California Approves New Mattress Recycling Fee

Mattress retailers and manufacturers face new requirements in California in 2016. Responding to attempts to over-regulate disposal of used mattresses, a coalition of manufacturers and retailers sponsored legislation to create an industry managed recycling program. The primary objective of the program is to get mattresses out of the waste stream and landfills. SB 254 (Correa, Hancock) was signed by Governor Jerry Brown on Sept. 27, 2013, with support from the mattress industry as well as local governments and environmental groups. Similar to legislation enacted in both Connecticut and Rhode Island, the California legislation avoids burdensome new mandates, the cost of which would ultimately be borne by consumers. 

It is estimated that Californians discard up to 2 million mattresses annually. Historically, most of those used mattresses end up in landfills occupying valuable space in the waste stream.

SB 254 required mattress manufacturers and retailers to develop a mattress recycling program to increase the recovery and recycling of used mattresses and to reduce the blight associated with illegal dumping. Since SB 254 was enacted, acting through the International Sleep Products Association, the mattress industry created the nonprofit Mattress Recycling Council (MRC), whose new program is known as “Bye Bye Mattress.” The Bye Bye Mattress program will be funded through a point of sale recycling fee that will be assessed on all mattresses sold within the state of California. Under the new law, all retailers and manufacturers doing business in the state are required to register with the MRC. Retailers are required to collect the fee from consumers who purchase product in the state. The California Department of Resources Recycling and Recovery (CalRecycle) has approved the MRC’s proposed budget and an $11 recycling fee to fund the Bye Bye Mattress program. Retailers may not lawfully sell mattress product in the state without registering with the MRC and collecting and remitting the fee. CalRecycle will have the enforcement authority which includes the ability to levy civil fines for non-compliance.

The recycling funds will be used to fund mattress collection, transportation, and recycling services throughout California. The program will also create recycling opportunities for California residents, hotels, universities, hospitals, and military bases and will support a fund to help communities battle illegal dumping. To comply with this new law, both brick-and-mortar and online retailers selling mattresses in or into California must register at MRCreporting.org. This secure portal also allows retailers to submit monthly sales reports and remit collected recycling fees. That means that by Dec. 30, 2015, all mattress sales within the state of California will require the levy, collection, and remittance of the recycling fee established by the MRC and CalRecycle.  

If successful, the Bye Bye Mattress program will keep old mattresses out of landfills, off highways, and out of vacant lots and alleys and create a comprehensive mattress recycling solution that is consumer friendly and efficient. It is also likely to create new recycling jobs in the state. A lot of eyes will be watching California’s implementation given the sheer size of the program needed for a state with a population of 36 million.

 

This Alert was prepared by Thomas L. Sheehy˘. Questions about this information can be directed to: 

>        Thomas L. Sheehy˘ |  +1 916.442.1111 | sheehyt@gtlaw.com

California Budget and Fiscal Stability: Will It Stay In The Black?

California is in the Black

Governor Jerry Brown’s initial state budget was Sacramento’s first on-time budget in years, and the first “majority vote” budget in decades for the Golden State. Since June 2011, Governor Brown has signed three more on-time and balanced budgets. In fact, in January 2014, Governor Brown proposed a budget with a projected surplus of over $5 billion! Under current estimates, the year-to-year gaps between spending and revenues have been erased for the foreseeable future in California. Governor Brown’s fiscal record is quite a contrast from his predecessors. To be fair to Governor Schwarzenegger, many of the tough cuts in education, health and welfare programs he was forced to make while in office, and take the political hit for, helped Governor Brown balance the state’s General Fund. Governor Brown also has benefitted from three other significant events, including one largely of his own making: (1) the end of the great recession; (2) strong stock market performance that has increased capital gains and is driving a tax revenue bonanza for the state; and (3) passage of Proposition 30, a general tax increase that raised both sales tax and personal income tax rates in California.

