Assembly Standing Committee on Revenue and Taxation

Bills on suspense that are not tax levies will be taken up today, including bills that are heard and moved to that are heard and moved to suspense during the first portion of today's hearing. Tax levy bills will be taken up at our next hearing on April 29. We will begin today's hearing by taking up bills under the regular order of business. Before taking up the suspense file.

With that in mind, the following bills on today's agenda will be eligible for a vote during the regular order of business. File item one AB 3134 Chen, file item two AB 2897 Connolly, file item five AB 3268 Low, and file item six AB 2769 Ortega. Finally, one bit, last bit of housekeeping. The three bills by the Revenue and Taxation Committee are proposed consent items. File item 9, file item 10, file item 11, and that's AB 3287, 3288, and 3289.

All right, we are going to start with Assemblymember Connolly, if you have everybody here, and this is file item two, AB 2897. Whenever you're ready.

Thank you, Chair and Members. Good afternoon. AB 2897 will update the statutory language used to define a community land trust, or CLT, in state law to reflect the full range of purposes a community land trust serves today. AB 2897 also addresses a technical cross-referencing correction in existing law that allows community land trusts to maintain the property tax welfare exemption under the same circumstances as low-income housing tax credit projects. CLT's are nonprofit organizations that steward residential property as affordable permanent housing.

Although the community land trust model is well known for providing housing, it is intended to be flexible, allowing for community-controlled businesses, services, or other kinds of organizational adaptation adaptations depending on community need. However, the existing statutory definition is overly narrow and excludes some community land trusts with diverse and nonresidential practices from falling within the category.

For example, community land trusts that facilitate stewardship of a community resource, such as a garden, nonprofit office space, or small business retail, may not fall under the current statutory definition. In community land trust properties, rented attendants are often eligible for the property tax welfare exemption, and in 2022, AB 1206 authorized community land trusts to keep their welfare exemption even if one or more resident's income increases.

This gives community land trusts flexibility in determining who qualifies as low-income so residents can maintain their housing security even if they get a promotion or raise. This bill has no registered opposition and was on consent in Assembly Housing Committee. I will now pass it to my witness, Amy Hindsheik, representing the bill's sponsor, the Community Land Trust Network. Welcome, Amy.

Thank you, honorable Chair Irwin and Members. My name is Amy Hindsheik and I'm representing the California Community Land Trust Network which has approximately 40 affiliates in all areas of our state from the Oregon border down to San Diego. With approximately 3500 residents living in CLT properties, the first community land trust grew out of the Southern civil rights movement as a tool for establishing a new form of land tenure for black farmers and their families.

It is unfortunate that while the original CLT's included farming and housing, our current legal definition in California does not include all the ways that our affiliates steward land for low-income communities. AB 2897 by Assemblymember Connolly would fix that. AB 2897 is not trying to broaden who is considered a CLT or broaden who receives a tax exemption. All we're trying to do is make the CLT definition match what's already happening on the ground.

CLT's operate community gardens, nonprofit spaces and other community ownership projects that benefit the community. It is common for CLT preservation projects to involve the acquisition of an apartment building and then a multi-year transition to a CLT homeownership project. During that transition, these buildings are typically simple rentals with no ground lease. We are updating the definition of a CLT to accommodate this common practice. AB 2897 is fixing the definition of a CLT to describe the work CLT's are doing.

And we thank Assemblymember Connolly for his leadership in this issue. Thank you.

All right, do we have any other witnesses in support? Witnesses in opposition, questions or comments from the Committee? All right, so we see that you reinserted the requirement that a local official must find the affordability restrictions for CLT housing that are in the public's interest. You intend to retain that requirement? Okay. All right. And Assemblymember Condley, would you like to close?

Well, appreciate your consideration and respectfully ask for an aye vote.

Right. We're first going to do the roll call for a quorum.

[Roll Call]

Okay, we have a quorum. And do I have a motion and a second? All right, motion by Assemblymember Grayson. A second by Assemblymember Rivas. And the motion is do pass to the Appropriations Committee. Miss Hyland, please call the roll.

Item number two, AB 2897. The motion is do pass to Appropriations. [Roll Call] That bill has passed 4-0.

All right. And that measure is out 4-0. Congratulations. You have your witnesses, Mr. Ward. All right. And that is item number eight.

We'll start with item seven, if that's okay.

I'm sorry. Item number seven, AB 1932.

Yes. Thank you, Madam Chair. Members, this is Assembly Bill 1932. I appreciate the opportunity to present this bill here for you today. I think, as you all know, we are grassling with a very difficult budget situation. And in the housing space, more than $1.2 billion on the table proposed for reductions. And at the same time, we see an increase of the number of Californians experiencing homelessness, now more than 181,000 on a given night without a safe and stable place to call home.

