A Publication of the County Executive Office/Legislative Affairs. County of Orange Positions on Proposed Legislation

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1 A Publication of the County Executive Office/Legislative Affairs DRAFT February 14, 2017 Item No. 37 Vol. IV, No. 7 County of Orange Positions on Proposed Legislation The Legislative Bulletin provides the Board of Supervisors with analyses of measures pending in Sacramento and Washington that are of interest to the County. Staff provides recommended positions that fall within the range of policies established by the Board. According to the County of Orange Legislative Affairs Procedures adopted by the Board of Supervisors on November 25, 2014, staff recommendations for formal County positions on legislation will be agendized and presented in this document for Board action at regular Board of Supervisors meetings. When the Board takes formal action on a piece of legislation, the CEO will direct the County s legislative advocates to promote the individual bills as approved by the Board. The Legislative Bulletin also provides the Board of Supervisors with informative updates on State and Federal issues. The Legislative Platform was adopted by Board of Supervisors Minute Order dated November 22, On February 14, 2017, the Board of Supervisors will consider the following actions: RECOMMENDED ACTIONS 1. Receive and File Legislative Bulletin INFORMATIONAL ITEMS 1. Legislative Update: CEO-LA 2. Sacramento Legislative Report 3. Washington Legislative Report CS Page 1 of 9

2 INFORMATIONAL ITEMS 1. Legislative Update: CEO-LA IHSS MOE Advocacy Update. On Wednesday February 8 th CEO-LA staff traveled to Sacramento and along with Platinum Advisors, met with members and staff from the County s legislative delegation. We met with Senators Pat Bates, John Moorlach and Janet Nguyen, and Assemblymembers Travis Allen, Phil Chen, and Steven Choi. We also met with staff from Assemblymembers Bill Brough, Tom Daly and Sharon Quirk-Silva, and will meet with Senators Josh Newman and Tony Mendoza, and Assemblymember Matt Harper next week. Our meetings focused on the Governor s proposal to eliminate the Coordinated Care Initiative (CCI), dismantle the county In-Home Supportive Services (IHSS) Maintenance of Effort (MOE) cost sharing arrangement, dissolving the Statewide IHSS Authority, and shifting collective bargaining for IHSS workers from the Statewide IHSS Authority to Orange County. Using the infographic we developed for these meetings, our delegation is extremely concerned about the impacts to the County. They were shocked to see how quickly the costs will escalate and understood the impact of how the County s property tax shortfall exacerbates the crisis. Our delegation members are ready to assist and engage to protect the County s interests. In advance of next week s meetings with the Department of Finance and the Governor s Office, CEO-LA has prepared a formal opposition letter to be signed by Chairwoman Steel and Vice Chairman Do, which will be delivered to the Governor, the Senate President pro Tem, the Assembly Speaker, and the Senate and Assembly Republican Leaders. Copies will be delivered to our legislative delegation members and the Department of Finance. Los Angeles County has already sent its opposition letter, and we anticipate the other five CCI Pilot Counties will follow suit. We have provided the attached infographic to your offices, and will share copies of the County s opposition letter once it is signed. CEO-LA will continue to provide updates to your Board and staff as new developments emerge. Please let us know if you have any questions. Page 2 of 9

3 IHSS COST SHIFT County of Orange Legislative Affairs Brief T he THE CRITICAL IMPACT TO ORANGE COUNTY California Department of Finance (DOF) has ended funding of the Coordinated Care Initiative (CCI) and has dismantled the In-Home Supportive Services (IHSS) Maintenance of Effort (MOE.) This decision will shift more than $465 million in new IHSS costs over six years to Orange County. Photo Credit: Orange County Elder Care A COST ORANGE COUNTY CAN T AFFORD In response to this unexpected action by the DOF, Orange County must determine how $37.8M will be absorbed before the Board approves the budget on June 30, The six-year projected costs include program growth, new federal overtime regulations, minimum wage increases up to $15 per hour by 2022, and the extension of three paid sick-leave days. This will cost the County an additional $465 million over six years. $35M IHSS COSTS - 6 YEAR PROJECTION Current OC IHSS Cost $73M $82M $98M Increased OC IHSS Cost $124M $152M $171M TOTAL IMPACT $465M FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 DID YOU KNOW? Orange County is the third most-populous county in California and sixth in the nation with three million residents who have needs you might not expect. Nearly one in three receive social services One in four use publicly funded medical services One in five live in poverty 49 percent of school children qualify for free or reduced school lunch Page 3 of 9