Governor Brown said repeatedly during his election campaign that he would neither sign nor support a general tax increase without a vote of the people. In uncharacteristic fashion compared to many politicians, he kept his word. Proposition 30 passed in the November 2012 election on a 54 percent to 45 percent vote margin. It raised top personal income tax (“PIT”) bracket payers in California by 3 percent to a full 13.3 percent on personal income. It also raised the state’s general sales tax by 0.25 percent to a full 7.5 percent. The sales tax increase sunsets after four years, at the end of 2016, and the PIT tax increase doesn’t sunset until the end of 2018. Seven billion in annual revenues are attributed to the temporary Proposition 30 tax increases. After passage of Proposition 30, California is among the highest taxed states in the country.

Time to Pop Champagne Corks and Celebrate Fiscal Stability?

Despite the recent improvements in California’s budget situation, there remain a number of major risks that threaten the state’s new found fiscal stability. These include billions remaining in short-term budgetary debt, hundreds of billions of dollars in longer term liabilities for unfunded public employee retiree health care and pensions, as well as demands for new program spending. The threat of the next recession and changes in federal policy could cost the state billons in higher costs and reduced revenues. Also, the temporary spike in capital gains primes the pump of the spending lobby. The pressure to increase state general fund expenditures is enormous and legislators are inclined to expand existing programs and create new ones. Many in the state’s capitol tend to see this temporary budget surplus as an opportunity to achieve their policy and spending agendas. As if these threats were not enough to cause panic at the California Department of Finance, the quarter‑cent sales tax increase under Proposition 30 will expire at the end of 2016, and the higher income tax rates on the state’s wealthiest residents will expire at the end of 2018. This is just in time for Governor Brown’s successor to be sworn into office.

California’s fiscal history is riddled with budgets that made permanent obligations of both spending increases and tax cuts based on temporary revenue increases driven by capital gains. After these spikes in revenues disappeared, as they always do, the state was forced to cut programs and raise taxes. This danger is exacerbated by the fact that two thirds of all general fund revenues come from the PIT and 50 percent of all PIT collected in the state come from the top 1 percent of taxpayers (an important, but small population). So when this handful of highly affluent individuals gets a financial cold, the state budget gets a severe case of influenza – or worse. And that is what happened to previous governors when the capital gains tax bubble burst – they had a fiscal roller coaster on their hands. So, the combination of the fleeting capital gains surge and the temporary Proposition 30 revenues should leave no doubt that the state’s modest surplus must be carefully guarded or fiscal ghosts of budgets past will haunt California. It should be clear to see that maintaining the new found fiscal stability will require considerable restraint, smart policy and economic momentum.

How Does California Avoid Repeating Budget History? 

There is one big “new” factor that could save California services and taxpayers the pain of more fiscal instability. The new factor is Proposition 2 on the November 2014 ballot. California voters have the very important opportunity to approve a bipartisan solution to the “boom-bust” budget cycles of budgets past. Governor Schwarzenegger fought hard most of his administration for meaningful budget reform that would prevent over-commitment of temporary state capital gains tax revenues. He finally reached an agreement with the Legislature in 2010, but that vote was put off and delayed until now. With the help of strong leadership by Governor Brown, and both Democrats and Republicans coming together this year, Proposition 2 was drafted as a significant improvement on the 2010 plan negotiated by the former Governor. 

Proposition 2, the Rainy Day Budget Stabilization Fund Act, is a legislatively-referred constitutional amendment. The measure, upon voter approval, would alter the state’s existing requirements for budget reserves and have the effect of smoothing out the spikes of “peak revenues” by putting them away in a budget stabilization (rainy day) fund that could only be tapped when critically needed. It also includes an education stabilization component to make sure Proposition 98 education funding guarantees are protected as well. The actual fiscal mechanism is a bit Byzantine to describe for this article, however, analysts in the Governor’s Department of Finance, the Legislative Analyst’s office and the legislative budget committees all agree that if it is enacted, it will make a positive difference in future budget stability. In addition to smoothing out year-to-year revenue spikes, it would accelerate the state repaying existing budgetary borrowing and debt, increase funds for infrastructure projects, and the additional cash reserves it creates would reduce the need for external borrowing and thereby cut financing costs associated with operating state government on a day-to-day basis. It is truly a win-win situation for all California residents and taxpayers.

