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CMTA Summer Tax and Energy Conferences=20
Energy Keynote Speakers=20 FERC Commissioners Nora Brownell and William Massey=20 August 1-3, 2001 at South Lake Tahoe=20 For registration and program information, go to CMTA's website:=20 http://www.cmta.net/archive/2001_tahoe_conference.shtml=20 Legislative Weekly=20 July 13, 2001=20 Issue 28, Volume 3=20 A weekly publication from the=20 California Manufacturers & Technology Association=20 detailing legislative and regulatory developments in Sacramento FRIDAY THE 13TH SURPRISE FOR CALIFORNIA BUSINESSES=20 The budget impasse will keep lawmakers working over the weekend. In additio= n,=20 a deadline looms for a vote on the Governor=01,s Memorandum of Understandin= g=20 (MOU) to keep Southern California Edison (SCE) out of bankruptcy. The=20 Assembly and Senate Democrats are making a final run at their own versions = of=20 the plan. A Senate version is still in the works, while the Assembly Energy= =20 Costs and Availability will hold an informational hearing Saturday afternoo= n=20 on ABX2 82 (Keeley D-Boulder Creek). ABX2 82 currently allocates the SCE=20 undercollection almost entirely to noncore customers (above 20kw), pays SCE= =20 two times net book value for transmission, and leaves open the possibility = of=20 a contribution from SCE above the $400 million tax refund provided in the= =20 Governors MOU. The sketchy outline of a Senate plan would impose all=20 undercollections to noncore customers, impose a $300 million haircut to=20 generators and an additional $800 million from SCE.=20 Direct access rights would be suspended under ABX2 82 until 2003 and a stud= y=20 would be authorized by March 31, 2002, on how to expeditiously phase in=20 direct access for customers over 20kw (and green direct access under 20kw).= =20 Some of California's largest businesses have already been hit with rate=20 increases over 100%.? CMTA supports an equitable sharing of the costs of th= e=20 SCE undercollection (as well as DWR contract costs) among all customer=20 groups, and will oppose a solution to the SCE problem that unfairly shifts= =20 these costs to California businesses.=20 ?=20 MORE OR LESS ENERGY There seems to be no shortage of bad business bills making their way throug= h=20 the Legislature.? Issues range from imposing strict liability on generators= =20 that reduce or discontinue electricity generation, to subjecting generators= =20 to felony criminal penalties for making basic cost/benefit business=20 decisions.=20 Generator Liability A measure, ABX2 51 (Reyes D-Fresno), that makes an electricity generator=20 strictly liable for any damages that are proximately caused when the=20 generator reduces or stops generating electricity for economic reasons,=20 passed (7-0) from the Assembly Judiciary Committee on July 3, 2001.=20 Since negligence and intent need not be proven in order to establish strict= =20 liability, under ABX2 51, a generator could be held strictly liable for=20 damages that resulted if electricity supplies were curtailed when the=20 generator was temporarily shut down to perform routine maintenance,=20 unscheduled maintenance or due to other external business factors.? ABX2 51= =20 also would make it difficult for a generator to permanently close a facilit= y,=20 even if the facility was not operating profitably.=20 Despite the fact that electricity shortages are driven by any number of=20 factors within and beyond their control, ABX2 51 would result in generators= =20 shouldering all liability and responsibility for electricity shortages.=20 CMTA will be actively advocating against this measure before it is heard on= =20 the Assembly Floor.=20 Felony Fuel Shortages=20 ABX2 65 (Cardoza D-Merced) is a vaguely worded measure that does not=20 explicitly identify what types of activities would be considered felonious.= ?