New Year Legislation

Taking a Measured Look at What the Future Holds

By Jason Fox
Traditionally, the January/February issue of California CPA outlines the year of advocacy ahead. However, if 2020 taught us anything, it’s to expect the unexpected. Even the most attentive experts could not have foreseen the disruption the global pandemic caused. Nevertheless, we attempt to assess what we do know and provide our best insights of what policy issues we see for the year ahead. Moreover, when the inevitable unexpected happens, we will have the advocacy and grassroots infrastructure in place to quickly adjust and respond on behalf of the CPA profession. 

Here are some of the major issues we expect to be working on for 2021.

Mitigation of COVID-19 & Budget Crunch
The California Legislature convened Dec. 7 to start the 2021-22 legislative session and the continuing impacts of the COVID crisis were front and center. The Assembly convened down the street in a large basketball arena and the Senate had a handful of senators participating virtually from their homes. Despite the logistical challenges of legislating around health and safety protocols, starting Jan. 4 the Legislature will begin its legislative duties in earnest. 

They will be introducing legislative proposals through Feb. 19 and legislative policy committees will begin vetting and acting on legislation shortly after. COVID-19-related legislation is expected to be priority. Support for health systems, economic relief, adjustments to labor laws and strengthened social services are all expected to be top issues considered. 

In addition to legislative proposals, the Legislature also will get a look at Gov. Newsom’s  2021-22 budget proposal, which is the first major marker of the governor’s policy priorities for the coming year. An important context for budget discussions is the state’s financial position. In November, the Legislative Analyst’s Office (LAO) projected that the state could see $26 billion in one-time surplus funds. While it’s difficult to pinpoint what exactly lead to the surplus, the LAO outlined several factors that may have contributed, namely tax revenues being stronger than projected and utilization of social services being less than projected. 

However, the surplus is projected to be quickly replaced by a structural operating deficit of $17 billion by 2024. Much of the spending is entrenched into the state budget and is unlikely to be rolled back by the current legislative leadership and administration. Further, with a growing need for COVID mitigation efforts and economic relief, it’s likely there will be growing pressure to increase spending programs and new sources of tax revenue. Expect to see a serious discussion of new taxes, including reintroductions of wealth tax proposals, higher income taxes and even the possibility of an expansion of the sales tax to services.

Adjusting to Changing National Policies
With a new president and Congress being sworn in and the likelihood of additional broad-based stimulus packages, we expect to see a number of federal policy changes that may require subsequent state actions. 
For example, if a Biden administration is able to work with Congress on a new tax plan, it’s likely to require some conformity considerations for California taxes. Additionally, changes to the Paycheck Protection Plan or a similar economic stimulus effort may further require considerations of California policies. 

Licensing
Getting individuals into the workforce will be a key priority for a post-COVID recovery. Often, well-intentioned policy proposals designed to get individuals licensed and working quickly actually erode long-established licensing models that balance consumer protection with a defined pathway to a profession. A seemingly minor change in a requirement for licensure can have significant ripple effects that can put consumers at risk. 

As you well know, the services provided by CPAs to consumers, businesses and governmental entities are critical to the state’s economic well-being and integral to creating trust in our financial systems. 

One misstep can open consumers to significant harm. The proficiency CPAs achieve through education, testing, experience, ethics and, ultimately, licensure through a responsibly developed licensing model is central to why the public can rely on CPAs and their services. We expect to continue to educate policy leaders and the public about the importance of a responsible licensing framework and, if appropriate, pursue policies that work within the framework rather than erode it. 

Whatever’s in store for us in 2021, the strength of CalCPA’s relationships, technical expertise and perseverance will position us well to tackle the most daunting challenges. 
Here’s to a great year of advocacy.

Jason Fox is CalCPA's vice president of government relations.