After a brief organizational period in December, the California Legislature effectively began the 2005-2006 two-year session on January 3, 2005. Although this “two-year session” concept sounds confusing, in reality it is quite simple: bills may be introduced and passed in either year, and bills introduced during 2005 may be carried over into 2006 in certain circumstances. So, either year may be viewed as a “session” in itself, and some first year bills “spill over” into the second year.

In a manner not totally unlike escrow, the legislative process tends to move from deadline to deadline. The most important deadline early in the year is the “bill introduction deadline”, the date by which new bills must be introduced. For 2005, the bill introduction deadline is Friday, February 18. And human nature being what it is, it will come as no surprise that almost all of the bills are introduced right at the deadline. Of the 2500-3000 new bills which will be introduced this year, approximately 2000 will be introduced right at the deadline, making it necessary to read a whole bunch of bills, really fast!

Because it takes a couple of weeks to sort through all of the bills introduced at the last minute, it will be early March before CEA knows exactly what has been introduced. It is possible to make a couple of predictions about what is likely to face us, however, and almost as important, what is not likely to be introduced. In the affirmative category, we are very likely to see bills which deal with the following subjects:

Elder abuse: last year a coalition of financial services groups, including CEA, killed a bill which would have made escrow officers and many other financial services employees “mandated reporters” of financial elder abuse, with criminal penalties for failing to report. It is likely that the author of last year’s bill will introduce another bill in this area for 2005, and the California Bankers Association has indicated an intent to introduce a less drastic, voluntary reporting bill.

Internet privacy: with privacy and identity theft continuing as “hot button” issues, there is a virtual certainty that any number of bills will be introduced relating to the collection of personal information by companies doing business on the Internet. As in recent years, this issue may be combined with the subject of “off-shoring”, to address circumstances where personal data is transmitted for handling outside of the U.S.

Predatory lending: depending upon the outcome of a pending state Supreme Court case coming out of Oakland, there may be attempts to broaden the state’s anti-predatory lending law to apply the law to more transactions. Business groups may also seek to have state law “preempt” the ability of local governments to enact their own ordinances on this subject.

“Split roll” property taxes: while very few politicians admit to favoring higher taxes, there is currently much discussion over closing tax “loopholes” in order to raise revenue. One that is very likely to be discussed is creating a “split” property tax roll, where commercial property is reassessed on some periodic basis, regardless of whether a “sale” in the traditional sense has occurred. Business groups will oppose the idea vehemently.

On the other hand, we have a pretty good idea of a couple of issues which are not likely to be raised:

1099s for real estate brokers: as indicated in the last CEA News, the staff at the Franchise Tax Board has indicated that they no longer intend to pursue any legislative requirement that escrow issue 1099s to real estate brokers for commissions.

Escrow disclosure of amount of property taxes: CEA was approached by a key staff member in the Legislature about the possibility of requiring escrow officers to advise buyers how much their property tax bills were likely to be. We described the various problems with this concept, at which point the staff person indicated that she would recommend against introducing such a bill. Whew!

By the next issue of CEA News, we will know better what little legislative “nuggets” we will be dealing with in 2005. Stay tuned…

by Michael D. Belote
California Advocates, Inc., Sacramento

Starting Over, Every Two Years