Senate Standing Committee on Revenue and Taxation

One, the Senate Committee on Revenue and Taxation will come to order. Secretary, please call the roll.

[Roll Call]

Okay, a quorum is present. Welcome, everyone, to our committee today. We have one bill on consent. If there's any objection to taking that off of consent. If not, I'd entertain a motion to. Senator Bradford moves. This is item number one, SB 946. This is on the consent calendar. Secretary, please call the roll.

[Roll Call]

All right, that bill has enough votes to get out, but we'll put it on call for our absent members. Next up is file item number two. This is Senate Bill 952 by Senator Dahle. He is prepared, Senator, please proceed when you're ready.

Thank you, Mr. Chairman and members. I'm presenting SB 952. This bill would provide a tax credit to help offset the cost of home hardening and vegetation management. With the cost of living so high in California, many people who live in high in fire hazard zones are unable to afford these protective measures.

Many are forced to prioritize things like groceries and utilities bills so they can. So this bill is providing some much-needed assistance to help people protect themselves and their families. The aggregate amount of total credits available per year is 500 million. To qualify for the credit, you must satisfy both of the following.

You must have an adjusted gross income of 140,000 or less for joint filers or adjusted gross income of 70,000 or less for single filers. You must own a dwelling or house unit in a moderate, high, or very high fire hazard severity zone. The vegetation management credit shall cover 50% of the cost, with the maximum credit being $1,000.

For example, if a homeowner spends $2,000 on vegetation management, they can get $1,000 for the credit. The home hardening credit shall cover 50% of the cost with a maximum credit available, depending on the severity zone the property is located in. For moderate severity zones, up to 2500 available.

For high-severity zones, up to 5000 is available, and for very high-severity zones, 10,000 is available. Those seeking a credit must request a credit reservation from the Franchise Tax Board and must provide all necessary tax and expenditure information as requested by the Franchise Tax Board.

This bill is trying to protect the most vulnerable in our state, my district. This especially is a home to many people living in moderate, high, and very high severity zones. But unfortunately, many of those cannot afford proper home hardening. The bill's income threshold is narrowly tailored to include those who otherwise would not be able to afford the measures because California's cost of living is so high. So, members, in closing, I just want to say that this is not the first time I've tried this bill.

Actually, Senator McGuire and I ran two times a bill like this, and we got it. Partway through the process. I've narrowed this down and tried to tailor it down to those who really would need the bill. So I know this is a heavy lift, especially at a time where we have revenues that are not exceeding where we were before. So with that, I respectfully ask for an aye vote.

Thank you, Senator Dahle. Do you have any primary witnesses? No. All right. Anyone here in the hearing room want to come up and indicate your support for the bill? Please come on up.

Good morning, Chair and members. Stanicia Boatner, on behalf of the California State Association of Counties, in support. Thank you.

Great. Thank you very much. Anyone else here in the hearing room? All right, we'll go to the opposition. Anyone in the hearing room in opposition to this bill, please come forward. Okay. Seeing none, we'll bring the matter back to the committee for comments or discussions. Members, any comments or discussions?

Well, Senator Dahle, thank you for your work. I mean, you're a passionate advocate for your district, and certainly your district's probably been one of the most hurt districts with these disasters than any others in the Senate. And probably you'd be competing with Senator McGuire, no doubt, and Senator Dodd and Senator McGuire, I know feels the same way you do, that these are a lot of folks that are living on the edge, that don't have the resources. A little bit of help from the state could make a big difference.

I've asked the question when these disasters strike, the state steps in and spends hundreds of millions, if not billions, of dollars to deal with that disaster. One of the difficult questions is if we had done more preventive work, both as a state and individually, could we not only have protected our property and lives in the long run, saved money? And I know it's a very difficult thing to kind of nail down, but I guess for me, at least, you've narrowed this bill down significantly. It does have a big price tag. We're not the fiscal committee here, so I don't think that that should drive our decision that, given the state's financial issues.

But I see that, you know, the costs range from $120 to $290 million. It's not a small deal. On the other hand, what you're proposing to do in the bill is very modest, even though it can make a big difference. I mean, that $1000 in mitigation, that $2,000 to seal up attics and move vegetation away could really make the difference not just on that property owner, but stopping a wildfire from taking off. That one of the statistics that I just talked with some neighbors about just this past week was that a homeowner can do everything right, but unless you have, here's the number, 70% of the homes in the area doing those same things right, you're probably not making the difference that you think you are just by taking care of your property. And so this is even a bigger issue than just individual homeowners.

But I think you should have the ability to continue to work on this bill if it moves forward today. I want to give you that opportunity to try to make the case for why this overall might be a savings to the state. And again, it's a tricky problem to try to figure out that that's where I come down on it. Senator Dodd, do you want to say.

I'm sorry to horn in after the last word generally here, but I agree with you on this, maybe is this moves forward to the Assembly, it could be amended in a way that would talk about as part of a firewise neighborhood coalition or something like that, if it qualifies that you could bring the cost down significantly and help communities that otherwise might not have the 70% participation, raise their participation rates as a result of this, thereby saving lots of property and perhaps lives.

Any further comments from committee members? Senator Dahle, do you want to close?

