State Senate GOP Analysis of SB 11

Posted by on Jun 10, 2013 in Blog | 0 comments

SB 11 (Pavley)


Senate Environmental Quality: 8-1 (4/3/13)

(AYE: Fuller; NO: Gaines)

Senate Transportation & Housing: 6-2 (4/9/13)

(AYE: Cannella; NO: Gaines, Wyland)

Senate Appropriations: 6-1 (5/23/13)

(AYE: Walters, NO: Gaines)

Vote requirement: 27 (Urgency)

Version Date: 05/28/2013

Quick Summary

Extends various clean air and energy incentive fees and funding for mitigation projects and construction and operation of a hydrogen fueling network. Delays the Air Resources Board (ARB) regulations on clean fuels outlets until January 1, 2024. Directs the ARB and the California Energy Commission (CEC) to study the policies and economics recommended to move toward a goal of 26% alternative fuel usage by 2022.

The NONE prediction suggests that while there is an understandable desire to delay future ARB mandates for gasoline retailers/wholesalers that require them to construct an expensive and inefficient infrastructure for hydrogen fuel, as well as a concerted interest in continuing the Carl Moyer programs incentives for overburdened regulated entities, the continuation of billions of dollars of vehicle registration fees and tire taxes for eight years is a hefty price to pay.

This bill would result in fee extensions of $8 in smog abatement, $18 for vehicle registrations, $10 on boat registrations, and $0.75 per tire on consumers annually until the year 2024.

Fiscal Effect VERY MAJOR STATE COSTS AND REVENUE INCREASES This bill extends clean air and energy incentive funding for 8 years past their sunset, which would provide a total of $2.5 billion in revenue. Of this amount, up to $20 million annually would be allocated from AB 118 fees for construction and operation of a hydrogen fueling network until there are at least 100 publicly available hydrogen fueling stations. This would result in fee extensions of $18 on vehicle registrations, $10/$20 on boat registrations, and $0.75 per tire on consumers.According to the ARB, this measure would impose new costs of approximately $370,000 annually to develop an updated petroleum fuel price economic analysis, evaluate investment programs and federal fuel and state policies in relation to meeting alternative transportation fuel goals, evaluate the effect of ARB regulations on state alternative fuel goals, and support the development of the CEC’s Integrated Energy Policy Report.

According to the CEC, costs would be minor and absorbable to design a loan incentive program, revolving loan programs, and other forms of financial assistance to further the development of up to 100 hydrogen fueling stations.

Fiscal Comment


The $1.75 tire recycling fee generates approximately $60 million annually of which the Carl Moyer Program receives $25 million and the CalRecycle tire recycling program receives $35 million.

AB 923 expanded the Carl Moyer Program and receives $50 million annually through a $2 DMV registration fee.

The Alternative and Renewable Fuel and Vehicle Technology Program receives $150-$200 million annually from smog abatement, vehicle registration, vehicle ID plate fees, and vessel registration fees.

Fiscal Consultant: Rocel Bettencourt


Arguments in Support:

The author seeks to extend funding “incentive programs that ensure the private sector has a minimum assurance of public funding to commercialize the changes need to transform the state’s motor vehicle fleet and fuels mix to meet California’s rigorous, unprecedented clean air and climate change goals.”

This bill is a result from a major last minute agreement in the 2011-12 session through SB 1455 (Kehoe) between the ARB and the petroleum industry that it regulates. In exchange for a delay on regulations imposing the “Hydrogen Highway” initiative on the gasoline stations in California, the industry agrees to support the extension of taxes and fees used to fund the Carl Moyer program and AB 118 fees that fund various air quality and alternative fuels programs. Specifically, these fees have been used to fund air pollution mitigation measures in cars, heavy duty trucks, buses and off-road vehicles (such as heavy construction equipment), and the development of all-electric and other alternative, non-polluting vehicles.

By delaying the ARB in its implementation of the Clean Fuel Outlet (CFO) regulation on petroleum retailers, it frees gasoline retailers and distributors from being forced to install infrastructure for a conceived hydrogen fuel future…at least for now. The hydrogen initiative will continue as a state government incentive program.

