Montebello Cannabinoid Business Association, thank you so much.

Madam Chair Members, George Miller, on behalf of Weed Maps in support. Thank you.

Sarah Nocito, on behalf of Origins Council, in support.

Chair Members Alicia Priego on behalf of the California Cannabis Manufacturers Association, in support.

Richard Miller, medical cannabis patient here in California, and asking you to please support this so our medicine could be affordable. Thank you.

Pamela Lopez on behalf of Jeter, in support.

Thank you. Do we have witnesses in opposition?

Hi, My name is Ajiwa Archiano. I'm here on behalf of Youth Forward. As Youth Forward, we oppose this legislation because of its impact on critical funding streams for care youth, substance use prevention, and for environmental restoration of land and water damaged by illegal cannabis grows.

Last year, the cannabis industry was successful in having the cultivation tax eliminated. Now the industry is asking for another tax reduction which will further impact these critical funding streams. I would also like to point out that while the industry argues they need tax cuts to reduce the illegal market, the state and local governments currently dedicate a large amount of cannabis tax revenue to enforcement activities designed to reduce the illegal market.

The Prop 64 Grant program, managed by the Board of State and Community Corrections, recently awarded $100 million to local governments to reduce the illegal market. Youth Forward has conducted an analysis of how local governments are spending their local tax revenues, and across the state, we are seeing local governments use these revenues for law enforcement and to close down illegal businesses.

In closing, I think it's important for us to remember that when voters approved Proposition 64, they did so with the understanding that cannabis would in fact, be heavily taxed and that revenues from these taxes would go to support prevention and use services. We ask that you support the will of the voters and reject this legislation.

Thank you, Madam Chair Members, Dr. Lynn Silver, pediatrician representing the Public Health Institute and clinical Professor at UCSF. There are many reasons to oppose this tax cut.

First, cannabis taxes were just substantially cut, diverting General Fund Dollars to COVID support to children and youth. CDTFA estimates new ongoing revenue loss of $148,000,000 from SB 512. This is revenue for children and youth living in poverty, children of color, and communities still impacted by the previous discriminatory drug policies it pays for preventing youth substance use and desperately needed childcare slots. SB 512 will increase cannabis profits by depriving children of safe spaces and their parents of their ability to contribute to the workforce.

At a time of skyrocketing deaths from overdoses and youth mental health crises. This is an exceedingly unwise cut. Second, our cannabis policy should seek to establish a legal market while not driving up consumption. Yet as the price of an intoxicating dose of cannabis has plummeted, daily or near daily, adult use in our state has tripled. ER visits are up 75%, and cannabis use during pregnancy associated with significant harm to the developing child has almost doubled.

Third, this cut will not be effective at eliminating the illicit market driven largely by vast overproduction and export. 2022 cuts did not increase legal sales as touted, nor will these. Fourth, legal analysis by attorney Michael Colintuno provided to the Committee concludes that the proposed changes are inconsistent with the letter and the intent of Proposition 64 and therefore impermissible amendments. Fifth, California's cannabis retail sector is not failing. Licensed retailers grew 31% in 2022 alone. 90% of storefronts, unfortunately, are not equity licensees.

Yet all storefronts would profit equally from these blunt reductions. Changes to cannabis taxation should be guided by principles of revenue neutrality or increase equity and preservation of voter defined dedications. SB 512, unfortunately, respects none of these. While the current law may be confusing, we believe this is an issue for CDTFA to resolve through its expert guidance in implementation. We ask the Committee respectfully to put children first and vote nay. Thank you.

Thank you. Do we have any other witnesses in opposition? So just one question. Given the state did comprehensively reform cannabis taxation just last year, and we have very little information in on how effective that was, why should we consider these changes so shortly after that reform passed?

We took $143,000,000 cultivation tax out of it and added $240,000,000 in new taxes under AB 195. By not only compounding local taxes, delivery fees, but also increasing the base on the wholesale pricing. So we can talk about that this lowered cannabis taxes, but it just didn't.

I can show that in every single report we have, every single receipt you've seen, you see at least three here that show that in 2022, there was a cost of $54.45. And now in the City of Los Angeles. The exact same product in 2023 is $63.81. If you show me where the tax reductions are, then I will show you that more people will be coming my doors. But when there's this large of an increase, it's sticker shock to most of my customers.

We just have one quarter worth of data currently then from the reforms. Right. And what you're saying is what that data is showing?