I do. I want to say, first off, thank you for your comments, both of you. When I first came to the Assembly 12 years ago, I talked about fire because I knew fire was a big issue. And I ran more forestry bills than I think any other member in the past 20 years has and passed those bills with a lot of opposition from a lot of environmental groups. But you remember, we only impact private lands in California, so there is nothing really much left to do. We've done streamlined exemptions for people to be able to do who have forested lands or communities. The Federal Government is one of our challenges because they have, they manage 65% of California's forest lands.

But this bill also will help folks that aren't in the forested areas, that are in brushlands and areas along the coast, Orange County, even folks could use this bill in some areas where we see so it's not just focused to my district, it's focused to areas of the state where we've seen wildfire in brush areas where we just need to do manage that.

So I think, again, I want to just let you know that there's not much left to do in the ability to be able to, except for figure out how to pay for it and at the end of the day or incentivize somebody to do it. And that's what this bill does, is try to incentivize them with their neighbors to do the right thing. So with that, I respectfully ask for an aye vote.

Thank you, Senator. Dahle. He's closed. Looking for a motion here in the committee. Okay. Senator Bradford moves the bill. This would be a do pass to appropriations. Secretary, please call the roll.

[Roll Call]

All right, that has enough votes to get out. We'll hold the roll open for absent Members. We're going to take just a 1 minute pause here in our hearing. We'll begin in just a moment.

We have SB 1327 by Glazer. He is here prepared and ready.

So let's just put one up.

Just put one up and I'll replace it. Okay?

All right. All set to go. Okay. Thank you Mister Vice Chair and Members, thank you for allowing me to present this Bill to you today. California has actually had two gold rushes here in our state. The first one is fairly well known. 1849 gold was discovered.

People came out to mine gold, and that's certainly what the state is known for. They made a lot of money. They also left a lot of damage, environmental damage, to our creeks, our rivers, our hills. But it put California on the map, and it's what California is known for. The first gold rush.

We've had a second gold rush here in our state that people aren't so familiar with. And I call it the data mining that occurred in our state about 25 years ago. Great entrepreneurs learned that if they could get people to pay attention to their services on the Internet, that they could acquire the data of all those individuals.

So you know that when you go online and look for a vacation place in Hawaii, and all of a sudden in your feed, you're getting all these notices about vacation places and hotels on the island. And that's because these platforms have learned that the data, they've learned all about you. They know everything about you.

And they have created a model where because of that advantage, that data extraction from each of us, it has enabled them to make their advertising opportunity on their platform so much more attractive to folks who are selling things.

And so this chart on my left gives you a sample of what that really has meant for those traditional advertisers, newspapers, other media outlets that you can see on here, the dramatic change that occurred about 20 years ago, where advertising revenue for newspapers, that's this line here is going up, and then you see the collapse, and then you see the line on the bottom, digital advertising here, and you see it going up on a, I don't have my degrees, but on almost a 90 degree angle going up year by year.

And that's because it's become the favorite vehicle for advertising, because they know about each of us. And the result of that has been the hollowing out of our newsrooms in California. I refer to that data as a data extraction.

Just like they extracted gold from our hills, and just like the gold miners from days long gone, they didn't mitigate that damage. And so what I'm proposing in this Bill is to mitigate that damage of that data extraction. And what it's done to our newsrooms through a data extraction mitigation fee.

And that's one major part of the Bill that's before you is that I'm proposing that the platforms that have utilized that data, taken advantage of that data, that they pay a mitigation fee. We have a sales and use tax rate in California today that's seven and a quarter percent.

And I'm proposing that if any entity, not just a platform, if any entity has those two combinations of data extraction and advertising, and if it exceeds two and a half billion dollars in advertising revenue in California, that they would pay the sales and use tax, this new mitigation fee on anything above that level.

And that's the revenue source that's proposed in this Bill to try to mitigate the damage that has been done to our newsrooms. Now, the other side of the equation is that how do you get money into the newsrooms but keeps government hands off of the business of journalism?

Because we know that part of the success we have as a democracy is to have a fourth estate. We call it the fourth estate, the news media, to keep us accountable that you can't have the hand of government in that space.

We held a hearing just weeks ago here in this Committee where we heard from experts about both the issue of revenue, what are the options for revenue, and what are the ways to get it into the newsroom in a way that those in the journalism community feel is a hands off process.

It's not an easy thing to create. And so out of that hearing, the consensus was the best way to do that is to provide a tax credit for a legitimate journalist doing their work in any newsroom, small and large, in California. So out of that, we've created a formula in this Bill exactly to do exactly that.

And here you see that formula. That for an entity, a journalistic entity, that has more than 10 employees, we're proposing a 25% wage credit if they provide benefits to that, employee health benefits, retirement benefits. We're proposing they get a 5% bump in that credit.

And you can see it goes up to 30% if they're an entity that has fewer than 10 employees. We provide an advantage for these small community papers and ethnic papers. They would start with a 35% tax credit. If they provide benefits, it would go up to 40%.

And then we did a couple other things in this Bill that you'll see. Number one is a lot of small news outlets can't hire a lot of full time employees, so we've created a benefit for freelancers. Number one. Number two is we have some newsrooms in California that are nonprofit. They don't pay taxes on their employees.

So we put a provision in the Bill to make sure that they'd be compensated the exact same way as a for profit entity would be. And then let me add this last point, which is that a part of resuscitating the news community in our state is a stabilization.