According to the author, demand for oil from developing countries, as well as volatility in oil producing regions of the world leaves California helpless to control its own transportation energy needs without additional government policies to reduce the state’s dependence on petroleum and increase domestically-produced cleaner fuels. Also, according to the author, California has the worst air quality in the country. There is a need to ensure a clean transportation future in order to improve air quality and public health and to ultimately be free from Draconian and unrealistic standards in the federal Clean Air Act. California’s three clean transportation and air quality programs are all set to expire in 2015. And since the bill’s proponents are unwilling to use the vast resources of energy that we have domestically–including the Monterey Shale–then they need more regulatory control over the petroleum we are forced to import from less environmentally friendly, conflict-induced countries.

When California’s current alternative transportation fuels goal of 26% by 2022 was adopted by CARB and the CEC assumed that gasoline prices today would be $3.22 per gallon. But today’s prices are actually closer in line with fuel prices projected between 8 and 30 years from now depending on which scenario is used. These assumptions need to be updated.

Again, according to the author, overdependence on oil, a sluggish economy, high unemployment, few clean alternative fuel choices and court injunctions on greenhouse gas (GHG) reducing regulations are leaving California with fewer options toward transportation energy independence and economic security. They claim that something must be done, and the author has just the right fee extensions to propose for a solution.

Arguments in Opposition:

“California’s rigorous, unprecedented clean air and climate change goals” are unprecedented goals for the reason of basic economics. Other states–and even the federal government–have found that no amount of government fiat, expropriated revenues and rent-seeking subsidies to a fiscally unsound energy sector are going to dramatically change the public’s preference in fuels for their vehicles. Yes, improved technology and car design has achieved cleaner air for much of California since the mid-20th century, but it has also come with its costs in displaced farmland for ethanol (less corn going into food stocks), increased overall fuel consumption (the rebound effect means people use more energy if they think it is more efficient) and an increase in car fatalities (due to lighter frame vehicle designs).

While such a focus on lofty alternative transportation fuel goals may have some marginal effect on our use of petroleum fuels, long-range success will only come when the public can buy the right car, for the right use/circumstance for the right price where the right fuel is available and accessible. By continuing to subsidize alternative transportation fuels that make little economic sense, we only distort the real costs for traditional fuels, deny them the funds they need to become more efficient and cleaner through private innovation and displace appropriate infrastructure taxes from infrastructure improvement projects.

The Howard Jarvis Taxpayers Association states: “This bill extends the imposition of numerous fees to fund alternative energy programs. SB 11 has been keyed as a two-thirds vote tax increase. SB 11 extends a number of existing fees, including vehicle registration and smog abatement fees from December 31, 2014 to December 31, 2023. It also extends until 2023 an up to $6 surcharge that can be imposed against cars in Sacramento County by the Sacramento Air Quality Management District. The cumulative impact of these exactions will result in a $2.3 billion tax extension.”

HJTA also points out that while it was the ARB that proposed the Clean Fuels Outlet regulation in the first place, and SB 11 suspends this provision, the regulation could be reinstated at any time. They suggest an outright repeal of any regulation that supports unproven and costly alternative energy technology, such as hydrogen. And while they concede that there is some benefit from the Carl Moyer program to truckers and the agriculture industry, even if these fees are not extended, up to $60 million will remain in place to help industry comply with diesel retrofit laws.

The Automobile Club of Southern California has had a long and consistent opposition to these sorts of bills with vehicle fees for smog abatement and air quality mitigation funding programs for non-motorist sources, violating the both the polluter pays principle and the state’s constitution. Per Article XIX, Section 2, the California Constitution provides that the revenue from fees and taxes imposed on gas powered vehicles should not go to other environmental mitigation stemming from off-road equipment, heavy duty vehicles, school buses or non-motor vehicle sources. Late amendments seek to address this problem, but it may be left to the courts to decide the constitutionality of this bill in the end.

In the end, the state government does not need to continue subsidizing alternative fuels and vehicles, picking winners and losers in the technology arena that realistically only a select constituency will be able to afford or choose to use, likely when it is commercially available years, if not decades, down the road. If all the effort policymakers and cottage industries have put into this green regime cannot project optimism into the future, hundreds of millions of dollars poured into more social engineering is unlikely to be more successful than simply letting the market send and interpret economic signals currently blurred by competing public interests.

