Legislative Sessions Underway in Washington, D.C. and Sacramento
by Kevin Gould, SVP/Director of Government Relations
At the federal level, Congress is in and we are seeing the re-introduction of several measures from the prior Congressional session that are impactful to the banking industry. One important factor that distinguishes this session compared to the prior is that Democrats have taken control of the Senate while maintaining a narrower margin in the House of Representatives. This could have implications on measures important to our industry.
The Secure and Fair Enforcement Banking Act has been re-introduced, H.R. 1996, and enables banks to provide financial services to legitimate cannabis-related businesses in states where it has been legalized. The measure is expected to pass the House with bi-partisan support. The Senate has expressed openness in advancing policy in this space, but rather than moving individual measures like H.R. 1996 forward, it is likely that such efforts will be considered along with more comprehensive reforms, such as criminal justice reforms pertaining to cannabis related convictions.
The Enhancing Credit Opportunities in Rural America Act, H.R. 1977, removes taxation on income from farm real estate loans made by FDIC-insured institutions. This measure will provide meaningful credit opportunities for farmers while leveling the playing field with the Farm Credit System.
It is expected that Senator Brown, chair of the Senate Banking Committee will reintroduce his measure from the last session, establishing government-backed digital wallets to all consumers. “FedAccounts” are a no-fee bank account made available at a post office, small bank or credit union. As we have seen at the state-level, this measure inserts government into the banking business.
While the pandemic prevented our annual visits to Washington, D.C. last year, we are planning a trip this October with our friends from the Florida Bankers Association. More details will be forthcoming and we hope that you will consider joining us.
The California legislative session is also well underway. The more than 2,400 measures introduced in late February are now moving their way through first house committee hearings. In order for these measures to remain active, they must pass their respective house of origin no later than June 4.
The association is engaged on numerous measures that have a direct impact on our industry. A few high-priority measures that we are opposing are worth highlighting.
Public bank advocates are back with the support of labor organizations. Assembly Bill 1177 creates the BankCal Program to provide financial services to California residents. The purported need for this program, as stated in the bill, is to help unbanked residents who lack access to traditional banks. The measure crates a mandate for all employers with five or more employees to offer as an option for payment of wages, direct deposit into the BankCal fund which will consist of zero-fee, zero-penalty federally insured transaction accounts and debit card services at no cost to account holders. Deposits made into the BankCal fund will be presumably participated out to public banks, credit unions and local banks. This measure is unnecessary given more than 150 banks operating within the state and the numerous examples of expensive government programs that have failed Californians.
The Legislature is also prioritizing climate change with the introduction of several measures focused on this issue. One measure, Senate Bill 449, requires that California corporations, or entities issued a license to operate or certificate of authority under the laws of the state, with annual gross revenue of at least $500 million submit annual disclosures identifying their climate-related risk and efforts adopted to mitigate those risks. Climate-related financial risk is broadly defined in the measure to capture a covered entity’s assets, liabilities, investments, supply chains and corporate operations. This measure will likely be duplicative given expected action at the federal level.
Commercial tenants would receive relief under a recently amended measure, AB 255. Among other provisions, landlords would be prohibited from terminating a lease if the tenant paid at least 25 percent of the lease. The measure includes an unclear and undefined exemption in circumstances where compliance would subject the landlord to significant risk of default on its own financial obligations.
At the same time measures are moving through the legislative process, budget discussion are ongoing. The state’s financial condition is much better than anticipated with revenues through March $14.3 billion above projections. All three major sources of revenue for the state are outperforming, personal income taxes are $12.8 billion better than expected along with corporate income taxes and sales taxes above projections at $721 million and $760 million, respectively. The budget must be passed by the Legislature by June 15 and signed the governor no later than June 30.
We appreciate the opportunity to share a brief update and will keep you informed throughout the year on important measures moving through Congress and the California Legislature. It’s an honor and privilege to represent you and we thank you for all that you do to support your customers and communities and for your engagement in the association’s advocacy efforts.