MEMORANDUM. Board of Directors. Kurt Evans, Government Affairs Manager. Santa Clara Valley Transportation Authority. DATE: May 31, 2013

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1 MEMORANDUM TO: FROM: Santa Clara Valley Transportation Authority Board of Directors Kurt Evans, Government Affairs Manager Santa Clara Valley Transportation Authority DATE: May 31, 2013 SUBJECT: Weekly Legislative Summary: Week of May 27, 2013 FEDERAL IRS: Committees in both the House and Senate continued to investigate revelations that the IRS has been targeting applications for tax-exempt status submitted by conservative organizations for greater scrutiny, while routinely approving applications requesting similar status from other groups. On May 22, Lois Lerner, the IRS director in charge of the agency s office that handles such applications, invoked her Fifth Amendment right against self-incrimination during an appearance before the House Oversight and Government Reform Committee. A Senate Finance Committee hearing held on May 21 marked the first public appearance of former IRS Commissioner Doug Shulman. The scope of the hearing ranged from the controversy itself to a wider discussion about oversight of non-profit groups that define themselves as primarily engaged in activities aimed at benefiting the public good. Treasury Secretary Jack Lew testified before the House Financial Services Committee on May 22. The question-and-answer period quickly intensified as committee members attempted to zero in on when exactly Lew became aware of the IRS s improper conduct. Multiple White House officials have stated that although they were aware that the Inspector General was close to releasing a report about the IRS s practices, they were not in a position to act on it since the conclusions were not yet final. Senior White House aides also have indicated that they did not inform President Barack Obama to avoid any possibility that he would be seen as interfering with the Inspector General s investigation. Immigration: Shortly after the Senate Judiciary Committee approved comprehensive legislation to overhaul the nation s immigration laws, House Speaker John Boehner (R-OH) and House Majority Leader Eric Cantor (R-VA) issued a joint statement indicating that their chamber would not simply take up and pass the Senate s bill as is. The two House GOP leaders noted that their chamber would work its will and produce its own legislation.

2 The Senate measure, crafted by a bipartisan group of senators known as the Gang of Eight, survived 212 amendments over five lengthy Judiciary Committee hearings. Left intact was the core of the bill, which provides a pathway to citizenship for the nation s 11 million unauthorized immigrants, tightens security along the southwest border with Mexico and fundamentally alters the nation s legal immigration system. At the same time, the Gang of Eight was successful in fending off poison pill amendments that could have scuttled the carefully negotiated bill. The Judiciary Committee approved the legislation by a 13-5 vote. It is expected to be debated on the Senate floor in June. Momentum to overhaul the nation s immigration laws is being fueled by the growing political influence of Hispanics. National Republican leaders, responding to a 2012 election in which Mitt Romney garnered only 27 percent of the Hispanic vote, have been pushing to rebrand their party. They view the enactment of immigration reform legislation, a priority issue for Hispanics, as one way to do that. However, those national efforts do not necessarily matter to House Republicans whose districts have become whiter, more conservative and less diverse than the nation as a whole because of the 2010 redistricting. The redistricting process, which was controlled in numerous states by Republicandominated state legislatures, resulted in a stronger GOP grip on the House. But it also created a political climate where incumbents are more vulnerable to primary challenges than general election battles, intensifying pressure on incumbents to appeal to base voters. And voters in the Republican base are skeptical of immigration reform. In fact, conservative groups are already mobilizing to oppose provisions that would establish a pathway to citizenship for undocumented immigrants residing in the United States. This issue could become fodder for GOP primary challenges if the House moves forward with a bill. STATE State Budget: The Democratic-controlled Legislature set up a much-anticipated confrontation with Gov. Jerry Brown over the FY 2014 budget by pushing ahead with spending plans that restore safety net programs and alter his proposal to overhaul the state s public education finance system. Using the revenue forecast provided by the non-partisan Legislative Analyst s Office (LAO), which shows the state taking in $3.2 billion more than assumed in the Governor s May Revision, the Assembly and Senate Budget Committees proposed more aggressive spending in separate plans that will be reconciled in a conference committee. Both chambers are gearing up for final action on the budget as the June 15 constitutional deadline looms. Assembly and Senate Democratic leaders want to use much of the additional $3.2 billion projected by the LAO to boost spending for K-12 schools and community colleges, increase reserves, and pay down debt. But each chamber has its own short list of other programs to bolster as well. The Senate budget commits $131 million to restore dental services for 3 million adult Medi-Cal recipients, provides $142 million for one-time infrastructure spending in the mental health system, and dedicates $100 million for nursing homes and family planning services. The Assembly version proposes $200 million to increase CalWORKs stipends, $200 million to establish a middle-class college scholarship program, and $100 million to boost funding for child care programs. Both chambers are proposing $100 million in additional court funding. 2

