I just came from the Capitol press conference on the sham of a report about the supposed cost of regulation in California. Not surprisingly conservatives and business groups are touting the study, as “evidence” that we need to de-regulate California and they took great glee in perpetuating a tired myth – California is a bad place to do business. The problems with the study are numerous, as noted in previous Calitics posts . The study takes much of its data from right-wing think tanks and Forbes magazine, not exactly subjective sources. It is purposefully vague in naming specific regulations that are supposedly so burdensome to business. It doesn’t take into account the myriad benefits of California consumer, labor, environmental and wage protections. And many of the arguments it does make are completely misleading.

The familiar refrain that California is a high-tax, high-wage-state that drives businesses away is simply not supported by the facts.

MYTH: California has the highest taxes in the nation

FACT : California is a high-income state with a wide range of revenue sources. Besides local and state taxes, California collects fees, assessments and other taxes. Taking into account all of those sources of revenue, California has a very moderate tax rate. The percentage of average income Californians pay in all taxes, which is a measure of tax burden, is reasonable compared to other states. Using that measure of tax burden, California ranks number 17 behind states like Alaska, Wyoming and North Dakota that have a higher tax burden per capita.

MYTH: California’s high-taxes and cost of doing business is driving businesses and jobs to states with fewer regulations

FACT: California loses very few jobs from businesses leaving the state. In fact, only 11,000 jobs leave the state annually out of a total of 18 million jobs. That’s only 0.06% of California’s total jobs that are lost by businesses moving out of state. The biggest job creation and loss engine are businesses opening, expanding, shrinking and closing within the state due to normal business cycles-very few businesses leave the state to our neighbors.

California has lost fewer jobs than our ostensibly “business-friendly” neighboring states. California does not rank in the Top 10 of states suffering job loss from 2008-09 and three of our five neighboring states lost more jobs than California. Our low-tax neighbors of Arizona, Nevada and Oregon had over 6.5% job loss, while California only had 4%. Even notoriously low-tax, little regulation states like Florida and the Carolinas have suffered more job losses than California.  

MYTH: Businesses will not come to California because of our high-taxes and high-wages

FACT: Businesses chose their locations for many different reasons including the tax burden, but also based on other criteria such as infrastructure, education and skill level of the workforce, access to intellectual and natural resources and many others. In that regard, California has an advantage because of our natural and human resources and the high concentration of research and technology centers. In addition, California workers are among the most productive with  an annual average output that is 13% higher than in other states.  

However, we are in danger of losing our competitive edge. Budget cuts result in crumbling roads, under-funded education systems that fail to educate the workforce, traffic-clogged highways that slow delivery and inadequate housing stock. California businesses can’t be globally competitive when they don’t have the infrastructure to perform. That is what will drive business from the state.

MYTH: California already taxes everything

FACT: Actually, California has many untapped sources of revenue that other states regularly tax. We could raise billions from the following immediate changes, with little impact on small businesses:

$855 million: Oil Severance Tax of 9.9% on any oil pumping from California soil or water (California is the only oil-producing state without one.)

$2 billion: Close the corporate loophole on Proposition 13 and raise the rates on assessments of corporate property.

$1.1 billion: Impose a tax on services, similar to the sales tax. California only taxes 21 of a possible 168 services that many states tax. In contrast, Washington and New Mexico tax 158 different services.

$470 million: Raise the corporate income tax by only 0.46% which barely keeps pace with the 557% net profit corporations saw from 2001-05 in California.

TOTAL: $5.725 Billion

If there’s one thing we’ve learned from our nation’s deep financial crisis it’s that when a group of Republicans come together and start scheming about de-regulation, everyone, including small business, should be concerned. Very concerned.

Around 11:00 this morning some senior Yacht Party members and their acolytes will stand in front of microphones in Sacramento trumpeting a report about state labor regulations and small businesses.  They can be expected to say that the real problem with the California economy is all those gosh darn regulations, and if only businesses could free themselves from the iron boot of – I don’t know, the 40-hour work week, child labor, the right to have an employee saw off his fingers in a lathe without responsibility, it’s a different thing every week with these people – the state could be saved.

It’s worth understanding what this report that makes them go ga-ga is all about.  John Myers had a sketch of it the other day.