And so that really juxtaposition is a very difficult position for all of us that we're pulling back from very much and desperately needed affordable housing dollars at the same time that we have the entirety of the budget that we are looking at in the same context. And what that allowed me to do is really step back and try to think a little bit more broadly about our tax and our fiscal policies.

The mortgage interest deduction is a massive permanent tax benefit we offer to existing homeowners every year, without question. In fact, it's the largest permanent housing expenditure in our budget each year. Let me say that again. It in and of itself is the largest expenditure that we give for housing support in the form of three and a half billion dollars of state tax deferred that is going to homeowners.

As a reminder, our principal homelessness program, the HAPP program, which we ask our local governments to use to end homelessness, has never received more than $1 billion a year. It's just a fact for context about what we're talking about here. When we think about the housing expenditures that we do appropriate every year that we adopt. There are serious equity implications to this. The Committee analysis noted filers who do not itemize, who are generally lower and middle income, do not receive any of these benefits.

Now, I'm not proposing to touch the MID for primary homes. However, there are a number of taxpayers who also get to deduct mortgage interest on their second or their vacation homes, as well as their primary homes for mortgages up to a cumulative total of one million dollars. And it's important to note that these are additional residences, not permanent rental units. This is an inefficient tax expenditure that costs the general fund nearly $200 million every year.

According to the FTB, tax filers that takes this deduction for a second home receive roughly $1,100 in tax benefit. Meanwhile, the non-refundable renters tax credit has been frozen at $60 for single filers for over decades, or about 1/18th of the benefit afforded to second home filers. This is deeply inequitable, and at a time when over two thirds of lower income Californians are spending half their income or more on housing, it's extremely troubling.

So with this bill, AB 1932, I'm proposing that the state eliminate this wasteful expenditure and stop subsidizing some Californians and purchasing second homes, and instead permanently increase home ownership opportunities for first-time home buyers. Especially desperately needed affordable housing for our extremely low income constituents and help our housing voucher recipients find apartments easier. With me to testify is Chris Martin, the Policy Director for Housing California.

Good afternoon, Madam Chair and Members. My name is Chris Martin, the Policy Director at Housing California. We are a statewide advocacy nonprofit focused on the production and preservation of affordable housing, protecting low income renters and ending homelessness. Housing California is proud to support AB 1932, which would remove the second home mortgage interest deduction and target these critical resources in investments in housing production, home ownership, and tools to help utilize federal housing vouchers.

Despite nearly tripling our production of affordable housing in the last four years, thanks to critical streamlining laws and unprecedented one time state investments, we still only fund about 20% of what is actually needed to meet our goals. On top of this, right now, as the Assemblymember mentioned, we are seeing both funds dry up from our Proposition 1 bond from 2018, as well as we're facing a huge budget shortfall and the Governor is proposing cutting all investment in state affordable housing.

This will lead to a loss of about 6,000 units over the next two years, at a time when we know the biggest barrier to affordable housing production is finance. For both rounds of the last two SuperNOFAs from our state housing department, the program was oversubscribed 10:1 both times. Additionally, we have new research on the affordable housing pipeline from enterprise community partners that pointed to about 46,000 units of affordable housing that are simply awaiting funding.

This all points to exactly why we need an ongoing source to increase housing production. We cannot rely on the volatile state budget to fund housing in one time spurts. We're facing an ongoing crisis that requires ongoing resources. AB 1932 presents an opportunity for us to create a reasonable, ongoing funding source. Our state tax system should reflect our values.

And in a state with over 180,000 people experiencing homelessness and a shortage of over 1.2 million homes, we should be prioritizing investments in getting people into their first home before subsidizing people to purchase their second home. Housing California applauds Assemblymember Ward for his vision, and we respectfully request your aye vote.

Do we have any other speakers in support?

Mark Stivers with the California Housing Partnership, in strong support. Thank you.

Rebecca Marcus, representing Leading Age California, in support.

Do we have any witnesses in opposition? No witnesses in opposition. Do we have questions or comments from the Committee? Assemblymember Grayson?

Thank you, Madam Chair. And in Housing, I know this bill went through there, I was able to help as far as making a motion to get out, but then I was called away to go vote. I didn't get to engage in a conversation, but to me, the reason why I was supportive of getting out of Policy Committee was because this is a very worthy conversation that I believe needs to have all parties at the table to contribute.

And sometimes the only way to make that happen is a leverage of a bill. And so with that, that's why today I would be supportive as well to be able to move this bill forward, to continue to have those kind of conversations although there appears to be continued questions looming about earmarking funds.