=20 The measure allows an individual or entity to be prosecuted for =01&creatin= g a=20 fuel shortage=018 defined as:(1) The diminution by contrivance or artificia= l=20 means of any of the supply of fuel to a point below that needed to meet=20 consumer demand;=20 (2) Restricting output or withholding capacity from bidding into the market= ;=20 and, (3) Economic withholding by submitting bids at prices above the producers= =01,=20 marginal cost.Fluctuations of in-state and out-of-state generation;=20 maintenance of facilities; weather; customer demand; and drought are just a= =20 few of the many components that converge to impact day-to-day energy=20 supplies. ABX2 65 does not allow for the natural swings in supply and deman= d=20 which are common in a market economy, and add one more unpredictable=20 component to the market, thus further complicating price and supply=20 fluctuations. In addition, the bill provides that producers only should receive marginal= =20 costs for their products.? This precept flies in the face of a free market= =20 economy.? Businesses should be able to receive a reasonable return on the= =20 products they produce and supply.? Limiting a business=01, profits to margi= nal=20 costs only further discourages investment in the State=01,s energy=20 infrastructure. Second, entities already may be prosecuted for illegal business practices,= =20 conspiracy, collusion and intentional market manipulation under the State= =01,s=20 Cartwright Act and the Federal Sherman Anti-Trust Act, among others.?=20 Enforcement of existing state and federal laws is sufficient to address the= =20 alleged illegal business practices the bill purports to remedy.=20 Third, the measure establishes that a person or entity who violates=20 provisions of the bill is =01&guilty of a felony and may be punished in sta= te=20 prison and a fine not to exceed 10 percent of the corporation=01,s gross=20 corporate assets.=018? These fines and penalties are excessively punitive.= =20 Fourth, the bounty-hunter provisions of the bill provide an incentive for= =20 employees and interest groups to investigate businesses for profit.? Other= =20 bounty-hunter legislation passed by the Legislature has resulted in many=20 frivolous lawsuits.? Some of the costs associated with these suits are=20 absorbed by businesses and some of the costs are passed on to consumers in= =20 the form of higher prices.? In any event, the bounty-hunter provisions have= =20 the potential to unnecessarily increase energy costs.? The regulatory branc= h=20 of our government already has the authority to investigate alleged unfair= =20 business practices.? This authority should not be passed on to employees an= d=20 interest groups.=20 ABX2 65 establishes a terrible precedent and has the very real potential to= =20 reduce existing energy supplies and to discourage future energy=20 infrastructure investment within the State.=20 Office of Ratepayer Advocate=20 Following the charge of Pacific Bell, CMTA and other business lobby groups= =20 have successfully slowed the progress of SB 201 (Speier D-Hillsborough) whi= ch=20 repeals the sunset of the Office of Ratepayer Advocate (ORA).? CMTA does no= t=20 oppose the continued existence of the ORA, but is advocating against langua= ge=20 inserted into the measure that significantly expands the ORA's authority.= =20 The ORA has exercised broad authority to supervise and regulate utilities,= =20 arguably beyond the authority it was granted when it became a stand-alone= =20 office. While there is ample legislative history in Public Utilities Code= =20 Section 309.5 indicating that the ORA should be independent of the=20 Commission, the PUC=01,s full authority was not automatically extended to t= he=20 ORA.=20 CMTA joined Pacific Bell in proposing amendments to limit the ORA=01,s auth= ority=20 and to require the PUC to issue written orders when ruling on the ORA's=20 discovery requests.? Written rulings by an Administrative Law Judge or=20 Commissioner would provide additional information to the ORA, utilities and= =20 the public explaining the basis for decisions.=20 In addition, CMTA supports requiring the ORA to pursue alternative dispute= =20 resolution prior to filing a complaint.? Many courts today utilize=20 alternative dispute resolution because it often leads to a more efficient= =20 disposition of cases.=20 CMTA also is supportive of extending, for five more years, the sunset in th= e=20 bill that the author seeks? to repeal.? Extending the sunset will allow the= =20 Legislature to assess whether or not the original intent of the legislation= =20 has achieved its purpose.=20 SB 201 failed passage in Utilities and Commerce on July 9, 2001 when the=20 author resisted? amendments to narrow and clarify provisions in the bill.?= =20 Reconsideration was granted and the measure received a necessary rule waive= r=20 to allow the bill to be heard, again, by the Utilities and Commerce Committ= ee=20 on July 16, 2001.=20 ?