Conclusion

California has made really impressive progress the last three years on its fiscal situation. Governor Brown and the Legislature deserve a lot of credit for making smart fiscal moves. They have also benefitted significantly from national and state economies rebounding from the great recession, as well as taxpayers’ willingness to increase their own taxes – albeit with a sunset. If policy makers can resist the temptation to “spend it all” in one year, and instead plan for the future, and if voters approve the Proposition 2 rainy day fund, California can experience balanced budgets and fiscal stability into the future. Governor Brown’s successor will still have to manage fiscal challenges when both sales tax and PIT increases sunset under Proposition 30; however, with the budget under control and a rainy day fund in place, he or she will be in a much better position to manage the state affairs at that time.

Tom Sheehy is the former Chief Deputy Director of Finance

and Acting Secretary / Undersecretary of the State and Consumer

Services Agency under Gov. Arnold Schwarzenegger. He joined

Greenberg Traurig's Sacramento government affairs practice

in October 2010 (https://www.linkedin.com/profile/view?id=36762795&trk=nav_responsive_tab_profile.)

Automated License Plate Recognition (ALPR) Technology: MYTHS VS. FACTS

MYTHS VS. FACTS

Automated License Plate Recognition (ALPR) Technology

(Why SB 893 is Bad Policy)

 

MYTH: Law enforcement agencies (LEAs) and private companies have no legitimate use of ALPR data.

Ø  FACT:  ALPR is used routinely by LEAs and the private sector to rescue abducted children, catch murderers, robbers, and drug dealers, find missing elderly adults, recover stolen vehicles, repossess cars whose drivers have broken contracts with lending institutions, and investigate insurance fraud. ALPR technology provides for increased police efficiency, higher productivity, and creates a greater deterrent to those committing crimes.

 

MYTH: Collecting license plate data is an intrusion of your privacy and ALPR databases contain personally identifiable information about vehicle owners.

Ø  FACT: There is no law that provides an expectation of privacy in a license plate. To the contrary, license plates are legally required to be mounted and publicly visible on vehicles at all times. ALPR technology takes a picture of a license plate and ONLY includes, the license plat number, date, time, and location information. It does not contain any personally identifiable information at all. ALPR databases are nothing but a collection of these pictures and standard computer industry best security practices are used to protect them.  

 

MYTH: Law enforcement agencies (LEAs) and private companies have no legitimate use of ALPR data.

Ø  FACT:  ALPR is used routinely by LEAs and the private sector to rescue abducted children, catch murderers, robbers, and drug dealers, find missing elderly adults, recover stolen vehicles, repossess cars whose drivers have broken contracts with lending institutions, and investigate insurance fraud. ALPR technology provides for increased police efficiency, higher productivity, and creates a greater deterrent to those committing crimes.

 

MYTH: Proposed laws, such as SB 893, that limit access to ALPR data, provide reasonable guidelines on the use of this technology, and will protect your personal privacy.

Ø  FACT: Limiting access to ALPR data DOES NOT protect personal privacy.  A license plate only contains numbers and letters – not personally identifiable information. The license plate reader does not, and cannot, identify the owner or driver of the vehicle. SB 893 would impede law enforcement’s ability to use this technology to solve crimes and to protect California communities.

 

MYTH: LPR technology is not that important to LEAs and they could solve crimes and get along just fine without the use of ALPR data.

Ø  FACT: ALPR technology is one of the most powerful crime-fighting tools available to law enforcement. It’s truly a force multiplier for both street officers and investigators. Most crimes have a vehicle nexus and LPR is the best tool to quickly solve these offenses and cut the crime rate in California.

 

MYTH: LEAs misuse the ALPR data creating concerns like the National Security Agency monitoring email and phone calls of private citizens.

Ø  FACT: Misuse of ALPR data is almost unknown. However, there are hundreds of great examples of the technology solving very serious crimes in California that might not have been resolved otherwise. ALPR critics, like chicken little, run around telling their version of “the sky is falling.” ALPR works and law enforcement should not shy away from this powerful tool.