3 Gov. Brown has called on lawmakers to exercise restraint, saying he does not want to restore funding to programs based on what could be a one-time windfall of tax revenues paid by wealthier Californians who sought to avoid higher federal taxes by cashing out investments at the end of He warned against enacting a budget that could put the state on the same path that led to past deficits. I don t believe you should have a budget based on a forecast that has a high reliance on volatile capital gains, he remarked. California can t repeat mistakes of the past by committing the state to a higher level of spending than the state can sustain. Caltrans: The Brown Administration announced that it has ordered a top-to-bottom independent review of Caltrans. In a prepared statement, Brian Kelly, acting secretary of the Business, Transportation & Housing Agency, said experts from the State Smart Transportation Initiative will take a fresh look at Caltrans operations, and help improve performance, communications and management. Housed at the University of Wisconsin-Madison, the State Smart Transportation Initiative includes members from 19 state transportation departments, and focuses on promoting sustainable transportation practices and industry reforms. Kelly said members of the group will interview Caltrans staff and people outside of the department before providing a written review in about seven months. Although Caltrans has come under scrutiny for its management of the construction of the new eastern span of the San Francisco-Oakland Bay Bridge, Kelly said the $270,000 review was driven by Gov. Brown s state government reorganization plan, which calls for consolidating transportation-related departments into a single Transportation Agency effective July 1. He indicated that similar reviews may be ordered for the Department of Motor Vehicles (DMV) and the California Highway Patrol (CHP). Kelly acknowledged that he shares concerns about management, performance and communications within Caltrans. It s a big department, he commented. They have a lot of challenges and a lot of demands on them. And I thought with the creation of a new agency, the timing was right doing a performance review. Covered California: The federal Patient Protection and Affordable Care Act provides for each state to establish a health insurance exchange by January 1, 2014, to serve as a central marketplace where uninsured individuals and families eligible for federal subsidies would be able to shop for coverage among competing plans. If a state chooses not to put an exchange in place, the federal government will set up and administer one on the state s behalf. Earlier this year, the U. S. Department of Health and Human Services gave conditional approval to California to run its own exchange, which is called Covered California. Since its inception, Covered California has been grappling with a complex and expensive ramp-up process as it seeks to sign up customers throughout the state s diverse communities. Because of the state s size, Covered California expects to develop seven geographic exchanges reflecting different markets in Sacramento, Northern California, the Greater Bay Area, the San Joaquin Valley, the Central Coast, Los Angeles, and the rest of Southern California. In addition, Covered California is developing a fully operational Web portal where consumers can shop for insurance policies. The goal is to offer consumers apples-to-apples comparisons of health care plans for purchase on the exchange s Web site. 3