Well, what we're saying is it didn't just decrease taxes. I mean, when you look at the increases that were there, we can wait more quarters, but we have almost 300 retailers who have not filed taxes. They are failing.

And so if we're going to wait for another 300 to fail next quarter, I think that's a slippery slope that I don't think we can go down. So I'm hoping that we see that we didn't maybe do the purpose and intent of AB 195. I think definitionally. We changed excise tax to gross receipts and included a whole new base of items. We're charging 15% excise tax on.

I think some of the definitions of excise tax saying they did not change under AB 195 is disingenuous since it added a bunch of new items to the base of the tax. And I think that should be at least recognized that that's where the increase came from.

All right, thank you. Do we have questions or comments from the Committee? Senator, would you like to close? Thank you.

And I didn't come to the Legislature to advocate as much as I have over the last six years on cannabis, but I saw the great need after the passage of Proposition 64. I have spent the last six years visiting operators like Ms.. Keith and so many others across the state. And their story is the same. They're struggling. They're struggling to survive. And as I've visited all these legal facilities, I've encountered more illegal facilities and they sprout up by the day.

And what we're hoping to do is reduce the retail price so we will drive up revenue for these legal operators because right now the illegal market is flourishing all throughout LA County, and I hear it all throughout the State of California. So this is a common sense measure that we feel will protect the programs that Prop 64 promised. As we all know many times on propositions, we think we understand all that's involved with it.

Yes, everybody was for legalizing cannabis, but people didn't read the fine print. Most voters don't. And that's what these operators are encountering right now, the fine print that really is making it almost impossible to survive here. The folks who are thriving are the outside venture capitalists from Canada and other states who are investing in California and not the folks who have lived here and want to earn a legit living and more.

So the customers who need their medicine and now are paying sometimes as much as 37% more for the same product that they were buying three or four years ago. So it's a common sense measure and I respectfully ask your I vote at appropriate time.

All right, thank you very much and without objection, this Bill will be referred to our Suspense file. Do we still have Senator Becker here? Yes. Okay, so file item three, SB 49. Senator, whenever you're ready. It's. Good afternoon, chair Members.

California needs to build more than 100,000 megawatts of new solar generation. So for perspective, that's three times what's been installed in the history of our state, along of course with the transmission to get it where it needs to go. This bill supports solar power as well as transmission lines that avoid construction on undeveloped or agricultural land with two approaches. The first part incentivizes solar canopies over parking lots or school lunches. For example, by offering a 5% investment tax credit for solar canopies paired with energy storage. Los Angeles County alone is an estimated 101 square miles of parking lots that could be generating a lot of local energy. And putting solar in parking lots statewide could generate 13,000 megawatts of new solar energy without needing any additional land. That's more than 10% of the state's need for additional solar. Besides parking lots, these can be built over school lunch areas, playgrounds at parks and make space better by providing shade. However, these are expensive to build, and more expensive in fact, than rooftop solar. And now the state has gotten rid of net energy metering. Effectively, the incentives to build solar canopies are much lower than before and there has not been a lot built to date. So we're not going to make use of all that parking lot space to generate solar energy unless we help make the economics work. The 5% investment tax credit proposed in this bill is a modest extra incentive to help get more renewable energy built, support clean energy jobs and provide shade for cars and trees. Just quick note, this is again only available for solar canopies that are paired with storage, and that's important because it can help our grid avoid blackouts. Right now, the state is spending billions of dollars of taxpayer money to purchase fossil fuel-powered backup to keep the lights on because we're worried about not having enough power for those evening peaks. The second part of the bill directs Caltrans to develop a strategic plan for making unused land within highway right of ways available for renewable energy generation, energy storage, and transmission lines. The state owns all this land already, so why not put it to good use? This part of the bill is mostly outside this committee's focus, but I just want to point out that other states earn revenue from leasing land in their rights of way to solar developers. So this effort could be a money maker for the state. In addition to helping us meet our clean energy goals with these two approaches, we will get more renewable energy built, support clean energy jobs, provide shade for our cars and kids and even earn the state some extra revenue. I strictly ask for an I vote at the appropriate time. And with me, I have Steven King from Environment California.

