Little Progress in State Budget Negotiations
Gov. Arnold Schwarzenegger and legislative leaders continue to meet regularly as they attempt to reconcile differences and approve a delayed state budget plan that is now entering its sixth week.  The pressure to reach a compromise continues to escalate as analysts predict that the state will run out of money in September, forcing the government to take on high-interest loans, compounding the current crisis.  The governor sent a message to lawmakers last week when he ordered the layoff of 22,000 part-time and temporary state workers, instituted a hiring freeze and lowered the pay of minimum-wage state workers to the lower federal standard until an agreement is made.  Democratic lawmakers are calling for higher taxes on corporations and upper-income households, couples earning more than $321,000 a year. They propose reinstating higher tax brackets for higher-income households that were reduced in the mid-1990s, when California briefly had a budget surplus.  Today the governor proposed a one cent sales tax increase for the next three years in exchange for other long-term fixes he believes will solve future budget problems. This move puts him directly at odds with his own party who remain steadfast in their opposition to a tax increase.

Legislation Update: Key Measures of Interest to Life Sciences Community
As the state Legislature winds down its activities for the 2007 legislative session, CHI continues to focus on several proposals of interest to the biomedical community in California.  For more information on any of these proposals, contact Sandra Pizarro, CHI vice president of state government affairs (916-233-3497 or pizarro@chi.org).

SB 1307 – Electronic Pedigree
Senator Mark Ridley-Thomas (D-Los Angeles)
SB 1307 would reform the current law in California regarding how members of the supply chain track and trace prescription drug products as they move from manufacturers to patients.  Recently the Schwarzenegger Administration outlinined what they would like to see in an electronic pedigree system.  The proposal is substantially different than the language put forth by Sen. Ridley-Thomas. Both parties, as well as other interested stakeholders in the supply chain, have been meeting regularly to develop a compromise prior to the end of session.  CHI is advocating diligently for strong preemption language that would require any system created in California to conform to federal standards when they are adopted.  CHI is also working to ensure that brand name manufacturers are afforded an adoption timeline similar to generic manufacturers.  The bill is currently scheduled for discussion on the Assembly floor.

AB 501 – Medical Sharps Disposal
Assemblyman Sandre Swanson (D-Oakland)
AB 501 would require manufacturers of home-use pre-filled syringes, pens or other injection devices to provide sharps containers (prepaid mail back or other transport), or coupons that can be exchanged for, or a toll-free number or Web site that can direct patients to, a qualified sharps container.  CHI has voiced several concerns with this bill because it will raise costs for manufacturers and patients without producing a comprehensive and effective waste disposal solution.  The Assembly will hear the bill this week, where legislators will vote for concurrence of amendments accepted in the Senate.  CHI and other stakeholders have also expressed our concerns to the Department of Public Health and the governor’s office and are awaiting their recommendation.

AB 558 – Chemical Substances Testing
Assemblyman Mike Feuer (D-Los Angeles)
AB 558 would enact the California Chemical Substances Act, which would require the Department of Toxic Substances Control, in consultation with the Office of Environmental Health Hazard Assessment, to identify and recommend the most accurate and effective methods to use to test for and evaluate the potential hazard traits of chemicals.  On Thursday, July 31, CHI met with staff in the author’s office to gain a greater understanding of the author’s goals and to outline potential concerns that CHI members have with the bill.  CHI wants to ensure that the legislation, while well-intended, is not overly broad in scope and does not produce information that can be easily misinterpreted by the public.  CHI is also working to make sure that sufficient trade secret protections are included in the measure.  The legislation, which could be expensive to implement, is currently on the Suspense File in the Senate Appropriations Committee.

AB 2381 – Definition of California Supplier
Assemblyman Gene Mullin (D-South San Francisco)
In the California Stem Cell Research and Cures Act, which established the California Institute for Regenerative Medicine (CIRM), there is an explicit requirement that grantees purchase at least 50 percent of their goods and services, to the extent reasonably possible, from California suppliers.  Currently a precise definition of that term does not exist.  Discussions with the author’s office have been occurring regularly as interested stakeholders attempt to reconcile their differences and produce a workable solution prior to the end of session.  The legislation will be heard in the Senate Appropriations Committee on Aug. 4.  The Independent Citizens Oversight Committee (ICOC) of the CIRM is also focusing on this issue and has been working on establishing a definition at its last two meetings.

AB 2114 – Corporation Tax Apportionment
Assemblyman Mike Villines (R-Clovis)
AB 2114 would change the current corporate tax code, making California more competitive with other states with respect to encouraging expansion of life sciences companies.  Currently the state’s tax structure relies heavily on property and payroll factors, discouraging corporate investment and expansion by imposing additional taxes on new jobs and capital improvements.  This places California at a disadvantage when other states are fighting to attract corporations by moving to a tax formula based solely on sales.  CHI believes that a shift in our tax code must occur in order to enhance California’s competitiveness by providing California-based companies with a strong incentive to create new jobs and expand operations in our state.  The legislation will be heard in the Senate Appropriations Committee on Aug. 4.

AB 1370 – Net-Operating Losses
Assemblywoman Sally Lieber (D-Mountain View)
AB 1370 would allow companies’ net operating losses (NOLs), for taxable years beginning on and after Jan. 1, 2008, to be carried forward for the 20-year period following the year in which the NOL was deducted.  CHI strongly supports this alteration in the tax code to bring California in line with the federal NOL standards because it appropriately recognizes the long and arduous biomedical product development timeline.  Companies often incur losses for more than 15 years as they work to get a product to market.  The legislation is currently on the Suspense File in the Senate Appropriations Committee.  This provision also has implications in current budget negotiations as Democrats have put forth a proposal to temporarily suspend NOLs for a period of three years.  CHI is supportive of this, as they have committed to push AB 1370 through the legislative process in return.