4 Recently, Covered California selected 13 companies to sell policies through its marketplace. The list includes Anthem Blue Cross, Blue Shield of California and Kaiser Permanente, three of the state s largest insurers. An estimated 2.6 million Californians will be eligible for federal subsidies if they buy policies through Covered California. All policies sold on the exchange are required to cover preventive care, prescription drugs, contraception, and medical screenings. In addition, they must include pediatric, mental health, maternity, and rehabilitation services. Premiums cannot vary by gender, and insurers are not allowed to set a maximum dollar amount that they will pay during a policyholder s lifetime. Driverless Cars: Google s self-driving car had already logged hundreds of thousands of miles on Bay Area roadways before Gov. Brown took a ceremonial spin in an autonomous Prius last year and signed legislation allowing the vehicles to operate in California. Now state government officials are playing catch-up as they attempt to write a whole new set of rules for how Californians will use autonomous vehicles in their daily lives. Should a blind individual be allowed to operate a self-driving car? Will an 8-year-old be permitted to drive to school? Should the vehicles be allowed to operate through all kinds of weather? Who will be at fault when a robotic car is involved in an accident? Officials from the DMV, Caltrans, the CHP, and the Department of Insurance are meeting regularly to tackle these and other issues. SB 1298, the bill that Gov. Brown signed last year at Google s headquarters facility in Mountain View, allows autonomous vehicles to operate on state roadways, but leaves it up to the DMV to work out the details. The author of the measure, Sen. Alex Padilla (D-Pacoima), noted that because the technology is still in a state of flux, it was important not to be overly prescriptive. He indicated that it was better to let the DMV write the rules as needed, rather than having to introduce new legislation every time the technology advances. According to Google, the technology could be widely available in five years. Right now, the company is focused on testing its technology and has not yet determined how it will get to the market. Google could make a device that people could buy to convert a regular car to an autonomous one, or the company could partner with a carmaker to embed its technology in a vehicle. In addition to Google, several auto manufacturers are working on autonomous driving technology. Although the regulatory process is just getting started, signs of tension already have emerged. In a recent meeting with the DMV, Google and other companies pushed for wide latitude to test their technology on California roadways in all kinds of conditions. They also contended that they have a business incentive to ensure that their products are safe before putting them out to market, and that the state should allow them to determine when their cars are ready for the public. Safety advocates, however, see it differently and argued that there should be some regulation. There is a host of other critical issues facing state regulators. For instance, the DMV will have to determine what criteria Californians would need to meet in terms of age, vision or driving skill to be able to operate a driverless car. New rules for auto insurance will be necessary because under current law, rates are determined by drivers years of experience and the number of miles they drive per year. Liability represents a huge area of unanswered questions. And privacy groups are likely to get involved to make sure that robotic cars cannot hold on to too much personal data about their users. 4

5 The goal is to have something in place by the end of the year. State officials intend to craft regulations for carmakers testing the technology first, followed by rules for the public to operate the cars. Water: The Delta Protection Commission voted 9-2 to oppose Gov. Brown s proposal to build two giant water diversion tunnels in the Sacramento-San Joaquin Delta, contending that the project would not help agriculture, recreation and water quality. The project, known as the Bay Delta Conservation Plan, calls for three intakes on the Sacramento River near Courtland. They would serve the two tunnels, which would divert a portion of the river s flow to existing state and federal canal systems near Tracy. The project also includes 100,000 acres of habitat restoration, which would require the purchase of Delta farmland. The Delta Protection Commission was created through the enactment of state legislation in 1992 and is mostly comprised of local government officials from throughout the five-county Delta region. Although the commission has no legal authority to approve or reject the Bay Delta Conservation Plan, it is responsible for ensuring the continued health of Delta agriculture, recreation and culture. Its vote was expected, given that local government officials from the region have been expressing opposition to the Governor s plan for months. The $14 billion Bay Delta Conservation Plan will not be released as a formal proposal until the end of this year. However, the state Department of Water Resources, which is leading the project, has released thousands of pages of draft documents over the past three months. That was enough to spur the Delta Protection Commission to formally voice its opposition. NOTE: Also contributing to this report were Steve Palmer with Van Scoyoc Associates; Delaney Hunter with Gonzalez, Quintana & Hunter LLC; Scott Haywood, VTA Policy and Community Relations Manager; and Colleen Valles, VTA Senior Policy Analyst. 5