San Francisco Chronicle - (Sunday)
Newsom’s deduction veto likely to stand
Reader questions on savings plans, condo mortgages
Today I’ve got answers to questions from readers about that failed statetax deduction for college savings and governmentbacked condo loans. Q: Responding to my column on Gov. Gavin Newsom vetoing a bill that would have created a statetax deduction for contributions to ScholarShare, the state’s 529 college savings plan, Emmett Miller of Lafayette wrote, “So, if AB211 sailed through both houses without a dissenting vote, how come there isn’t a veto override?”
A: To override a veto, a bill must be returned to its house of origin and get a twothirds vote to overturn in both houses. AB211 passed the Senate and Assembly with zero votes against and only two members not voting.
“It has been a long time since a governor vetoed a bill with such overwhelming support,” said Dan Schnur, a political communications professor at UC Berkeley and the University of Southern California.
But overwhelming support is not enough to overturn a veto. You also need “extremely strong feelings about a bill,” he said, and he’s not sure a collegesavings deduction “is the type of thing that is extremely motivating to most members.”
Overriding a veto “is the political equivalent of nuclear war,” Schnur added, and “governors hold grudges. They have a lot of authority over a legislator’s spending projects in the state budget.”
The last time the Legislature overturned a veto was in 197980 during Jerry Brown’s second term.
“In recent decades, the numbers have seldom lined up in a way that fosters veto overrides,” John Pitney Jr., a professor of American politics at Claremont McKenna College, said in an email.
California had a Republican governor in 23 of 29 years between 1982 and 2010. “Except for a brief GOP reign in the Assembly during the 1990s, the Democrats held both chambers during that
time span, but they did not have supermajorities. With the increasing polarization of party positions, neither side could count on help from the other during an override vote. When it came to overrides, the Legislature got out of practice,” Pitney said. “Now that Democrats seem likely to hold on to supermajorities for a long time to come, I would expect some lawmakers to think about reviving the practice. That's especially true if Newsom's approval numbers fall,” he added.
But it won’t happen with AB211, according to the bill’s sponsor, Assembly Majority Leader Ian Calderon, DWhittier (Los Angeles County).
“A veto override is a much different vote with unfavorable implications which would most likely result in the votes not being there to override,” he said in an email. “Veto overrides are usually reserved for the most serious of issues and disagreements. It’s best to work with the Governor’s office at this point for a solution.”
AB211 would have given ScholarShare a big boost. Investors can save in any state’s plan, but most choose their homestate plan when it offers residents a statetax credit or deduction. California is one of only seven states that have an income tax and don’t offer a tax incentive. That’s one reason ScholarShare is dwarfed by some plans that have lured outofstate investors, including Californians, with lower fees or aggressive marketing.
ScholarShare should get a boost, however, from Morningstar, which published its annual review of 529 plans on Tuesday. It upgraded ScholarShare from “silver” to “gold,” making it one of only four 529 plans in the country with the highest rating in the influential guide. The others are Virginia’s Invest529, Illinois’ Bright Start College Savings, and Utah’s my529.
“These plans stand out for their low costs, strong stewardship, and exceptional investment options,” Morningstar said in its report.
Morningstar said it upgraded California’s
“It has been a long time since a governor vetoed a bill with such overwhelming support.”
Dan Schnur, political communications professor at UC Berkeley and University of Southern California
rating because the ScholarShare board voted to change the way its agebased funds switch from stocks to bonds as the beneficiary gets closer to college. The change, which takes effect next year, will make for a smoother transition and reduce the risk of making a large shift out of stocks just after a market dip, “when there's the potential to lock in losses,” it said. It also said the plan’s funds “rank among the most affordable in the industry within their respective categories.”
Q: In response to my column on the Federal Housing Administration’s groundbreaking decision to guarantee mortgages on some condo units in complexes without FHA approval starting Oct. 15, James Allison writes, “Do you know if the U.S. Department of Veterans Affairs will make a similar change? I’m a disabled Navy veteran who can’t afford a singlefamily home in Alameda, but some condos would be within reach if I could get a VA loan. Unfortunately, I have repeatedly found that complexes do not have VA approval and the homeowners associations are unwilling to go through the process. I feel as if the VA mortgage benefit is a benefit in name only in the Bay Area.”
A: Don’t hold your breath. I asked the VA and got only this response via email: “VA remains committed to serving Veterans by ensuring access to their home loan benefit. FHA’s policies and procedures are separate from VA. VA continues to evaluate the processes and procedures regarding condo loans.”
Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender @sfchronicle.com Twitter: @kathpender