And we all seen the stories about newsroom layoff after newsroom layoff. This Bill creates an incentive to grow newsrooms now back again. So it creates a stabilization on a tax credit level. But if they grow with a net new employee in the state, they're going to get anywhere from 10 to 15% increase in that tax credit opportunity.

And so you can see how that plays out here, that if you're the Los Angeles Times and you grow, you get a 35% tax credit. If you provide benefits, which they do, they'd get a 40% tax credit. If you're a smaller publication and you grow a single employee, you can get up to 50% covered on this proposal.

That's before you in this Bill. Okay, now you're going to hear from opponents in a few minutes. Somehow this added cost to them is going to create all kinds of issues with advertisers. You know, this issue of, some people call this an ad tax, I call it a mitigation fee from this proposal.

But there are ad taxes at other places in the world. England is one example, and we've not seen any impact on small employers through that revenue source that's been used. So we're going to hear about that.

But if you, and one last thing on this, if you look at the profits that these platforms are making, and by the way, the way the Bill is written today and the threshold requirements that are in the Bill, it would likely only affect three entities, Meta, Google and Amazon.

But if you look at Meta as one example, their ad sales are growing about 25% year over year. It's an unbelievable $1.0 billion profit Center for them. Good for them. The idea that this Bill is going to affect those ad rates is, for me, not really logical.

If that was the case, they'd be reducing ad rates over the last few years, not raising them. So I ask all of you advertisers out there, small or large employers, have your ad rates gone down? And I think the answer is likely no, they haven't gone down despite these massive profits.

So the accusation that this Bill is going to create this big impact on advertisers is something that's a little bit hard for me to get my head around. Let me say a few things that I think you know, I'm going to step away from this proposal specifically and say things that I think you intuitively know.

Senators, our democracy is dependent upon an informed public. They know what we are doing. And the thing that worries me a great deal is that we're seeing the fourth estate hollowed out. And that ability to communicate and have our citizens know what we're doing is getting narrower and narrower.

And you see the potential in our future where you could have these platforms that have a chokehold over that information source, not only hollowing out the news, independent news sources, but a chokehold over that information source. And it can be a very, very worrisome thing.

One of the things that we invest more than anything else in our work in state government is education. You guys all know the budget. We have a former budget chair here. She knows the budget. And we put a tremendous amount of money in education. But we do that for a reason.

It's not just to make sure everybody can be the best they can be in their lives. It's not just because we want an economy that thrives. It's because we know that an informed population is what keeps our democracy together. It's the glue that we have. So we put a lot of money in education for that reason.

And it's easy to think about a democracy and say, it's been here forever in all of our lifetimes, and it's going to be here forever in our kids, in their kids lifetime. But if you look at democracy in the whole arc of the world, it's a very rare thing. It's a very rare thing.

You look around all the danger points in the world today, whether it's North Korea, no democracy, Russia, no democracy, even the conflict in the Middle East. How many democracies are in that space? You look at Hungary, a democracy, but now you have somebody who doesn't want it to be a democracy. What is he doing?

He's killing the news media. He's strangling all the independent press. And so we've seen this story over and over again. Some of us were just down in Argentina. It's now viewed as it used to be one of the biggest economic democracies in the world.

And on our visit, it's now a 30 year young democracy because it all got wiped out. It all got wiped out. It's more fragile than any of us can ever imagine.

One of the things that we know very well as Senators is that we have an incredible lobbying corps here that talks to us about all kinds of issues. There's over 2000 registered lobbyists in Sacramento, but I'd suggest to you, on their client list, none of them have democracy.

That's not what they are there to take care of democracy. It's really up to us. It's up to us in this web of all these interests that we have to weave in and around. It's really up to us.

When we fought the king at the beginning of our nation, our founders knew how important the independent media was to a democracy. And that torch was lit. And, friends, that torch is now in our hands. It's in your hands whether it stays lit. Can we protect that democracy?

So we're going to hear a debate potentially today about winners and losers and all the rest. But really, it's in our hands now to kind of get above all that stuff and realize that the decisions that we make today and on this Bill are that impactful in the work of, of sustaining that democracy in our state.

I'll say one final thing. I'm entering my 10th year in the Senate, voted on more than 10,000, I think, bills carried many myself. I can't think of a more important legislative measure that I'm working on than this measure today, not for one thing or another.

It's really about a concept and a belief in how we do our work here in California and in the United States, preserving and protecting a democracy. With that, I respectfully ask for your support today. I have two witnesses that I'd like to invite up to the table, if that's okay.

Steve Waldman is the head of Rebuild Local News. He just flew out here from New York to be a part of this hearing today. Steve, I'm so grateful that you took the time. He works all over the country on this issue of saving democracy and rebuilding local news. And I appreciate you being here.

And I also want to invite up Lance Noble. Lance is one of those entrepreneurs that has tried to maneuver through this landscape, this littered landscape of news collapses and the rest. And he's actually started his own news operation, City Side, Oakland Side, Berkeley Side. He can explain it a little bit more.

And with that, I'll turn it over to the chair.

Thank you. Witnesses. Go ahead.

