News

By Hannah Dreier

SACRAMENTO, Calif.—Middle class Californians will get relief from soaring college costs if a bill passed by the Assembly Monday becomes law.

AB1500 would eliminate a $1 billion tax break for out-of-state corporations and use the expected windfall to reduce tuition.

It is the second component of Assembly Speaker John Perez's "Middle Class Scholarship Act." The Assembly previously approved the other part, which would reduce tuition by more than half for families whose annual household income exceeds the cap for getting a free ride at California's public universities ($70,000 a year for the California State University system and $80,000 for University of California system) but is less than $150,000.

The Legislature approved the tax loophole in 2009 as a way to get a handful of Republican lawmakers to vote for the state budget.

On Monday, Republican Assembly members objected to what they described as an attempt by Democrats to undo the previous budget deal.

"This wasn't a loophole, it was a product of careful, extensive negotiations and promises," said Assemblyman Don Wagner, R-Irvine. "Promises made by one side of the aisle to secure the votes that they needed from the other side of the aisle. Promises that have now been completely undone."

But Perez, D-Los Angeles, said there was no use preserving a two year-old status quo where "you are getting kicked in the head by other states."

"This will help California businesses remain competitive while ensuring that California's middle-class families have the same opportunities to succeed as our generation had," he said.

The 2009 tax loophole deal allowed companies operating in multiple states to choose the cheaper of two formulas for calculating their tax liability in California. They can use an option that considers sales, property and payroll, or a formula that considers only sales.

Perez's bill would force corporations to use only the sales factor. At least 11 other states, including Texas and New York, require that corporations calculate their tax obligations this way.

Last year, Gov. Jerry Brown, a Democrat, passed a single-sales requirement through the Assembly, but his measure failed to get GOP support in the Senate. Republicans say the change could drive job creating corporations out of California.

AB1500 passed the Assembly 54-25, barley meeting the two-thirds threshold. Assemblyman Brian Nestande, of Palm Desert, was the lone Republican supporter.

"I'm putting forth my vote to say we need to come together and work on some of these issues to bring businesses back to California," he said.

Assemblyman Nathan Fletcher, an independent, also voted yes.

"It's not the job of tax policy to help companies pay less; it's the job of tax policy to create an incentive for economic growth in our state," he said.

One Democrat, Tony Mendoza of Artesia, initially abstained from voting, but ultimately gave the measure a "curtsey vote."

The bill still faces several obstacles.

Republican lawmakers are promising to block Democrats from reaching the two-thirds majority vote they need in the Senate, and four out-of-state corporations have vowed to continue lobbying against the act.

"The Legislature today sent a very clear sign that it's picking winners and losers rather than doing everything it could to encourage more job growth in California," said Peter DeMarco, a spokesman for the corporations, which include General Motors Corp. and Procter & Gamble Co.

An initiative on the November ballot provides another wrinkle.

Proposition 39 would close the loophole and dedicate a portion of the additional revenue to clean-energy projects. Proponents have promised to stop campaigning if Perez's package is signed into law, but if voters approved the measure anyway, it could lead to a court battle.

The act is expected to benefit about 200,000 college students and could take effect as soon as this fall if it passes the Senate and is signed by the governor.

Tuition for the University of California and California State University systems is three times what it was a decade ago.

By Patrick McGreevy

The state Assembly voted Monday to close what Democratic legislative leaders call a corporate tax loophole to raise $1 billion for scholarships for middle-class college students in California.

The Assembly voted to eliminate a provision of tax law that allows out-of-state corporations to pay less in taxes than businesses based in California by letting them be taxed based on the portion of their property and hiring they have inside California, as well as sales in the state.

The bill by Assembly Speaker John Perez (D-Los Angeles) bases the corporate taxes on sales.

Perez said his legislation "Fundamentally speaks to the question of tax fairness for California businesses" and gets rid of a "perverse incentive for businesses to create jobs outside California."

The measure and a companion bill would reduce student fees by two-thirds for University of California and California State University students whose families earn less than $150,000 per year, Perez said.

