Liliana Nava Ochoa
The California State Assembly passed the Middle Class Scholarship bill with a bipartisan vote of 54-25 on Aug. 13.
The approval of Assembly Bill 1500 by the Assembly symbolizes a big step closer toward higher education affordability for California's middle class students. The Middle Class Scholarship is geared toward helping students from middle class families with an income of up to $150,000 reduce tuition fees by two-thirds.
"Anytime you can get a bipartisan two-person vote, that clearly shows that there's a lot of amends for the bill. We're very encouraged by the efforts of student groups all over the state, including at UC Davis, who have been very strong in terms of helping us get the word out and get support built up for the Middle Class Scholarship," said John Vigna, spokesperson to California Assembly Speaker John A. Pérez. "We just essentially need to keep the pressure and make sure that a handful of senators who need to pass the bill do the right thing and vote 'yes.'"
According to Vigna, the upcoming weeks will be crucial in ensuring that senators understand the importance and positive effects the Middle Class Scholarship will have on the state of California and make the right choice.
Many students remain optimistic about the bill's passage in the Senate.
"There are no substantial scholarships for middle class, Caucasian women, regardless of my honor roll GPA. Even if there were scholarships out there for someone in my predicament, I hardly have the time to apply for them between work and school," said fourth-year political science major Angel Rogers. "I am very optimistic about AB 1500 and the Middle Class Scholarship because I want my brother and sisters to go to college, but I would never want them to have to go through my experience. I only wish that the Middle Class Scholarship and AB 1500 had passed sooner."
In order for the Middle Class Scholarship – which is composed of two bills – to be funded, both AB 1500 and AB 1501 must pass and each must take effect. AB 1501 is the scholarship itself and AB 1500 will provide the funding for the scholarship by closing a corporate tax loophole.
"If corporations are going to be paying for our tuition breaks in the form of taxes, I don't see anything wrong about this. I think it's a great way to transfer wealth and make this state a place for more equal opportunities," said third-year economics student Henry Shin.
The passing of AB 1500 indicates that it will now be considered by the State Senate along with AB 1501 which passed earlier this year. If both bills pass the Senate, it will be considered by the governor.
"We're all very excited. This bill addresses a very critical issue facing the state which is obviously higher education affordability and tax fairness for California businesses. But it's also, I think, symbolic of our larger efforts to rebuild and stop reacting to the recession that happened a few years ago," Vigna said.
The Middle Class Scholarship would save an estimated 42,000 UC students approximately $8,169 and 150,000 California State University (CSU) students $4,000 annually.
"Most kids are taught to do well in school so you can go to college and … get your degree and get a decent job and have a good middle class life, and we've really undercut that commitment with these fee hikes over the last 10 years," said Vigna. "And at a certain point we just have to say stop, enough is enough. And go back to the way things were, which worked very well for California. We need to make the decision, as a state, that we are going to move forward and [the] Middle Class Scholarship is definitely a part of that."
John A. Pérez, the Assembly speaker, is responding to Dan Morain's Aug. 15 column "Using CEQA as bait, Pérez muscles tax bill" and the Aug. 16 editorial "What price will Pérez pay for his pet causes?" The editorial criticized the speaker for floating a trial balloon to reform the California Environmental Quality Act to get votes for his legislation to amend state tax law to raise about $1 billion from out-of-state corporations to help fund college scholarships for middle-class families.
I was elected to establish priorities based on critical issues facing our state. This year, one of my bills is the Middle Class Scholarship Act to address the growing inaccessibility of college for middle-class families who have been squeezed out by skyrocketing fees. The Bee calls my fighting for college students and middle-class families a "pet cause," and I say, guilty as charged.
My colleagues and I are also focused on the critical work of helping California companies compete and create jobs in California. That's why as part of the Middle Class Scholarship Act we voted to close a tax giveaway that only benefits out-of-state corporations at the expense of jobs here – an action supported by innovative California businesses like Qualcomm and Genentech.
It's also why we're looking at a number of regulatory reforms including making it easier for businesses to adapt to new regulations, extending timber harvesting permits while protecting environmental safeguards and, as we did last year, looking at possible improvements to the California Environmental Quality Act.
I'm proud of my 95 percent lifetime rating with the California League of Conservation Voters, and there is simply no way I would put California's natural resources or our environment at risk for the Middle Class Scholarship Act or any reason.
I have worked to find common ground with businesses and environmentalists and with Democrats and Republicans to find solutions. Californians expect this kind of bipartisanship and collaboration, especially in these tough economic times.