In essence, we do not need to teach the grass how to grow; we only need to remove the rocks from it. With so many people out of work, this is yet another fee and tax bill that will only burden any recovery, especially if the costs of proving another round of uneconomical technologies will only be borne by soon-to-be-green-weary Californians while other state’s watch upon this great social experiment at a distance. Or, as simply stated by G.K. Chesterton” [No society can survive the] fallacy that there is an absolutely unlimited number of inspired officials and an absolutely unlimited amount of money to pay them.”
Other Issues:

Where are the health benefits? Besides expropriating funds from the private sector to pay for projects desired primarily by the environmental intelligentsia, essentially changing out old technology with newer technology, where are the studies that have shown these subsidies to have had real and substantial, positive health impacts as projected when proposed years ago? How many lives have been saved and at what actuarial costs? And what evidence are we getting that the projects and programs funded here are not simply shifting emission leakage (or benefits elsewhere to the east as the winds blow) when we continue to reap the effects of China and Mexico’s particulate emissions in their carbon-based energy sector?

Are hydrogen fuel cells really the cost-effective future of cars? According to former U.S. Department of Energy official Joseph Romm, “A hydrogen car is one of the least efficient, most expensive ways to reduce greenhouse gases.” Asked when hydrogen cars will be broadly available, Romm replied: “Not in our lifetime, and very possibly never.”


Extends authority of local air districts to adopt a $2 DMV vehicle registration fee, from its current expiration date of January 1, 2015 to January 1, 2024.

Prohibits the ARB, until January 1, 2024, from enforcing any clean fuels outlet regulation considered on January 26, 2012, that require the construction or operation of a publicly available hydrogen fueling station at any retail outlet. Requires an annual study on the number of hydrogen-fueled cars to be sold, leased and registered in the state beginning on June 30, 2014.

Creates a benefit-cost score to appropriate funds for the Alternative and Renewable Fuel and Vehicle Technology Program or the Air Quality Improvement Program. Provides that these funds are expended in a way as not to violate Article XIX of the Constitution.

Requires that the ARB consult with the CEC in developing and adopting guidelines for both the Alternative and Renewable Fuel and Vehicle Technology Program or the Air Quality Improvement Programs, considering greenhouse gases, as well. Requires CEC to rank applications for projects proposed for funding awards on benefit-cost scores.

Dedicates $20 million per year (until June 30, 2016) from the AB 118 program to constructing and operating a hydrogen fueling network until there are at least 100 publicly available hydrogen fueling stations. Allows the CEC to spend less than this amount if it determines that fewer hydrogen fueled vehicles are being produced, or if the private sector is providing adequate fueling stations. Provides for the annual study of the number of hydrogen-fueled vehicles and hydrogen fueling stations, three-years out, as well as other findings, beginning June 30, 2014.

Requires the CEC and ARB to report on development of hydrogen fueling network as well as do an economic analysis.

Authorizes the CEC to design grants, loan incentive programs and other financial assistance to deploy hydrogen fuel networks.

Extends the $8 fee for smog abatement, a $3 fee on vehicle registrations, $5 for special identification plates and $10 on boat registrations, and $1 per tire on consumers annually until the year 2024.

Adds an urgency clause to take effect immediately.


Carl Moyer Memorial Air Quality Standards Attainment Program provides incentive grants for cleaner-than-required engines, equipment and other sources of pollution providing early or extra emission reductions. Eligible projects include cleaner on-road, off-road, marine, locomotive and agricultural sources. The program achieves near-term reductions in emissions of oxides of nitrogen (NOx), particulate matter (PM), and reactive organic gas (ROG) which are necessary for California to meet its clean air commitments under the State Implementation Plan.

Air Quality Improvement Program (AQIP), established by AB 118, it is a voluntary incentive program administered by the ARB to fund clean vehicle and equipment projects, research on biofuels production and the air quality impacts of alternative fuels, and workforce training. Current projects include hybrid and pollution-free vehicle incentive programs providing grants toward the purchase of less polluting passenger and heavy duty vehicles, and Advanced Technology Demonstration Projects which demonstrate promising technologies to reduce emissions.

