An 11th-hour contract agreement by two hold-out unions and an agreement by a third union to extend its contract negotiations deadline with the nation's freight railroads have averted a national rail shutdown. The nation's Class 1 railroads have now negotiated new contracts with 12 of the 13 unions with which they deal; the lone hold-out is the Brotherhood of Maintenance of Way Employees (BMWE), which agreed to continue contract talks until February 8, 2012. The head of the railroad bargaining unit was quoted: "These agreements offer a terrific deal for rail employees. They lock in well-above-market wage increases of more than 20% over six years, far exceeding recent union settlements in other industries." President Obama created a Presidential Emergency Board in October, and it's believed the agreements track that panel's recommendations. It's estimated a national rail freight shut down would have cost the country $2 billion a day.

The Obama Administration this week made major changes in its proposed and controversial boiler emissions rule, easing the proposed requirements it thinks will curb toxic air pollution. EPA said the new proposal's requirements are already being met by 99% of the boilers in operation. The new proposal will require "pollution controls at the 5,500 largest and most polluting nationwide, such as those at refineries and chemical plants." The agency added an additional 195,000 smaller boilers will be able to meet the new regulation through "routine tune ups." Despite EPA's description, the National Association of Manufacturers (NAM) said the reproposed rules are not enough and will "do significant harm to job growth." NAM said it will continue to push for a rewrite of the rules and set a "more reasonable approach" to compliance of at least 15 months.

Interstate truck drivers are banned from using hand-held cell phones while driving under a new rule finalized this week by the Department of Transportation. Violations will draw civil penalties of up to $2,750 for each offense and disqualification from operating a commercial motor vehicle for multiple offenses. Secretary of Transportation Ray LaHood said states could suspend a driver's commercial license after two or more serious traffic violations. Truck company owners who allow the use of hand-held cell phones by drivers would face a maximum penalty of $11,000. DOT said about four million drivers are affected by the new rule.

December 2011

As 2011 winds to a close we look back on the legislative year and prepare for 2012. While this was the first budget enacted before July 1, it was littered with gimmicks and far too optimistic revenue projections. In order to allow for the budget to be financed and revenue warrants to be issued to the state (essential for cash flow purposes) the budget had to include automatic spending cuts enacted by a trigger. The trigger is "pulled" if the revenue projections fall below expectations. The Legislative Analyst Office has already stated that revenues are running over $3 billion below projections and the Director of Finance will release her findings on December 15th. All indications are that the "triggers" will be pulled, requiring mid-year budget cuts of $3.7 billion - 40% from education, the rest from a cross section of programs.  

Impacts on agricultural interests from the current budget are significant including $19 million in general fund cuts to the Department of Food and Agriculture from a cross section of programs from pest inspection and prevention, increased fees for phytosanitary certificates, elimination of the $32 million for the state's fair system and fee increases in many agencies that impact business and agriculture most notably $24 million increase in fees at the Water Resources Control Board. The association is actively meeting with the Department and our industry allies assessing what additional potential negative impacts from the triggers.  

The Governor completed his first bill signing of his third term on Sunday October 9th. His overall veto percentage was low, 14.36 percent. Number of bills considered by the Governor was 870. Typical with Governor Brown, there was not a clear pattern with bills, but he was clearly more friendly to unions and public employees.  

For agriculture it was a mixed bag. After vetoing the "card check for ag bill" in the summer, the Governor signed SB 126 (Steinberg) which retains the secret ballot but upon a finding by the ALRB of an unfair labor practice during the election that rises to a level where a fair election cannot be held, the ALRB can certify a union as the sole representative for that workplace.

Governor Brown will ask voters to raise nearly $7 billion annually by hiking taxes on upper-income earners and sales in California over the next five years. The Democratic governor is expected to file his tax initiative for the November 2012 ballot. He wants the tax plan to help bridge next year's budget deficit, which the nonpartisan Legislative Analyst's Office pegs at $12.8 billion. Under the measure, California would impose a half-cent sales tax increase starting in 2013 and an income tax hike on high-income earners starting retroactively with the 2012 tax year. Both would expire at the end of 2016.

The upper-income tax hike starts with a 1 percent increase at $250,000 for individuals and $500,000 for joint filers. A separate increase would charge 1.5 percent more on income between $300,000 and $500,000, followed by a third step of 2 percent on income above $500,000 for individuals (with amounts doubled for joint filers). That would increase the tax on millionaires from 10.3 percent to 12.3 percent.

The income tax change generally affects the top 1 percent of taxpaying households, a favorite target of Occupy protesters in recent months. In 2009, the 1 percent threshold of tax filers started at $400,635, according to the Franchise Tax Board.  

Sources said the state would dedicate the money to school districts, intended as a way to convince voters who have said in recent polls that they would approve higher taxes for education. But the governor's proposal would still help the state balance its budget, without guaranteeing that the net effect would be an additional $7 billion for classrooms. It would also include some language limiting how much money gets spent on salaries and administration.