Good afternoon, Ms. Chair and members. I'm Steven King, clean energy advocate with Environment California, and we're pleased to sponsor this important bill with Senator Becker. Last week's string of record-breaking global temperatures is an urgent reminder that we must accelerate our transition to clean energy like solar power. We need a lot more solar panels producing clean, renewable energy in California if we want to avoid the worst impacts of climate change and meet our state's clean energy requirements. California has ample space in areas that are already developed, like parking lots and the rights of way alongside our highways that can accommodate solar power quickly with little controversy. SB 49 will help address our state's urgent need for more clean energy generation by incentivizing solar canopies over spaces like parking lots and school lunch areas with a 5% tax credit, and by having Caltrans develop a strategic plan for making unused land alongside the highways available for solar generation, energy storage and transmission lines. This bill will unlock the solar potential of California's sprawling concrete jungle, turning sunny paved areas all across the state into more comfortable shaded spots that can produce clean energy. By going solar over parking lots and alongside highways, we can avoid many of the challenges and delays associated with siding, permitting and building clean energy infrastructure, because these areas are generally located near existing transmission lines and they're in areas that have already been disturbed. Investing in more clean energy with the help of this bill and its modest tax credit will pay dividends in the future, strengthening California's electric grid and allowing us to phase out dirty gas power plants that pollute our air and exacerbate our warming climate. We have the ability to build a lot more renewable energy in California, and uncontroversial spaces, including parking lots and highways, should be a big part of the solution. Thank you so much for your time, and I respectfully urge your aye vote.

Thank you very much. Are there any other speakers in support?

This is Janet Cox speaking in support for Climate Action California, 350 Bay Area Action, the Ventura County Climate Hub and several others. Thank you very much.

Patrick Welch, California Municipal Utilities Association, in support.

Cynthia Shallot for Indivisible California State Strong, representing 80 chapters up and down the state. In support.

Samuel Goodman here on behalf of Kim Stone of Stone Advocacy, representing the California Solar and Storage Association, in support of SB 49.

All right, any speakers in opposition? Comments from the committee? Assemblymember Petrie.

I'll just say I really appreciate the creativity of the solution. I think in both aspects of the, you know, hope that we're able to find the resources this year to make this happen. So. Thank you, Senator. Thank you.

And we've had some discussion on first of all, I want to say I think this is really important policy, and especially the portion of coming up with a strategic plan and figuring out how we get this done. And I like, of course, and I think it's really important that it's matched with storage. Also, we do have the committee analysis raised some concerns about implementation with the tax credits. Have you considered doing a grant program? Because I think it's crucial that the policy move forward. But tax credits are... it is very difficult to move them all the way through the entire process. So what are your thoughts about looking at funding via a grant program?

Thank you. And we are open to looking at that going forward. I mean, I'll tell you the reasons we did not do it initially. Number one is grants rebates can run out. And so what developers want is certainty. So, hey, if they're going to do this, that their credit is going to be there. And so sometimes with grant programs, you just don't know. With my own home, with building decarbonization, just didn't know if the tech rebates were going to run out before you got your equipment installed. And then, second, solar projects have long been supported by federal tax credits. So developers are used to this approach and have a process set up for handling, including third party ownership approaches that do allow savings to be passed along to the end customers in the upfront price, rather than requiring the end customer to pay the full cost up front and apply for the savings later. So those are the two reasons why we didn't pursue it, but we're certainly open to looking at it going forward.

All right, well, we certainly appreciate you and without objection, this bill will also be referred to... oh, I am sorry, would you like to close?

Respectfully ask for your aye vote. Thank you for the discussion.

Thank you very much. And this bill will be referred to our suspense file. Senator Cortese here. I love that all the Senators are here. We're trying to move through this as quickly as possible. All right, this is file item five, SB 335 by Senator Cortese. Senator, please begin when you're ready.

Thank you. Thank you Madam Chair and members. We appreciate you allowing the presentation of SB 335 at this time. And I want to thank the chair and the staff for their diligence. I will be accepting the committee amendments. The bill would grant the County of Santa Clara temporary authority to give voters the option to raise local taxes until December 2028. Existing law allows local jurisdictions, including cities and counties and some special districts, to collectively levy local sales tax up to a 2% limit. SB 703, signed into law in October of 2017, granted the County of Santa Clara authority to propose a new or increased sales tax of 0.625% even if the combined local sales tax would exceed the 2% cap. That bill sunset it in 2022 without a proposal being placed on the ballot. So SB 335 would simply give the county that same authority an extension, so to speak, until 2028. During the COVID-19 pandemic, the county invested well over $1 billion into response activities to protect community health, much of which will not be reimbursed at all or may take many years for reimbursement. Moreover, the impact of inflation and flattening revenue are creating a substantial budget deficit. Unfortunately, forecasts predict an even greater shortfall the following budget year. At the same time, community needs are only expected to rise in the coming years, as we all know, particularly if economic conditions continue to worsen. Equity is central to the county Santa Clara's mission. I know that, having served there myself. The core function of the county is to provide safety net services to disadvantaged communities. Dedicated revenue for county services would disproportionately benefit lower-income individuals, communities of color, unhoused residents, and other vulnerable community members. If placed on the ballot and approved by the voters, any new sales tax revenue would be used to address local priorities, such as supporting housing services for unhoused residents, behavioral health, trauma and emergency care for the community and public safety services. With us today to testify is David Campos from the County of Santa Clara. And with that, at the appropriate time, I would respectfully ask for your aye vote.