4 REALIGNMENT REVENUE WON T BRIDGE THE GAP The DOF believes the County has enough revenue to absorb these costs from its allocation of 1991 Realignment Funding from the state. However, most of that revenue is required by existing state and federal law to be allocated to existing programs, leaving insufficient revenue to pay for new services. CRITICAL SERVICES WILL BE THREATENED The cost of the IHSS shift to OC taxpayers starts at almost $38M and grows to $171M. Over six years, that is $465M taken away from critical services to residents. -$21M PUBLIC SAFETY $0 $10.4 $10.4 $10.4 $10 $9.8 $10.1 FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 Current OC IHSS Cost Increased OC IHSS Cost 91 Realignment Revenue from State -$7.2M COMMUNITY SERVICES -$6.8M GENERAL GOVERNMENT FAST FACT Orange County will not be able to absorb these costs without cutting essential public health and safety services. Our property tax revenue shortfall limits our ability to provide programs that serve our residents. State Average PROPERTY TAX SHORTFALL MAKES PROBLEM WORSE Orange County receives the lowest percentage of property tax revenue in California. Despite being one of the largest generators of the state s tax revenue, Orange County receives about six cents on the dollar as opposed to the statewide average of 15 cents. This is the County s largest income source for essential discretionary and mandated programs and is used to fund critical services. Special Redevelopment Schools Districts Cities Funds County Orange County Los Angeles San Bernadino Alameda San Diego General Property Tax Dollar Allocation, By Selected Counties Page 4 of 9

5 2. Sacramento Legislative Report Prepared by Amy Jenkins, Nicole Wordelman, & Steve Wallauch New legislation is rolling out slowly, as lawmakers prepare to meet the bill introduction deadline February 17 th. The federal administration continues to be a major preoccupation, with legislation pertaining to immigration moving forward in both houses. On February 8 th, Assemblywoman Lorena Gonzalez Fletcher (D-San Diego), Assemblyman Adrin Nazarian (D- Sherman Oaks), and Assemblyman Kevin McCarty (Sacramento) introduced a package of bills titled, California Welcomes Refugees. The three legislators have the largest population of refugees in California. AB 343 would make refugees eligible for in-state tuition at public colleges; AB 349 (not yet in print) would allow refugees who served US military or State Department to apply foreign work experience toward eligibility for a professional license; and two additional pieces of legislation included in the package (numbers currently unknown) would add $5 million to budgets of school districts serving high child refugee populations, as well as declare June 20, 2017 World Refugee Day. President Donald Trump s conversation on Fox News with Bill O Reilly has elicited much discussion about how much power the president himself has to cut funding to the state. During the discussion, President Trump referenced cutting funding to California and stated: We give tremendous amounts of money to California. California in many ways is out of control, as you know. In response, new Attorney General Xavier Becerra said that he is willing to battle the federal government and pointed out that California provides more funding to the federal government than any other state. He also joined 15 other states in filing a friend of the court brief Monday denouncing the Administration s travel ban. The Legislative Analyst s Office produced a report last month examining federal funds coming into California. A total of $368 billion comes to California, although much of that funding is direct payments to individuals, private entities, and universities. $8.2 billion goes directly to local governments, and about $105 billion goes to the state, primarily for health and human services programs. National Environmental Policy Act (NEPA) Delegation. AB 28 (Frazier) has been unanimously approved by both the Assembly Committees on Transportation and Appropriations, and the bill is headed for a floor vote on Monday, February 13 th. AB 28 would re-enact a program that authorizes Caltrans to assume the responsibilities of administering the National Environmental Policy Act (NEPA) for federally funded transportation projects in California. The statutory authority for Caltrans to assume this role expired on January 1, This NEPA delegation process speeds up the environmental review process that is required under NEPA and CEQA. Technically, AB 28 would waive Caltrans 11 th Amendment right to sovereign immunity from lawsuits brought in federal court in short, it requires Caltrans to defend its work in the NEPA document. The bill is moving at an accelerated pace in order to reach the governor s desk before Caltrans is required to re-apply with the federal Department of Transportation. Transportation Funding. It appears that a transportation funding package will begin to move through the legislative process next week. AB 1 and SB 1 are similar transportation funding proposals that would generate about $6 billion to maintain state highways, local streets & roads, and mass transit systems. Below is a chart comparing AB 1, SB 1, and the governor s transportation proposals. The Senate Committee on Transportation & Housing is set to hear SB 1 (Beall) on February 14 th. SB 1 is then expected to be heard by the Senate Committees on Environmental Quality, Governance & Finance, and then Appropriations before reaching the Senate Floor. Approval by the committees only requires a majority vote, but a 2/3 vote is required on the Senate Floor. Page 5 of 9