How do we know that the money that is saved from this or increases because of this actually goes to housing rather than just into a general fund pot and gets lost in there? So there's a lot of questions that need to be answered. But again, I believe this bill is the tool to facilitate the conversations that need to happen to at least give us some certainty and direction of which way to go. So thank you to the author and make a motion.

This is going to be on suspense.

Oh, okay. On suspense, okay.

So just to follow up, can you name again where the funds are going?

Yes. Thank you. As proposed today--And again, I appreciate, Assemblymember, your comments as well because this does continue to stoke more conversation, having had a chance before this was even introduced, to meet with some of the registered opposition on file here. And I know they haven't had a chance to take some of these propositions back to their board, who has not had a chance yet to meet yet. I do intend to continue to work on any of their concerns.

I don't believe, as proposed, that this is going to somehow disincentivize the opportunity for additional purchases or the opportunity to be able to acquire new property, to be able to grow family equity or wealth. This is really, I think, a conscientious effort on its face to be able to shift whether or not we are going to subsidize vacation homes or subsidize the need for first time home ownership. To answer your question, Madam Chair, 50% of the formula goes to the multifamily housing program.

25% of the formula would go to support homeownership opportunities, and 25% would go towards local public housing authorities for housing navigation services and landlord incentives for housing bachelor recipients. And that's as of today.

All right. And then there's obviously a lot of unanswered questions. I would also ask, if people have a second home because they work elsewhere in the state, how would you be handling that? That's certainly not a vacation home.

Of course. You know, that is something that is a necessary course of business, and it's something I want to look at a little bit closer to make sure that we're not creating unintended consequences for people just to be able to do their jobs.

All right. And no other questions?

May I, Madam Chair? And in the testimony, we kept hearing exchanges of second home and then vacation home. There's some people that have a second home that may not be a vacation home. Are we differentiating between that?

In the code, there is no differentiation. In fact, for tax purposes, it's just primary home or second homes. So I think we're using vacation home as just something that is an example of maybe something we commonly are familiar of to sort of paint a picture.

Okay. I just wanted to make sure that we weren't eliminating the ability for mortgage interest deduction for those that have a second home that's renting.

That is excluded, yes. Anything that is put out for lease, of course, because otherwise it would be passed on to the renter, and that would be a burden as well.

Okay. Thank you.

All right. Assemblymember, would you like to close?

Thank you. Thank you for the consideration. I understand this is a suspense candidate, Madam Chair, and I appreciate the consideration as well today. This is purely an opportunity, like I said, to be able to sort of look at the totality of what we are thinking about with regard to both our tax and budget policies and recognizing that you can subsidize one, you can subsidize the other.

But this year, we can't subsidize both, and we have to make a call, and that's what we are doing through this bill. And we would respectfully request your aye vote.

All right. Thank you very much. And without objection, this bill will be moved to our suspense file. Our next item up is item eight, AB 2353. Whenever you're ready.

Thank you, Madam Chair and Members again. AB 2353 is before you, and I want to thank the Committee staff as well for your hard work on this, and of course, I would be happy to accept the Committee's amendments. This bill would ensure that nonprofit, affordable rental housing developers can access the existing Welfare Property Tax Exemption without floating unnecessary tax payments while their application is under review.

Currently, affordable rental housing developers must pay property taxes upfront and then seek reimbursement both--after both the Board of Equalization and the County Assessor have approved the development's exemption. Thus, affordable housing developers lose crucial and extremely limited affordable housing dollars and incurring interest, further increasing some of the development costs.

This bill would reduce the cost of developing affordable housing by allowing nonprofit, affordable housing developers to withhold relevant tax payments without penalty while their Welfare Exemption applications are under review if the property is deed-restricted and the developer has received a clearance certificate from the BOE. For witnesses in support, I have Mark Stivers, the Director of Advocacy with the California Housing Partnership.

Thank you. Good afternoon. Again, Mark Stivers with the California Housing Partnership. Some bills, like the Assemblyman's previous bill, seek to raise revenues for affordable housing. With this bill, we're trying to reduce costs so we can stretch whatever limited resources we have further and build more affordable homes. The process to get a Welfare Exemption for affordable housing takes, on average, about two years, sometimes more.

As the Assemblyman said, the developers float hundreds of thousands of dollars per development for that two-year period, only to get them reimbursed when the applications invariably are approved. By our calculation, this bill would free up as much as 64 million dollars over any given two-year period that nonprofit developers could then reinvest in producing more affordable housing. So we think this is a very good bill to cut costs, be more efficient with our resources, and we urge your consideration on suspense. Thank you.

