By Kathleen Pender, SAN FRANCISCO CHRONICLE
September 1, 2020
The California Legislature passed bills to beef up consumer financial protection and job protection for employees who take paid family leave. But it failed to pass bills that would have raised taxes on the wealthy and addressed some wildfire issues. Here’s a closer look at legislation affecting consumers and taxpayers that moved to the governor’s desk before lawmakers adjourned Monday – and some that didn’t make it.
More consumer financial protection: The Legislature passed AB1864, which will create a state version of the federal Consumer Financial Protection Bureau by restructuring the Department of Business Oversight. That department will be renamed the Department of Financial Protection and Innovation and be given “broad general jurisdiction over providers of consumer financial products and services,” said Suzanne Martindale, senior policy counsel with Consumer Reports, part of a coalition backing the bill.
“To date, the department has had specific authorities under particular statutes or licensing schemes, but the law has been silent on whether, as a general matter, if you are a financial service provider, can they look at your books and try to stop violations of the law,” Martindale said. This bill “answers the question in the affirmative” and will give the department the “supervisory and regulatory tools it needs to ensure it has that kind of broad jurisdiction,” she added.
It will also give the department authority over certain companies that are not subject to state oversight, such as credit reporting agencies, debt collectors and certain financial technology companies such as those providing loan products.
Martindale said the bill was a response to weakening in consumer financial regulation at the federal level. Richard Cordray, who served as the federal bureau’s first director under President Obama, was a consultant on the bill. Even if the federal bureau “was operating aggressively, they can only do so much,” Cordray said in an interview earlier this year. He added that what happens in California, because of the size of its economy, “can affect the national marketplace.”
Gov. Gavin Newsom is expected to sign the bill.
More job protection: Most private-sector employees pay into California’s State Disability Insurance and Paid Family Leave program, which provides partial pay if they take time off work to tend to their own illness or care for a new child or sick family member. However, those who take Paid Family Leave are not automatically eligible for job protection. For that, “you have to be covered under separate job protection laws, which have strict eligibility requirements, including an employee threshold that leaves out millions of California workers,” said Sharon Terman, director of the work and family program at Legal Aid at Work.
Previously, there were different thresholds for different types of family care. SB1383 lowers it to companies with five employees for all types. Newsom is expected to sign the bill.
The rich are safe, for now: As expected, a last-minute bill that would have created the nation’s firststate wealth tax failed to advance. Introduced on Aug. 13, AB2088 would have levied a tax of 0.4% of net worth, excluding directly held real estate, that exceeds $30 million for most taxpayers. People subject to the tax who moved out of the state would still have to pay it, in declining amounts, for up to 10 years, a provision critics said wasunconstitutional.
Author Rob Bonta, D-Oakland, said when he introduced the union-sponsored bill that it would not be heard before the Legislature adjourned, but “it can be reintroduced on day one of the next session.”
A proposed “millionaire’s tax” also did not advance. AB1253 would have raised California’s top personal income tax rate – already the highest in the nation at 13.3% – to 16.8%, retroactively to Jan. 1. It would have add a surcharge of 1% to incomes between roughly $1 million and $2 million, 3% on income between $2 million and $5 million, and 3.5% on income greater than $5 million, bringing the top rate to 16.8%.
No deal on wildfire insurance: After moving swiftly through the Legislature, a pair of wildfire-insurance bills were pulled by their authors after being watered down. AB2167 and companion bill SB292 originally would have created a complex plan to let insurance companies request higher rates than currently allowed for homeowners’ and renters’ policies in selected wildfire-prone areas in exchange for promising to sell a certain number of policies in all those areas combined.
The insurance industry, which backed the bill, said it would encourage insurers to write and renew policies in high-risk areas. Opponents, including consumer groups and California Insurance Commissioner Ricardo Lara, said it would lead to spiraling premiums without guaranteeing that residents in fire-prone areas would be able to get insurance from mainstream companies.
The authors pulled the bills after they were amended to simply require the insurance commissioner to study issues proposed in the bills.
“This is a near miss for California homeowners and renters who would have taken an enormous financial hit if this bill had passed,” said Harvey Rosenfield, founder of Consumer Watchdog.
Also no deal on wildfire prevention: Another wildfire-related bill that died would have continued a surcharge on electricity bills set to expire after 2035 for 15 more years – through 2050. The surcharge would have paid off $3 billion in bonds the state would have sold to finance wildfire mitigation projects. The fee would have applied only to customers of the state’s three large investor-owned utilities, including PG&E.
The fee has been on their bills since 2002, to pay off bonds sold after the state Department of Water Resources began purchasing power during the energy crisis. It was supposed to drop off this year, but it was extended through 2035 to help finance a wildfire insurance fund that will reimburse investor-owned utilities for payments they make to victims of wildfires caused by their equipment.
The bill, AB1659, was introduced in its current form on Aug. 25 and abandoned Sunday amid strong opposition. Its backers planned to come back with a plan to use $500 million in other state funds for wildfire prevention, but that idea died as well.