The fight over unions using members' dues to fund political spending is headed back to the ballot next year. A proposed initiative to block unions and corporations from using automatic payroll deductions for political purposes has made the cut to go in front of voters next November, the Secretary of State announced today. The measure also bans labor unions, corporations and, in some cases, contractors doing business with state government, from making contributions to candidate-controlled committees.    

Supporters say the changes will help curb the influence of special interest money in the political process. Labor unions, which are expected to mount a major and well-funded opposition campaign to the initiative, say it is nothing more than an effort to strip them of their political power. The last time a so-called "paycheck protection" measure was on the ballot was in 2005, when voters rejected a proposal backed by then Governor Arnold Schwarzenegger.  

Proponents had initially sought to qualify their initiative for the June primary. But that timing was affected by a new law that limits future initiatives and referendums to the November general election. The payroll deduction measure was the primary target of Senate Bill 202, the labor-backed measure introduced and approved by Democratic lawmakers in the final days of the legislative session and signed into law by Governor Jerry Brownin October.

A key reason for the periodic feast and famine in state income tax collections is that most of the taxes are paid by wealthy Californians.

In the 2008 tax year, the most recent one for which the state has complete statistics, the 118,349 Californians with income of $500,000 or more contributed $16.9 billion - almost 41 percent of the $41.7 billion collected. The 4,774 Californians with income of $5 million or more paid just under $7 billion in taxes. That's nearly 17 percent of total taxes paid in 2008, an average tax payment of $1.5 million for each of the 4,774 filers.

More of the taxable income of these wealthy Californians is derived from investments, which means it has more variables such as sales of real estate or stocks. Any number of studies have noted this skewing toward the wealthy and urged the state to become less reliant on high-income earners. The problem is, taxing rich people polls well.

Just about every national livestock and poultry producer group - and two major egg producers -along with the National Farmers Union (NFU) and the American Farm Bureau Federation (AFBF), told the House and Senate Agriculture Committees in letters this week they oppose an agreement between the United Egg Producers (UEP) and the Humane Society of the U.S. (HSUS) to amend the Egg Products Act to create a federal standard for egg laying hen housing. The ag groups said the so-called "enriched cage system" called for by the UEP-HSUS legislation will increase cost of production, egg costs to consumers and do little if anything to improve bird welfare. "Our organizations continue to make considerable animal care investments with an eye toward continued animal welfare improvements; (however) this proposal would stifle the industry for years to come. We ask simply Congress reject any attempt to legislate unwarranted animal rights mandates," the groups said. UEP said the letter, "...is a direct challenge upon egg farmers who are not asking for federal appropriations and simply want to improve the welfare of egg laying hens and end the prospects of ballot initiatives." Said UEP, "They (the ag groups) are motivated by a hypothetical and theoretical fear that our legislation that involves eggs only would set a precedent they do not like." UEP called on its members to make "their feelings known" to Congress. The Association of California Egg Farmers supports the UEP-HSUS agreement.

The 5th Gordon Currie "Salty" Crab Feed / North Bay District Meeting has been scheduled for Tuesday, January 17, 2012.  The event begins at 6:00 pm at Mister McGoos Restaurant located at 1375 Petaluma Boulevard North, Petaluma, CA.  The cost is $45.00 per person and reservations are due by January 9th in care of Darrel Freitas.  Click here for flyer   

A new "security perimeter" agreement that both government's contend will modernize border security and expedite cross-border inspections and movement of goods was announced this week by the U.S. and Canada. The deal creates a "trusted shipper" program under which inspections can be conducted in the manufacturing plant rather than at the border, and expands the number of categories to include food to be fast-tracked. The Canadian Chamber of Commerce said the deal will reduce compliance costs and border delays significantly, but acknowledged most of the benefits will come over years and will not be obvious to the general public in many cases. The deal also includes harmonizing safety regulations between the two nations, particularly for food and transportation, and the details of how this will happen were not immediately available.

Former New Jersey Governor and Senator Jon Corzine (D), now the disgraced former CEO of MF Global Holdings (MFG), was grilled for over three hours December 8 by the House Agriculture Committee, and when his testimony concluded, all the committee really heard was Corzine's expression of regret, his acknowledgement a misunderstanding could have led to the improper use of customer funds, and his admission, "I don't know where the money is." Corzine, who chose not to invoke constitutional protections against self-incrimination, hoped to delay testifying until January, 2012, so he could "obtain and review relevant records so that I could be more helpful to the Committee."  

Instead, the committee subpoenaed Corzine when he failed to reply to a formal invitation. Corzine is also set to testify under subpoena at the Senate Agriculture Committee December 13, and an oversight subcommittee of the House Financial Services Committee December 15. "I never intended to break any rules, and I certainly would never intend to direct or have segregated funds moved," Corzine told Rep. Frank Lucas (R, OK), committee chair. Rep. Randy Neugebauer (R, TX), chair of the Financial Services oversight subcommittee before which Corzine will appear next week, would not let up on the issue of whether Corzine authorized MFG employees to move customer funds out of protected accounts. "If I did, it was a misunderstanding," Corzine said. The money in question is upwards of $1.2 billion in missing customer funds and assets - funds that should been held in protected segregated accounts - when MFG filed for bankruptcy protections October 31, the eighth largest bankruptcy filing in U.S. history.  