Thank you very much, Senator Cortese, Madam Chair, honorable Members of the Revenue and Taxation Committee, I'm David Campos, on behalf of the County of Santa Clara. SB 335 is simply about giving the Board of Supervisors the ability to go to the voters and ultimately have them decide whether or not to increase sales taxes in the county up to 0.625%. As Senator Cortese, who is a former supervisor, noted, the County of Santa Clara is facing economic challenges. There is a great deal of economic uncertainty, and we're not the only local jurisdiction that is facing that as we are still coming out of a pandemic. We in Santa Clara spent more than $1 billion in response to the pandemic. And while we're proud of the work that we did that, we're still waiting to receive reimbursement from the federal government, and as you can imagine, that takes some time. And as we're doing that, we're still having to serve as the safety net to the most vulnerable of our 2 million residents. We're talking about individuals who deserve and need health care, people who are homeless, people that require additional services in behavioral health. We are that safety net. And as we face the prospect of having to cut those services, we believe that it is only fair that we have the ability to ask voters in Santa Clara to decide whether to raise sales taxes so that we can cover those basic services. I'm here on behalf of James Williams, who actually today officially became our new county executive, and he simply wants his Board of Supervisors to have the ability to go to the voters the same way that the prior board did. So with that, we'll respectfully ask for your consideration and ask for a yes vote today. Thank you very much.

All right, thank you very much. Are there any other speakers in the room in support? Any speakers in opposition?

Madam Chair and committee members, Tobias Wolken with the California Taxpayers Association in opposition. California's state-imposed sales tax rate is the highest in the country. And districts that are authorized to exceed the 2% sales tax cap are among the highest combined sales tax rates in the United States. It's also important to remember that the state does not offer a local exemption for manufacturing and research and development purchases, which makes our ability to compete for these investments more difficult. We believe that the cap plays an important role in keeping the state affordable, especially for low-income Californians, and efforts to circumvent the cap should be rejected. Thank you.

Thank you very much. Any questions or comments from the committee? All right. And you did mention that you were going to be accepting the amendments.

Yes, amendments are accepted.

Thank you. Very good. And I do want to just remind the panel that we have approved these ceilings a couple of times in the past year since I've been chair. It does come down again to convincing your voters, and so I do want to make sure that that's clear with that. Senator Cortese, would you like to close?

Yes. Thank you very much. Again, Madam Chair and I would respectfully ask for your aye vote. All right, very much.

All right, very much. And this is a vote item. Do I have a motion and a second? All right, so we have a motion by Assemblymember Pacheco, a second by Assemblymember Bains. The motion is due, passe as amended to the floor. Mr. Ruff, can you please call the roll?

Senate Bill 335. The motion is due, pass as amended to the floor. Irwin. Aye. Irwin, aye. Wallis. No. Wallis, no. Bains. Bains, aye. Grayson. Pacheco. Aye. Pacheco, aye. Jim Patterson. No. Jim Patterson, No. Petrie-Norris. Luz Rivas. Ta. No. Ta, no.

Valencia. Valencia, aye. Zbur.

All right, this item is on call with four votes, and the members we'll be back.

Great. Thank you very much. Appreciate your help, Chair. Thank you.

File item six, the very patient Senator Dahle, SB 542. Whenever you are ready, you may begin.

Thank you. Thank you, Madam Chair and members. I'm here to present SB 542. I accept the committee amendments to align this bill with the budget bill, SB 131. Victims of wildfire need to be properly compensated by the responsible party and or their insurance companies. It is difficult to understand the tremendous loss that many have suffered due to wildfires. Californians need to do the right thing by these victims and not only improve electrical infrastructure and wildfire preparedness for the future, but also provide immediate relief to those who have already struggling financially. This bill would exclude PG&E settlement and payments awarded to victims of the 2020 Zog fire from gross income, meaning those payments would not be subject to income tax. It would be wrong to tax the payments given the victims that were only necessarily because of the negligence of PG&E. We as legislators need to continue to provide for fire victims, and this bill will do just that. I know that this bill is aligned with the it's in the budget, but we just want to make sure that it doesn't get line itemed out and that we have a bill to follow up with. So I respectfully ask for an aye vote.