=20 ASSEMBLY INSURANCE COMMITTEE PASSES UI BENEFITS BILL=20 SB 40 by Senator Richard Alarcon (D-Sylmar) passed out of the Assembly=20 Insurance Committee on July 11 on a 10-5 partisan vote.? The bill would=20 increase the cost of unemployment insurance (UI) to employers by more than= =20 $3.2 billion over four years and provides no systemic changes to help offse= t=20 the cost.? CMTA and other employer representatives opposed the bill.=20 An increase in unemployment benefits is a direct payroll tax that would be= =20 funded entirely by employers.? According to the Employment Development=20 Department's (EDD) projections, SB 40 as proposed would raise employer=20 contributions over and above the existing rates by $160 million by 2004,=20 given there are no changes in the unemployment rate.? Further, it is=20 estimated that by 2005, the total employer UI tax increase would jump to $7= 82=20 million, a 32 percent tax increase.? SB 40 would increase the maximum weekl= y=20 benefit from the current level of $230 to $325 in 2002, to $373 in 2003, to= =20 $384 in 2004 based on state average weekly wage estimates.=20 The bill contains several other provisions that add costs to employers such= =20 as an alternate base period using the most recent 52 weeks of the benefit= =20 year that will allow six to eight percent more applicants to qualify for UI= =20 benefits.? This would be a new system in addition to the current quarterly= =20 reporting system and would impose a new burden on employers who would have = to=20 manually report alternate base period wage information to EDD within ten da= ys=20 or pay a $250 civil penalty.? It would also entitle employees who leave the= ir=20 job during a trade dispute caused by a reduction in wages and employees=20 locked-out of work by the employer during a collective bargaining dispute t= o=20 receive UI benefits anyway.=20 The federal Worker Adjustment and Renotification and Training Act (WARN)=20 requires an employer of 100 or more employees to give at least a 60-day=20 notice in plant closings or mass layoffs affecting 50 or more employees.? I= f=20 the employer fails to provide a WARN notice, they are liable for civil=20 damages in the amount of 60 days of back pay and benefits to each affected= =20 worker.? Some employers elect to not give the advance notice and pay the 60= =20 days and benefits in order to avoid possible problems with product quality,= =20 equipment sabotage, poor attendance, injuries and etc.? However, the upside= =20 to this decision is that employees get 60 days in which to look for work fu= ll=20 time with full pay and benefits.? SB 40 would allow these employees to=20 collect UI benefits during the same 60 days.=20 California=01,s UI maximum weekly benefit of $230 is the fifth lowest in th= e=20 nation and has not been increased since 1992.? However, California has the= =20 most liberal eligibility requirement of any state by almost any measure and= =20 in order to maintain any reasonable control on UI cost, the historical=20 trade-off has been workers receiving lower benefits. The above provisions a= re=20 good examples of how the system can be abused and must be resisted by=20 employers.=20 CMTA along with other employer representatives are in serious discussion wi= th=20 the proponents of SB 40 to determine how to increase the benefit level and= =20 make some modest systemic changes that will help avoid placing an undue=20 hardship on employers.? Further discussions are being scheduled.=20 ?=20 STORMWATER BILL PUT OVER=20 Late last week, Senator Kuehl=01,s office circulated a negotiated compromis= e on=20 the stormwater monitoring bill, SB 72 (Kuehl D-Santa Monica).? Based on tha= t=20 version, the business community and the municipalities were prepared to=20 remove their opposition earlier this week in the Assembly Environmental=20 Safety and Toxic Materials Committee.? However, the evening before the=20 hearing, the bill=01,s sponsor, Heal the Bay, circulated a new set of amend= ments=20 to Committee members.? Their version deletes several sections of the bill,= =20 including carefully crafted language intended to preserve and strengthen=20 group monitoring programs.? It also creates the potential for expanded=20 monitoring requirements for industrial facilities.