FBA’s Public Policy Goals for 2020

Family Business Association of California

The following is FBA’s Public Policy Goals for 2020, as approved by the Association’s Board of Directors.

State tax issues. FBA needs to be diligent in this debate to maintain fair and equitable business and personal taxes in California:

  • Continue our leadership role to maintain prohibition on estate tax in California.
  • Split Roll is headed for the 2020 statewide ballot and rolling back of Proposition 13 continues to be a concern in California and FBA will fight against any proposal to negatively impact commercial property taxes.
  • Continue to oppose efforts to enact a sales tax on business services.

Regulatory and lawsuit relief continues to be a top priority for FBA members but regulations surrounding labor relations and human resource management provide additional challenges to our members. FBA will focus on opposing legislation and regulations that impact labor and our workforce and relief from PAGA lawsuits against family businesses. Also, work to broaden AB 5 of 2019 to exempt more types of contractors who should not be employees and soften the blow from this onerous legislation.

Workforce development and identifying a qualified and available source of labor is an increasing challenge. FBA will work to support workforce development opportunities that help provide a trained workforce.

Publicize FBA policy, legislative and regulatory positions.

  • FBA will work to achieve coverage of those positions and opinions in the news media.

Continue to explore opportunities to assist the transfer of ownership and property between family members and through successive generations and oppose efforts to make that more difficult.

Continue to build relationships with key legislators, new legislators and new administration officials and:

  • Sponsor the 8th Annual Family Business Legislative Conference
  • Meet one-on-one with more key legislators, new legislators, and officials in the Governor’s Office to educate them on the importance of family businesses and what issues are critical to family businesses
  • Encourage FBA members to call on their legislators and engage employees in both education and advocacy to illustrate the impacts state government has on family businesses and their employees.
  • Participate in coalitions, public events, and hearings advancing the importance of the family business model and family business issues.

FBA Names Senator Nielsen Outstanding Legislator for 2019

The Family Business Association of California, the only organization advocating exclusively for California’s thousands of family businesses, has named Sen. Jim Nielsen, R-Tehama, as its Outstanding Legislator for 2019.

FBA Executive Director Robert Rivinius said the veteran lawmaker was selected because he’s always been a strong advocate for family businesses.

Robert Rivinius, left, and Sen. Jim Nielsen.

“Sen. Nielsen grew up in a family business and has always been a strong advocate for family businesses during his years in the Legislature,” Rivinius said. “We need more lawmakers who understand the unique issues facing family businesses and who recognize how important family businesses are to the state’s economy and the fabric of our communities, and we thank him for his support.”

Nielsen said he was proud to receive the recognition.

“California needs strong family businesses because they’re the cornerstones of their communities and the foundation of our state’s economy,” Nielsen said. “I want to thank the leaders and members of FBA. It is an honor to be recognized.”

Nielsen was first elected to the Senate in 1978, serving until 1990. He returned to the Legislature in 2008 as a member of the Assembly and was elected to the Senate in 2012. He represents all or portions of Butte, Colusa, Glenn, Placer, Sacramento, Sutter, Tehama and Yuba counties. He serves as Vice Chair of the Budget & Fiscal Review and Elections & Constitutional Amendments committees and is a member of the Governmental Organization, Governance & Finance and Veterans Affairs committees.

He has been recognized by numerous taxpayer and small business groups for his leadership on state budget issues and for his unrelenting fight against profligate government spending. He is also a leader in protecting and strengthening private property rights and for reforming state regulations and out-of-control spending.

Founded in 2012, the Family Business Association of California is the only organization working exclusively at the Capitol to educate lawmakers and regulators about the importance of family businesses to the state’s economy and to their communities and to advocate positions on legislation and regulations. FBA has also taken the lead to defeat recent proposals to impose a state inheritance tax, which would make it much more difficult to keep businesses family-owned from generation to generation.

Do Economic Recoveries Die of Old Age?

Elliot Eisenberg, Ph.D. | GraphsandLaughs, LLC

The US economy is clearly slowing.  After adjusting for inflation, GDP grew by 2.9% in 2018, and by an even better 3.1% in 19Q1.  But growth slowed to just 2% in 19Q2, is expected to grow at a similar pace the rest of this year, and to then slow further in 2020.  According to some pundits, this rapid slowing is a clear sign we are in the final stages of this economic recovery and that a recession is fast approaching.  They point out that we are in the 11th year of this recovery, making it the longest one in history, and as such we are simply due for a recession.  Fortunately, they are wrong, expansions do not die of old age.  Let me explain.

Elliot Eisenberg

Prior to WWII, the idea that expansions were more likely to end as they got older was very common and was frequently mentioned in business and economics textbooks. And indeed, it was justified by the data.  Using a statistical technique called survival analysis, which looks at the probability of some particular event occurring given the age of the subject, be it a person or a car or sports team, it is clear that prior to WWII recessions were more likely to happen the longer the recovery.

The intuitive starting point is based on analogies to human mortality. In short, this presumption suggests that as an economic recovery ages, assorted imbalances and rigidities accumulate that hobble the economy and make it more fragile. As a result, a recovery is increasingly put at risk by smaller and smaller shocks, and it becomes increasingly likely the economic expansion will fall into recession the longer it lasts. Analogies to cars are also frequently cited. All else equal, as a car ages, the probability that it will suffer a mechanical breakdown increases. Thus, older cars are considered less reliable and generally command a lower price than new ones.