Certainly. And do you have a primary witness?

No, I don't. I'm going to make it easy for you today.

And is there anybody in the room that wishes to speak in support? Opposition? All right, questions or comments from the committee?

And Senator, would you like to close?

I respectfully ask for an aye vote.

All right. Without objection, this Bill will be referred to our Suspense file. Thank you. Thank you, Senator Dolly. Next up, we have file item seven, SB 862. Senator Laird. Good afternoon, Senator Laird.

Thank you, Madam Chair. Senate Bill 862 would allow the voters of Santa Cruz County to decide if the County of Santa Cruz should raise the combined tax limit, a tax rate limit over 2% for the Santa Cruz Metropolitan Transit District, also known as Santa Cruz Metro. This is not a first. This has already been done, as noted in the analysis for Alameda, Contra Costa, Los Angeles, Monterey, San Francisco, San Mateo, Santa Clara, Sonoma and Ventura counties, as well as the cities of Alameda, Berkeley, El Cerrito and Santa Fe Springs. Transit has been really challenged since the pandemic all across the state, and this would give the district a chance to go to the voters. The one opposition from the Taxpayers Association argues against the tax. That's the argument for the voters. This is just the item that would enable the voters to consider that it isn't it itself. And in a past life, I spent nine years on the board of directors of Santa Cruz Metro, and it has very strong support, and it actually will probably weather a little better over the short term. Some of the things that are happening to transit agencies, but in part because there are fees. Every student at the University of California, Santa Cruz pays a bus fee as part of their student fees and gets a free pass. And so any of the 20,000 students that live in the greater Santa Cruz area are the backbone of the system, but it is still challenged. We have roughly 50% of the county is in an unincorporated area. It is spread out and it's spread apart, and the transit district connects it. So this is very important. If this passes, they would have the opportunity to go to the ballot in 2024. And with me today to testify in support is Michael Tree, the CEO and General manager of the Santa Cruz Metro. And at the appropriate time, I would respectfully request an aye vote.

Madam Chair and Members. I'm Michael Tree, CEO for the Santa Cruz Metropolitan Transit District. I join you today to voice my agency's support for SB 862 and to urge an aye vote on the Bill. Today, Senator Laird captured well the mechanics of the Bill. And as the Bill sponsor, I want to underscore that the tax measure this Bill would authorize is critical to Metro's long term fiscal health and speak in greater detail to what the Bill would mean for my agency and our riders today. Santa Cruz Metro operates fixed route service as well as paratransit service, which is your door to door service for your senior and disabled. And we know from our survey data that our riders are primarily from really vulnerable communities. For example, 65% of Metro's customers earn less than $24,000 a year, with 44% having an annual household income of less than $15,000 a year. And 60% of Metro's customers do not have access to a car. What's more, the Watsonville service area, from which nearly half of the riders on Metro originate, comprises eight US. Census tracks designated as historically disadvantaged communities. And so, like other agencies across the state, Santa Cruz Metro was particularly hit hard by the pandemic. We lost the hospitality and the food service workers and the students at the University and at Cabrillo College who really serve as the core riders for Santa Cruz Metro. And we experienced, as did others, the rising costs for capital and operations that have simply outpaced the growth in our funding sources. We're now facing an operational deficit that would begin in 2027 without additional funding. Metro would need to consider service cuts and layoffs that would thwart our agency's recovery. And we'll need to shelve our plans to improve our paratransit or door to door service, to expand access for elderly and people with disabilities in the county as well as our fixed route services. And the board has a lofty goal of doubling their ridership within the next five years and has plans in place to do that. And so that not being able to talk to the voters about our deficit and about these improvements would be a big blow to the agency's goals. So we appreciate the actions that the Legislature has taken to provide stopgap funding to help transit agencies like ours, but we want to make sure that we're also doing our part by pursuing self help. And so 862 is that path forward. And again, I urge your aye vote and I'm happy to answer any questions.

All right, very good. Are there any other witnesses in the room wishing to speak in support? Any witnesses wishing to speak. In opposition.