=20 Heal the Bay=01,s action created an atmosphere of confusion and frustration= that=20 lead Senator Kuehl and Committee Chair Hannah-Beth Jackson to hold the bill= =20 in committee.? In all probability, a rule waiver will be secured for an=20 August hearing in Assembly Toxics.? In the meantime, discussions will resum= e=20 on Heal the Bay=01,s proposed changes.? CMTA remains hopeful that the=20 outstanding issues mentioned above can be resolved without sacrificing the= =20 progress achieved over several weeks of negotiation.=20 ?=20 CMTA ADVOCATES FOR CAREER AND TECHNICAL EDUCATION FUNDING=20 CMTA has formally urged that $100 million dollars be allocated in the State= =20 Budget for Career and Technical Education (CTE, also known as vocational=20 education). At the outset of this session, legislative leaders stated that= =20 CTE was one of the highest education priorities for the year.? Unfortunatel= y,=20 the Governor eliminated funding for CTE in the May Revise and the Budget=20 Subcommittees subsequently funded only $10 million for an unallocated fund.= =20 In the past decade, more than half of the career technical education progra= ms=20 faced closure in the Los Angeles Unified School District because of lack of= =20 funding and support; statewide, the trend has been the same.? Without new= =20 funding this year, more programs will close.?? The acquisition of marketabl= e=20 skills in high school offers students, both those who are college bound and= =20 those who will immediately enter the workforce, the opportunity to earn hig= h=20 salaries and engage in meaningful careers.? CMTA continues to support=20 legislation designed to rebuild California=01,s CTE/vocational education sy= stem.=20 ?=20 UPDATE ON THE CALIFORNIA ECONOMY A recent report from the California Department of Finance confirms that the= =20 state=01,s economy does not seem destined to repeat its extraordinary 2000= =20 performance this year.? Employment growth slowed significantly during the= =20 first five months of 2001.? The slowdown is principally centered in the San= =20 Francisco Bay Area due to the dramatic contraction in internet-related=20 service industries. Below are data supporting the report=01,s conclusions:= =20 California=01,s employment picture has changed notably since the end of 200= 0.?=20 In May, industry employment grew by 3,200 following gains of 19,400 in Apri= l=20 and nearly 58,000 in March.? Thus far in 2001, industry employment has=20 expanded by an average of 12,500 jobs each month compared to an average of= =20 49,000 jobs each month in 2000. Despite decelerating job growth, California is still the nation=01,s growth= =20 leader.? While the state added over 3,000 jobs in May, nationally nonfarm= =20 employment fell by 19,000.? Since the beginning of the year, California has= =20 accounted for 73 percent of the nation=01,s new nonfarm jobs. California's unemployment rate was unchanged in May at 4.9 percent.? The ra= te=20 a year ago was 5.0 percent.? While still low by state and national standard= s,=20 the unemployment rate of all San Francisco Bay Area counties rose in May. Computer services=01*heavily concentrated in the San Francisco Bay Area=01*= are=20 bearing the brunt of the employment slowdown.? Business service employment= =01* which includes computer programming and personnel supply services=01*grew b= y=20 nearly 13,000 jobs per month in 2000 but has averaged only 800 a month thus= =20 far in 2001.? Within business services, the growth rate of computer service= s=20 employment has been cut in half.? Year-over-year industry employment growth= =20 in the San Jose Metropolitan Area=01*the Silicon Valley=01*has dropped from= 5.9=20 percent in December 2000 to 1.3 percent in May 2001.? Growth in the San=20 Francisco Metropolitan Area over the same period dropped from 4.7 percent t= o=20 2.6 percent. California=01,s real estate market is also cooling.? Home sales have modera= ted=20 and prices in the state=01,s costliest region, Santa Clara County, have=20 softened.? Statewide sales of single-family homes in May were off nearly 13= =20 percent from one year ago.? However, the median price of a single-family ho= me=20 in May was still up 10.7 percent from a year-ago. Preliminary General Fund agency cash for June was $432 million below the=20 2001-02 May Revision forecast of $7.926 billion. Year-to-date, revenues are= =20 $389 million lower than the $78.781 billion that was expected. www.cmta.net=20 California Manufacturers & Technology Association=20 980 9th Street, Suite 2200=20 Sacramento, CA? 95814=20 (916) 441-5420 phone=20 (916) 447-9401 fax=20 ?
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