Also under AB 118, the Alternative and Renewable Fuel and Vehicle Technology Program distributes as much as $100 million annually in financial incentives for businesses, vehicle and technology manufacturers, workforce training partners, fleet owners, consumers and academic institutions to develop and deploy alternative and renewable fuels and advanced transportation technologies to help attain the state’s climate change policy objectives. Projects selected for funding accelerate the development of the alternative transportation fuels and help grow the nation’s energy security through fuel diversity. One of these projects is the Hydrogen Highway.

California Hydrogen Highway is an effort to assure that hydrogen fueling stations are in place to meet the demand of fuel cell and other hydrogen vehicle technologies. The Clean Fuels Outlet (CFO) regulation is intended to provide outlets of clean fuel to meet the needs of those driving clean, alternative fuel vehicles. An effort of the ARB, this regulation proposed January 2012 is proposing to target “gasoline producers and importers” as the regulated party responsible for creating hydrogen retail infrastructure and would require hydrogen fuel outlets at each gas station in California. The Western States Petroleum Association, in response to the regulation, believes that the regulation is forcing infrastructure investments on non-interested parties and will likely result in certain legal challenges.

The effort to replace gasoline as the main fuel to power automobiles in California started in response to the mandate set forth in AB 2076 (Shelley, 2000). That bill required the CEC and the ARB to submit a report to the Legislature in 2003 entitled Reducing California’s Petroleum Dependence. The report makes several recommendations to reduce petroleum dependence, as follows:

1. Reduce demand for on-road gasoline and diesel to 15% below the 2003 demand level by 2020.

2. Establish national fuel economy standards that double the fuel efficiency of new cars, light trucks, and sport utility vehicles.

3. Increase the use of non-petroleum fuels to 20% of on-road fuel consumption by 2020 and 30% by 2030.

In response to AB 1007 (Pavley, 2005), the ARB and CEC adopted the State Alternative Fuels Plan in December of 2007. That plan recommended the target of 26% alternative fuel usage by 2022.

Low Carbon Fuel Standard (LCFS) is a regulatory mandate adopted by the ARB. It requires fuel producers to reduce the carbon content of their fuels by 10% by 2020. The regulation was adopted in April 2009. The AB 32 Implementation Group notes that this regulation is expected to increase fuel costs by $3.7 billion and other groups note that it could disrupt fuel supplies. In December 2011 a federal judge granted a preliminary injunction against the implementation of California’s LCFS, which has since been lifted, though the courts are still considering the case even as the ARB works on its regulations. In three separate rulings the judge rejected the ARB’s defense as he concluded that the state acted unconstitutionally and the regulation “impermissibly treads into the province and powers of our federal government, reaches beyond its boundaries to regulate activity wholly outside of its borders.”

Electric Vehicles Of course, if all of our vehicles were powered by electricity, there would be no need for gasoline, but there would be a large need for carbon-based electricity generation since wind and solar are not likely to replace carbon-based energy as consistent and reliable on the grid. Additionally, the pace of sales of electric and hybrid-electric vehicles has been slow and is not meeting the high expectations of its proponents.

All-electric and plug-in hybrid vehicles remain more expensive than equivalent gasoline vehicles, leaving them unaffordable for most American consumers. Among significant rebates at a state and federal level for electric cars, consumers can claim a $7,500 tax deduction, with the savings not available for months after the purchase. Under the rebate plan, a 2011 model of the Chevy Volt would cost about $32,800. A 2011 Nissan Leaf would be approximately $25,000.

Nationwide, as of January 2012, approximately 4,000 pure electric vehicles have been sold since introduction in 2010. Worldwide, the number is approximately 40,000. General Motors recently announced a slowdown in the Volt production lines in order to reduce inventory.

In March, 2012, Governor Jerry Brown issued an executive order directing his Administration, using $120 million obtained in a settlement with NRG Energy, Inc. to develop a statewide network of charging stations for zero-emission vehicles (ZEVs), including at least 200 public fast-charging stations and another 10,000 plug-in units at 1,000 locations across the state. The settlement stems from California’s energy crisis. The executive order also directs the ARB, CEC, and the Public Utilities Commission to cooperate and set ambitious goals for electric vehicle development in California.