Happily, however, various postwar changes in the economy have contributed to more robust and longer-lived expansions!  One key change has been the rise in the share of services produced in the economy and the concomitant decline in goods.  This change has diminished the importance of inventory fluctuations and, as a result, has moderated the business cycle.

The role of the federal government has also drastically changed.  Since WWII, government activity has, among other things, increasingly focused on stabilizing the economy.  In short, the government has gone from a laissez-faire hands-off attitude towards the economy to a forceful, countercyclical policy. This approach has not only prolonged business cycles but has, importantly, eliminated the pattern of cycles becoming increasingly fragile as they age.  In a sharp reversal, it is now recessions that are increasingly likely to end the longer they last as policymakers take action to revive growth, such as passing tax cuts and spending increases and lowering interest rates.

In closing, enjoy the current expansion. Treat it like a good friend or a fine glass of wine and savor every extra month together. While it is almost ten and a half years old, it might well last another year, two if we are lucky. Better yet, the recession that follows is not likely to be particularly deep, as there are no asset bubbles in the making, nor are the sectors of the economy that usually drive us into recession growing inappropriately quickly.

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70-word economics and policy blog can be seen at www.econ70.com

Are 1,061 Pages Enough?

By Robert Rivinius, FBA Executive Director
CalChamber Labor Law DigestWhen I have a chance to meet with someone in the Legislature or from the Governor’s Office, I take them a copy of the Cal-Chamber’s 2019 California Labor Law Digest. The book is 8″ x 11″, 2 1/2″ inches thick, and has 1,061 pages. As I present the book, I tell them that if they would like to start a family business in California they will need to know everything contained in the book, follow it to the letter of the law, and even if they do that, probably will be sued.

The lawsuit might be generated by some accommodation an employer was trying to make to actually help their employees, like a late lunch so a person can eat with their co-workers, or skipping a break in order to attend their child’s Little League game. Our labor laws have done a great job of taking flexibility away from California employers who would like to accommodate an employee’s reasonable requests.

I also ask the person receiving the book to keep it in their office and when a new regulation is proposed, take a look at the book and ask, “Are 1,061 pages of labor law compliance requirements not enough? Would 1,200 pages be better?” It usually is an eye-opener for the person receiving the book and maybe, even in a small way, could make a difference in their decision-making.

PAGA Reform Would Help Grow Our Economy

By Ken Monroe
Chair, Family Business Assn. of CA and president, Holt of California

This op-ed originally appeared in the Orange County Register on July 5, 2019

Ken MonroeYou can’t watch TV or go online these days without hearing about more and more politicians who are calling for America to become a socialist nation. With California’s presidential primary just nine months away, these calls will become even louder in the months ahead.

As a family business owner and chairman of the Family Business Association of California, I’d argue that in many ways we already live in a socialist state. After all, a basic definition of socialism is that the state redistributes the wealth and controls the means of production. Through high taxes and ever-increasing regulations, California does both quite effectively.

But there are other ways the state redistributes wealth, and one of the most egregious is the Private Attorneys General Act, or PAGA.

PAGA was one of the last bills signed into law by Gov. Gray Davis before his historic recall in 2003 and was his parting gift to the state’s trial lawyers. It allows private attorneys to act as the state and use the 800 pages of labor laws on the books to sue employers over any and all violations, even for incredibly trivial issues. For example, if a company doesn’t list its full legal name on a paystub, it’s a violation.
But no matter how trivial, the penalties for each labor code violation are the same: $100 for each employee per pay period for an initial violation, and $200 for each employee per pay period for each subsequent violation, along with other possible penalties.
These violations can be stacked, with multiple penalties for each statutory wage violation and can quickly add up. I know, because my company, Holt of California, was sued over allowing our employees the flexibility to schedule lunches so they could eat with friends, even if that meant they worked more than five hours set without a meal break.
Because the possible penalties and legal fees in PAGA lawsuits can easily total millions of dollars if a suit goes to trial, most employers settle the cases. While the employees usually get about 60% and the lawyers get about 35%, that means a few lawyers get large checks while the numerous employees end up with relatively little.

PAGA has created an unfair distribution of wealth and should be repealed, with the state once again given the power to enforce labor laws. Since trial lawyers are a major part of the state’s progressive governing coalition, this probably won’t happen any time soon.

But there are some reforms that could at least make PAGA truly focus on the needs of employees more than the trial lawyers’ desire for big paydays:

• First, give employers 90 days to cure underlying issues before a suit can continue. Faced with a similar deluge of lawsuits over construction defects a decade ago, the Legislature gave homebuilders an opportunity to make repairs before they could be sued, so there is a precedent.
• Cap attorney’s fees so that in cases where significant violations occurred that the employees get more of the settlements.
• And make some common-sense reforms in those 800 pages of labor laws. Give employees the right to take their lunch break when they want to and allow companies to include the name they do business as on paystubs. The state should focus on situations that really harm employees.

Successful economies need an ongoing economic engine to create wealth. Here in California, family businesses play a major role making California the fifth-largest economy in the world. But our state’s economic engine is being choked back by a whole host of state laws and regulations, so the Legislature should at least take some modest steps to strengthen our economy. PAGA reform would be a good place to start.