We should all be working hard to get California back on track. That's why my colleagues and I want to level the playing field to help California businesses compete and want to help middle-class students become part of an educated workforce without having to face crippling debt. These are "pet causes" all Californians, including The Bee, should support.
Measure Heads to Full Senate
SACRAMENTO—Assembly Speaker John A. Pérez’s AB 1500, which closes a corporate tax loophole that exclusively benefits out of state corporations at the expense of California businesses and uses the money to fund a two-thirds reduction in student fees for middle class students at UC and CSU, was approved by two key Senate Committees today.
AB 1500 passed the Senate Governance & Finance Committee and was subsequently approved by the Senate Appropriations Committee, which also approved AB 1501, the companion measure to AB 1500. Both bills form the “Middle Class Scholarship Act,” which is now pending approval by the full Senate. Both bills passed the Assembly with a bipartisan, two-thirds majority.
“I am very pleased that the Middle Class Scholarship Act has taken another crucial step towards becoming law,” said Speaker John A. Pérez (D-Los Angeles). “With today’s actions by the Senate, we are closer to ensuring fairness in our tax code for California businesses, and providing critical relief for middle class families trying to weather the crisis of affordability in higher education.”
Speaker Pérez introduced the Middle Class Scholarship Act in February of this year to reduce student fees by two-thirds for middle class students at UC and CSU, as well as provide $150 million in relief for community college students. AB 1501 creates the Middle Class Scholarship. The companion measure, AB 1500, generates $1 billion annually to fund the scholarship by closing a corporate tax giveaway that exclusively benefits out-of-state corporations at the expense of California businesses by giving them an unfair advantage in calculating their tax obligation to the state.
“At a time when our students are facing insurmountable amounts of debt coupled with rising fees and a poor job market, corporations outside of California are enjoying a sweet tax break that penalizes job creation and property ownership in California,” said Angélica Salceda, a UC Berkeley law student and representative for the University of California Students Association. “Not only should California be encouraging job creation and property ownership within our own state by eliminating this unnecessary tax loophole but we, as a state, should be prioritizing higher education as an investment for our future. “
Over the past decade, student fees have soared at the UC and CSU, forcing students to take on staggering levels of debt. The Middle Class Scholarship Act will save middle class students $8,200 at UC and $4,000 at CSU annually. Community Colleges will also receive $150 million to increase affordability for community college students.
“Higher fees make the dream of an undergraduate degree unreachable for many or saddle hundreds of thousands of students with unmanageable debt,” said Sarah Couch, a Sacramento State student representing the California State Student Association. “The Middle Class Scholarship Program means that the middles class students across California will be eligible to receive a scholarship that covers up to two-thirds of their system wide fees, which would dramatically change both the affordability and accessibility of the CSU, giving students more time to focus on their studies.”
“Not only does this legislation really address some of the serious cost concerns for students being able to attend our higher education systems, but it also begins to address rebuilding our workforce,” said Alameda College student and President of the Student Senate for California Community Colleges Rich Copenhagen. “Through the Middle Class Scholarship Act, we will both be providing California businesses with equal taxation and we are also building a stronger, better trained workforce, giving all of California a stronger foundation to be competitive in our economy.”
Both measures now go to the Senate Floor for consideration.
Website of Speaker John A. Pérez: www.asmdc.org/speaker
Below are links to audio of Speaker Pérez and students who spoke at today’s Senate Governance & Finance Committee hearing:
Opening remarks from Speaker Pérez at today’s Senate Committee hearing. (2:45)
CSU Student Association representative Sarah Couch says the skyrocketing cost of a higher education in California is financially strangling students. (:14)
UC Student Association representative Angélica Salceda says while students are being hit with rising fees and tuition, out of state corporations are getting a tax break. (:14)
California Community College Student Senate President Rich Copenhagen says AB 1500 will address many of the issues facing students and the state. (:29)
CONTACT: John Vigna (916) 612-7795
If the Legislature could write a corporate tax code that favors — or at least isn't stacked against — businesses that invest in California and employ Californians, that'd be a move deserving a round of applause, right?
And if in the process the Legislature could raise money to offset the steep cuts in higher education budgets that have pushed California's public universities to roughly triple their tuition over the past decade, that'd be a sound investment in the future of middle-class Californians, right?
Unfortunately, in the hyperpartisan environment of Sacramento, this win for California's businesses and ambitious young people can only happen when Republicans commit career suicide, as a Southern California assemblyman, Brian Nestande, did this week when he lent a crucial vote for the Democratic-sponsored Assembly Bill 1500.