To get the two-thirds vote needed for the bill, Democrats were joined in voting for the measure by Assemblyman Nathan Fletcher, an independent from San Diego, and Assemblyman Brian Nestande (R-Palm Desert). Assemblyman Tony Mendoza (D-Artesia) said he provided a "courtesy vote" even though he has "serious concerns" about "where this money is going to go to."

It is less certain whether the measure will get the needed votes in the Senate.

Most Republican lawmakers, including Assemblyman Tim Donnelly of San Bernardino, opposed the measure as harmful to corporations during an economic slump.

"It’s a bad idea," Donnelly said. "We’re going to raise taxes on corporations who are going to make a decision on whether they are going to stay in California or locate in California."

By Amy Quinton

The measure is authored by Assembly Speaker John Perez.  It would end a tax break in California law, which allows out-of-state corporations to pay less in taxes than businesses based in California.

The bill required Republican support in order to pass, but Assembly member Brian Jones made it clear that would not come from him.

Jones: "What a great concept we have here today, let's take from the evil greedy rich corporations and let's give to the needy middle class, what honorable Robin Hoods we have here today."

An effort to close a similar tax break last year passed in the Assembly but failed in the Senate.

A companion bill would use the new revenue to cut student fees by two-thirds for UC and CSU students whose families earn less than $150,000 per year.

By Timm Herdt

SACRAMENTO — The Assembly on Monday passed a bill that would change the formula corporations use to calculate California income taxes, a switch that would generate an estimated $1 billion a year in new revenue for funding scholarships that would reduce college costs by two-thirds or more for middle-class students at state universities.

One Republican and the Legislature's only independent joined with all the Democrats to provide the needed two-thirds majority, 54-24.

The bill passed Monday deals with the change in the tax formula. The second part of the plan, which establishes the middle-class scholarships, was passed by the Assembly in May with 55 votes, including those of the two Republicans who represent parts of Ventura County, Jeff Gorell of Camarillo and Cameron Smyth of Santa Clarita.

Gorell voted no on the tax provision, while Smyth abstained.

Assemblyman Brian Nestande of Palm Desert was the only Republican who voted for the tax change.

The vote was a victory for Assembly Speaker John Pérez, D-Los Angeles, who has made the middle-class scholarship proposal the centerpiece of this year's legislative agenda.

"By closing this loophole, we use the money to roll back a decade's worth of fee hikes at the UC and CSU for middle class families," he said in a statement released after the vote.

The proposal calls for automatically awarding the scholarships to any student at a UC or CSU campus whose family makes less than $150,000 in annual income. Students from lower-income families, with incomes up to about $70,000, already receive Cal Grants to offset tuition costs.

The scholarships would benefit an estimated 150,000 CSU students and
44,000 UC students. In addition, the bill would provide $150 million a year to community colleges to reduce attendance costs.

The middle class is "the population that gets squeezed" by soaring college fees, Pérez said.

The bill, which now moves to the Senate, would eliminate an option for multistate and multinational corporations in calculating how much state tax they owe. They now can determine how much of their profits are subject to California taxes by using only the percentage of sales that take place here or use a three-part formula that also factors in how much of their property and payroll are in the state.

The bill would require corporations to use only the sales factor, an approach supported by many large, California-based companies, which say using the other option provides an unfair advantage to competitors based out of state.

Supporters say the switch will help the state's economy because it will remove a disincentive for out-of-state companies to open operations in California. If they use the three-part formula, their California taxes would go up if they opened facilities or hired workers here.

"We have a tax code here that doesn't incentivize you to create jobs here," said Nathan Fletcher, the San Diego assemblyman who left the Republican Party this spring to become an independent. "When they debated this on the floor of the Texas Legislature, they didn't say, 'Let's think about what helps California companies.' "

California is one of two states that offer the optional formula. A majority of states use the single-tax factor that AB 1500 proposes.

The change in the formula is supported by a number of California corporations, many in the technology and biotechnology industries, including Thousand Oaks-based Amgen.