Thank you. Are there any other witnesses in support?

Chris Martin with Housing California, in support.

Rebecca Marcus, LeadingAge California, in support.

Any witnesses in opposition? Any questions of the Committee? Would you like to close?

Thank you. I respectfully request your aye vote.

All right. And without objection, this will be referred to our suspense file. Assembly Member, thank you. Assembly Member Grayson, is your witness here?

Yes.

All right, why don't you, we'll move to item four, AB-2686. Whenever you're ready.

Thank you so much. Good afternoon, Madam Chair and Members. AB-2686 is a necessary Bill that would help prevent significant cost increases for housing developers who remediate contaminated soil and return land to productive use. In 2021, the Legislator passed SB-158, a Budget Trailer Bill with the intent of stabilizing the structural deficit of the Department of Toxic Substance Control, or DTSC as we know it.

In order to achieve this, SB-158 made changes to one of the major fees that are paid to DTSC when remediating a site. Previously, a tiered model, the generation and handling fee was instead set at a rate of $49.25 per ton. This fee is paid to DTSC for the purpose of monitoring and certifying a site as the developer is conducting and paying for the remediation work.

The new fee structure applied to all projects that were in development at the time of passage of SB-158, as well as projects that recently completed the development process. The revised fee structure had a significant detrimental impact on many projects, including essential housing projects and projects that help provide essential community services. This fee significantly increased the cost of remediating contaminated soil in urban infill sites or in situations where developers encountered naturally occurring toxic materials.

The increased fee has made several projects infeasible at a time where California is already struggling with rising costs. So to help provide greater certainty for affected projects, AB 2686 would provide an alternative fee for housing and nonprofit developments that were deemed complete by December 31, 2021. This alternative fee would be set at $5.72 per ton of hazardous waste, mirroring a similar fee that was set in a subsequent Budget Trailer Bill last year.

The state should not penalize builders for opening up land for productive use, especially when they are the ones cleaning up pollution instead of creating it. At a time where many in California are facing increased development costs, we must do what we can to help create a more favorable environment that allows us to build housing that's affordable.

While I am very aware and how important it is to keep DTSC fiscally stable, it is equally important that we do not do it solely on the backs of those who create essential housing and provide vital community services. With me today, my witness I'll have self-introduce will be testifying.

Good afternoon, honorable Committee Members. My name is Rhiannon Bailard and I'm the COO of UC Law San Francisco, formerly UC Hastings Law, which is a public institution. Over 50% of our students identify as people of color. 80% of our students receive either merit based or need based aid, and in August of 2023, we opened a housing project that provided 656 below market housing units, which provides housing for our own students, as well as students from UC San Francisco, San Francisco State University, UC Berkeley, UC Davis, many others.

Essentially, we have provided a housing complex and a shared campus in the heart of San Francisco. Relevant here today. We generated, during our site preparation, 2,400 tons of hazardous waste in 2021. We paid a fee of $105,000 for that waste in 2021. In 2022, we protested what we first thought was a duplicative billing, a billing error.

Ultimately, we ended up paying an additional $118,000, plus an additional $22,000 in fines and interest during the time at which we were protesting again, which we thought was a duplicative Bill. The new fee passed just mere weeks before we had ceased being a generator, which happened in August 5, 2021. And while the project was privately financed, most of our student body, as I mentioned, receives aid, and every resident pays rent, of course. And so some of these costs are borne by taxpayer dollars.

We appreciate, as Assemblymember Grayson said, the vital role the DTSC plays, and we understand the challenges the state is playing. However, the imposition of a duplicative fee on a public institution while we were trying to build housing for not only our own students, but also students from other institutions in the very real and expensive market of San Francisco feels like an unreasonable burden. Thank you for your consideration.

Thank you. Are there any other witnesses in support?

We did have a witness that was with the San Francisco and Marin Food Bank. But I believe. Oh, go ahead.

Yes, he got caught in traffic, so I'm so sorry about that. But I'm Catherine Charles. I'm here on behalf of Housing Action Coalition as a sponsor. In support. Thank you.

Tiffany Fan, on behalf of Strada Investment Group. In support. Thank you.

And Laura Lane, on behalf of the San Francisco-Marin Food Bank, whose witnesses going through security right now. So appreciate it. In support.

We'll count that witness, too. Do we have any witnesses in opposition? Okay, do we have questions from the Committee? Assemblymember, would you like to close?

I respectfully ask for an aye vote when the time is appropriate.

All right, thank you very much. And without objection, this Bill will be moved to suspense. Thank you.

