NFIB California Main Street Minute, June 19-23

From your small-business-advocacy team in Sacramento

Happy Juneteenth National Independence Day, the newest of the 11 federal holidays, and welcome to the June 19-23 edition of the NFIB California Main Street Minute from your small-business-advocacy team in Sacramento.

We Have a State Budget … Almost Complete

• A big worry for 120 Californians – will our legislators still be paid? – was lifted out of their minds when those 120, with a few exceptions, voted for a 2023-2024 state budget as required of them by the state constitution by last Thursday, June 15.

• But that is not the end of it.

• In this informative article about the budget process from beginning to end, CalMatters reporter Sameea Kamal explains, “But the approved plan is far from final. Legislative leaders will continue to work out specifics in conversations with the governor, as well as through ‘budget trailer bills,’ which are sometimes controversial follow-up bills that flesh out specifics.

• “By law, the Legislature must approve and the governor must sign a budget before July 1, the start of California’s fiscal year. Otherwise, the state can’t pay its expenses, such as salaries or some vendor payments. Based on recent history, it’ll be very close to the final deadline before Newsom and legislative leaders announce their final deal. Last year, that announcement came on June 26, a Sunday night, and the budget bill wasn’t signed until June 30. This year, the deadline is June 27, according to Jason Sisney, budget advisor with the Assembly speaker’s office.”

And for those budget trailer bills …

• “This year, Sept. 14 is the deadline for the Legislature to pass any bills. That means any budget trailer bills … must be approved by that date. Amendments to the budget are in bills referred to as ‘budget bill juniors,’ which can also include trailer bills. Critics say that too many major policies are determined in these trailer bills, without sufficient review. Newsom has a month, until Oct. 14, to sign or veto bills. But adjustments to the budget could still be made well into 2024.”

Small Business and the State Budget

• Past Main Street Minutes have long prepared small-business owners for the eventuality that their top concern, paying down the state’s enormous unemployment insurance trust fund balance with the federal government, would not happen and this document from Sen. Nancy Skinner, chair of the Senate Budget and Fiscal Review Committee, confirmed it.

• Under the Labor and Workforce Development section (bottom of Page 27), you’ll find in sections:

— “253. Removes the $500 million one-time General Fund commitment in 2024-25, made part of the Budget Act of 2022, to offset the anticipated rising federal unemployment insurance (UI) tax rates resulting from the UI Trust Fund insolvency.

— “254. Withdraws the $750 million one-time General Fund UI Debt payment in 2023-24.

— “255. Includes a one-time loan of $306 million from the Unemployment Compensation Disability Fund to the General Fund to support the state’s payment of the UI loan interest payment. Because of lower revenue projections and a resulting increase in the budget problem, the Administration proposed this loan to assist in closing the projected shortfall and ensuring the submission of a balanced budget plan. The loan provisions include language to prevent the State Disability Insurance contribution rate from increasing because of the loan.”

• As the pandemic took off, 18 states needed help from Uncle Sam to meet their obligations to pay unemployment benefits to their out-of-work citizens. Today, only California, New York, and the Virgin Islands have yet to pay back what they owe. For the foreseeable future, California will only pay the interest, not any of the principal, on its nearly $17.3 billion debt (as of June 9).

• According to a report by the state Legislative Analyst’s Office (LAO), “To repay the federal loans, the federal UI payroll tax rate on employers will increase by 0.3 percent for tax year 2022. However, employers will not pay this higher rate until 2023 when employers remit their 2022 federal UI payroll taxes.”

• The chart provided in the report pegs the 2023 UI payroll tax at $316 per employee per year: $253 for the state UI payroll tax; $42 for the base federal UI payroll tax; and $21 for a federal UI payroll tax add-on. By 2031, LAO estimates both the state and base UI payroll taxes to remain the same, but the federal UI add-on to rise to $189 for a total of $484 per employee per year – if nothing until then is done about reducing California’s federal UI loans.

• As reported in the June 5-9 Main Street Minute, NFIB California State Director John Kabateck and California Business Roundtable President Rob Lapsley had a private meeting with Gov. Gavin Newsom’s top economic adviser, Dee Dee Myers, who told them the governor was very concerned and sympathetic about the problem but could not find any legislative support for doing something about it.

Latest NFIB California Podcast

• State Director John Kabateck sits down with Sen. Angelique Ashby to get her take on the big issues facing the state, her caucus, and working across party lines. Click here to listen.