Critics say the switch would amount to a $1 billion tax increase for corporations and hurt large companies that have headquarters in other states but also large operations in California. Among the most active opponents is International Paper Co., which has two facilities in Oxnard and one in Camarillo.

Assemblyman Brian Jones, R-La Mesa, said proponents seek to take from "greedy corporations" to give to the "needy middle class."

"What honorable Robin Hoods are today on the floor of the Assembly," he said.

The measure is expected to face tougher opposition in the Senate, where most observers think a two-thirds majority vote is unlikely.

In addition, Assemblyman Tony Mendoza, D-Artesia, cast a yes vote Monday only as a courtesy, saying he would like to see the Senate change the way the money is allocated.

If the proposal becomes law, the proponents of Proposition 39 on the November ballot, which seeks to change the tax formula, say they will stop campaigning for their measure. If the bill fails, they will continue to urge voters to adopt the change. Under their proposition, the revenue would be used not for college scholarships but largely for energy retrofits of public buildings that are designed to create clean-energy jobs.

Sacramento - A measure to dramatically reduce the cost of a higher education in California, authored by Assembly Speaker John A. Pérez, has been approved on a bipartisan vote by the Assembly. Assembly Bill 1501 establishes the Middle Class Scholarship program (www.MiddleClassScholarship.com). The Speaker says passage of the Middle Class Scholarship Act will make college more affordable for middle class Californians, covering students whose family income is under $150,000 but over the amount allowed to qualify for most financial aid. The Middle Class Scholarship Act also includes Assembly Bill 1500, which closes the wasteful elective Single Sales Factor tax loophole that benefits out-of-state corporations and deposits the revenues into the Middle Class Scholarship Fund. The Assembly has not yet voted on AB 1500. Here’s more on AB 1501 from Speaker Pérez in this Assembly Access video. www.asmdc.org/speaker

Students Strongly Support AB 1500, Closing Elective Single Sales Factor Loophole to fund Middle Class Scholarship

SACRAMENTO—The Assembly Revenue and Taxation Committee heard AB 1500 today, a bill authored by Assembly Speaker John A. Pérez (D-Los Angeles), that will close a tax loophole benefitting out-of-state corporations in order to slash college fees by two-thirds for California's middle class families. Students from across California testified in support of closing the tax loophole and using the money saved to fund the Middle Class Scholarship Act. The measure will be taken up for a vote by the Committee on Revenue and Taxation at its meeting next week.

“I am very pleased AB 1500, which closes an egregious and unnecessary corporate tax loophole and uses the savings to dramatically lower student fees, was heard by the Assembly Revenue & Taxation Committee,” Said Speaker John A. Pérez. “We know the best way to restore prosperity and health to our economy is to invest in opportunities for California's middle class families, and that is exactly what the Middle Class Scholarship aims to do.”

Speaker Pérez's Middle Class Scholarship Act is contained in two pieces of legislation: AB 1500, which closes the wasteful elective Single Sales Factor loophole and deposits the revenues into the Middle Class Scholarship Fund, and AB 1501, which creates the Middle Class Scholarship program providing the scholarships for CSU and UC students and appropriating funds to community colleges. AB 1501 was heard and approved by a unanimous, bipartisan vote in the Assembly Higher Education Committee last week.

Closing the elective Single Sales Factor loophole by passing AB 1500 was strongly supported by students from around California. California technology companies BIOCOM, Cisco, and Qualcomm also testified on the importance to California businesses of closing the elective Single Sales Factor loophole.

“Closing this loophole will bring a billion dollars back into California from out of state corporations that can be used to provide relief to thousands of middle class families, and my fellow students and I are strongly in support of the Speaker's efforts to close this loophole and make higher education affordable and accessible for middle class students,” said Paul Murre, a junior at CSU San Francisco who testified in favor of the measure before the Committee.

The Middle Class Scholarship Act is a plan to make college more affordable for middle class Californians, covering students whose family income is under $150,000 but over the amount allowed to qualify for financial aid. CSU students will save $4,000 per year or $16,000 over a four-year period, UC students will save about $8,200 per year or nearly $33,000 over a four-year period, and Community College students will see their costs reduced significantly as well. According to estimates, 150,000 CSU students and 42,000 UC students would be eligible for the scholarship. Community Colleges would also receive $150 million to reduce costs for students.