Okay. Oh, yeah. Yeah, let's--okay. Why don't we take up the proposed consent calendar? Yes. Three items are proposed for consent: AB 3287, AB 3288, and AB 3289.

So moved.

Second.

Okay. That bill has--the consent calendar has been--oh, we have to move. Announce. All right, let's. All right, for AB 3287, the motion is do pass to the Committee on Appropriations. For AB 3288 and 3289, the motion is do pass to the floor. And we have a motion by Assembly Member Ta and a second by Assembly Member Grayson. Ms. Highland, please call the roll.

[Roll Call].

Okay. And that passes, four/zero. Assembly Member Ta, I'm just going to pass this to you for one moment.

We don't have anyone here. Ms. Ortega is on her way.

Low. Please.

Thank you very much, Mr. Chair and Committee Members, for allowing me to present Assembly Bill 3268 to help extend the sunset relief for property taxes for eligible interest from 2025 to 2030, and I respectfully ask for an aye vote. With me today to answer any technical questions that you may have is Jeff Nygaard with the County of Alameda Assessor's Office. Respectfully ask for your aye vote.

Please. Yes.

Good afternoon. My name is Jeff Nygaard. I'm with the Alameda County Assessor's Office. I'm the Chief of the Appraisal Division, and I'm here in support of AB 3268, and I'm specifically--I'm here for questions. Thank you.

Move the bill.

Second.

Do we have--hello, Mr. Low.

Hello, Ms. Irwin.

All right, do we have--have we asked for witnesses in support? Okay. Witnesses in support. Witnesses in opposition? Okay. Then we had a motion by Assembly--oh, questions or comments? We had a motion by Assembly Member Grayson and a second by Assembly Member Gipson, and Mr. Low, would you like to--

No, thank you.

All right, and that motion is 'do pass to the Appropriations Committee.' Ms. Highland, please call the roll.

On Item Number Five: AB 3268, the motion is 'do pass to Appropriations.' [Roll Call].

And that bill is out; five to zero.

Thank you very much, Mr. Low. Next up, we have Assembly Member Ortega with File Item Six. Good afternoon.

Thank you.

Good afternoon.

And you can start whenever you are ready.

Thank you so much, Madam Chair and Committee Members, for the opportunity to present AB-2769. I want to start by accepting the amendment suggested by the Committee, and thank you so much for your work on this Bill. This Bill would simply add a checkbox on the California Franchise Tax Form asking filers if they or someone in their household would be interested in learning about apprenticeship opportunities.

The Tax Board would then request the Department of Industrial Relations, DIR, to send information to the filer on the California Apprenticeship Grant. In 2018, Governor Newsom set a goal of reaching 500,000 registered apprentice by 2029. According to the DIR, California currently only has 92,000 people registered as apprentices. This means we are not on track to meet the Governor's goal by this deadline.

AB-2769 aims to facilitate awareness of these apprenticeship programs and grants by making it easier for people to find out which opportunities best suit their goals. This small change could have a huge impact on expanding the career options of young adults, exposing them to a wide variety of stable, well-paid protected jobs. Testifying with me today, we have Mr. Alfredo Camacho, Western Regional Director from Young Invincibles, and Isis Orellana, Policy Analyst of the California Workforce Association.

You may start.

Thank you. Good afternoon, Chair and Members of the Committee, thank you so much for your time today. My name is Alfredo Camacho, the Western Regional Director of Young Invincibles. We are a national nonprofit focused on policy and advocacy for young adults ages 18-34, expanding economic security for them. So AB-2769 for us is a critical step forward in making apprenticeship programs more visible and accessible to historically underrepresented groups to ensure that all Californians have equal access to pathways for economic advancement.

By leveraging the state's tax filing process, this Bill enables Californians to explore apprenticeship opportunities and career pathways that align with their needs. By receiving information directly from a trusted resource, young people from historically underrepresented communities face barriers to accessing quality education and meaningful career opportunities, and apprenticeships are an opportunity to gain valuable skills and earn a living wage while also creating a pipeline for growing sectors here in California, such as renewable energy, technology, healthcare, goods movement, and manufacturing.

Still, many young people miss out on apprenticeship programs, both from lack of information and the decades-long push towards college for all. Women also remain underrepresented, in apprenticeship programs, comprising only 7% of apprenticeships. AB-2769's expanded outreach efforts means reaching more young people and women, providing them with access to apprenticeship opportunities that can lead to economic mobility at a crucial time, providing a comprehensive solution to historical, economic, and geographic disparities to apprenticeship opportunities. Thank you for your time and consideration.

Thank you.