MYTH: ALPR is an out-of-control, unregulated governmental intrusion into the private lives of ordinary citizens.

Ø  FACT: ALPR systems don’t really work that way. They do not track “ordinary citizens.” An individual vehicle will only come to the attention of law enforcement in one or both of two situations: 1) If the vehicle is on a “hot list” (e.g. stolen or felony stop) at the time the license plate is initially read, or 2) when a query is made as a result of a criminal investigation and a vehicle or vehicles are identified as meriting follow-up. Despite wild accusations by groups such as the ACLU, ALPR records are not personally identifying information; ALPR cameras capture images of a vehicle and its plate, not the person who is operating it.

MYTH: ALPR is used like a GPS system that tracks every move a vehicle makes.

Ø  FACT: ALPR records are intermittent captures of encounters with vehicles and don’t come close to the full-time tracking of GPS devices. The vehicle’s registered owner is unknown to law enforcement without a separate query of a secure database that leaves an audit trail.

MYTH: ALPR data can easily be abused by LEAs to produce politically embarrassing information that can be used to hurt or discredit ordinary law-abiding citizens and pry into their lives; ALPR historical databases are ripe for abuse like racial profiling and stalking.

Ø  FACT: ALPR critics have rarely ever produced a case of an ALPR database being used for nefarious purposes; if it does happen, those who misuse databases can be held accountable, fired and prosecuted for any crime that might have been committed. The reality: other databases routinely used by LEAs have much more intrusive and private information than the typical ALPR system. For instance, a simple driver’s license check tells what a person weighs, their natural hair color, when they were born, where they live and what their driving infractions have been.

  

Ø SB 893 would limit California law enforcement agencies ability to use ALPR data thus removing a tool from their tool box and making it harder to keep our communities safe.

 

 

 

 

 

 

 

California's Unfunded Retirement Liability Equals $10,386 Per Taxpayeror / $5,650 for Every Man, Woman and Child in the State

California Public Employee Retirement System - CalPERS*

The 2014 budget includes $4.6 billion for state contributions to the California Public Employees Retirement System (CalPERS), a 24 percent increase from the 2013-14 level of $3.7 billion. Annual contributions will continue to rise, with another nine percent increase in 2015-16, 12 percent increase expected in 2016-17 and a six percent increase anticipated in 2017-18. Contributions are projected to reach $5.9 billion in 2017-18, a 60 percent growth in state General Fund contributions since 2013-14.

The fast-paced increases are mainly due to steps CalPERS has taken over the last few months aimed at returning the pension fund to fully-funded status in 30 years, phasing in additional contributions beginning in 2014-15. In October 2013, CalPERS began a review of mortality rate projections, which has led to the Board adopting changes to economic (discount rate, price inflation, and wage inflation) and demographic assumptions (retirement rates, employment trends, disability rates, salary rate projections and mortality rate projections).

　

For example, the impact of the new assumptions on rates for state employees would be as follows:

	Employee Group	2013-14 Contribution Rate	2014-15 Contribution Rate	2017-18 Contribution Rate
	State Miscellaneous	21.30%	24.28%	32%
	Schools	11.50%	11.70%	20.50%
	State Industrial	16.40%	18.10%	21.50%
	State Safety	17.90%	19.40%	20.50%
	State PO/FF	31.30%	36.80%	45%
	CHP	35.90%	43.50%	56%

Pension Reform of 2013.
The budget includes $102.7 million General Fund redirected from savings achieved as a result of pension reform (AB 340, Statutes of 2012) towards the state’s unfunded pension liability. This, however, is a very small step toward eliminating the unfunded liability, which is currently about $46 billion just for state employees. Total state unfunded retirement liabilities (e.g. including health benefits and STRS) are estimated to be about $193 billion.  