AB 1500 closes a corporate tax break snuck into law as part of the 2009 state budget deal. The loophole lets national companies apportion their share of California corporate tax according to one of two formulas — one based on the share of its employees, plant and sales in the state, the traditional method, and the other based strictly on their share of sales in California. Naturally, companies' lawyers and accountants pick the one that lowers their tax bill. Wouldn't you like such options when you fill out your 1040?
There's a strong argument for basing taxes strictly on sales. That formula doesn't tax companies for hiring or building factories or offices in California, but rather encourages those home-grown companies that sell products around the nation and the world. For that reason pro-business Republicans have long advocated switching to the "single sales factor," while many liberals have complained it was a simple corporate giveaway. Let's be clear: On an almost strictly partly-line vote, Sacramento Democrats are embracing a pro-business stance.
What they're dropping, however, is a loophole that lets big out-of-state corporations choose their own tax rules, year by year, according to their own convenience.
To win the two-thirds vote required to pass any tax measure in the Legislature, Democrats needed a handful of non-Democratic votes. They won one from Nathan Fletcher, a San Diego assemblyman who quit the Republican Party earlier this year, and the other came from Nestande, who was Assembly Republicans' No. 2 leader but was essentially demoted for his heresy. (The north state's Jim Nielsen and Dan Logue, meanwhile, both voted no.) He'll be condemned to the same doghouse as every other Republican who could ever make a deal.
Look, higher taxes on business are not the solution to California's budget problems. But the steady erosion of budgets for California State University and the University of California and the rise in tuition have shut out students, who either can't afford fees or simply can't find spots at capped campuses. Those who do enroll often cannot get classes they need to finish their degrees.
The one robust engine pulling California's economy is its higher education system, which feeds the innovative technical fields — software, computers, biotechnology, green energy — that are building the fortunes of the future. Our modern economy needs the best-educated workforce we can create. And hard-working students whose grades can get them into a good college shouldn't be priced out.
If Republicans can't close a loophole in pursuit of that goal, even to create a business-friendly corporate tax, what on Earth are they in the Legislature to do?
Assemblyman Brian Nestande has taken a bold and surprising stance, breaking from the Republican majority by supporting a bill that would end a $1 billion tax break for out-of-state businesses.
The bill would negate an agreement reached during negotiations in 2009 to persuade Republicans to approve the budget. That deal allowed national and multinational corporations to calculate taxes on sales, property and payroll in the state. Assembly Bill 1500 would return to a formula based only on sales, known as the uniform tax policy.
The Palm Desert Republican became the deciding vote in the Assembly for AB 1500, the Middle Class Scholarship Act. His yes vote sent the bill to the Senate. Nestande resigned as chairman of the Assembly Republican Caucus, the No. 2 position in the party. He understood he would have to do so when he cast this vote.
The Desert Sun respects Nestande for standing up to likely negative reactions from his Republican colleagues. He may have resigned the No.
2 position in the party, but in our mind he has established himself as the No. 1 leader of the California Assembly. His actions are driven by what he feels is best for California and he is willing to break party lines to do it.
We editorialized against AB 1500, because we wouldn't want the bill to block the surge in foreign investment in Riverside County. Nestande voted against the bill in the Revenue and Taxation Committee, but reversed course after talking to the California Business Roundtable, which represents 21 of the state's largest businesses. He was convinced that it would be a boost to California-based businesses.
We're convinced, too.
Tapping into a potential $1 billion pool for scholarships also would have a long-term economic impact. The author, Assembly Speaker John Pérez, points out that since 2004, student fees at the California State University have increased by 191 percent, to $5,970 a year. University of California climbed 145 percent, to $12,192.
Middle-class California college students certainly need the help.
Nestande also sees it as an opportunity to negotiate for regulatory reforms that would help local businesses. He wants to streamline the state's environmental review process.
“I will be in the room when these changes are negotiated,” Nestande said.
If those reforms don't accompany the bill when it returns to the Assembly, he'll vote against it.
If Nestande's independent move can ease the regulatory burden on local business, boost California-based companies and help more students to go college, it will have been a worthwhile departure from the party line.
Here's a representative who is doing what he thinks is right and is putting his job and reputation on the line. That's leadership. That's bold. That's what is needed to get this great state moving in the right direction.
Measure Approved on Bipartisan Vote
SACRAMENTO – Speaker John A. Pérez’s AB 1500, which seeks to close a corporate tax loophole that only benefits out-of-state corporations at the expense of California’s businesses, and uses the money to fund a two-thirds reduction in student fees for middle class students at the UC and CSU, passed with bipartisan support in the Assembly today. The measure, which is part of the two-bill Middle Class Scholarship Act, will create tax fairness for California’s businesses by removing an unfair provision of the tax code that benefits out-of-state corporations, while also addressing the crisis in higher education affordability at the UC, CSU and Community College systems.