6 Whether the 2/3 threshold is attainable is still questionable, but with the governor engaged, passage is within the realm of possibility. Truck Weight Fees Loan Repayment Excise Tax Vehicle Registration Fees Cap & Trade Revenue Diesel Sales Tax AB 1 (Frazier) SB 1 (Beall) Governor s Proposal Based on Budget Summary. Actual language not available yet. REVENUES Returns approximately $500 million in truck weight fees over 5 years. Repay over two years $706 million in outstanding loans. $1.8 billion in new gasoline excise tax revenue by raising gasoline excise tax by 12 cents. $1.1 billion gasoline excise tax revenue is generated by eliminating BOE s true-up process. This would reset the price based excise tax back to 17 cents. $600 million in new diesel excise tax revenue by increasing the excise tax by 20 cents. $1.3 billion by imposing a vehicles registration fee of $38. $21 million by imposing a $165 registration fee on all zero emission vehicles. $300 million in additional cap & trade revenue dedicated to transit programs by increasing the formula allocation to these programs. $263 million by increasing the sales tax on diesel fuel by 3% for a total rate of 5.25%. Returns approximately $500 million in truck weight fees over 5 years Repay over two years $706 million in outstanding loans $1.8 billion in new gasoline excise tax revenue by raising gasoline excise tax by 12 cents. $1.1 billion gasoline excise tax revenue is generated by eliminating BOE s trueup process. This would reset the price based excise tax back to 17 cents. $600 million in new diesel excise tax revenue by increasing the excise tax by 20 cents. $1.3 billion by imposing a vehicles registration fee of $38. $13 million by imposing a $100 registration fee on all zero emission vehicles. $300 million in additional cap & trade revenue dedicated to transit programs by increasing the formula allocation to these programs. $300 million by increasing the sales tax on diesel fuel by 3.5% for a total rate of 5.75%. No Proposal Keep using weight fees for debt service. Repay $706 million over three fiscal years. $1.1 billion by eliminating the BOE s true-up process for the price based excise tax, and setting the price based excise tax at 21.5 cents. Adjust the excise tax for inflation. $425 million by increasing the diesel fuel excise tax rate by 11 cents. Adjust the excise tax for inflation. $2.1 billion by imposing a $65 Road Improvement Charge on the registration of all vehicles, including zero emission and hybrid vehicles. $400 million cap & trade revenue appropriated to the Transit Capital & Intercity Rail Program, and $100 million to the Active Transportation Program. No change. Page 6 of 9

7 Article 19 Revenue TOTAL REVENUE Approximately $70 million in Non-Article 19 funds is directed to the Road Maintenance and Rehabilitation Account. Approximately $6 billion and $706 million in onetime funds. Approximately $70 million in Non-Article 19 funds is directed to the Road Maintenance and Rehabilitation Account. Approximately $6 billion and $706 million in onetime funds. No change. Approximately $4.2 billion and $706 million in onetime funds. General Break Down of Revenue Allocations State and Local Partnership Program Active Transportation Program Advanced Mitigation Fund University Research Funding Cities -- $1.1 Billion & $176 million one time. Counties $1.1 Billion & $176 million one time. Transit -- $563 million SHOPP -- $1.47 billion STIP -- $770 million State and Local Partnership Program is created and funded with $200 million. Active Transportation Program would receive $80 million from the RMRP. In addition, up to $70 million will be transferred to the Active Transportation Program resulting from operational efficiencies identified by Caltrans through the annual budget process. Advanced Mitigation Fund is allocated $30 million for four years. California State University will receive $2 million. Cities -- $1.1 Billion & $176 million one time. Counties $1.1 Billion & $176 million one time. Transit -- $563 million SHOPP -- $1.47 billion STIP -- $770 million FUNDING PROGRAMS State and Local Partnership Program is created and funded with $200 million. Active Transportation Program would receive $80 million from the RMRP. In addition, up to $70 million will be transferred to the Active Transportation Program resulting from operational efficiencies identified by Caltrans through the annual budget process. Advanced Mitigation Fund is allocated $30 million for four years. California State University will receive $2 million. Cities -- $580 million Counties $580 million Transit -- $400 million SHOPP -- $1.8 billion STIP -- $800 million $250 million allocated to a local partnership grant program. Active Transportation Program would receive $100 million in cap & trade revenue. This would be an annual appropriation subject to budget negotiations. The proposal includes an Advanced Mitigation program, but it is unknown how much revenue is dedicated to this program. Unknown $3 million to the Institutes of Transportation Studies at the University of California. State Highway $1.45 billion is $1.45 billion is $1.7 billion in Page 7 of 9