*Senate Minority Fiscal Office

1/3 Of All California Households Have Income Below $22,000 (Qualify For Government Paid Healthcare)

The State Is Now Reporting That 1/3 Of All California Households Qualify For Medi-Cal. That means that 1/3 of all California households have household income BELOW $22,000. $22,000!!! California, collectively, may be a "big economy" but when it is made up of millions and millions so poor and in poverty that they qualify for government healthcare such as Medi-Cal, well that is an economy that no one I know on the right or the left wants to live in. Taxes and regulations matter A LOT because they directly influence the formation and retention of HIGH-PAYING jobs. Right now, this state is an exporter of middle class jobs that pay more than $25 per hour. They are not being cited here do to regulatory, tax and related costs that our neighboring states don’t have.

Rainy Day Fund Ballot Initiative - Analysis

 

 

 

Governor’s Original Proposal Lacked Teeth. In January the Governor proposed a new rainy day fund (RDF) to replace ACA 4 (2010), which had already been scheduled for a vote on the November 2014 ballot. The Governor’s proposal relied solely upon the state’s capital gains revenues to make deposits into two reserves, one general account and one account for Proposition 98 expenditures. However, the focus on capital gains alone would have resulted in many good tax revenue years in which the state set aside no funds for a rainy day. The Governor’s proposal also left the door open for legislative Democrats to use the RDF as a slush fund rather than a true "locked box" reserve for economic downturns because it could have been raided by a majority vote.

 Real Improvements Made. Legislative negotiations improved upon the Governor’s proposal, and the resulting bipartisan compromise bill, ACA 2X 1 (Chapter 1, 2013-14 Second Extraordinary Session, Perez), reflects the following key improvements:

• Up-Front Annual Deposits. Provides for annual tax revenue transfers of 1.5 percent of all General Fund revenues to the general reserve or to debt reduction. In addition, the "windfall" capital gains in excess of 8 percent of revenue would also increase the reserve or reduce debt, after shifting the Proposition 98 portion to the education reserve. This greatly increases the funding available for reserves or debt reduction compared to the Governor’s proposal to use only capital gains over 6.5 percent of revenue.
• Objective Withdrawal Standards. Sets objective measures for when withdrawals can be made in order to ensure the RDF is a "locked box" for economic downturns, not a slush fund that could easily be raided on a majority vote. Also limits the amount that can be withdrawn to the lesser of 50 percent of the reserve balance if no funds were withdrawn the previous year, or the amount needed to maintain a "current services" budget adjusted for population growth and inflation.
• Ensuring the Reserve Is Built. For the first 15 years, requires half of the RDF transfer amount to go into the reserve fund while the other half is used to reduce budgetary debts, including unfunded pensions and other retiree benefits. After 15 years, all of the RDF transfer will go into the reserve by default, but the state still would have the option to use up to half the transfer to reduce the same debts or unfunded obligations.

Billions in Reserves Projected. The RDF bill (ACA 2X 1) was recently signed into law following a special session, rather than as part of the budget process, but the new requirements would not take effect until 2015-16 if voters pass the measure this November. (The 2014-15 budget does include a $1.6 billion deposit to the current Budget Stabilization Account, made under Proposition 58’s current reserve requirements.) However, as shown in the table on the next page, the Department of Finance projects rainy day transfers of $6.1 billion over three years beginning in 2015-16, including $3 billion for debt reduction and $3 billion for the general reserve. Notably, $5.3 billion of these combined amounts results from the up-front 1.5 percent set-aside that Republicans negotiated.

 

 

 

 

Rainy Day Fund Forecast Dollars in Millions
		2015-16	2016-17	2017-18	Total
	Annual 1.5% of General Fund Revenues	$1,699	$1,772	$1,851	$5,322
	Capital Gains Taxes in Exces s of  8% of General Fund Revenues	$174	$233	$341	$747
	Total Rainy Day Amount	$1,873	$2,005	$2,191	$6,069
	Debt Repaym ent (50%)	$937	$1,002	$1,096	$3,034
	Depos it to General Res erve (50%)	$937	$1,002	$1,096	$3,034
	Note : Capital gains amounts are net of amounts attributable to Proposition 98.  All estimates assume there are no budget shortf alls that w ould allow other uses of Rainy Day amounts to maintain spending.   S o urc e : Department o f Finance, Califo rnia State B udget - 2014-15

Source: Senate Republican Fiscal Office