1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 JULY 21, 2009 9 ITEM P OTHER ADMINISTRATIVE MATTERS 10 P1 EXECUTIVE DIRECTOR'S REPOR 11 B REGISTERED WARRANTS 12 13 ---o0o--- 14 15 16 17 18 19 20 21 Reported by: Juli Price Jackson 22 No. CSR 5214 23 24 25 26 27 28 1 1 2 P R E S E N T 3 4 For the Board Betty T. Yee of Equalization: Chair 5 6 Judy Chu Vice-Chair 7 Bill Leonard 8 Member 9 Michelle Steel Member 10 Marcy Jo Mandel 11 Appearing for John Chiang, State Controller 12 (per Government Code Section 7.9) 13 Diane G. Olson 14 Chief, Board Proceedings Division 15 16 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 SPEAKERS 2 ---o0o--- 3 Name Page 4 Michele Pielsticker 4 5 ---o0o--- 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 NSTREET 2 SACRAMENTO, CALIFORNIA 3 JULY 21, 2009 4 ---oOo--- 5 MS. OLSON. Our next item is P1b, registered 6 warrants. And we have speakers for this item. 7 MS. YEE: Okay. Let me have the speakers come 8 up for this particular item. 9 Okay, let me -- Mr. Hirsig, why don't you 10 introduce the issue, then I'll have Ms. Pielsticker. 11 MR. HIRSIG: All right. Madam Chair, Members, 12 this relates to the Board's acceptance of registered 13 warrants which are issued by the State. 14 MS. YEE: Okay, thank you. 15 Good afternoon. 16 ---o0o--- 17 MICHELE PIELSTICKER 18 ---o0o--- 19 MS. PIELSTICKER: Good afternoon. Michele 20 Pielsticker, California Taxpayers Association. 21 I'm just here to urge the Board's acceptance of 22 registered warrants in payment of tax liabilities. We 23 think that it's consistent with the Franchise Tax 24 Board's policy. 25 And it would also mitigate some of the burden 26 that the businesses are enduring as a result of 27 receiving IOUs as payment from the State. 28 we just think it's good policy and it could 4 1 save the State some money with respect to interest. So, 2 it's a sort of a win-win for everyone. 3 ---o0o--- 4 MS. YEE: Okay, thank you very much. 5 If I could -- maybe I could ask those of you 6 who are at the table just to speak to the question 7 before us and then I think, Mr. Leonard, if you could 8 elaborate? 9 And I appreciate you bringing this forward to 10 the Board. 11 MR. HIRSIG: I'll proceed. 12 Madam Chair, Members, this question arose 13 whether or not the Board could accept these registered 14 warrants. And you have been provided with a memorandum 15 explaining the legal issues related to that. 16 The minutes from the Board from August 1992 17 show that the Board had voted at that time to accept 18 registered warrants. Based on the Board's decision in 19 1992 and the legal analysis that's been provided, staff 20 recommends accepting these registered warrants. 21 Our recommendation includes only those 22 registered warrants that meet the following criteria: 23 They must be issued by the State, 24 they must be presented by the payee named on 25 the registered warrant and not a third party. 26 So, unless the Board has any further questions 27 or wishes to provide further directions, staff would 28 proceed accordingly. 5 1 I do have staff to address any legal questions 2 or procedural questions you might have. 3 MS. YEE: Okay, thank you. 4 Mr. Leonard? 5 MR. LEONARD: Thank you, Madam Chair. 6 I appreciate you putting it on the agenda. 7 There's good staff work that's been done on this and 8 they've thought ahead. 9 I think we're ready, with Board approval, to 10 implement the program, be consistent with our prior 11 action of 1992. 12 Fortunately, IOUs only come around every twenty 13 years or so. 14 MS. YEE: Well, they may be more commonplace 15 these days, unfortunately. 16 MR. LEONARD: We have that. 17 And in addition to Miss Pielsticker's points 18 about saving the State money and being consistent with 19 other departments and agencies and ourselves, the only 20 other factor in its favor I would add is -- and I think 21 the State of California agencies failure to accept IOUs 22 would have a negative effect on our credit rating as 23 credit agencies look at whether they should recommend 24 anybody should buy California paper. 25 Since these IOUs have now been appropriately 26 labeled as government securities, according to 27 Treasurer Lockyer, they're part of what we consider 28 State debt for credit rating purposes and it -- I 6 1 believe it has a value. 2 And it has -- to the extent that it meets with 3 within our criteria for payment of outstanding tax 4 obligations as outlined by Mr. Hirsig, I think it's a 5 reasonable and responsible way to go. 6 And I would so move. 7 MS. YEE: Mr. Leonard, may I? 8 I actually thought, given what the staff had 9 provided us indicating that they've opined that we do 10 have authority, I'm not so sure there's anything for 11 us to decide. 