Thank you so much for having us. Our coalition, Rebuild Local News Coalition represents a very broad range of groups. Publishers, labor unions, conservative rural weekly newspapers, urban websites, for profits, nonprofits.

And there is actually, of all the ideas that we have seen around the country, the idea that unites all those different players in our coalition is the idea of the employment credit, the proposal that Senator Glazer is putting forward, and the reason that we care about this, of course, is this national collapse of local news.

And it is really hard to get one's head around the scale of this collapse. Thousands of newspapers have shot, on average, two and a half newspapers are closing every week in America.

The studies have shown over and over again that when you're in a community that has less local news, you have more corruption, more pollution, less civic engagement, higher borrowing costs for city government, higher taxes and higher polarization. So there's all sorts of negative effects that are shown over and over again in communities.

California has lost 68% of its journalists in less than two decades. That's actually one of the worst states in the country in terms of the collapse of local news. We really like this idea of the employment credit as the way at this, because as Senator Glazer said, the incentives are smart.

You know, if you slash your reporting, you get less. If you add reporters, you get more. It's future friendly. It helps both established players and startups, commercial and nonprofits, large and small. It properly constrains the role of government, which is a key issue. There's no panel of state officials.

There's no panel of state officials picking winners and losers and deciding who to get grants. In several ways, the Bill is actually better than the federal version and some of the other ones out there. First, because it gives a higher benefit to smaller and medium sized newsrooms under 10.

This is especially important for ethnic media and rural newspapers, which tend to be smaller and are incredibly important in their communities and have been disproportionately hurt by this wave of closures around the country.

And it also allows for support of freelancers specific requests on the part of that we were hearing on the part of ethnic media organizations because a lot of their publications don't have full time employees. We're grateful that those concerns were heard.

We tend to think that efforts to help local news in a global way actually pay for themselves because the amount of money that local reporters end up saving for governments and businesses through their reporting.

If I may just. We typically give two minutes for each witness. I don't like that. Since I'm chairing, I'm going to give you a little bit longer. Okay. Am I up to two already? I'm going to give, yes, you succeeded that, but I will give the opposition a little bit more time.

So I just want you to keep that in mind. Wrap it up so your other witnesses. Yeah, good.

That's fine. Thank you for the heads up. So let me just close on the last point about, well, why are we asking tech companies to help pay for this? First, because they're the big winners in the digital revolution. Alphabet, which recall, owns not just Google, but YouTube, Meta, which is Facebook and Instagram.

Amazon together brought in about 1 trillion in revenue. That's more than procter and gamble, Eli Lilly, McDonald's AT&T, Coca Cola, Citicorp, Lockheed Martin, Morgan Stanley, Nike and Netflix combined times two. So the $240 billion in profit that the three bring in would go down to 239 billion in profit under this Bill.

So we think it's a very modest proposal in that sense, and would have a dramatic improvement in the coverage of communities in California.

Thank you. Next witness

Chairman, Senators, good morning. My name is Lance Noble. I'm the CEO and co founder of Cityside Journalism Initiative, a nonprofit local news organization serving cities in the Bay Area. It's my pleasure to speak to you today about the grave issues facing local journalism and how I believe this Bill will help.

Cityside was founded 15 years ago with the launch of Berkeley Side, which is recognized nationally as a pioneer of independent, digital only local news. We now have three newsrooms in the East Bay, Oakland Side, Berkeley Side, and launching next month, Richmond Side. We hope and plan to work in more communities in Northern California in the coming years.

We cover the staples of daily journalism, City Hall, schools, arts, housing, local business, as well as deeper dives into key issues. We also publish a lot of community stories that build cohesion in our cities and share the mic with underrepresented voices.

This is precisely the kind of coverage that has been lost in many places over the last two decades in particular. Our work is an important part of the democratic infrastructure of our communities. As Steve just mentioned, social science research shows numerous problems that arise when you lose local news.

We're part of a growing movement to bring back local journalism and to do it better than in the past, when local news often ignored or stigmatized communities of color. I'm delighted to tell you that this new wave local journalism, produced by small but mighty newsrooms, can do great things.

Just this week, one of our peers, Lookout Santa Cruz, won this year's Pulitzer Prize for breaking news for its coverage of the devastating floods and mudslides in Santa Cruz County last year. But for all of our success, our organization and others like us live a precarious existence. We're small businesses with all the pressures that entails.

We get great support from our donors, from advertisers, and from foundations. But we're operating on the edge. SB 1327 addresses the critical issue for city side and other local news organizations. How can we support the talented reporters and editors that work for us?

And how can we find ways over time to grow their numbers so we can do more for the communities where we work? It answers the question in an innovative way that could set a model for other states. The tax credit provided by the Bill would make a substantial difference for cityside.

It would add significant stability for our unionized newsroom and greatly increase the likelihood that we could judiciously expand reporting numbers. It would provide some financial certainty in a business that is ruled by uncertainty and change. I'd urge the Committee to pass the Bill and help ensure the survival of much needed local news in California.

Thank you, those here in the room that wish to add on as support name and organization only.

Thank you Members. Tristan Brown with CFT, Union of Educators and classified professionals. I've also been asked to meet you for the Media Guild of the West, the Pacific Media Workers Guild and the News Guild of the Communication Workers of America. All in support. Thank you.

Thank you.

Seeing no other witnesses in support, we have opposition.