The document, wonkishly titled Cost of State Regulations on California Small Business Study, was quietly made public late yesterday. You can read it here […]

The summary says it all, at least in the eyes of the business community:

The study finds that the total cost of [business]regulation to the State of California is $492.994 billion which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation results in an employment loss of 3.8 million jobs which is a tenth of the State’s population. Since small business constitute 99.2% of all employer businesses in California, and all of non-employer business, the regulatory cost is borne almost completely by small business. The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $4,359.55 per small business, indirect business taxes not generated or lost were $57,260.15 per small business, and finally roughly one job lost per small business.

Basically, regulations take your wives, enslave your children, throw your ice cream on the ground, and write “loser” on your chest in sun tan lotion when you fall asleep at the beach.  It’s amazing how in line this study is with standard conservative tropes about onerous regulations and big government.  I wonder why that is?  Here’s Myers.

So how do (authors Sanjay Varshney and Dennis Tootelian) reach their conclusions? The 33 page report (85 pages if you include the charts) relies heavily on Forbes Magazine and its annual report of the best — and worst — states in which to do business. The 2008 report ranks California #40 in the nation, and that’s the relative placement the authors used for their calculations.

“Forbes data is reliable,” says the study, “in that it uses credible sources of secondary data that are well recognized and respected as credible independent research in the business world.”

Perhaps, but Forbes’ proprietary methodology isn’t entirely transparent. Its website does note the sources for its rankings: data from both the federal government and nonprofits like the Tax Foundation and the conservative-leaning Pacific Research Institute.

This “academic” study cribbed their data from a MAGAZINE profile?  One owned by a movement conservative, which includes materials from wingnut welfare think tanks?  And we’re supposed to just let that go?

Myers goes on to note that the way Varshney and Tootelian transform the Forbes data into dollar amounts is entirely inscrutable, but designed to advance the proposition that every single state’s set of regulations are harmful to business.  “Even Forbes’ #1 state for business friendliness, Virginia, comes out with a regulatory climate that’s a net loss to the state of $4.4 billion.”  The study also neglects to determine which regulations harm business more or less.  It’s a partisan mess of a report and it should not be taken seriously.  Which is why the Yacht Party has taken to it so quickly, with classy headlines like “California Businesses Waterboarded by Governmental Overregulation.”

Look, labor regulations serve a particular purpose.  It’s true that they have a cost to business, but they also provide a significant cost savings to the individual, to the public health system, to the overall quality of life for the laborer.  We have made these trade-offs over hundreds of years.  The Yacht Party may think that The Jungle is a fantasy utopia, but in my experience, Californians and pretty much everybody else appreciate safe food and clean air and the minimum wage.

You can get a good sense of the intellectual honesty of a politician – and the media – by seeing if they bite at this crap sandwich of a report.

That’s why the Assembly has stalled, we’re hearing.  The education part of the budget bill would statutorily put into language a payback of $11 billion in education funds denied to schools under the Proposition 98 mandate.  The Yacht Party doesn’t want to pay it back.  And that’s because they don’t want to pay for it in the future.

The result of not writing into language a payback of these funds will be that education interests will sue, and win, and it will likely cost the state more in the long run.  But you can say “it will cost the state more in the long run” about virtually every aspect of the budget, so why should that trouble anyone?

…so the Assembly came back in session briefly to vote for permanent freezing of COLA in social services programs, and CalWorks and IHSS anti-fraud measures.  It got 43 votes, and only needed a majority, so it passes.  Still nothing on the Prop. 98 payback changes.

…Unbelievable.  This is from Asm. Dave Jones:

Asm. Reeps holding up $24 B in budget solutions due to spat with Senate Reeps. Asm. Reeps kidding themselves if they think Senate returning

7 minutes ago from mobile web

Asm. Reeps mad because Senate Republicans because Sen. Reeps sent over one bill not two on educ. cuts & Prop 98 repayment. Dont they talk?

10 minutes ago from mobile web

I’m guessing they’re pissed because they wanted to be able to vote against the repayment – which could pass by majority vote – and for the cuts to education.  Complete political posturing.  Too late, the Senate jammed them, and now they’ll either walk the plank or blow up the whole thing.  Because they want to be successful thieves that don’t pay back what they steal.

It looks like the Governor and the Legislature have resolved the issue over prison reform in the budget by setting that piece aside as a separate issue to be decided later.

Legislative leaders and Gov. Arnold Schwarzenegger defused an issue today that threatened to blow up a fragile compromise over the plan to erase the state’s $26.3-billion budget deficit.

