SBE News

Capitol Update 6/21/2024

California Supreme Court orders Taxpayer Protection Act off the ballot, siding with Newsom

For the first time in decades, the California Supreme Court has taken a citizen initiative off the ballot before voters could weigh in. Justices on the state’s highest court unanimously ruled the measure known as the “Taxpayer Protection and Government Accountability Act,” also known as the TPA, amounts to an illegal constitutional revision. Only the Legislature has authority to put a proposed revision before voters, and the TPA was initiated by business groups via a ballot measure.

The measure aimed to restrict tax increases across California by requiring voters to approve any new statewide tax and raising thresholds for approval of local taxes. Gov. Gavin Newsom and a coalition of Democratic elected officials and labor unions asked the court to remove the initiative from the November ballot, arguing it would fundamentally change the power of the Legislature and local governments to levy taxes.

Justices agreed with Newsom and his allies, ruling the measure “exceeds the scope of the power to amend the Constitution via citizen initiative.”

“The changes proposed by the TPA are within the electorate’s prerogative to enact, but because those changes would substantially alter our basic plan of government, the proposal cannot be enacted by initiative,” the court’s opinion reads.

The ruling directs the Secretary of State to “refrain from taking any steps to place the TPA on the November 5, 2024 election ballot or to include the measure in the voter information guide.”

“We are grateful the California Supreme Court unanimously removed this unconstitutional measure from the ballot,” Newsom spokesperson Izzy Gardon said in a statement. “The Governor believes the initiative process is a sacred part of our democracy, but as the Court’s decision affirmed today, that process does not allow for an illegal constitutional revision.”

Labor unions and other Democrats celebrated the decision as one that would protect investment in state services.

“We have argued from day one that the Taxpayer Deception Act is an illegal revision to the constitution funded by a handful of wealthy real-estate developers and landlords desperate to avoid paying their fair share,” said Jonathan Underland, a spokesperson for the campaign opposing the initiative. “The Supreme Court’s decision to take this dangerous initiative off the ballot avoids a host of catastrophic impacts, protecting billions of dollars for schools, access to reproductive healthcare, gun safety laws that keep students safe in classrooms, and paid family leave.”

Business-aligned proponents of the measure blasted the ruling as politically motivated and a hit to California’s direct democracy.

“Today’s ruling is the greatest threat to democracy California has faced in recent memory,” backers including Rob Lapsley of the California Business Roundtable, Matthew Hargrove of the California Business Properties Association and Jon Coupal of the Howard Jarvis Taxpayers Association said in a statement. “Governor Newsom has effectively erased the voice of 1.43 million voters who signed the petition to qualify the Taxpayer Protection Act for the November ballot. Most importantly, the governor has cynically terminated Californians’ rights to engage in direct democracy despite his many claims that he is a defender of individual rights and democracy.”

The backers said the decision “sends a damning message to businesses in California and across the country that it is politically perilous to invest and grow jobs for the future.”

They vowed to explore legal options and “fight for the people’s right to hold their government accountable through direct democracy.”

New statewide taxes and tax increases in California already require approval from two-thirds of state lawmakers in both chambers. The measure sought to add an additional requirement for voters to approve them, as well. The TPA also would have reclassified many government fees as taxes and nullified recent tax increases that did not meet its new requirements.

High court justices agreed with arguments from Newsom, Democratic lawmakers and former directors of the state Department of Finance that the measure sweeping measure would fundamentally change the powers of state government by shifting taxing authority from the legislature to voters.

“Such a change would significantly alter the legislative process and framework for exercising the taxing power,” the ruling, authored by Justice Goodwin H. Liu, reads.

Justices also took issue with the initiative’s attempt to define government fees as taxes, ruling it would shift the power to set fees from a local government’s administrative branch to the legislative branch. Rather than a mayor or other government administrative official setting library fees or utility rates, the taxpayer Protection Act would have placed those decisions would fall before a local legislative branch.

“The reassignment of local fee-setting from administrative to legislative processes would substantially alter the processes by which local governments raise revenue and, in so doing, would significantly alter the work of local government itself,” the ruling reads.

In a meeting with reporters after the ruling, Lapsley said the campaign behind the Taxpayer Protection Act is shifting its immediate attention to support a ballot measure that aims to reform Proposition 47 and oppose two tax-friendly measures placed on the ballot by Democratic lawmakers.