Peter Blocker, CalTax, I believe you can come up to the table if you'd like. There may be some questions, and we'd like to have you guys up there for that.

Thank you. Good morning, chair Members. Peter Blocker with the California Taxpayers Association and on behalf of a broad coalition of individual and business taxpayers, both large and small, in opposition to SB 1327.

We oppose this Bill because we'll raise operating costs for small businesses in the state, increase prices for California consumers, and if passed, will be met with numerous legal challenges because the tax it would impose is illegal under federal law and unconstitutional.

I'd like to emphasize that all the discussion about the Bill so far is focused on these large companies targeted by the tax. The economic burden will fall on small businesses and consumers.

Like other functioning taxes on business inputs, this tax will increase operating costs for California small businesses, making them less competitive, and manifests itself in higher prices that are ultimately paid by consumers.

While we respect Senator Glaser's passion and commitment to the goals of this Bill, the revenue raised by this tax will be unavailable for years when it is met with the inevitable legal challenges it will face.

The Bill is similar to digital advertising tax passed in Maryland in 2020, which is still mired in litigation, which has gone on for years and as a result of the numerous lawsuits, the same fate of this Bill will face the same fate as that one that has had numerous lawsuits.

Similarly, this tax would be susceptible to legal challenges, most notably under the Commerce clause of the US Constitution, which prohibits taxes that create undue burdens on interstate commerce, and for running to file the Internet Tax Freedom act, which bars states from passing taxes that unfairly target online commerce.

As I stated, we oppose this Bill for a myriad of reasons. We think this will harm the state's business climate, make it more expensive for small businesses to operate, and violates federal law.

However, even if you disagree with us on those points and support this tax increase, because SB 1327 shares much of the same legal uncertainty as the Maryland tax, we believe the Legislature should strongly consider waiting until the litigation there is resolved before moving forward with a proposal in California, especially as California is experiencing a budget deficit, to avoid the time consuming process of implementation, costly litigation and potential refunds, which would be owed with interest if the law is ruled unenforceable.

And for these reasons, we urge no vote. Thank you for your time.

Thank you. Others here that would like to speak in opposition, name and organization only, please.

Good morning. Tim Taylor on behalf of the National Federation of Independent Business and opposition. Thank you.

Good morning. Gema Gonzalez. On behalf of the California Hispanic Chambers of Commerce, in opposition. Thank you.

Good morning. Naomi Padron. On behalf of the Computer Communications Industry Association, in opposition thank you.

Carolyn Veal Hunter on behalf of California Black Media we are actually more of a tweener, and we've been working with the Senator on concerns, addressing the issues here, addressing local media, address black and ethnic media even in greater proportions. So there's some changes we'd like to see, and we're working with the, on those. So we're opposed, but would like to see those amendments.

Thank you.

Good morning. Kris Rosa on behalf of the Silicon Valley Leadership Group, in opposition.

All right. Dylan Hoffman on behalf of Tech Debt, in opposition. Thanks.

Vanessa Chavez with the California Association of Realtors, in opposition.

Andrea Deveau, on behalf of the California Asian Chamber of Commerce, in opposition.

Preston Young from the California Chamber of Commerce here today in opposition.

Jonathan Arambel on behalf of A&A, the Association of National Advertisers and CTIA, the Trade Association for the Wireless industry, in opposition.

Good morning. Sabrina Lockhart on behalf of the California Attractions and Parks Association, in opposition. Thank you.

Good morning. Annalee Augustine on behalf of the Family Business Association of California, opposed thank you.

Good morning. Steve Cruz on behalf of the motion, Motion Picture Association, in opposition.

Good morning. Joe Thompson as a small business owner for Gold Rush Grill, in opposition.

Okay. Thank you. Seeing no other witnesses, we'll bring it back to Senators for questions. Senator Dodd.

There certainly is a lot to unpack here, hearing both the supporters and the opposition. To be sure, this is a substantial tax, bigger probably than any tax that I've seen during my time here.

And frankly, I'm not really sure that if we're going to pass a tax, is this the best thing for us to do, particularly at a time where we're arguably anywhere between 30 and $70 billion in deficits going forward? Who actually knows what the right amount is to do?

I mean, Senator, you talk about the damage that's been done, all the mining of data and everything these companies have done, and I do see that. I am moved by the points you make here.

But at the end of the day, should we be doing more work and trying to determine what is the right amount that these companies, I mean, when you paint it at $1 trillion in, $240 million in profits, it's kind of like, wow, how much money are we really leaving on the table?

And believe me, I can argue both sides of this. You know, this, this Bill very, I'm not sure I would say eloquently on my part, but nevertheless, effectively. And so those are, those are some questions, certainly, as some of the opposition said, that they'll pass this on, you know, to small businesses.

You see that that's what these companies do. We raise their taxes. They're going to pass it on. I think there's another good point. The litigation in Maryland, should we be proceeding with this until, you know, until that's done?

Having said all that, that's all the negatives and everything on it, I am moved by the poster behind you and how much a lot of these countries pay for funding democracy, as you put it.

I suppose I've been in this situation before where I voted on a lot of bills I really didn't like. I don't like a lot about this, but the very basic premise that you're trying to hit here, I do like, I do appreciate, and I think you need some time, you know, to work through this.