8 & Local Streets and Roads Funding Trade Corridors Improvement Fund continuously appropriated for maintenance of the state highway system as specified in each SHOPP plan. $1.45 billion is continuously appropriated to cities and counties $600 million for the Trade Corridors Improvement Fund program. This Fund will also govern the allocation of federal FAST Act funds received by the state. continuously appropriated for maintenance of the state highway system as specified in each SHOPP plan. $1.45 billion is continuously appropriated to cities and counties. $600 million for the Trade Corridors Improvement Fund program. This Fund will also govern the allocation of federal FAST Act funds received by the state. new tax revenue and $100 million in Caltrans efficiency savings for making repairs to the state highway system. $1.1 billion to cities and counties for local street and road maintenance projects. Trade Corridor Improvements are allocated $250 million, along with $323 million from loan repayment funds, for investment in the state s major trade corridors. 3. Washington DC Legislative Report Prepared by Potomac Partners DC The Senate on Tuesday confirmed Betsy DeVos to lead the Department of Education, with Vice President Mike Pence making history by casting the tiebreaking vote for a Cabinet nominee. Secretary DeVos was confirmed 51-50, the narrowest margin in congressional history for a Cabinet post, after Senators Susan Collins (R-ME) and Lisa Murkowski (R-AK) joined with all 48 Democrats in opposing her nomination. Senator Sessions (R-AL) will likely be confirmed as the next U.S. Attorney General this week as well. Partisan fighting in the Senate is sure to spill over into the confirmation proceedings for Neil Gorsuch s nomination to the Supreme Court, where he will need 60 votes unless Senate Republican Leadership decides to use the nuclear option that would allow for a simple majority instead. Key Appropriations Committee chairmen and senior staff this week expressed an increased pessimism about the ability of Congress to avoid a year long continuing resolution (CR) for FY17 that will freeze the rest of this year s funding at the FY16 levels with no new policy changes. Driving this pessimism is a lack of clarity from the White House on their domestic spending priorities. Further complicating matters is the Administration s request for a supplemental appropriations bill that funds additional defense and border security while failing to provide options for any new spending offsets or pay-fors for the border wall. Consequently, we are also seeing the FY18 appropriations and budget target dates continue to slip. A career civil servant at the Office of Management and Budget told us this week that agencies may not be in a position to send detailed congressional justification documents to Capitol Hill for months--possibly mid June. Much of this is driven by delays in confirming Cabinet Secretaries. Until that happens it is difficult for anyone at the federal agencies to assert authority for changes in policy direction and budget planning. Appropriations Subcommittee Cardinals are privately saying they expect hearings and bill markups to also slip by a month or more from their usual schedule. Repeal and replacement of the Affordable Care Act (ACA) continues to grind along with the House Energy and Commerce Committee staff putting together legislative options for member consideration. While there is not yet agreement on a path forward among congressional Page 8 of 9

9 Republicans and the White House, we can reasonably expect more details to be made public after the Senate confirms Health and Human Services Secretary nominee, Congressman Tom Price (R-GA). It is also a possibility that the replacement plan could be enacted through a series of bills rather than one bill with implementation spread over the next four years. In terms of other related legislation, there are credible rumors that tax reform may be moved up in the queue to give more time for ACA replacement legislation to move through regular order in the House and Senate. In terms infrastructure initiatives, House Transportation and Infrastructure Committee members have indicated they are in early discussions on new legislation aimed at expediting project delivery for both water and surface transportation infrastructure in response to President Trump s promise to deliver new infrastructure projects around the Country. This bill would likely expand and strengthen the environmental streamlining reforms included in last year s Water Resources Development Act and Surface Transportation Authorization (the FAST Act). This new reform bill could also be a precursor to new infrastructure authorization legislation. House T&I Chairman Shuster also plans on advancing a Federal Aviation Administration (FAA) Authorization later this year. If you or your staff have any questions or require additional information on any of the items in this bulletin, please contact Peter DeMarco at Page 9 of 9