He said his coalition is exploring options for the 2026 ballot, including potentially individual pieces of the Taxpayer Protection Act.

“This for us is just a battle in the bigger war. We will be back,” Lapsley said.

Agreement Reached to Reform Private Attorneys General Act to Create a Better, Fairer System for Workers and Employers

The California Chamber of Commerce and the Fix PAGA coalition, representing non-profits, social justice advocates, family farmers, health care providers and businesses, are supporting legislation to reform California’s broken Private Attorneys General Act (PAGA).

The agreement was announced by Governor Gavin Newsom, Senate President pro Tempore Mike McGuire and Assembly Speaker Robert Rivas yesterday after months of discussions between labor advocates and the coalition.

“We came to the table and hammered out a deal that works for both businesses and workers, and it will bring needed improvements to this system. This proposal maintains strong protections for workers, provides incentives for businesses to comply with labor laws and reduces litigation,” Governor Newsom said.

If passed by the Legislature, the legislation would reform PAGA to ensure workers retain a strong tool to resolve labor claims and receive fair compensation, while limiting the shakedown lawsuits that hurt employers and employees.

“This package provides meaningful reforms that ensure workers continue to have a strong vehicle to get labor claims resolved, while also limiting the frivolous litigation that has cost employers billions without benefiting workers,” CalChamber President and CEO Jennifer Barrera said. “We thank Governor Newsom, Senate President pro Tempore McGuire and Assembly Speaker Rivas for navigating this agreement, and we encourage the Legislature to pass this package quickly.”

Legislation Details

The core elements of the reform package are:

  • Employee Share of Penalty
    • Increases share employees receive from any penalty from 25% to 35%.
  • Standing
    • Requires the employee (plaintiff) to personally experience the alleged violations brought in a claim.
    • Alleged violations must have occurred within the last year (presently, there is no time limitation).
  • Penalty
    • Caps Penalties: For employers who proactively take steps to comply with the Labor Code before receiving a notice, the maximum penalty that can be awarded is 15% of the applicable penalty amount.
    • Caps Penalties: For employers who take steps to fix policies and practices after receiving a PAGA notice, the maximum penalty that can be awarded is 30% of the applicable penalty amount.
    • Reduces the maximum penalty where the alleged violation was brief or where it is a wage statement violation that did not cause confusion or economic harm to the employee (i.e. misspelling of company name or forgetting to add “Inc.” on the pay statement).
    • Levels the playing field for employers who pay weekly by ensuring a penalty is adjusted. Presently, such employers are penalized at twice the amount because penalties accrue on a per pay period basis.
    • Addresses derivative claims.
    • Creates a new penalty ($200 per pay period) if an employer acted maliciously, fraudulently, or oppressively.
  • Employer Right to Cure
    • Expands which Labor Code sections can be cured, so employees are made whole quickly.
    • Protects small employers by providing a more robust right to cure process through the state labor department (Labor and Workforce Development Agency) to reduce litigation and costs.
    • Provides an opportunity for early resolution in court for larger employers.
  • Strengthening Enforcement Agency
    • The Administration will pursue a trailer bill to give the California Department of Industrial Relations (DIR) the ability to expedite hiring and filling vacancies to improve and expedite enforcement of employee labor claims.
  • Judicial Discretion (Manageability)
    • Codifies that a court may limit both the scope of claims and evidence presented at trial.
  • Injunctive Relief
    • Allows for injunctive relief.

recent report found that since 2013 there have been nearly $10 billion in PAGA court case awards, but due to significant attorney fees, workers receive only a small portion of these awards. PAGA hurts virtually every industry and employer in California, including non-profits, local governments, family-run businesses and others.

“This agreement is important because it protects working people, who are the real engine behind California’s economic strength,” said Assembly Speaker Robert Rivas (D-Salinas). “It also recognizes companies that follow labor laws, and it puts more muscle into enforcement. I grew up watching farmworkers and employers find common ground, so it means a lot to me that so many groups came together and found consensus. This is a hard-earned agreement, and that makes the positive outcomes we’ll see for businesses and workers even better.”