And for those reasons and the commitment that I made to the author earlier when he first called me on this, I will be supporting it today. But I do reserve, you know, the right, this is going to be a two-thirds vote on the floor. It's going to be, it's going to be a tough vote there.

And I do reserve the right to see how this process has played out, and we'll just leave it at that. I do have one question, though, Mister Chair. I'm waiting for it. You talked about the nonprofits. How do they get compensated if they're not nonprofits and these are tax credits and everything?

You kind of indicated that it would be. And to me, there's a lot of great nonprofits in the media, and if we're going to go down this road, we have to make sure they're covered as well.

If I may, there's guidance in the Bill, Senator, that takes the same formula that you heard for profits, and it provides the FTB with the requirement to provide money, direct grants in compensation rather than a tax credit. So it's written in, again, the same strategy, which is to have no judgment about one nonprofit over another. It says that if they meet the criteria in the Bill for a journalist and a journalism publication, they would receive a grant equal to that tax credit.

Thank you, Senator Blakespear. And then we'll go to Senator-

Yes, thank you. I want to commend the author for bringing this Bill forward. I very much support this Bill, and I want to share that. Some of the reasons why are, I see this as California continuing its leadership and trying to tackle the biggest problems that we face in our nation. And some of the statistics that have been shared by the author but also by the lead witnesses, I think are really important to remember the context of this.

So one of the things that was shared was that California has lost 68% of journalists in the last two decades, and that is a substantial hollowing out of our news media and the number of people who are that watchdog on government.

We also recognize that local news has a very positive effect on all parts of our civic society. So the examples that were given were that it reduces corruption, it reduces pollution, it reduces borrowing costs for local governments, and there's less polarization. And I think that all of those things are true when you think about why. And that's because when there are decisions that are being made that are not in the light of day and that are not receiving any type of coverage, and it's easier to cut corners.

And I come from having served in local government, but also having worked as a journalist, and I have a bachelor's and master's degree in journalism and the experience of covering government and then having that be in the newspaper and having people reach out with feedback and having the decision makers see what that is, see what that feedback is, there's a whole loop that is happening there that's healthy.

And so the value of having journalists be hired is really clear. And I think it's also important to recognize that this conversation is taking place right now at a time in our nation where there are certain forces that are really trying to undermine all of our very important institutions.

So we see that, we see attacks on our judiciary, we see attacks on elections, we see attacks on our civil servants at all levels. And so these attacks on the media, I think also in some ways can lead to a lack of support or an ambivalence about support for journalists and media companies.

And it's important to me, and this is why I so much support this Bill, that we are a bulwark against that, that we are saying that in California, we value journalists, we recognize the good they do, and we want to figure out how to support them.

And so when you think about how to solve this problem, which is something that I've thought about conceptually for many years, but have not been able to come up with workable solutions.

And I think what the author has done here is recognize that in some of these countries that are spending a lot more money, like the United Kingdom, spending dollar 81 per capita, whereas we're spending dollar three per capita, that they're investing in the BBC and other types of investments that are linking more closely the journalism business to government.

And so, but in America, we don't have that tradition, and we also are very skeptical of that. So figuring out a way to finance journalism and journalists without having the government directly subsidizing it and somehow having a finger on the coverage that comes out of the media, that's a really important component.

And so to me, this Bill really is doing that in a great way because it's recognizing, as was stated, that the tech companies are the big winners in the digital revolution.

And so recognizing that first graph that he showed where the advertising revenue is going down at the same time that advertising revenue is going up dramatically for tech companies versus newspapers. You really can see the correlation between the two that are happening. And so this, to me, is a really important thing.

I don't know if it will be the ultimate thing we vote on, on the floor, but it's important to support it in Committee. It's important to say this is a value that we have in California. This supports the values that our nation is built on and relies upon to sustain our democracy.

And we want this to be considered among the, there's an Assembly Bill that's also wrestling with the same problem and figuring out how we can harmonize those two and do something meaningful in the State of California about this very significant problem. So I thank again, the author, and I look forward to the continued work on it, but I think that it's a really important thing that we work on, and at the appropriate time, I'll move the Bill.

Senator Skinner.

Thank you. Chair. Senator Glazer, thank you for bringing this forward. My questions are, the analysis does a great job explaining, as you also did, how the tax credit would work on the basis of number of employees, on the basis of providing benefits if they expand the employees, things like that.

What I'd like you to talk a little more about is how we define an eligible news source or an eligible, because I think that is an area that could well be rife with anyway. So if you could talk about that some, then I have a couple other comments to make.

Great. Thank you, Senator Skinner. It is something that we've worked on and is a part of the Bill. We do define in the Bill what a journalist is, and I can get you that. I think it's in the analysis.

In the analysis.

I certainly, it includes editing, it includes photography, it includes writing.

Okay.

So, yes, so it defines that. Secondly, it requires that you have to have a certain number of publications a year to be qualified. Okay.

So I understood what was the journalist, but the tax credit is to the entity that employs the journalist. So that's where I'm getting at, is what, is what defines the eligible entity. And I know it's in the Bill, but I just wanted you to talk about it.

Right. So it sets standards that they must meet in terms of what they do, how they do it, who they employ, whether they're certified, have liability insurance is one example, or license if they're a broadcaster. So it sets out all the minimum floor that they have to meet.