NFIB Member Making News

• NFIB member Paul Cramer, vice president and general manager of Star Milling in Riverside County and a member of NFIB California’s leadership council, pens a guest editorial for the Times of San Diego in support of driverless trucks.

• “As a small business owner, I’m concerned about our state’s unsafe roads and optimistic about the future of autonomous trucks for Riverside County and the rest of the state. Regrettably, fearmongering and misinformation has California lawmakers considering putting the brakes on autonomous trucks in the Golden State with Assembly Bill 316. We should not preemptively ban AV trucks, but instead encourage California safety officials to put regulations and oversight in place to ensure the highest levels of safety for this new technology.”

• NFIB has not taken an official position on driverless vehicles.

NFIB California in the News

• State Director John Kabateck discusses retail theft with Siyamak Khorrami, host of California Insider, “The biggest problem is we have policymakers that are still not listening, not waking up to fixing [Proposition] 47, providing more funding for our local law enforcement, and we ask, what does it take to do that. In 2022, there were 17 pieces of legislation authored by Democrats and Republicans alike and included diversion, rehabilitation programs, plus accountability for the crime—None got out of committee.”

— As if collectively hearing Kabateck’s question, last week (June 14), a bipartisan group of 66 legislators signed a letter to Pedro Nava, chairman of the Little Hoover Commission, asking his state agency to research and report on retail theft.

— “Reports of increased theft post-Prop. 47 have led to heightened scrutiny of law enforcement’s ability to respond effectively with agencies and prosecutors arguing that Prop. 47 restricts their ability to arrest and prosecute perpetrators and leaves them unable to adequately address the rise in crime … We recognize the Commission’s long standing reputation as a trusted provider of independent research to the Legislature. That is why we request that the Commission shed light on this multi-faceted issue by investigating retail theft, shoplifting, and organized crime …”

• Check out the latest Kaba-Text for what is making retail theft a supremely urgent issue, especially for one California city.

Next NFIB California Podcast

• Last Thursday (June 15) the Howard Jarvis Taxpayers Association filed a ballot initiative “that will restore the right of parents to transfer their home and limited other property to their children without reassessment to market value.” Jon Coupal, president of the HJTA, is the featured guest on the next NFIB California Podcast due out shortly.

Letters of Support

• NFIB is member of one coalition calling on the State Water Resources Control Board to approve a water rights permit for the proposed Sites Reservoir and another coalition “writing in strong support of Governor Newsom’s plan to streamline critical infrastructure projects.”

National

• Thank you, NFIB California members, for your help in making this year’s Fly-In event a successful one for small businesses everywhere. And thank you to the California delegation in Congress for meeting with our members. Story and pictures here.

Highlights from NFIB Legislative Program Manager Caitlin Lanzara’s weekly report

• NFIB members met with their legislators at the NFIB Fly-In in Washington, D.C. Small business owners representing 30 states told Congress the importance of supporting the Main Street Tax Certainty Act and the Credit Card Competition Act. Watch the video recap here.

• On June 12, NFIB’s President Brad Close published an op-ed in The Hill titled, “Small Business needs leadership from Congress – now.”

• On June 14, NFIB’s article titled, “Expert Tips on Classifying Workers,” explained how to correctly classify independent contractors and employees. Read the article here. NFIB also released Episode 11 of the Small Business Rundown podcast on the classification of independent contractors, featuring NFIB Small Business Legal Center Executive Director Beth Milito.

— In related news, also on Tuesday, the National Labor Relations Board issued a decision in The Atlanta Opera, reinstating the Obama-era standard for determining whether a worker is an employee or independent contractor under the National Labor Relations Act. The decision abandons the emphasis on entrepreneurial opportunity established and implements a narrow independent contractor standard. NFIB will likely be involved in the litigation challenging the Board’s decision when the opportunity becomes available. Our amicus brief to the Board can be read here.

In other legal news

• On June 13, NFIB joined a coalition of business groups in filing an amicus brief in the ADA website case Acheson Hotels, LLC v. Laufer at the U.S. Supreme Court. Law360 reported on NFIB’s brief. The case highlights the uncertainty for small businesses when complying with the ADA and the applicability of websites. We are urging the Supreme Court to limit the practice of plaintiffs’ attorneys weaponizing the ADA to harm small businesses. Read the press release here.

Next Main Street Minute June 26.