Some speculate the unaccounted funds were improperly used to cover margin calls on sovereign foreign asset investments, which if true, would be a violation of federal restrictions on how MFG could legally invest and use customer funds.   Another hearing witness, James Kobak, lead counsel for the trustees in the MFG liquidation, told the committee trustees will appear in federal bankruptcy court December 9 to hear if they can disperse another $2.1 billion to an estimated 36,000 former MFG customers, roughly doubling the total payout to $4.1 billion, translating to roughly 60-70% of customer money frozen since the bankruptcy filing. Neither Corzine nor MFG have been charged with any wrongdoing; however, the Commodity Futures Trading Commission (CFTC) and the FBI are investigating actions that led to the bankruptcy filing. Testifying before Corzine was CFTC Commissioner Jill Sommers, who heads the commission's oversight into MFG. She laid out for the committee what MFG was allowed to do and what it wasn't, as well as the exact role the CFTC plays in regulating companies like MFG.  

Sommers took flack from several members of the panel, particularly Rep. Tim Johnson (R, IL), on why CFTC Chair Gary Gensler recused himself from MFG oversight. Johnson was reminded Gensler acted because Sen. Charles Grassley (R, IA) demanded his recusal based on his previous employment with Corzine at Goldman Sachs. Copies of all witness testimony can be found at www.agricutlure.house.gov by clicking on the "hearings" button and following the links.

Calling the October 31 MF Global Holdings (MFG) bankruptcy a "shock to our industry and our firm," John Fletcher, general manager of Missouri Agri-Service LLC, told the House Agriculture Committee December 8 "we have believed for decades that risk to segregated customer funds held by members of the clearinghouse was virtually zero. Now we know that was not the case." Appearing on behalf of the National Grain & Feed Assn. (NGFA), Fletcher testified how, upon learning of the MFG bankruptcy filing, customers could not access futures positions or funds in their accounts, had difficulty moving accounts to new futures commission merchants (FCMs) or "understanding how and why various adjustments to account balances took place." He said today customers have access to hedge accounts, but only about 60% of initial margin funds are available to the new accounts. He acknowledged his firm is "trying to manage a $600,000 deficit in the value of our account." Fletcher pointed out in detail to the committee the responsibilities and restrictions under which MFG should have operated, including the segregation of funds from company operating expenses, including margin calls. He also called for title documents, including warehouse receipts to be returned without a surcharge "for customers to buy back their own property."  

Fletcher emphasized the need to restore confidence in futures markets and the safety of segregated funds and property, explaining understanding the whys and hows of MFG is vital. He laid out several questions that regulators and self-regulatory organizations must answer, including what customer protections are currently in place, were audit procedures properly followed, and who was responsible for enforcing compliance. He also said changes to exchange-traded risk management tools may be needed, postulating it may be necessary for "some other entity other than FCMs to be responsible for holding and safeguarding segregated customer funds." Stressing "we make no judgments or recommendations on these questions today," Fletcher said NGFA was not recommending legislation or additional regulatory authority. The bottom line, he said, is that "all possible actions" must be taken" to get assets returned to MFG customers, and to ensure the situation never happens again. Fletcher's full statement can be found at www.agriculture.house.gov by clicking on the "hearings" and following the links.

Saying she's decided not to release the full legislative package she developed with House Agriculture Committee Chair Frank Lucas (R, OK) for submission to the failed deficit reduction committee, Senate Agriculture Committee Chair Debbie Stabenow (D, MI) said this week that package will be part of a "foundation of ideas" to be used to craft a 2012 Farm Bill. The bill, which was never submitted to the super committee, was a consensus approach by her and Lucas to cut $23 billion from ag spending over 10 years. Stabenow said she will hold hearings beginning in late January or early February both in Washington, DC and throughout the country, and "you'll see things unfold as we go through the hearings." In a speech this week at the Farm Journal Forum in Washington, DC, Stabenow said the draft bill would have consolidated 23 conservation programs into 13 focusing on working farm and ranch lands, regional partnerships, easements and wetlands, along with a smaller Conservation Reserve Program (CRP). She also said there was consensus around a shallow loss program on small revenue losses not covered by crop insurance. The hottest debate surrounded farm programs and risk management, she said, and how to reform direct payment programs will remain problematic. Sen. Pat Roberts (R, KS), ranking member of the committee, said the Stabenow-Lucas plan, because it was written without input from other committee members, should not be the basis for the Senate's bill, but agreed with Stabenow that the commodity program rewrites will be the toughest to tackle, saying these programs must be more market oriented and not simply guarantee income or price.