And by the way, if there's suggestions on how we could improve it or strengthen it. I'm very open to continuing that, that conversation. What we have tried to avoid is having a bias, an opinion about one or the other. And the whole idea here is to not have government do that in any way, but simply support the ecosystem in a way that is objective and fair, but does set as some sort of a journalistic standard for somebody that's legitimate.

It puts if you're a new, for example, if this Bill was to become law and a year later someone was to form what they would call a media company, it does require a pause to let them prove that there's a time requirement that's in the Bill to show that they're legitimate, not just trying to feed on the taxpayer credit that might become available.

So we have built into the Bill those types of things in anticipation of your fair question. And if there's more things we should do in that space, I'm very open.

To considering them, and I'm not sure what they are. And certainly we want to respect and abide by freedom of the press. And we, and I appreciate the construction that, you know, we don't want. Well, don't want. I mean, I actually think the Canadian broadcast company, CBC and BBC are, you know, pretty balanced, all things considering.

But, you know, we don't have that model other than the national public radio, public radio. Right. Which, of course, as is shown there, is very minimally supported. But I also, and I don't know how to account for it, but just by the creation, what we've seen is anything we create that provides a guaranteed source of funding from the government can be manipulated and in many times has been, and I don't know how to correct for that.

But I certainly wouldn't want to see that or the rise of what some people would consider not legitimate media type of entities being formed and creating just to be able to take advantage of this guaranteed funding. But as I said, I don't necessarily know how to correct for it. I would say that I do. I mean, it is a requirement under Prop 98.

But I do appreciate that we are funding that the revenue generated from this would Fund our schools because interestingly enough, and you all may have some examples of this in your districts, but for example, in my district, some of our high school newspapers are high school journalists have broken very important stories, have done investigative reporting and uncovered things that our other journalists did not figure out.

And there was a very well known case, well documented case, where an individual who owned a motel in Berkeley had basically brought over immigrant women from India young girls and was using them, in effect, in a sex trade circumstance. And the motel happened to be situated near Berkeley High.

So the students kept noticing that these girls were always around in the daytime and not in school. So they started to talk to them about it and asking them questions and asking them what are they doing there. They uncovered this entire thing, which ended up having the DA bring charges against the motel owner.

And he was prosecuted and served time. So I bring that up because it's why we need good investigative journalism, regardless of whether it is from these official, what we might call the official media sources. But even there is a role for our high school and college journalistic sources.

And while the Prop 98 money would not go with community colleges, but not to our other college sources, I think it's a good support not only for the fact that we have to, but because it can generate some good results. But I am concerned about how we build in some safeguards. But as I said, I do not have an answer for you right now.

Senator Bradford.

Thank you, Mister Chair. I too have concerns as it relates to this measure, but I commend the author because I clearly get where he's trying to go and what you're trying to achieve here. But there's still a lot of questions that remain unanswered.

And my biggest concern, again, as I share with you, is the ethnic media. And even though it says they will be considered here at the end of the day, they're always usually left out and still needing more assistance than some of the other publications. And I value the free press.

I think it's nothing more important in this country than having a free, independent press. And I'm seeing it die. It's dying on the fine on a daily basis. Three local papers in my district, and now only one survives right now. And the daily breeze is struggling to stay alive right now as well.

So there needs to be a balance here. I just don't know if we have, you know, this gets where we need to go. Because again, as my colleague from Berkeley stated, folks coming in and masquerading as, you know, a publication of journalists just to take advantage of these tax opportunities in this revenue stream. Leave some questions.

And I forgot where the lawsuit is currently going on. Maryland. In Maryland. I would maybe like to see the results of that, to see how that plays out too, because again, it's still a lot of unanswered questions. I think the intentions of this Bill, the goals, I should say, are well intended. And like I said, I commend you but I still have some concerns as we go forward. May I speak to that?

May, you may. Well, just. Thank you. Senator Bradford, I continue to have very productive conversations with the whole ecosystem of the journalism community, most particularly with ethnic media. And I want to solve for the issues that you've raised. I'm committed to doing that. If the Bill moves forward today.

And in regard to the lawsuit issue, this Bill is significantly different than the Maryland advertising tax. And I could go through all the particulars.

We've had lawyers look at this, but I'm not going to, if you want to hear them, I'm willing to give you the specifics of how this is different, but that litigation threat will be here no matter what.

And yet we see, and you have artfully articulated this, hollowing out even in your district and how we know it's continuing. The Los Angeles Times just laid off almost 100 newsroom journalists in Los Angeles just a few months ago. But I'm very committed to, again, working with you all. If this Bill moves forward on all these issues.

You know where my heart is and what I'm trying to get to, the complicated and challenging and frankly, humbling, to be honest about it, in all that we do. This is a very humbling experience to try to find a solution to something so deep and meaningful.

Senator Dodd had a follow up question.

I guess the other thing that I wanted to bring up just as part of the record and just a commitment to look into this a little bit more and get educated on this is we've had a lot of hedge funds that have bought out newspapers and have just the very core of their philosophy on buying them out was really not to further democracy or further our news cycles, but to pull out money, to extract money from these operations to be able to make more money.