Madam Chair and Committee Members, Tobias Holcomb of the California Taxpayers Association just reiterate my previous point that allowing these locals to exceed the cap creates affordability issues for Californians and increases cost of doing business for businesses engaged in manufacturing, agriculture, and telecommunications. Thank you.

Thank you. Any questions or comments from the Committee? Senator, would you like to close?

Yes. Ironically, given the opposition statement, it's agricultural workers and service workers in the hospitality interest industry that are most not able to get to work if we don't do something about this. And so I know it's been done for many before. Appreciate the support and respectfully ask for your aye vote.

It would be the second time in this meeting that it would be done.

How did the first one go?

The first one squeaked by. Now we're waiting for a few more votes to see if it passes. Do we have a motion and a second? A motion by Assembly Member Pacheco. We have a seconded, and the motion is due. Pass to the floor. Mr. Ruffle, you please call the roll. Avelino Valencia.

SB 862. The motion is due. Pass to the floor. Irwin Aye. Irwin. Aye. Wallis no. Wallace no. Bains Grayson. Pacheco. Aye. Pacheco. aye Jim Patterson. Jim Patterson? No. Petrie-Norris. Luz Rivas Ta No. Ta no. Valencia. Valencia. Aye. Zbur has three votes. It's on call.

And that motion has three votes. It is on call. Thank you very much. Thank you. And I think this is last but not least. Thank you. Senator. Yes, it's SB 82.

All right. Thank you. Honorable Chair, I'm here to present SB 82. So, SB 82 seeks to provide the universal standards for counties across the state in the document requirements for the Disabled veterans Property tax deduction. Simply put, veterans have to meet a few qualifications in order to receive the property tax deduction, and these include proof of discharge and manner of discharge, proof of disability rating by the VA, and the affirmation that the house is their principal residence. While there are a few smaller aspects to these three factors, these are the main qualifiers. By and large, it has become evident through my office that, unfortunately, some counties have enforced stringent paperwork requirements to establish these proof, and requirements that act as a barrier for entry for veterans who qualify. The issue surrounds the paperwork or proof from the United States Department of Veterans Affairs on the veteran's disability status. While veterans do receive what we call the original Ward letters, those are the paper copies when they are discharged that state the disability status of the veteran, their ward date, and their percentage of disability. Veterans also use an online platform by the USDVA to generate those letters in case they are lost. This online, electronically generated letter is backed with the full support and authority of the USDVA as proof of the veteran's disability status rating and award, but counties, many counties still are trying to are requiring the original written piece of paper. So by clarifying to our counties that both letters carry equal weight in the eyes of our federal VA and in the eyes of the state, we can remove this arbitrary barrier to entry practice. This Bill has zero opposition and is a simple effort to help our veterans community. I respectfully ask for your aye vote.

And do you have any witnesses in support?

I did not bring any witnesses.

Any witnesses in support in the room? Any witnesses in opposition in the room? Questions or comments from Committee? Senator, would you like to close?

No, I respectfully ask for your aye vote.

All right. Do I have a motion in a second? So that is a motion by Assemblymember Wallis and a second by Assembly Member Pacheco. The motion is due pass to the Appropriations Committee. Mr. Reffe, please call the roll.

SB 82. The motion is due pass to Appropriations. Irwin aye. Irwin aye. Wallis aye. Wallis. I Bains Grayson Pacheco. Aye. Pacheco. aye Jim Patterson. Jim Patterson. aye Petrie-Norris. Luz Rivas Ta Aye Valencia. Valencia. Aye Zbur has six out.

Okay, that Bill is out. Thank you. All right. Thank you. All right. Before moving to vote on items on suspense, we will take up the consent calendar, which includes file item 9, SB 889 by the Committee on Governance and Finance. I have a motion and a second. A motion by Assembly Member Wallis. A second by Assembly Member Patterson. Ms. Ruff, please call the roll.

Consent calendar. Irwin Aye. Irwin. Aye Wallis. Aye. Wallace. I Bains Grayson Pacheco. Aye. Pacheco I. Jim Patterson. Aye. Jim Patterson. I Petrie-Norris. Luce Rivas Ta. I Valencia. Yes. Valencia I zabur has six votes. All right. Consent calendar is out.

Consent calendar is out. And do we have so we would like to get all Members to come and join us so we can read off suspense. Was there anybody that wasn't here for the first few votes that we could go yes. Yeah, we need everybody to vote on suspense. We just need everybody here. But was Mr. Wallis sitting here the whole time? Yes. zero, I didn't see. Sorry. Behind. zero, yeah. Can I vote twice? If you would like. That's why I'm really surprised that you over here. Okay. All right. Thank you.

