MOORLACH UPDATE —Surpluses and Surcharges — July 27, 2018

How about another state tax for a specific service?  Let’s just forget that providing public safety is a core function of government and that projected tax revenues are at the highest level in state history.  All the same, the Governor is guilting the Legislature to cram down yet another tax expansion, making it an urgent requirement before the Session concludes at the end of August.  Call it an urgency for an emergency.

Isn’t it great how government bureaucracies work?  They are not incentivized to keep current with the technology in the marketplace because being competitive is not a requirement.  They realize after many years that telephone land lines are declining and that cell lines are expanding.  Shocking news, right?  So, it’s time to change the formula.

I haven’t received any specific details on how the numbers will play out.  When I talked to the reporter about the Modesto Bee and Merced Sun Star piece below, she had not yet received anything from the Office of Emergency Management or CalFire at the time of our chat.  Last month, I made two specific requests to the Governor’s Emergency Liaison for specific details, to no avail.

The Governor wants to tax an increasing sector for cell phones, yet wanting to tax gasoline by the gallon, a supposedly decreasing sector thanks to his trying to move drivers over to electric vehicles.  Again, no understanding of changing technologies and trends.  But, the bureaucracy finally awakes and demands an immediate tax increase.  It’s a sad mind blower.  It’s always the taxpayers that have to suffer from poor governmental planning and management.

I have a podcast on this proposed cell phone tax increase, which you can listen to, as well as other podcasts I’ve prepared during this Legislative year, HERE.

Governor Brown has lost his supermajority in the Senate and no longer has the 27 Democrat votes necessary to modify this tax.  Sen. Mendoza resigned as a result of the #MeToo movement earlier in the year.  Sen. Newman was soundly recalled for voting for Senate Bill 1, the gas tax increase.  This reverberation is not lost on Republicans and those Democrats up for reelection this November.  Stay tuned.


Cell phones, landlines would be taxed more to pay for 911 upgrade under Jerry Brown’s plan



After raising prices at the gas pump last year, Gov. Jerry Brown wants to increase taxes on Californians again to overhaul the 911 emergency services system.

The Brown administration is asking the state Legislature to erase an existing tax on in-state phone calls in exchange for a flat fee on cell phone lines, landlines and other connected devices capable of contacting 911. The tax, estimated to start at a monthly rate of 34 cents per line, is expected to generate $175.4 million in the first calendar year — more than double the current tax — with the possibility of ballooning to over $400 million based on need in later years.

“It is an increase in an existing surcharge to modernize an antiquated system that is critical to be able to provide timely emergency information to Californians,” said H.D. Palmer, a spokesman for the California Department of Finance. “This falls into a fundamental purpose of government, which is protecting public safety.”

There’s little disagreement that 911 technology desperately needs an upgrade in California. The system dates back to the 1960s and the state admits it’s failed in times of crisis. Five years ago, the California Technology Agency reported that many of the network’s radio parts had been discontinued by the manufacturer.

The new digital system would allow 911 dispatchers to accept calls, texts and video. The Brown administration says it would be more reliable than the existing network, deliver calls faster and allow dispatchers to more accurately pinpoint the location of wireless callers, among other safety benefits.

But Brown’s proposal, wrapped up in Senate Bill 870 and Assembly Bill 1836, would require the support of two-thirds of the members of the state Legislature. Some lawmakers are hesitant to support even modest tax increases in an election year, fearing negative campaign attacks.

The recall of former Sen. Josh Newman, who GOP operatives tied to the gas tax, is fresh in the minds of Republicans and Democrats.

“Someone just got recalled for raising a tax,” said Sen. John Moorlach, R-Costa Mesa. “I will tell you that we’re getting pressure as Republicans to not vote for the tax increase. That’s legitimate.”

Moorlach, like some other Republican lawmakers, questions why the state refuses to dip into its existing treasury to fund a system that Brown argues is critical to public safety. The administration expects a $9 billion budget surplus in the fiscal year that began July 1, and anticipates total reserves to hit $16 billion next year.

“911 services are in jeopardy because their funding hasn’t been made a priority in the budget,” said Sen. Joel Anderson, R-Alpine, in a letter opposing the tax to constituents. “With a $9 billion surplus, I believe the state has plenty of money to fund these important services. The Legislature doesn’t need to take even more money out of our pockets.”

The Brown administration said a fee on lines provides a permanent and more reliable funding stream than the budget, which is susceptible to ups and downs in the economy.

“The 911 system needs to continue operating flawlessly,” said Patrick Mallon, assistant director of public safety communications at the Governor’s Office of Emergency Services. “There is a significant danger in tying the future of the 911 system to a budget surplus we have in 2018-2019. This legislation will last for another 25 years. What if we’re flush this year and not next year?”

Mallon and other supporters say both the 911 system and the model to fund it are outdated.

Several 911 dispatch centers were evacuated last year after the main spillway cracked at the Oroville Dam and high water threatened to flood Butte, Sutter and Yuba counties. Under the existing 911 system, there was no way to automatically reroute emergency calls to other centers.

“For 24 hours, if you lived in that area, you were held incommunicado,” Mallon said. “If you needed to evacuate and needed some help, you called somewhere where there was nobody there.”

A new Next Gen 911 system would be able to automatically send calls to the nearest operable center. The changes would include transitioning the California Public Safety Microwave Network from analog to digital and offer more paths for calls to reach 911 operators if cables are damaged by fires or earthquakes. The new system would also enable live monitoring of outages.

The State Emergency Telephone Number Account, the funding pool for the 911 system, currently relies on a less than one percent tax on the cost of in-state phone calls.

As more cell phone users opt to text instead of call, revenue has dropped an average of 6 percent a year since 2011. The existing tax generated about $80.6 million in revenue for the 911 system last year. Now consumers pay about 14 cents per month, according to OES.
The new tax rate would be determined every October and range from 20 to 80 cents per line per month. The change would not kick in until Jan. 1.

The money would be used to continue the existing 911 system, cover administrative charges and begin the multi-year development of the Next Gen 911 call system and the analog-to-digital conversion of the California Public Safety Microwave Network. With half of the current fiscal year funded from the new tax, the state expects to receive $133.5 million in revenue for the 911 system in 2018-19 and cover an additional $10.3 million in expenditures with leftover money from last year.

Senate President Pro Tem Toni Atkins, D-San Diego, said upgrading and modernizing “California’s 911 system is an urgent public-safety priority” and long overdue. Legislative leaders and Brown are actively discussing the proposal with their GOP colleagues and may need several of their votes to pass the bill after lawmakers return to the Capitol next month.

Rob Stutzman, a Sacramento-based Republican consultant, said of all the two-thirds bills in the current legislative session, the 911 tax “is the most defensible for what it provides.”

Despite targeting Newman over a tax increase last year, he said some Republicans could get away with voting for this one. Opposing it may pose a problem, he said.

“I could see some Republicans feeling the pressure to vote for it because they could be vulnerable to an attack that they didn’t update the 911 system,” Stutzman said. “’Assemblyman so-and-so voted to let your kids sit on the side of the road without the cops being able to find them’ — that’s how it would manifest itself in a campaign.”

Mallon and others said OES has been working on the proposal for some time, but it wasn’t a legislative priority until this year. The California State Sheriffs’ Association, California Fire Chiefs Association, California Chapter of the National Emergency Number Association and others support Brown’s plan.

“This bill is about saving lives,” said Brian Ferguson, a spokesman for Brown in an email. “Enacting this legislation now is critical to sustaining and modernizing our 911 system which Californians expect to work without fail during emergencies. “