In recent years, CSU fees have increased 191%, UC fees have increased by 145%, and community college fees have also increased significantly. Student loan debt has also reached an astronomical high, with national student debt figures breaking the trillion dollar mark and surpassing the level of credit card debt held by American consumers.

AB 1500 was heard, but not voted upon by the committee due to committee rules that require bills with fiscal policy changes to be considered and voted on at a later date. AB 1500 is expected to win approval from members of the committee, the majority of whom have co-authored the bill with Speaker Pérez.

For more information on the proposal, go to www.MiddleClassScholarship.com.

Website of Speaker John A. Pérez: www.asmdc.org/speaker

CONTACT: John Vigna (916) 612-7795

Opening remarks from Speaker Pérez at today’s Revenue and Taxation Committee hearing. (4:51)

Speaker Pérez says the tax loophole encourages companies to create jobs outside of California. (:12)

Speaker Pérez says some of the out of state corporations opposed to AB 1500 are headquartered in state’s with the same tax law AB 1500 would require. (:15)

Speaker Pérez says AB 1500 is good policy that invests in our collective future. (:07)

Speaker Pérez says, due to the skyrocketing cost of college, student debt has reached $1-trillion and left graduating students with a massive debt load. (:19)

SACRAMENTO—The Assembly Higher Education Committee unanimously passed AB 1501 today, a bill authored by Assembly Speaker John A. Pérez (D-Los Angeles) that will slash college fees by two-thirds for California’s middle class families. Students from across the state testified in support of the Middle Class Scholarship Act, speaking about their own financial hardships, the stress of paying off paralyzing student loans and their hopes for higher education in California.

“Today’s bipartisan approval of the Middle Class Scholarship Act by the Assembly Higher Education Committee is the first step towards restoring the promise of affordable and accessible higher education for California’s middle class families,” said Speaker Pérez. “The students who spoke in favor of the Middle Class Scholarship Act were a powerful reminder that we need to invest in opportunities for every person in our state, and one of the best ways to do that is to reduce student fees by two-thirds for middle class families.”

AB 1501 is one of two pieces of legislation that make up the Middle Class Scholarship Act, a plan to make college more affordable for middle class Californians, covering students whose family income is under $150,000 but over the amount allowed to qualify for financial aid. CSU students will save $4,000 per year or $16,000 over a four-year period, UC students will save about $8,200 per year or nearly $33,000 over a four-year period, and Community College students will see their costs reduced significantly as well. According to estimates, 150,000 CSU students and 42,000 UC students would be eligible for the scholarship. Community Colleges would also receive $150 million to reduce costs for students.

“I was very pleased to be able to testify in support of Speaker Pérez’s Middle Class Scholarship Act, which will be a major benefit to my fellow student,” said Jeremy Pilaar, a senior at UC Berkeley and member of the UC Student Association Board of Directors. “Even though I’ll be graduating this year and won’t be able to get the Middle Class Scholarship, I know thousands of students across the state will benefit enormously from this effort.”

Those comments were echoed by Aissa Canchola, a senior at CSU Fullerton, who said, “CSU students are graduating with so much debt, we have to find the first job that comes along instead of finding the job that will help us get started on our careers, and we need to lower fees so that graduating students have opportunities for the kinds of jobs we’ve worked and studied hard for.”

In recent years, CSU fees have increased 191%, UC fees have increased by 145%, and community college fees have also increased significantly.  Student loan debt has also reached an astronomical high, with national student debt figures breaking the trillion dollar mark.

“As a community college student, I know so many of our students are worried about how they’ll be able to afford going to a four year university when they can barely afford to attend a community college right now, and the Middle Class Scholarship will help them out tremendously,” said Emily Kinner, a Student Trustee of De Anza College (Cupertino, CA). “This bill will dedicate $150 million dollars to provide relief to community colleges, and will help every community college student who wants to go to a UC or CSU be able to do so.”