That is SB 335. The motion is due pass as amended to the floor. Grayson. Grayson aye. Petrie-Norris. Luz Rivas. Zbur. Five votes still on call.

Okay, that Bill is still on call.

Lifting the call on file item seven.

All right, we are lifting the call on file item seven. A SB. 862

Bains aye. Bains aye. Grayson aye. Grayson. Aye. Petrie-Norris. SB 862. Not voting. Luz Rivas. Zbur.

All right, that Bill is still on call, has five votes, needs one more.

We can call the absentees on SB 82.

Okay, SB 82. We will call the absentee Members.

This Bill has already passed two appropriations. Bains aye. Bains aye. Grayson aye. Grayson aye. Petrie-Norris. Aye. Petrie-Norris. Aye. Luz Rivas. Zbur. And we can call absentees on our consent calendar.

And then we will call absentee Members on the consent calendar.

Bains aye. Bains aye. Grayson aye. Grayson aye. Petrie-Norris. Aye. Petrie-Norris. Aye. Luz Rivas Zbur.

All right, so we are waiting for two Members so we can get started. So we did just receive permission to move through with our suspense file. All right, we are going to start with file item two, SB 624. At this point, yes. File item two, SB 624. That Bill is held in Committee. Next up is file item three, SB 49 by Senator Becker. The chair is recommending an aye vote. The motion is due pass as amended to the Appropriations Committee. The amendments have been distributed and delete the tax credit provisions from the Bill. Do we have a motion and a second? All right. So motion by Assembly Member Petrie-Norris. A second by Assembly Member Grayson. Mr. Ruff, please call the roll.

SB 49. The motion is due pass as amended to Appropriations. Irwin aye. Irwin Aye. Wallis. Aye. Wallis. Aye. Bains. Aye. Bains aye. Grayson aye. Grayson. Aye Pacheco. Aye. Pacheco? Aye Jim Patterson. Jim Patterson. Aye Petrie-Norris. Aye. Petrie-Norris. Aye. Luz Rivas. Ta aye. Ta Aye Valencia. Valencia. Aye Zbur.

All right, that Bill has nine votes. SB 49 has passed file item four. SB 512 is being held in Committee. Next up is file item six. The chair is recommending an I vote, and the motion is due pass as amended to the Appropriations Committee. Do we have a motion and a second? A motion by Assembly Member Grayson and a second by Assembly Member Petrie-Norris. Can we please do the roll. Mr. Secretary.

The Bill is SB 542. The motion is due pass as amended to Appropriations. Irwin aye. Irwin. Aye Wallis. Aye, Wallis. Aye Bains. Aye Bains. Aye Grayson. Aye, Grayson. Aye Pacheco. Aye, Pacheco. Aye Jim Patterson. Jim Patterson. I Petrie-Norris. Aye. Petrie-Norris. Aye Luz Rivas. Ta Aye Valencia. Valencia. Aye Zbur.

The vote is 9 to 0. SB 542 has passed file item 10, SB 96. Chair is recommending an I vote. The motion is due pass to the Appropriations Committee. Do we have a motion? And second. Assembly Member Petrie-Norris moves. Assembly Member. Grayson seconds. Mr. Ruffe, please call the roll.

The Bill is SB 96. The motion is due passed to Appropriations. Irwin aye. Irwin. aye Wallis. Aye, Wallis. aye Bains. Aye. Bains. Aye Grayson. Aye. Grayson. Aye Pacheco. Aye. Pacheco. Aye Jim Patterson. Jim Patterson. Aye Petrie-Norris. Aye. Petrie-Norris. Aye Luz Rivas. Ta Aye Valencia. Valencia Aye Zbur vote is 9-0.

SB 96 has passed. File item 11, SB 419. The chair is recommending an Aye vote. The motion is due pass to the Appropriations Committee. Do we have a motion to a second? Assembly Member Grayson a second by Assembly Member Wallis. Mr. Ref, please call the roll.

Bill is SB 4119. The motion is due pass to Appropriations. Irwin aye. Irwin. Aye Wallis. Aye. Wallis. Aye Bains. Aye Bains. Aye. Grayson. Aye, Grayson. Aye Pacheco. Aye, Pacheco. Aye Jim Patterson. Jim Patterson. Aye Petrie-Norris. Aye. Petrie-Noris. Aye Luz Rivas. Ta. Aye Ta. Aye Valencia. Valencia. Aye Zbur.