Good afternoon, Madam Chair and Members of the Committee. My name is Isis Orellana with the California Workforce Association. CWA represents all 45 workforce development boards across the state. In addition to supporting our local workforce development boards, CWA's commitment to apprenticeship is evident in several of our key projects. One project includes our federal youth apprenticeship expansion grant aimed at expanding apprenticeship programs in the state. Additionally, CWA sits on the California Youth Apprenticeship Committee, which is responsible for developing and defining youth and high school apprenticeship frameworks.

Recognizing the need for quality workforce development professionals, CWA became a program sponsor for the Workforce Development Professional Certificate Program and Registered Apprenticeship Program designed to meet the needs of workforce development professionals as a pathway for personal growth and professional development. Local workforce development boards play a crucial role in promoting business growth by matching talent with industry needs.

AB-2769 supports this by increasing awareness and enrollment in apprenticeship programs, ensuring that local businesses have access to a trained and skilled workforce, 30%, that is, a percentage of California youth that end up with a four-year degree. While outcomes for this group are generally positive, California's existing educational infrastructure regrettably isolates those who may not wish to continue their education past high school and prefer to instead gain technical skills to advance their careers.

California's diverse population face varied economic disparities and institutional barriers that create obstacles that may make post-secondary educational education inaccessible. With Governor Newsom's soon-to-be-released master plan for career education, California is soon to embark on a transformational change on how we treat apprenticeships. This includes utilizing any and all tools available to grow this alternative pipeline. It is for these reasons, CWA supports AB-2769.

We would like to thank Assemblymember Ortega for bringing this measure forward and respectfully ask for your aye vote. Thank you.

Thank you. Other witnesses in support.

Madam Chair and Members. Sarah Flocks. California Labor Federation. In support. Thank you.

Madam Chair and Members. James Thuerwachter with the California State Council of Laborers. In strong support.

All right, thank you. Do we have any witnesses in opposition? Questions or comments from the Committee? Assemblymember Gipson.

Thank you very much. I was reading the summary, and anything dealing with apprentice programs is something that I absolutely believe in. I want to thank the author for bringing this before us today. I will be, in fact, supporting this Bill. I would move this Bill and also would love to be considered as a co-author of this Bill.

When we look at when we took out wood shop, metal shop, in which I have been focused on since I've been here, career technical education and giving our students the opportunity to. One, use and be part and be trained of this emerging technology. We have a workforce that's not have a number of jobs, but not a trained workforce to do and fill these positions. So anything that we can do to move the needle and move people into these programs helps California.

It helps our technology that exists that emerged in California when we, California took out this from schools, that's when we saw the prison pipeline opened up. Let me say that again. That's when we saw the prison pipeline open up, because when they graduated from high school, they had nothing to do. And then now our hope and promise is now locked away in jail and prison. And this is, I think it's a good step in the right direction.

I'm excited about it, and thank you very much for bringing this measure before this Committee.

Thank you. And, yes, I can add you.

All right, would you like to close?

I respectfully ask for your aye vote.

Very good. All right, so we have a motion by Assemblymember Gipson and a second by Assemblymember Grayson. And the motion is do-pass to the Appropriations Committee. Miss Hyland, please call the roll on.

Item number six, AB-2769. The motion is do-pass to appropriations. [Roll Call].

All right, that Bill is out. 5-0. All right, Mr. Fong, item number three. Whenever you're ready.

Yep.

Thank you, Chair Members, as George Skelton stated in the latest LA Times article, when the stock market sneezes, California State government catches pneumonia demonstrated through the peaks and valleys in California's capital gains collections, budget volatility will only continue unless the state changes how it handles capital gains.

This Bill, Assembly Bill 2486 will create a capital gains stabilization account which will store an average revenue from capital gains over several years.

Back in 2015, a University of California Berkeley Professor researching economics and taxation stated that he is pretty confident that California will have another fiscal crisis given its tax structure nine years later. The state is now facing a $73 billion deficit, according to the LAO, requiring major cuts and delays in spending in the budget negotiations following a $97 billion state budget surplus in 2022. Aside from Alaska, California has the most volatile tax structure within the United States.

The state used to rely heavily on retail sales and use taxes to fill its coffers but has now shifted towards receiving most of its revenue through personal income taxes. That reliance on personal income taxes also skews heavily towards the top 1% of income earners, who paid half of the state's personal income taxes in 2020, the state's total personal income taxes in 2021.

Therefore, California's revenues are extremely unpredictable due to its reliance on revenues from personal income tax, which relies heavily on the strong stock market returns. Given that this demographic is heavily invested in the market.

Betting on strong market returns year over year in order to Fund our state government programs is not only risky, but it's also fiscally irresponsible. California's tax system is broken and relies on the rich to bail the state out of its fiscal mismanagement.