Hydrogen powers what exactly…“Hydrogen vehicles include hydrogen fueled space rockets, as well as automobiles and other transportation vehicles. The power plants of such vehicles convert the chemical energy of hydrogen to mechanical energy either by burning hydrogen in an internal combustion engine, or by reacting hydrogen with oxygen in a fuel cell to run electric motors. Widespread use of hydrogen for fueling transportation is a key element of a proposed hydrogen economy.

“Hydrogen fuel does not occur naturally on Earth and thus is not an energy source, but is an energy carrier. Currently it is most frequently made from methane or other fossil fuels. However, it can be produced from a wide range of sources (such as wind, solar, or nuclear) that are intermittent, too diffuse or too cumbersome to directly propel vehicles. Integrated wind-to-hydrogen plants, using electrolysis of water, are exploring technologies to deliver costs low enough, and quantities great enough, to compete with traditional energy sources.

“Many companies are working to develop technologies that might efficiently exploit the potential of hydrogen energy for mobile uses. The attraction of using hydrogen as an energy currency is that, if hydrogen is prepared without using fossil fuel inputs, vehicle propulsion would not contribute to carbon dioxide emissions. The drawbacks of hydrogen use are low energy content per unit volume, high tankage weights, very high storage vessel pressures, the storage, transportation and filling of gaseous or liquid hydrogen in vehicles, the large investment in infrastructure that would be required to fuel vehicles, and the inefficiency of production processes.” (from Wikipedia)

Related Legislation

SB 1455 (Kehoe, 2012) Eliminates the ability of CARB to require gas stations to provide hydrogen based fuel stations until December 31, 2023. Extends the AB 118 program and fees until December 31, 2023. Extends the Carl Moyer program and fees until December 31, 2023. Dedicates $20 million per year from the AB 118 program to hydrogen fuel infrastructure until June 30, 2016. Requires the ARB and the Energy Commission to review and report on progress toward establishing a hydrogen fuel network and the goal of 100 hydrogen stations statewide. This bill would result in fee extensions of $18 on vehicle registrations, $20 on boat registrations, and $1 per tire on consumers annually until the year 2023. Continues the study of the alternative transportation fuels goal of 26% by 2022. The vote on the Assembly Floor was 55-21(AYE: Achadjian, Olsen, Smyth; NO: All Other Current Republicans, except; ABS: Conway) and died on the Senate Floor with a vote of 25-10 (AYE: Emmerson, Fuller; NO: All Other Current Republicans, except; ABS: Cannella, Huff).

AB 118 (Nunez, Chapter 750, Statutes of 2007) Among other things, created the Alternative Renewable Fuel and Vehicle Technology Program and the Enhanced Fleet Modernization Program and required the ARB in consultation with the Bureau of Automotive Repair to commence a program for the voluntary retirement of passenger vehicles and light and medium duty trucks that are high polluters. Increased annual vehicle registration fees by $1 for the next 7 years to pay for the vehicle retirement program. The measure passed the Senate 21-18 (NO: All Current Republicans) and the Assembly 46-31 (NO: All Current Republicans).

SB 225 (Soto, Chapter 627, Statutes of 2006) Allowed grants for projects in the Carl Moyer Program to be increased to reflect the state consumer price index. Increased the amount of funds available for administrative purposes from 2% to as much as 13%. This bill passed off the Senate Floor 30-9 and off the Assembly Floor 53-25.

AB 1007 (Pavley, Chapter 371, Statutes of 2005) Required the ARB and the CEC to develop and adopt a state plan to increase the use of alternative fuels by June 30, 2007. The vote on the Assembly Floor was 49-27 (NO: Emmerson, Huff).

AB 923 (Firebaugh, Chapter 707, Statutes of 2004) Expanded the types of programs covered by the Carl Moyer program, set a minimum allocation to air districts, allowed each district to increase the registration fee surcharge from $4 per vehicle to $6 per vehicle in order to remediate the air pollution harms caused by motor vehicles, increased the cost-effectiveness threshold from $12,000 per ton of NOx reduction to $13,600, and increases the tire fee by $.75 with revenues deposited in the Air Pollution Control Fund to fund programs and projects that mitigate or remediate air pollution caused by tires. The measure passed the Senate 22-10 and the Assembly 52-21.

