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The (BIG) Blue Wave

Mike Belote

By Michael Belote, Esq., California Advocates, UTA California Lobbyist

Experts predicted a wave of Democratic success in the midterm general elections in California, but no one expected the extent of the domination. To call the elections a “blue wave” is an understatement. “Blue tsunami” is more accurate. And remarkably, some believe that the 2020 elections could be even more one-sided.

As of this writing, hundreds of thousands of votes remain to be counted throughout California, and there are still races to be decided. But here is what is known so far: on election day, Democrats held an advantage in the 90-person Assembly of 55/25. The ration is now 60-20, with one race in San Diego still too close to call. Thus Democrats will have at least a 75/25% advantage, a full six seats over the 2/3 supermajority of 54.

In the state senate, Democrats went into the general elections with an advantage of 26/14, and achieved a net gain of three seats, for a current ratio of 29/11, two votes over the 27-vote supermajority.

The California Congressional delegation changed radically. From an advantage of 39-14, Democrats now hold at least 45 seats in the 53-member caucus. And one final seat in the Central Valley is currently within a few hundred votes, so the advantage could be 46-7.

In terms of statewide offices, Democrats won every race. At one point it looked like independent candidate and former Insurance Commissioner Steve Poizner might be elected again as Insurance Commissioner, but days after the election it was clear that Democratic State Senator Ricardo Lara had won the seat.

The extent of Democratic domination can be summed up with one startling observation: Orange County is now a predominantly Democratic county. Orange County!

When combined with the election of Gavin Newsom as governor, almost certainly to the left of Jerry Brown, the entire political apparatus in California has moved from blue to neon blue, electric blue, possibly the bluest state in the country. The change will have unknown effects on policymaking. But part of the issue is simple arithmetic: in order to defeat a Democratic bill on the Assembly floor, opponents will now need to convince at least 20 or 21 Democrats to vote against their colleagues. And really to be safe, opponents need to get the affirmative vote below about 35, because when votes get close, friends tend to vote with friends, so the mission becomes that much more difficult.

In theory, with strong supermajorities in each house, Democrats could raise taxes, place measures on the ballot, and override governor’s vetoes, all without Republican votes. But because there are all manner of Democrats, just as there are all manner of Republicans, these powers may be more theoretical than real.

The new legislature comes to Sacramento on December 3 to be sworn into office. A small number of bills will be introduced the one day the legislature is in town before the new year. Things really get going on Monday, January 7, 2019. And things will become much clearer by the bill introduction deadline of February 22, 2019.

What do we see coming for UTA, and the broader real estate community? It is likely that the following issues will be part of the mix:

• Privacy: Some UTA members will be subject to AB 375, this year’s privacy bill, which has a delayed operative date until January 1, 2020. Bills will be introduced to clarify some of the uncertainties contained in SB 375, but no one should expect a rollback of the broad consumer protections contained in AB 375.

• Housing: California’s housing crisis obviously is not getting better, and this will be a major issue moving forward. The recording surcharges contained in SB 2 from last year will not be rolled back. The California Association of Realtors is advocating a special session on housing. There are likely to be dozens, if not hundreds of proposals to increase housing production.

• Taxes: All manner of taxation will be at issue. California remains dangerously dependent on income taxes, which fluctuate greatly with the economy, but stakeholders are far apart on how to reduce volatility. In terms of property taxes, the proposal to create a “split roll” already has qualified for the November, 2020 ballot, and the legislature may try to address the subject with it’s own ballot initiative to head off an expensive split roll fight. And in terms of sales taxes, Senator Bob Hertzberg (D-Van Nuys) is certain to be back with his proposal to tax most services in California, presumably including default services.

• Small Dollar Loans: Bills to increase regulation of small dollar loans mostly either failed or were vetoed in 2018, and some will return. The question is the degree to which secured lending might be affected. This is something for UTA to watch closely.
Enjoy the holidays, for things could get wild in 2019!

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