The Middle Class Scholarship Act closes the elective single sales factor loophole, a tax break that only benefits big out-of-state corporations and costs the state nearly $1 billion in lost revenue every year.

For more information on the proposal, go to www.MiddleClassScholarship.com.

Website of Speaker John A. Pérez: www.asmdc.org/speaker

CONTACT: John Vigna (916) 319-2408

Assemblyman Marty Block didn't have a tough sell during his recent visit to Chico State.

"How many of you would like to pay two-thirds less for tuition and fees?" he asked straight away after taking the stage set up in the Trinity Commons area last Thursday (April 19). The question was met with generous applause from about a hundred students and others milling about during the Associated Students' Make it Matter event, a nonpartisan voter-registration and awareness drive.

Block, a San Diego Democrat and chairman of the Assembly Higher Education Committee, was on a multiple-campus tour, drumming up support for the Middle Class Scholarship Act, a proposal to subsidize the majority of tuition and fees for California State University and University of California students with household incomes under
$150,000 but too high to be eligible for financial aid.

The act is bound to be a no-brainer on the 23 CSU and 10 UC campuses, but it's going to be a tougher sell in the Senate and Assembly. That's because the estimated $1.1 billion generated to fund the scholarship would take a tax-policy change of charging multi-state corporations doing business in California by the amount of their sales, rather than on the percentage of business.

Block, co-author with Speaker John A. Perez of Assembly Bill 1500 and Assembly Bill 1501, which would eliminate that corporate loophole and fund the scholarships, respectively, said that the bills would affect mostly out-of-state corporations, mainly tobacco companies and certain automobile manufacturers. And they would benefit nearly 200,000 college students, automatically cutting their tuition and fees by two-thirds, a yearly savings of more than $4,000 for 150,000 eligible CSU students and more than $8,000 for about 42,000 UC students. (Community college students would receive aid to pay for textbooks or other fees under the plan.)

Still, for Republicans, that spells tax increase.

And there are competing interests among Democrats.

As Sacramento Bee columnist Dan Walters pointed out this week, Senate Bill 1505, the California Keep Our Promises Act, by Sen. Mark DeSaulnier's (D-Concord) proposes spending $600 million of that same potential pool of money on services for veterans.

During his brief talk at Chico State, Block explained how middle-income earners are a marginalized group when it comes to higher education. While low-income students are eligible for financial aid, and students from wealthy families can afford the current cost of tuition, students from middle-income families bear a huge financial burden.

"If you're not born into wealth and privilege, that doesn't mean you don't deserve an affordable higher education," he said.

He was echoed earlier that day by John Vigna, a press secretary for Speaker Perez, who introduced the Middle Class Scholarship Act.

Vigna, a 2006 graduate of Sacramento State, said his family would have qualified under this plan. Instead, like many students, he had to take on loans. That was before the economy tanked, before so many families went from two wage-earners to one, or were put out of work entirely.

"It's really targeted at the middle-class families who have taken a lot hits in the recession," he said of the pending legislation.

The Middle Class Scholarship Act would bring tuition fees back to the levels seen more than a decade ago, but it would not keep the CSU and UC systems from instituting fee hikes in the future. (Fees at the CSU have risen by 191 percent since 2004 due to declining support from the state.)

Block, a professor for more than 20 years at San Diego State, went on to reference the Master Plan for Higher Education, which 50 years ago set out the goals of increasing the access, affordability and quality of higher education. Today, that plan is crumbling. For example, because there are fewer course offerings due to budget constraints, many students cannot earn degrees in four years. Block noted that postponing the graduation rate of students further burdens them financially and keeps qualified workers out of the job market, which in turn hurts California.

Block championed the Middle Class Scholarship Act as a grassroots movement. He encouraged students to sign a petition at middleclassscholarship.com and to join a social-media campaign for the effort, including uploading videos to YouTube. He invited students to the State Capitol to speak in committee about the benefits of the proposal. A simply majority vote will do there. He acknowledged it will take a stronger effort to win over the Senate and Assembly, where two-thirds votes are required for passage.