AB 1493 (Pavley, Chapter 200, Statutes of 2002) Required the ARB to adopt regulations to reduce the emissions of greenhouse gases by motor vehicles. The vote on the Assembly Floor was 41-30 (NO: Wyland).

AB 2076 (Shelley, Chapter 936, Statutes of 2000) Required the CEC to examine the feasibility of operating a strategic fuel reserve and to report its findings to the Legislature.

Support & Opposition Received

Support: Achates Power

Aemetis, Inc.

California Air Resources Board

Alameda-Contra Costa Transit District

Alliance of Automobile Manufacturers

American Lung Association, California

Association of General Contractors

Association of Global Automakers

Baker Commodities

Bay Area Air Quality Management District

Bay Area Biosolids to Energy Coalition


Bioenergy Association of California

Black Business Association

Bosch Rexroth Americas

California Association of Black Pastors

California Association of School Transportation Officials

California Association of Winegrape Growers

California Biodiesel Alliance

California Citrus Mutual

California Cotton Ginners & Growers Association

California Council for Environmental and Economic Balance

California Dairies, Inc.

California Electric Transportation Coalition

California Energy Commission

California Farm Bureau Federation

California Grape & Tree Fruit League

California Independent Oil Marketers Association

California Manufacturers & Technology Association

California Municipal Utilities Association

California Natural Gas Vehicle Coalition

California Rice Industry Association

California Service Station & Automotive Repair Association

California Small Business Alliance

California Thoracic Society

California Transit Association

California Trucking Association



Carson Black Chamber of Commerce


Center for Sustainable Energy



Clean Energy

Coalition for Clean Air

Coalition of Energy Users

CODA Automotive

Community Fuels

Construction Industry Air Quality Coalition

Contra Costa Council

Crimson Renewable Energy, LP

CR&R, Inc.

Dow Kokam

Efficient Drivetrains, Inc.

Electric Vehicles International, LLC

Environmental Defense Fund

Eaton Vehicle Group

Efficient Drivetrains, Inc.

Electric Vehicles International, LLC

Greater Corona Hispanic Chamber of Commerce

Greenkraft, Inc.

Harvest Power


Hydrogenics Corporation

Imperial Western Products

Kern County Taxpayers Association

Kings Canyon Unified School District


Los Angeles County Economic Development Corporation

Los Angeles County Medical Association

Mission Motor Company

Moreno Valley Black Chamber of Commerce

Motiv Power Systems, Inc.

Move LA

Napa Valley Unified School District

Natural Resources Defense Council

New Leaf Biofuel

Nisei Farmers League

Odyne Systems, LLC

Otto Construction

Pacific Ethanol

Physicians for Social Responsibility


Propel Fuels


Public Health Institute


Quantum Technologies

Regional Asthma Management & Prevention

Renewable Energy Group, Inc.

Sacramento Black Chamber of Commerce

Sacramento Municipal Utility District

San Diego Gas & Electric

San Diego Urban Economic Corporation

San Francisco County Transportation Authority

San Francisco International Airport

San Joaquin Valley Unified APCD

Santa Clara Valley Transportation Authority

Sempra Energy

Sierra Energy & Sierra Railroad

Silicon Valley Leadership Group

Slavic American Chamber of Commerce

Smith Electric Vehicles

South Bay Latino Chamber of Commerce

South Coast Air Quality Management District

Southern California Gas Company


Technology Partners

Tesla Motors

The Grant Farm

Total Transportation Services, Inc.


University of California

UPS, West Region

US Hybrid Corporation

Ventura County Air Pollution Control District

Vision Industries Corporation

Volvo Group North America

Waste Management

Western Agricultural Processors Association

Western States Oil

Western States Petroleum Association

Yokayo Biofuels

Yolo-Solano Air Quality Management District

Opposition: Automobile Club of Southern California

CRM Company (unless amended)

Howard Jarvis Taxpayers Association

Sierra Club (unless amended)

Senate Republican Policy Office/Lance Christensen, Doug Yoakam

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