“Today’s bipartisan vote was a critical step forward for the Middle Class Scholarship Act,” said Speaker John A. Pérez (D-Los Angeles). “By closing this loophole, we can remove an unfair advantage in the tax code that helps huge, out-of-state corporations at the expense of California businesses, and we can use the money to roll back a decade’s worth of fee hikes at the UC and CSU for middle class families.”
Speaker Pérez introduced the Middle Class Scholarship Act in February to address the crisis in higher education affordability. AB 1500 closes the Elective Single Sales Factor provision of the tax code, which allows out-of-state corporations to choose amongst different formulas in determining their tax obligation to the state. This gives out-of-state corporations an unfair advantage over California businesses, and by closing this loophole, AB 1500 will put an end to the one billion dollar tax break that incentivizes companies to move jobs out of California.
“We should all agree that we must do everything possible to make California a more competitive place for job creation and to provide relief to middle-class families,” said Assemblyman Nathan Fletcher (I-San Diego). “By closing a tax loophole that benefits out-of-state corporations we can put millions of Californians a step closer to achieving the American Dream. Now is the time to restore access to higher education and also make California a more competitive place to create 21st Century jobs.”
AB 1501 passed the Assembly earlier this year, and is currently pending in the State Senate. With today’s vote, AB 1500 will now be considered by the Senate, and if both measures are successful, will be sent to the governor for his consideration. If the governor signs both measures, students whose families earn less than $150,000 will see their student fees lowered by two-thirds at the CSU and UC, and $150,000,000 will be directed towards relief for Community College Students.
CONTACT: John Vigna (916) 319-2408
Website of Speaker John A. Pérez: www.asmdc.org/speaker
By Steven Maviglio
Assembly Speaker John Pérez did the near impossible yesterday: won a Republican vote for a tax measure as well as that of the Assembly's lone independent.
The Speaker's AB 1500, which closes corporate tax loophole that benefits out-of-state corporations and uses the money to fund a two-thirds reduction in student fees for middle class students at the UC and CSU, passed with the support of Republican Brian Nestande and Independent Nathan Fletcher.
Prying away two votes from the Republican Caucus is a fete rarely seen in the Legislature -- particularly on anything related to taxes. But the Speaker showed his ability to cross party lines and move the bill out of his house.
"Today's bipartisan vote was a critical step forward for the Middle Class Scholarship Act," said Pérez (D-Los Angeles). "By closing this loophole, we can remove an unfair advantage in the tax code that helps huge, out-of-state corporations at the expense of California businesses, and we can use the money to roll back a decade's worth of fee hikes at the UC and CSU for middle class families."
"We should all agree that we must do everything possible to make California a more competitive place for job creation and to provide relief to middle-class families," said Assemblyman Nathan Fletcher (I-San Diego). "By closing a tax loophole that benefits out-of-state corporations we can put millions of Californians a step closer to achieving the American Dream. Now is the time to restore access to higher education and also make California a more competitive place to create 21st Century jobs."
(San Diego) - Assembly Speaker John A. Pérez (D-Los Angeles) has announced new support for the Middle Class Scholarship Act (www.MiddleClassScholarship.com), legislation he introduced in February to address the crisis in higher education affordability for California’s students and families. Assemblymember Nathan Fletcher (I-San Diego), representatives from the business community and students joined the Speaker in supporting the Middle Class Scholarship Act. “The Middle Class Scholarship Act will close a corporate tax loophole that hurts California’s businesses and costs the state jobs, will cut student fees by two-thirds at UC and CSU, and will make our community colleges more affordable as well, helping ensure that all California’s students have the chance to make the most of their potential,” said Speaker Pérez. Here’s more in this Assembly Access video. www.asmdc.org/speaker
SACRAMENTO – In case you missed it, Assembly Speaker John A. Pérez (D-Los Angeles) and Assemblymember Nathan Fletcher (I-San Diego) were featured in a KUSI San Diego piece on the Middle Class Scholarship Act. Assemblymember Fletcher announced his support for the bill while meeting with the Speaker, college students and business leaders at the Qualcomm headquarters in San Diego on Friday.