I guess it is a little unsettling that we would have tax credits for those type of operations. So I just like some discussion in that area a little bit in more depth so we don't make a mistake by unintended consequences.

Fair enough. Thank you. All right, so I have a couple comments. First of all, I want to, I really respect you and you take on things that are very challenging and also things that we need to talk about. I think these are definitely things.

I have 15 counties and I have little communities all spread out through those 15 counties. And there used to be, 11 years ago when I was campaigning, there was a paper in every one of those communities, and there are a few left, very few, but there are a few left, and they just can't compete.

So that's, that's where we're at. But I want to just focus in on maybe some of the things that I have concerns about with this Bill. Number one, you know, in California. We. Tax when there's a problem. We just pass a tax and we're going to fix everything with taxing some rich person.

And I will just say I have no love for the giant corporations in our state. That in my mind I think maybe manipulate and use all my data taken from me and market it to me, and I don't appreciate that.

But taxing them and redistributing that is quite frankly, one of the huge problems that we have with our deficit at the state level is because those companies are leaving and their people are leaving because the tax structure in California is horrible. $29 billion in the last two years have left the California in a tax base.

And I don't think they're coming back anytime soon until we get in a structure where we can be competitive with other states to attract those businesses that we desperately need to run our government and to run the things that we all need for our communities. And quite frankly, that's fell on deaf ears throughout this state.

And this Legislature continues to move in a direction that is not business friendly. And you cannot have a public sector if you don't have a strong private sector. And we're totally upside down in California right now.

The part that this Bill that is attractive is that we need to be able to have the free and unbiased and unmanipulated press. In my mind, that's what America is about. That's what California is about. So there's a dilemma here. We're going to tax, we're going to try to redistribute it in a way that is fair. That's the goal of this Bill, is to make it fair and actually, hopefully make it unbiased and, and free. But I don't think this Bill will do that.

And I have, I want to just comment a little bit about the nonprofits and the NGO's and give you some examples of where I think there are some huge problems in this Bill.

Number one, we do lots of stuff through the CEC and through NGO's where we have no, we can't audit them and figure out what's going on because they're a nonprofit. And we don't have the ability to go in and find out where our tax money or the revenue that we've given these NGO's and nonprofits go. And we're using them all throughout the state. And I think that's a huge problem for California because there's no accountability.

And I think this Bill, and if you would like to address that some, I would like to get more understanding on how the nonprofits and how that's going to work and how we can actually do oversight with these tax dollars. So that's a question I have for you because I think it's a huge problem with your Bill.

I don't have a thorough answer, Senator, to that. The nonprofit community is a very small part of the news media ecosystem today. It's grown out of desperation that advertising dollars aren't there anymore and they need philanthropy.

But the broader question that you're asking goes way beyond this issue to a whole set of others that I'm not prepared to really provide much insight to you about. If there are ways to build in appropriate transparencies, I'm open to that in terms of how the money is, how it's funded.

If there's some elements that you think should be disclosed as eligibility criteria, I'm now just talking off the top. I'm open to hearing what those might be help get to what you're talking about. But I know you're raising a much broader philosophical concern than what's just in this Bill.

All right, well, I appreciate that. We do have a motion by Senator Blakespear, and I would only give you the opportunity to close.

Thank you for this hearing. I appreciate you indulging me with this longer conversation and discussion than normal. I would say that I appreciate Senator Skinner's point that I didn't make about Prop 98.

This Bill does fully Fund Prop 98 and our rainy day Fund and also sets aside money so that the platforms that may be affected by this Bill could deduct those expenses as a business expense so they're not taxed twice. So that is all built into the Bill.

Many of you have known my life here in the Senate over these last 10 years. You know that I'm not a big fan of taxes, of higher costs on business. I've got lots of scars in that space. Certainly, the cast tax vote was one fine example of that. So I don't do this lightly.

I will note that in the technology space, 99% of the companies aren't affected by this. This is a few they've done really well. I hope that if this Bill moves forward, that we'll continue to have conversations with them, and I hope that their executives, if they're watching or listening, will have some inkling of appreciation for protecting our democracy.

Because at the heart of it, it's really what's driving this Bill is to find a way to ensure that our democracy, temporary as it will be, can extend it out a little bit longer for the liberty and freedoms that we also enjoy. With that, I respectfully ask for an aye vote.

So the motion is do pass to appropriations. Will you please call the roll?

[Roll Call]. Four to one.

We'll leave that Bill on call for Members to add on. We can close the roll. Tally votes no. Four to one, it's out.

Okay, so we're going to close the roll on the remaining bills that we have on our docket today. I understand Senator Padilla is not going to be returning to committee. Somebody knows something different. So we will begin with the consent calendar. This is file item number one, SB 946 by Senator McGuire. Secretary, please open the roll.

Motion is adopt a consent calendar. Current vote is four to zero. [Roll Call] Senator Dodd?

That bill is out. Six to zero. Vote. Next up, file item number two. This is SB 952 by Senator Dahle. Please open the roll.

Motion is to pass to the Appropriations Committee. Current vote is five to zero, with the chair and vice chair voting aye. [Roll Call]

All right, that bill is out, five to zero. And we've closed the roll on file item three. Yes, that concludes our business here today. Thank you to our wonderful staff and all those who have participated. The Senate Committee on Revenue and Taxation is adjourned.