"You need to join this fight," Block said. "You need to make it matter."

LOS ANGELES – With bipartisan support, the Los Angeles City Council unanimously passed a resolution yesterday, 12 to 0, endorsing the Middle Class Scholarship Act (AB 1500 and 1501) introduced by Assembly Speaker John A. Pérez (D-Los Angeles).

“The Speaker’s bills would go a long way toward restoring the middle class in California,” said City Council President Wesson, who introduced the resolution with Councilmember Tony Cardenas. “We need to make sure that higher education is affordable for all Californians, and that our students have all the opportunities that they deserve.”

“I’d like to thank the Speaker for his leadership on the Middle Class Scholarship Act,” said Councilmember Cardenas said. “The backdrop of this legislation is that over the last nine years to attend a public university students now have to pay three times as much as they did nine years ago.”

“I am very pleased to receive the unanimous support of the Los Angeles City Council for the Middle Class Scholarship Act, which will cut student fees by two-thirds for middle class families” Speaker Pérez said.  “The City Council recognizes that our future prosperity is directly tied to restoring access and affordability of higher education for every person in California.”

The resolution recognizes the much needed financial relief for middle class families who are sending one or more children to California colleges, stating that CSU tuition has skyrocketed 191% over the past 9 years and UC tuition has risen 145%, giving many students thousands of dollars of debt after they graduate.

The Middle Class Scholarship Act plans to cut college fees by two-thirds for families who make less than $150,000 a year, but too much to qualify for financial aid. The act will be paid for by closing the Single Sales Factor loophole, a tax break benefitting out-of-state corporations, which will bring in more than $1 billion.

Under the act, CSU students will save $4,000 per year or $16,000 over a four-year period, UC students will save about $8,200 per year or nearly $33,000 over a four-year period, and Community College students will see their costs reduced significantly as well. According to estimates, 150,000 CSU students and 42,000 UC students would be eligible. Community Colleges would receive $150 million to reduce costs for students.

For more information on the proposal, go to www.MiddleClassScholarship.com.

Website of Speaker John A. Pérez: www.asmdc.org/speaker

CONTACT: John Vigna (916) 319-2408

California used to be known as a place where middle and working class families would settle so that their children could have access to affordable top public universities and unparalleled job opportunities. However, this dream has been deteriorating over the last 20 years, as tuition for a UC education has increased by around 21 percent over the past couple years, more than any other state. In addition, graduating students are leaving college straddled with unprecedented student loans and an underperforming job market. But it doesn't have to be this way.

Speaker John Perez's Middle Class Scholarship Act is a major step in relieving the financial burden for many California families. Under the two bills, which are currently in the California state legislature, both UC and Cal State tuition would be cut by two-thirds for families that make between $80,000 and $150,000 a year.

Additionally, the scholarship provides over $150 million in aid to community colleges.

And what's even better is that this bill wont be funded on the backs of California's residents. Instead, the scholarship gets revenue by closing a tax loophole that enables out-of-state corporations to pick which tax rate they pay. This measure, which has broad bipartisan support in the California state legislature, would generate over $1 billion in revenue and help middle class families as well as California businesses.

Investing in higher education is beneficial for not just students, but all California residents. According to estimates, the scholarship would help around 42,000 UC students save $8,169 per year. This would help lessen the massive debt for many California students and enable many to actually attend a UC. Additionally, lowering costs to higher education isn't just good for students — it's good for the economy of California. According to the California community college chancellor's office, for every $1 taxpayers spend on higher education, the state gets a $3 return on its investment.

Ultimately, momentum is building for the scholarship throughout all UC campuses, especially at UCSD. Through passionate and vocal support from students and faculty alike, UCSD is leading the charge. We have collected more petitions in support of the scholarship than any other UC or Cal State campus. This is due to the inherent importance students see in making college more accessible and affordable amidst rising college fees.

However, our work here is not done. We need your help to show our legislators why investing in public higher education is integral to sustaining the future of California. Increasing access to higher education by lowering costs must be a priority of the California legislature. We must stand together in our support. Sign the petition and take action today.