Speaker Perez's Middle Class Scholarship is a two-bill package that will eliminate the Elective Single Sales Factor loophole in California law, which allows out-of-state corporations to pay less in taxes than businesses based in California. The money saved by closing this loophole, approximately one billion dollars annually, will be used to fund the Middle Class Scholarship, which will cut student fees by two-thirds for UC and CSU students whose families earn less than $150,000 per year and includes $150 million to increase affordability at the state's community colleges. The bills that make up the Middle Class Scholarship Act are AB 1500 and AB 1501.
For more information on the proposal, go to www.MiddleClassScholarship.com.
by Marisa Lagos
Middle-class students at California's public universities are one big step closer to receiving a major tuition break, after the Assembly narrowly approved a measure Monday that would fund college scholarships by eliminating a corporate tax break.
Democratic Assembly Speaker John Pérez, who has made the measure his top priority this year, needed the support of two-thirds of the Assembly because the legislation is a tax measure. He squeaked out the bare minimum number of votes by persuading two lawmakers from outside his party - Republican AssemblymanBrian Nestande of Palm Desert (Riverside County), and GOP-turned-independent lawmaker Nathan Fletcher from San Diego - to vote for the tax increase.
The measure fell one vote short at first Monday, when Assemblyman Tony Mendoza, D-Artesia (Los Angeles County), refused to join other Democrats in supporting it. Mendoza argued that the money raised by the tax should go directly to struggling universities, but ultimately said he would vote for the measure in the hope that it will be amended in the Senate. The bill then passed 54 to 25.
Pérez of Los Angeles may have a tougher time wrangling votes in the Senate, which has yet to consider the funding measure - but on Monday, he relished the victory in the lower house. Gov. Jerry Brown has said he will sign the measure if it reaches his desk, which would reduce tuition for qualifying students whose parents make less than $150,000 a year to less than what it was nearly a decade ago.
In approving AB1500, the Assembly voted to roll back a law that allows corporations to choose the less costly of two formulas for calculating the taxes they owe, and is believed to cost the state up to $1 billion a year. Under the bill, multistate businesses would have to calculate their California income tax liability based on the percentage of their sales in California - and not, as currently allowed, instead base their taxes on factors including property and payroll, which can result in a low tax bill for corporations that keep the bulk of their operations out of state.
The speaker noted Monday that some of the state's largest biotech and technology companies, such as Qualcomm and Genentech, "which employ thousands of Californians," support the measure "because they are put at a competitive disadvantage" by current law.
"This measure fundamentally speaks to the question of tax fairness for California businesses," Pérez said. He argued that the current system "effectively created a perverse incentive for businesses to create jobs outside the state of California."
Both houses passed another bill earlier this year that set up the technical structure for offering the aid to students whose families make less than $150,000, but too much to qualify for other grants. The bill that passed Monday is the follow-up to that legislation.
The corporate tax break that would be repealed was approved in 2009 by the Legislature as part of budget negotiations between Democrats and Republicans.
The proposed change incensed most Assembly Republicans, who said it would stifle economic recovery and exacerbate what they called a hostile business climate in California.
Assemblyman Curt Hagman, R-Chino Hills, said businesses can't make long-term plans and investments in California because policymakers "keep changing the rules."
"We don't have a lack of students going to the University of California and California State University - we have a lack of jobs when they come out," he said. "Until we make California competitive again, we will have that problem."
Fletcher, however, said the state isn't a competitive place for job creation because "we have a tax code that doesn't incentivize creating jobs here." He also said many GOP-dominated states have embraced the rules AB1500 would enact.
"At the end of the day, our obligation is to do what's right for the people we represent," Fletcher said. "I am sympathetic to the out-of-state folks, but I didn't get elected for their best interests. ... It's time for the Legislature to do what's right for the state of California ... (to) make California a more competitive place that actually creates jobs, and to make sure more children have access to the American dream."
Tuition at both the University of California and California State University systems has soared in recent years as lawmakers cut hundreds of millions of dollars from the higher education budget. It could rise even higher if voters reject a tax measure on the November ballot authored by Brown. A $500 million higher education budget cut will automatically take effect if that ballot initiative fails.
Under the plan that the Assembly passed Monday, students who qualify would see the cost of their tuition and fees drop by two-thirds.
It would amount to a $4,000 annual savings for California State University students and just over $8,100 for students attending the University of California, and would take effect as soon as this fall.
Both new students and current students would be eligible if they do not already qualify for financial aid.
The corporate tax break targeted by AB1500 will also be put on the voters' chopping block this fall in the form of Proposition 39, which would eliminate it and use the extra money, in part, to fund alternative energy projects as well as the state's general fund. If Pérez's bill passes, Prop. 39 sponsors have said they would end their campaign.
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