Convergence of End of Session and California Budget Fight Create Opportunity for Hanky Panky

“One reason California still has no state budget is a closed-door dispute over a tax proposal that could be a multimillion-dollar boon to banks that engage in subprime lending.

“The proposal, according to legislative sources and industry lobbyists involved in the private budget talks, was brought to the table by the Schwarzenegger administration at the urging of lenders and other corporate interests. The proponents argued that it would help offset costs to businesses that could result from other tax changes under consideration. “

Read the article. What’s not said speaks volumes. You’ll see no one is really willing to talk about it publicly except Jena Ross of the California Budget Project who may have blown the whistle on this one.

Assemblymember Ted Lieu, now the powerful Chair of the Rules Committee, but who cut his teeth on this issue as Chair of the Assembly Banking Committee, has described this play by lenders and Republicans in one word: “Outrageous” He told us yesterday, that just the focus of this in the budget context is cause for consternation. He said:

“In the best of times, I can think of a million things, to help and sub prime lenders are not one of them. So we’re trying to preserve education, and preserve health care and those should be our priorities and not giving huge tax breaks to lenders. During the mortgage boom of a few years ago, and in effect, they’ve made all this money by putting out riskier loans that hurt families and cost economic downward spirals that leads to foreclosures and they want to apply these large tax breaks against this massive profit they’ve made in the last few years. And to me that’s rewarding and enabling bad behavior. And I think it’s just outrageous; I think it’s idiotic, it’s beyond outrageous. It’s just stupid. I can’t think of a worse time to put in a tax break for sub prime lenders, if indeed there is ever a good time to do it anyway.This is restricted to those folks who have made a whopping amount of money, which would mean sub-prime lenders.”

And there is a pattern here. Given the impact of this issue on California and the broad pattern of practices by the lending industry here—as evidenced by Attorney General Jerry Brown’s lawsuit against Countrywide, the legislature’s action so far on the subprime issue pales in comparison. So far bills that have passed have had the support of the banking industry—and it is no mean feat that Senator Perata persevered and was able to get urgency legislation passed by the necessary two-thirds majority that provided some immediate help. Other bills, such as Assemblymember Lieu’s AB 69, to require disclosure of data on subprime loans and foreclosures, were watered down to the point that they were opposed by the good guys here—the Center for Responsible Lending because of the lack of lender specific reporting. Although the bill had the support of some other consumer friendly groups, it had the opposition of CRL because it was watered down, despite Lieu’s efforts. It is a rare bill opposed by the industry that appears to be headed for final passage.

Another bill, AB 529, by Assembly Majority Leader Alberto Torrico aimed at providing homeowners with three to four months of advance notice on their initial home loan resets was approved 23-16 by the state Senate yesterday and will provide some help where it is needed. Also, SB 1240 and SB 1737 by Senator Machado, Chair of the Senate Banking Committee, have been revived and are on the move, having passed the Assembly yesterday. But these bills are pale and timid versions of what needs to be done.

There have been a lot of behind the scenes meetings to put together major legislation in AB 1830 (Lieu) and much of this tug of war has not been visible. The legislature has its opportunity to pass major legislation here and redeem itself. A bill in print—the final product—is expected to emerge next week in what may be the waning hours of the session. Some reformers here fear that passage of some of these other more minor bills will give the Governor cover to veto AB 1830 while signing the others. This would be a major disgrace.

High-Tech Anti Worker Moves Tied to Budget

Also embroiled in the budget dispute is a move by high-tech interests in California to take away some of the rights of workers in their industry. Here is a flyer passed out by labor yesterday to Democrats in the Capitol:

OVERTIME PAY TAKEAWAY CANNOT BE PART OF BUDGET DEAL

The high-tech industry continues to push overtime takeaways for high-tech workers as part of a budget deal. Such proposals must be rejected.

• The budget shouldn’t be used to push through anti-worker policies that would fail on their own merits during the legislative process. How does cutting the wages of high-tech workers help resolve the budget gap?

• The final budget deal will be tough enough for California’s workers. Cuts in health care, education, social services, local government will create serious hardships for millions of working families. Sweeteners for big business like overtime takeaways will just make a bad budget deal even worse for the two million working families we represent.

• Times are tough for all working families, including those who work in the high-tech industry. With the bottom dropping out of the housing market, middle class families are losing significant value in their only assets. Unemployment is on the rise and high-tech worker wages are declining.

• Now, big high-tech companies that have been sued for cheating workers out of overtime pay are trying to make matters worse by taking away workers’ rights to that pay. Eliminating overtime amounts to a major pay cut for families already struggling to make ends meet.

• Labor has gone neutral on two recent bills that significantly expanded the high-tech overtime exemption:

o AB 1093 (Matthews, 2005) – permitted the full time salary equivalent to be used.

o SB 929 (Cogdill, 2007) – lowered the threshold for overtime exemption from $41 to $36 an hour. A HUGE GIVE to the high-tech industry

It’s hard to see the ball when it’s hidden. If you see something, however, send us an email so we can write about it or an article for publication.