The vote is 9-0. And that was 419, right? Yes. And that was SB 419. Next up, file passes. That Bill passes. Next up is file item 12, SB 520 by Senator Seyarto. Chair is recommending an I vote. The motion is due passed to the Appropriations Committee. Do we have a motion? In a second. Moved by assemblymember. Wallace Seconded by assemblymember. Petrie-Norris. Mr. Ref, please call the roll.

Bill is SB 520 by Seyarto the motion is due pass to Appropriations. Irwin aye. Irwin Aye. Wallis aye. Wallis. Aye. Bains. Aye. Bains Aye. Grayson aye Grayson Aye. Pacheco aye. Pacheco. Aye. Jim Patterson. Jim Patterson. Aye. Petrie-Norris. Aye. Petrie-Norris. Aye Luz Rivas. Ta aye. Ta Aye Valencia yes. Valencia. Aye Zbur.

The vote is nine yeses, zero no's. SB 520 has passed, and our last file item is file item 13, SB 734. The chair is recommending an I vote. A motion is due passed to the Appropriations Committee. Do I have a motion? And second. All right. Assembly Member Grayson moves. Assembly Member Petrie-Norris. Second. Mr. Rough, please call the roll.

Bill is SB 734 by Senator Rubio. The motion is due pass to Appropriations. Irwin aye. Irwin. Aye. Wallace. Aye, Wallace. Aye. Baines. Aye. Baines. Aye Grayson. Aye, Grayson. Aye. Pacheco. Aye, Pacheco. Aye. Jim Patterson. Jim Patterson. Aye Petrie-Norris. Aye. Petrie-Norris? Aye. Luz Rivas. Ta. Aye Ta. Aye Valencia. Yes. Valencia. Aye Zabur.

All right, you are all free. And I really want to thank the Committee. All right, I'd like to thank my Vice Chair and the Republican Caucus staff and of course, our fabulous consultants on this Committee. And I would like to say we're adjourned, but we are waiting for a few more Members. You are all adjourned or let go. You're dismissed. You're dismissed. I'm not adjourned, Madam Chair. Thank you. All right, we are going to go to regular order and vote on items 5 and 7. Item five.

Lifting the call. Lifting the call on item five.

Bill s SB, 335. The motion is due. Pass as amended to the floor. Zbur. Aye. Zbur aye. Six votes.

All right, that Bill is out. Thank you, Assembly Member Zabur. And then we're going to lift the call on file item seven.

File item seven is SB 862 by Senator Laird. The motion is due. Pass to the floor. Luz Rivas, Zbur aye. All right. Zbur aye. Six votes. That Bill is out.

We can now go through all the items or you can leave. These were the two that would not pass without you.

Can we do them?

Yes, we can.

Just announce that that Bill passed.

Go. What?

Just announced that that last Bill passed SB.

Yes, the file item seven passed 6-0. All right, are you ready to go?

I am. Where did my sheet go?

Okay, add ons on 82.

Okay. Add on to file item eight.

SB 82. That Bill is already passed. Do pass to appropriations. Zbur aye.

We can add on to our consent calendar.

Add on to the consent calendar.

Adding on to the consent calendar. Luz Rivas, Zbur. Zbur aye.

Okay, and then we're going to move.

Quickly through now we're going to the suspense.

Suspense. All right, suspense. We start with file item three, SB 49.

SB 49. Luz Rivas Zbur aye. Zbur, aye.

File item six, SB 542.

SB five, 42 by Senator Dahle. The Bill has passed, due pass is. Amended to Appropriations, Luz Rivas, Zbur aye. Zbur aye.

Next is file item 10, SB 96. Portantino

SB 96. This Bill has passed, due pass to. Appropriations, Luz Rivas, Zbur aye. Zbur aye.

File item 11, SB 419. By Senator Roth

SB 419 This Bill is passed, due, passed to appropriations, Luz Rivas, Zbur aye.

File item 12, SB 520. Seyarto

SB 520. By Seyarto. This Bill is passed, due, passed to appropriations, Luz Rivas, Zbur aye. Zbur aye.

File item 13, SB 734.

SB 734 by Senator Rubio. This Bill is passed, due, passed to. Appropriations, Luz Rivas, Zbur, aye.

And he's been able to add on to everything over here. File items, okay. Not six also. You did it. Okay. Thank you. Thank you. All right. And with that, this meeting of the Rev and Tax Committee is adjourned.