12 What I would like to see is actually a shift of 13 focus to see if we can make this more transparent and to 14 try to codify our practice and statute. 15 I do think -- I don't want to have to go back 16 and revisit digging up old records from back in '92. 17 And as it is, the records, I think, were 18 incomplete. We couldn't track down all of the relevant 19 documents. But I think -- certainly I would defer to 20 staff relative to the authority question. They have 21 looked at it. They've had the experience in '92. But I 22 know there is a bill by Mr. Anderson to look at the 23 issue of accepting IOUs generally that I would love to 24 see our own practice codified in it. So that we at 25 least have it out there, public, transparent. And it 26 might be an opportunity to reconcile any inconistencies 27 that we may see in the current statutes as well. 28 So, if there's no objection, I would like to 7 1 just defer to staff on this and make that direction to 2 staff to look at how to codify this practice and 3 statute. 4 MR. HIRSIG: We will do so. 5 MR. LEONARD: Are you -- Madam Chair? 6 MS. YEE: Yes? 7 MR. LEONARD: No objection to your 8 recommendation to clarification. 9 Are you suggesting we try to reach Assemblyman 10 Anderson this week to explain to him our recommendations 11 and, in case -- I haven't read the bill of late, I don't 12 know how consistent or consistent it is. 13 MS. YEE: Actually, it's fairly broad. I was 14 surprised. 15 MR. LEONARD: It's very broad. 16 MS. YEE: Yes. 17 MS. MANDEL: The Controller's already -- the 18 Controller's taken a support position on the bill as 19 amended July 1st, so -- 20 MR. LEONARD: Right . 21 Thank him for me. 22 MS. YEE: And I'm not suggesting that we hold 23 up anything. The staff has opined that we've got 24 authority, so, I'll -- 25 MR. LEONARD: Right. 26 MS. YEE: -- with all deference to them, that's 27 where we are. 28 But I think that rather than having to reinvent 8 1 or recreate or re-establish the history behind this 2 relative to our agency, I think it would make sense to 3 codify this practice. 4 I don't think we've seen the end of registered 5 warrants, unfortunately, as we move forward. 6 MR. LEONARD: My question is are you asking our 7 legislative unit to contact Mr. Anderson? 8 MS. YEE: Actually, our legislative unit maybe 9 to draft what the practice would be and I think that 10 would be the appropriate vehicle, yes. 11 MS. SHEDD: Why don't I draft something up and 12 take it to the legislative -- 13 MS. MANDEL: I guess my confusion is the 14 Controller is in support of the bill as it's written. 15 So, I -- 16 MR. LEONARD: I'm talking this week, that's why 17 I'm asking the question. 18 MS. MANDEL: I am confused. 19 MS. YEE: I'm not suggesting there's any time 20 frame, whatever the vehicle is to codify this. 21 I don't want to have this come back to us. I 22 don't want to have any speculation about what history 23 kind of told us because the history, frankly, here is 24 incomplete. 25 But I'm totally deferring to staff on the 26 authority question. Because you've kind of looked at it 27 and I just would like to have this a little bit more 28 transparent in terms of what our practice is. So that 9 1 if there's any inquiry about whether BOE accepts 2 registered warrants, it's clear. 3 MS. SHEDD: I understand. So, when -- 4 MS. MANDEL: Like the BOE to have specific -- 5 like for the future to have to have some specific -- 6 MS. YEE: Authority to accept warrants. 7 MS. SHEDD: All right. I understand, I'll 8 bring it back. 9 MS. YEE: Any other comments on this? 10 Yes, Mr. Leonard? 11 MR. LEONARD: I guess the last question, the 12 Chair has asked we defer to staff. 13 It's your intention to -- Mr. Hirsig, to 14 announce the exception -- the acceptance of warrants 15 from our taxpayers? 16 MR. HIRSIG: Yes. We'll send a news release as 17 soon as the meeting is over. 18 And the procedures will be finalized. Randi 19 and her staff and the sales and use tax environs have 20 completed a draft already. 21 MS. YEE: See, we're ready. 22 MR. LEONARD: Thank you so much. 23 ---O0O--- 24 25 26 27 28 10 1 REPORTER'SCERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON Hearing Reporter for the 8 California State Board of Equalization certify that on 9 JULY 21, 2009 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 10 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: September 24, 2009 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 11