This bill proposes a solution to the revenue volatility issue by creating a separate account for capital gains collections and sending a consistent five year average amount to the General Fund. Given that revenues will no longer be reported and spent all at once, this will smooth out the volatility without increasing taxes.

I respectfully ask for an aye vote. And joining me to testify in support of AB 2486 is Tobias Wilkin on behalf of Caltech.

Thank you, Madam Chair and Committee Members Tobias Wolken, on behalf of the California Taxpayers Association, in proud support of AB 2486. Large deficits are not new for the state and are a direct result of the unpredictability of California's progressive tax structure, which relies heavily on the tax revenue from high income earners and capital gains.

California has taken important steps to address revenue volatility, including the establishment of a rainy day fund, and this bill would build on previous revenue stabilizing measures.

AB 2486 would simply provide a mechanism for using more accurate revenue estimates when drafting the budget by depositing personal income and corporate tax revenues into an income stabilization fund.

This is another solid step towards stabilizing the budget process for the benefit of taxpayers and government programs alike. The revenue averaging system proposed in this bill addresses the volatility problem in a very straightforward and transparent way without any harmful economic side effects.

For these reasons, the California Taxpayers Association supports this bill and urges your I vote at the appropriate time.

All right. Do we have any other witnesses in support? Any witnesses? Are you support?

Opposed?

Opposed. All right, witnesses in opposition.

Chris Myers with the California School Employees Association, representing 250,000 classified employees across the state. We're opposed to the bill just because we have concerns about its impacts on Prop 98. We're unsure what those impacts are. And for those reasons, we're going to ask for your no vote today.

All right, thank you. Questions or comments from the Committee? No questions or comments. Would you like to close?

Thank you, Madam Chair. California will continue to have surpluses followed by detrimental deficits if stability is not returned to our tax collection method. To avoid over promising on state programs and then facing yet more cuts in future budget years. This chaotic structure requires some uniformity. We're dealing with this right at this very speak.

So AB 2486 restores this stability, which will allow the state to allocate funding with more certainty, providing more consistency for state funded programs. Respect the ask for aye vote.

All right. Thank you very much. And with that objection, this bill will be referred to our suspense file. And we are waiting for one more author. Mr. Chen, have you been able to.

I call.

Okay. I'm.

Add ons, Mr. Gipson to the Consent Calendar, which has passed. [Roll Call]. On Item number 2, AB 2897 that Bill has passed. [Roll Call]. You're all clear.

All right, Assemblymember Chen, we are ready for you.

I am so sorry for my tardiness. My apologies.

No problem.

Thank you, Madam Chair.

Item number one, AB 3134.

Thank you, Madam Chair. First, I want to thank the Committee for working with my staff. And we will be taking all Committee amendments in lieu of time. I know that you guys have been waiting for me. I want to defer to my key expert witness testimony, Mister Matt Siverling from the Association of County Auditors.

Thank you, Madam Chair. And Members Matthew Siverling, on behalf of the State Association of County Auditors. This Bill would provide an expansion to an existing tool that county auditors and counties use to expedite money into the hands of taxpayers where the money is due, increasing the threshold from $5000 to $10,000 for a number of different refunds that qualify without a fund or without a claim for that refund to be submitted.

So in the spirit of returning that money back to taxpayers more quickly, especially when it's owed to them, we ask for an aye vote. Thank you.

All right. Thank you. Any other witnesses in support?

Good afternoon, Madam Chair. Members Karen Lang, on behalf of the California Association of County Treasurers and tax collectors in support. That's the fun part of the job, is giving them money back. And we ask for your aye vote. Thank you.

All right. Thank you. Any witnesses in opposition? Any questions from the Committee? Mister Chen, would you like to close?

I respectfully ask for your aye vote, Madam Chair.

All right. Do we have a motion?

Thank you.

All right, a motion by Assembly Member Grayson and a second by Assembly Member Gibson. The motion is do pass as amended to appropriations. Miss Hyland, please call the roll.

On item number one, AB 3134. The motion is do pass as amended to appropriations. Erwin?

Erwin, aye. Ta? Bains? Gibson? Gibson, aye. Grayson? Grayson, aye. Jim Patterson? Luz Rivas? Luz Rivas, aye. That Bill has passed.

That Bill is out. Congratulations.

Thank you, madam.

All right, now, we are going to be.

We will need to wait until all the Members stop. Then we'll have to do add ons for regular order of business. And then we can move to suspense. So we need Jim Patterson here.

We can. Okay. All right, so this is with suspense. We need everybody here, unfortunately. So we're waiting for our two Republican Members. Two?