Instead, Senate President Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, said both houses would vote on the plan Thursday night – but without an element that would prescribe details of a $1.2 billion cut in spending on prisons. A vote on that part of the plan will be delayed until next month, the leaders said.

“Everything’s on track,” said Steinberg, after he and Bass met privately with Schwarzenegger in his office. The governor popped out after the Democratic leaders left to dismiss the issue as just one of “some hiccups, and some obstacles and bumps in the road … there will be some difficult moments, but the bottom line is we are going to get this budget done.”

I see, so a plank of the budget that involves policy changes will be put off until another time.

Gee, that doesn’t seem to be the accommodation made for privatizing the welfare enrollment process.  Or enacting measures like background checks and fingerprinting for IHSS clients and recipients.  Or drilling at Tranquillon Ridge.  Or selling the State Compensation Insurance Fund.  Or the lobbyist-fueled deal to extend redevelopment projects and borrow against the funds.  All of those are huge policy changes, some of them unrelated to the current budget, that reflect mainly conservative perspectives.  They must be passed now, now, now, but because Republicans threw a fit and distorted the intent, a pretty modest (though necessary) prison reform part of the package, with savings of $1.2 billion dollars, gets delayed.

These dead of night budget deals and the disproportionate urgency placed on them are fruits of a poisoned, horrible broken process for determining budgets in this state.  It’s why everyone with a brain considers this not only a bad deal but one we’ll have to revisit in a few months anyway.

And this is what we’re talking about when we talk about the shame of the Democrats for giving in on virtually every part of this negotiation, without exception, and for failing to show the leadership for thirty years necessary to stand up to a broken process and actually do something about it.

In most public schools expect larger classes, fewer counselors and librarians, and a slimmer menu of arts classes and athletic programs — and maybe a tighter array of courses generally. More subtly, the quality of all services, from graduate programs at Berkeley to the condition – and maybe the safety – of the neighborhood park will decline. Will any of those things – and there are countless more – bring the realization that you can’t have a great state, or maybe even a decent one, on the cheap?

What’s badly wanted here is political leadership with courageous enough to talk about that link and not celebrate surrender to the anti-tax fanatics of the right. In this current budget deal, the Democrats got a few face-savers on education funding and welfare reductions, but in the end, despite all the nervous smiles, they lost.

The New York Times today writes that a “pinch of reality” has threatened the California dream.  Yet the political leadership still live in dreamworld, seemingly satisfied with the broken structure of government, confined to a short-term strategy and a political process that works for them as individuals but for none of their constituents, and just unable to operate against a minority the public hates but which runs circles around them.  We have deferred that California dream for so long that it may be unable to get it back.  But without a functioning democracy, and with a majority leadership that has practically abdicated responsibility in the face of a conservative veto, you can be sure of that proposition.

If you get a chance, take a listen to Warren Olney’s Which Way, LA? tonight.  You can find it right here.

The California portion starts about halfway in, at around 28:40.

So Warren Olney describes the craptacular deal, and then has two lawmakers on to talk about it.  First up is Bonnie Lowenthal, who is positively ebullient about the prospect of selling out local governments and breaking the very fabric of the social safety net.  Asked if she’ll vote for the budget, she goes “I certainly am!”  Olney, incredulously, lists the scope of the cuts, but she replies, “We have a deal, the stalemate is done, the IOUs will be over!”  Later in the show, she enlightens us that it’s better to have something than nothing, and that we saved the “framework” – not the funding, just the framework – of most programs.

Then Chuck DeVore comes on.  Now DeVore is running for US Senate, and needs to be as crazy as he wants to be.  So Olney asks him if he’s voting for the budget.  And he says he hasn’t read it, but it didn’t go far enough with the “reforms” and cuts to programs.  (He also uses the spanking new right-wing canard that California has 12% of the population and 32% of the welfare recipients, which is only true if you count all kinds of services that other states don’t consider welfare as welfare) Then Olney says that there were no new taxes in the deal, and DeVore hails that, and eventually says “this is the best compromise we could possibly get.”  And Olney says, “So then you’ll vote for it.”  And DeVore says “No.”

I guess DeVore didn’t get handed his talking points that he’s supposed to throw a hissy fit about a fake report in the LA Times regarding early release, almost certainly planted by Sam Blakeslee to give cover to Yacht Partiers who want to vote against the budget.