The legislature will consider the PAGA reform legislation as early as this week. The deadline for measures to be withdrawn from the November 2024 ballot is June 27, 2024.

“Today’s agreement is critical to the long-term success of workers and businesses here in the Golden State,” said Senate President pro Tempore Mike McGuire (D-North Coast). “Commonsense reform of PAGA has been discussed for years, and thanks to the collaboration of all sides, including the work of the Governor, this agreement will continue to provide strong worker protections and implement long talked-about reforms. Next steps include working with Speaker Rivas to move legislation forward in the days to come.”

If the PAGA compromise measure is passed and signed by the Governor before to June 27, the Fix PAGA coalition will remove its November 2024 PAGA reform measure from the ballot.

Fed has ability to lower borrowing costs without rate cuts

The Federal Reserve has revised expectations for interest-rate cuts in 2024 to one from three, but the central bank has other, more subtle tools that could decrease rates to benefit businesses and households. The Fed can sway rates by communicating intentions, even without cutting its base rate. The yield on the 10-year Treasury has a strong influence on long-term loans, and the yield declined from 4.7% in late April to 4.33% after the Fed’s latest rate decision. Any further moves could affect conditions for borrowers. Full Story: The Wall Street Journal

Younger workers turning to the trades

Gen Z is beginning to respond in a meaningful way to rising wages in the construction industry and the promise of rewarding careers as an alternative to college. Katie Tabeling reviews the landscape of training and apprenticeships in the trades as the National Student Clearinghouse predicts that 779,000 people will enroll in vocational institutions this year, up 17% from 2023. Full Story: Delaware Business Times  

EEOC guide may help tamp down harassment on the job

Addressing a persistent problem in the construction industry, the Equal Employment Opportunity Commission has issued a guide to help prevent harassment on the job. The guide acknowledges factors unique to the industry that contribute to unwelcoming environments and cites examples of harassment while recommending five strategies to combat it, beginning with committed leadership. Full Story: Construction Dive  

How states will be using $20B for water infrastructure

Water infrastructure will account for about $20 billion of spending under the federal American Rescue Plan Act. In a Q&A, Aleena Oberthur, a project director with Pew’s state fiscal policy project, discusses how states will apply the funding, with much of the work concentrated in the West and Southeast where populations are growing and governments are attempting to address inequities. Full Story: Governing  

Senate overwhelmingly passes nuclear power bill

The US Senate voted overwhelmingly in favor of the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act, which is designed to bolster nuclear power, and sent it to President Joe Biden for his signature. The bill would accelerate timelines and reduce fees for licensing new nuclear reactors, require the Nuclear Regulatory Commission to consider and report options for streamlining the environmental review process for nuclear plants, and change the NRC’s mission to prevent unnecessary limits on nuclear power. Full Story: The Hill   Engadget  

AI is coming to make asphalt better

The asphalt industry is looking into AI and machine learning to enhance production, mix design, and quality control, with potential developments in AI-driven production assistants anticipated within 18 months, says Gary Bisel from Command Alkon. Despite potential benefits like cost savings and environmental advantages, there is still a need for extensive data, significant technology investments, a user-friendly interface and human oversight. Full Story: For Construction Pros

Gilbane brings in new region lead out west

Providence, Rhode Island-based Gilbane Building Co. has tapped a construction vet to head its work out west. Ryan Heeter has joined the company as senior vice president and West Division leader, which encompasses California, Arizona and Nevada, according to a June 20 news release. Heeter brings over 25 years of experience to Gilbane spanning all major markets and delivery methods, per the release. His past projects include the Oregon Health Sciences University’s Knight Cancer Research Building in Portland, Oregon, and the California Department of Corrections and Rehabilitation’s California Healthcare Facility in Stockton, California, Gilbane told Construction Dive. Prior to joining Gilbane, Heeter was the vice president of San Mateo, California-based Truebeck Construction, according to his LinkedIn. He was also senior vice president at Milpitas, California-based XL Construction.

Construction begins on $13B BART line in Calif.

California’s Bay Area Rapid Transit on Friday began construction of a $13 billion, 6-mile line that had been planned and delayed for 30 years. The line will extend from North San Jose west to Santa Clara and include four stations, with a planned opening in 2037. Full Story: San Jose Mercury News (Calif.) (tiered subscription model)