Mister Patt and Miss Rivas. Where did Mister Ta go?

And Mister Ta. Oh Bains too. Yes. Or we can all just say a different time and go present bills or.

Pepperoni.

Oh dear. Yeah,

Move to add ons while we're waiting?

On item number one, AB 3134. The Bill has passed. Ta? Ta, aye. That's it.

Okay, Miss Bains, we're just going to do add ons for you.

Yes.

And then we'll be going to suspense. We're still waiting for Mister Patterson.

Assembly Member Baines, I'm sorry. This has been silenced, so we have to redo that. I'm sorry, what? We had it muted, so we need to redo it.

Redo?

Just the consent calendar. We need to announce it again

On the consent calendar for add ons, which has already passed. Bains? Bains, aye. On item number one, AB 3134, which has passed, Bains? Bains, aye. On item number two, AB 2897 that Bill has passed, Bains? Bains, aye. On item number five, AB 3268, that Bill has passed. Bains? Baines, aye. On item number six, AB 2769 that Bill has passed, Bains? Baines, aye. That is it. That's all. Don't leave yet.

All right, Mr. Patterson, we're going to start with add-ons.

On the consent calendar, which has passed, [Roll Call]. Item Number One: AB 3134: that bill has passed. [Roll Call]. Item Number Two: AB 2897: that bill has passed. [Roll Call]. Item Number Five: AB 3268: that bill has passed. [Roll Call]. Item Number Six: AB 2769: that bill has passed. [Roll Call]. Okay, we're clear on that.

All done with that. All right, so having dealt with all items under our regular order of business portion of the meeting, we will now take up the bills on our suspense file in file order. We will start with file item three, AB 2486 by Assemblymember Fong.

This bill is held in Committee item file item four, AB 2686. Assemblymember Grayson. This bill is held in Committee file item seven, AB 1932, by Assemblymember Ward. There is some interest in having additional conversation on this issue.

I will be supporting the bill, but not committing to supporting this measure on the floor. So do I have a motion and a second, second. A motion by Assemblymember Gibson. A second by Assembly Member Reavis. The motion is do pass to the Committee on appropriations. Miss Hyland, please call the roll on.

Item number seven, AB 1932. The motion is to pass two appropriations. [Roll Call]

I think we have a change in vote.

Vote change. Banes.

Ida. No.

Yes. I don't know, sir. aye to no that bill passes four to three.

All right, file item eight. You want to announce that?

Zero, that Bill is out four to three. The next item is file item number eight, AB 2353 by Assemblymember Ward, I am recommending an aye vote. And the motion is do pass, as amended, to apply a five year sunset ensure properties are still subject to the four year look back for assessors to correct the rule.

Require that an exemption claim and notification of ineligibility are submitted in accordance with existing law and to make clarifying and technical changes. Do I have a motion and a second?

A motion by Assembly Member Gipson. A second by Assembly Member Rivas. The motion is 'do pass as amended to the Committee on Appropriations.' Miss Highland, please call the roll.

On Item Number Eight: AB 2353, the motion is 'do pass as amended to Appropriations.' [Roll Call]. That bill's out seven/zero.

That bill is out seven/zero. Next, File Item 12: AB 2564 by Assembly Member Boerner. The--I am recommending an aye vote, and the motion is 'do pass to Appropriations.' Do I have a motion and a second? Assembly Member Grayson moves. Assembly Member Rivas seconds. Miss Highland, please call the roll.

Item 12, AB 2564 by Assemblymember Boerner. I am recommending an aye vote. The motion is do pass to appropriations. Do I have a motion and a second? Assemblymember Grayson moves, Assemblymember Rivas seconds. Please call the roll. Do pass to appropriations. Yeah.

On Item Number--

Okay. I did say 'do pass to Appropriations.'

[Roll Call]

All right. And the last item on--oh, I'm sorry. That bill is out; seven/zero. The last item on our agenda is File Item 13, and that's AB 2977. I am recommending an aye vote, but it is based on 'do pass on the amendments,' and the amendments are: 'to remove all provisions of the bill except for the expanded eligibility of the Young Child Tax Credit.'

With these amendments, removing all tax increases from the bill, and now require simply a majority vote on the floor. Do I have a motion and a second? A motion by Assembly Member Grayson. A second by Assembly Member Rivas. Miss Highland, please call the roll.

On Item Number 13: AB 2977, the motion is 'do pass as amended to Appropriations.' [Roll Call]. That bill has passed four to zero. Five to zero.

All right, and that bill has passed five to zero, and have we finished with all our business?

Yes.

All right. With that, our meeting is adjourned.