I don’t think you could encapsulate the strategy and approach of the two parties better in a work of fiction.  Lowenthal is just pleased as punch for everything to be over, DeVore knows he can get more and doesn’t want any part of his own handiwork so Democrats can be blamed for the consequences.  One side looks only to put out immediate fires and the other has a long game strategy playing out over decades.

It is not pleasing to be a Democrat at this juncture.

Very interesting stuff going on.

This afternoon we got the Leak of the Week from Capitol Weekly – a look at Dennis Hollingsworth’s letter to his entire caucus.  It’s in budget-ese, but Zed is positively giddy about all the cuts to social services, all the denial of fee increases, and he’s basically telling his caucus they got everything they wanted.  It was good to see the inside thinking, especially if Yacht Party members turned around and voted against the budget.  They know that their preferred option is deeply unpopular, and would rather distance themselves from this solution and make the Democrats own the budget.  So this was a key document counteracting that.

Then at around 2:30, Michael Rothfeld changed his original process story about legislators building support for the deal into this bombshell:

The state budget deal negotiated by Gov. Arnold Schwarzenegger and legislative leaders would reduce the population of California prisons by nearly 27,000 inmates in the current fiscal year.

That would be done with a combination of new measures, including allowing some inmates to finish their sentences on home detention, creating new incentives for completion of rehabilitation programs and scaling back parole supervision for the least serious offenders.

The proposal, details of which were obtained by The Times, would save a total of $1.2 billion in the coming year.

It is unclear whether Republicans will vote for a budget plan that includes reduction of the state prison system, which now houses 170,000 inmates. Some GOP votes are needed to pass a budget in California.

If Republicans demur, the Democrats who dominate the Legislature could approve the prison proposal as separate legislation with a simple majority vote, which would not require GOP support […]

The budget plan also would create a sentencing commission to reexamine the state penal code, which would not save money immediately but would advance plans under discussion by lawmakers for years. The commission would be charged with establishing new sentencing guidelines by July 1, 2012.

Prisons are slated for $1.2 billion in cuts in the budget, and most stories last night claimed that included no early release.  Clearly Republicans – and possibly the Governor – saw those cuts as best employed by turning the prisons into Public Storage units, cutting all drug treatment and vocational training programs and reducing corrections officer overtime.  So this looked to be a bait-and-switch by the Democratic legislature.

Except nobody seems to know how the LA Times got this story.  And less than an hour later, Sam Blakeslee alerts the media:

Throughout budget negotiations we insisted that Republican votes would never be provided for a budget deal that included early release of prisoners.

Our caucus and staff developed a cut strategy for corrections that provided the necessary savings to close the deficit without risking public safety.

We had a clear understanding with the democrats that NO corrections bill would be a part of the budget and that we would have an honest chance to contest the policy issues in the light of day in August.  

Just two hours ago I learned from staff that Senate democrats are concocting a radioactive corrections bill that includeds the worst of the worst _ sentencing commission and release of 27,000 prisoners, etc

When I spoke with Dennis he was as surprised and upset as I was regarding what appears to be a serious breach of the agreement in the Big 5.

I have called and personally told both Karen and Darrell that their will be no republican votes for any portion of the budget if they allow such a bill to be part of the package.

This seems just a little too neat to me.  This report was leaked to the Times anonymously, after a separate email from the Senate GOP gets leaked showing what a great snow job they think they got over the Democrats.  And then Blakeslee has an email out to his caucus – within less than an hour of the story leak – that comes up with a credible reason to shut down the deal, blaming those double-crossing Democrats.

FWIW I’d love a sentencing commission/early release of nonviolent offenders bill to become a reality, but I hardly believe that Senate Democrats, who as a caucus have participated in 30 years’ worth of sentencing increases, and who scuttled a sentencing commission bill from Gloria Romero just last year, would sneak this into a budget bill out of nowhere, with complete language less than a day after a deal was reached.  It would be completely out of line with prior history.  It doesn’t scan at all.  

But it’s sure a bonne chance for Republicans to have this fall in their lap…

…Discussion in OC Progressive’s diary.

…OK, so the Governor’s Corrections Secy is briefing reporters.  And will you look at that, the Times’ story was wrong, as was Asm. Blakeslee!  The report of 27,000 released is misleading, says the Secretary, but the Administration is interested in some reforms, including a sentencing commission.  Wow, that’s great, at least in theory.  They are offering early release credits that would maybe release 1,700 total.  This looks more and more like a coordinated hissy fit laundered through a compliant media.