Parsky Commission Looking To Spring A Surprise On California?

by: David Dayen

Wed Sep 09, 2009 at 13:09:31 PM PDT

The plan is that, just about 24 hours from now - or 11 a.m. Thursday, to be precise - a state commission will consider and potentially adopt a proposal for an entirely new tax system for the state of California.

It would be a radical undertaking, slashing some taxes, eliminating others and establishing a new tax about which no one in California is familiar. No one can say with anything approaching certainty how much it would cost businesses and consumers or how much revenue it would generate to finance state services.

Yet, despite the significance of the task, despite all the unanswered questions and despite the imminence of a decision, as of this writing - midafternoon Tuesday - the details of the proposed new tax plan have not been made available for public review.

A spokeswoman told me a little after 3 p.m. there was still hope that the detailed proposal would be posted on the commission's Web site before the day was out.

The Legislature has made no indication that they would take up whatever plan the Parsky Commission votes out, even after the Governor orders a special session to deal with it.  And with both sides of the aisle condemning aspects of the plan, liberals for the tax burden shift, and conservatives for the unknown tax increases that may be part of any deal, I wouldn't call the prospects likely for a Parsky Commission plan to become law.  But the secrecy is certainly troubling, as well as the revival of provisions voted down by the people on multiple occasions.

But members of the tax commission are reviving the rainy-day fund idea once again. Most notably, the idea has had some of its strongest support from Democratic-appointed commissioners.

Former Assemblyman Fred Keeley said recently that while many commissioners believe the state can reduce its budget volatility through changes in the tax system, he believes the tax system isn't so much the problem.

"My belief is that volatility of the general fund, to the degree it's a problem, is due to the governor and Legislature with regard to spending," Keeley said. "That can be solved by way of an appropriately designed rainy-day fund or lockbox."

Another Democratic appointee, University of Connecticut law professor Richard D. Pomp, reminded the commission this month that he has long believed the reduction of volatility was a spending issue.

"From the outset, I have argued, and continue to believe, that volatility, which is a feature of every state's tax system, is a spending problem and not a tax problem," Pomp wrote. (That comes awfully close to the oft-used GOP line that California's budget problems are "a spending problem, not a revenue problem.")

I think these Democrats are trying to argue that volatility in the tax structure is a good thing, which it is.  But the leap from that to a spending cap doesn't follow.  There's a difference between spending wisely in good years and a third-party mechanism that limits the ability to restore chronic budget cuts from bad years, which is what a cap would inevitably do. (A rainy-day fund without a cap would be different, but may end up serving the same purpose.)

I stick with my prediction that the commission is doomed, but it still bears watching.

...Kevin Yamamura has more.

The Conservative Vision Of A Constitutional Convention

by: David Dayen

Mon Jul 27, 2009 at 10:04:36 AM PDT

If Californians do rewrite the Constitution, it should be revised to resemble more closely the concise federal Constitution: more responsible legislators and executives, stronger control of the bureaucracy and less direct democracy.

Then he comes up with several issues that appear nowhere in the federal Constitution.  Here are his six proposals:

1. Part-time Legislature
2. Hard spending cap
3. Two-year budgeting cycle
4. Eliminate the two-thirds supermajority requirement for budgets
5. Unified executive branch
6. Repeal ballot-box budgeting

The first four are either irrelevant to the federal Constitution or in direct conflict to federal Constitutional provisions.  But I will soldier on and take them in kind.

Karako clarifies that his vision of a "part-time legislature" would not be a citizen legislature, and would include the same salaries and responsibilities as today.  With all due respect, then, we already have this.  State legislative sessions, in theory, open in January and end on August 31, and there are numerous recesses in between those dates.  The only reason it seems lately like the legislature is always at work is because four extraordinary sessions have been called in the past year and a half to deal with the budget mess.  Our legislature works around six months out of the year in less extraordinary circumstances.  That sounds part-time to me.

This notion of a hard spending cap has been soundly rejected by the voters twice in the past four years.  It is certainly not a feature of the federal Constitution, and it does not take into account emergency spending needs, the outpacing of inflation over wages in areas like health care, and multiple other provisions.  States with spending caps have seen their quality of life suffer and their state rankings plummet (see TABOR in Colorado).  This would in my view be disastrous, and obviously it's the major bone of contention between liberals and conservatives.

A two-year budget cycle actually sounds prudent to me.  I would supplement it with an advisory long-term budgeting benchmark that would bring the concept of long-term planning back into state government, but anything that looks beyond the horizon could improve the quality of state budgets.

Conservatives have begun to relent on the 2/3 rule for passing a state budget, while keeping in the requirement for taxes, for somewhat selfish reasons.  I agree that the current system eliminates accountability for both sides of the aisle, and letting the majority rule on these issues would allow the people to decide the results of that course of action.  But Karako doesn't take this to the logical conclusion, that a budget is composed of taxes and spending, and that only with a full repeal of both of these 2/3 provisions would we have representative democracy in this state.  He wants to hold one party responsible for budgeting while tying their hands on how to go about instituting that budget.

After citing positively how other states have part-time legislatures, and negatively how only two other states require a 2/3 vote to pass a budget, Karako calls for a "unified executive branch" without mentioning that practically no other state has its Governor appoint all additional Constitutional officers.  Some states have Governors appoint certain various members, but not the entire slate.  This and the next idea show a typical conservative contempt for the will of the people.  Democracy, even direct democracy, is not the problem with California.  (This "unified executive branch" is also a cover for vesting greater authority in the executive to engage in, as Karako says, "firing and controlling non-elected bureaucrats and public employee unions," or union-busting, in the vernacular.)

And that leads us to Karako's idea to repeal all ballot-box budgeting, where he does not specify between different types of ballot-box budgeting.  Those measures with funding sources provide no strain on the budget process because they do not impact the General Fund.  Unfunded mandates do represent a problem, and reformers have devised a solution, essentially "paygo" for ballot initiatives, requiring that they include a funding source before presenting them to voters.  Karako, instead, wants to repeal all voter-approved measures and place them under the General Fund.  I also believe in the indirect initiative, allowing the legislature a crack at either passing a ballot measure themselves in consultation with the proponents, or changing the language with amendments to better reflect current priorities.

On one thing I agree with Karako; "California needs constitutional reform before we can expect sustained fiscal reform."  I don't think his ideas hold to his belief in drawing on the wisdom of the US Constitution; however, I do see some common ground, on two-year budget cycles, on the need for democratic rule, on initiative reform.  My belief is that a Constitutional convention could bring together the entire rich diversity of the state to discuss, debate and decide on these issues, coming to a decision that will improve representative government in the state.  I'll see Mr. Karako there.

UPDATE by Robert: For a progressive vision of a constitutional convention, the Courage Campaign's Citizens Plan to Reform California (CPR for California) is a good place to start. I plan to write more about it this week.

Taking The Exact Wrong Advice

by: David Dayen

Mon May 04, 2009 at 16:22:02 PM PDT

Last week, Robert Cruickshank offered the special election advocates some pretty good advice - focus on Prop. 1C, which covers 83% of the short-term budget hole that can be gained from the passage of the ballot measures, because the state party approved it, because it's the only measure that matters in the near term, and because they need to focus their energies, since very little good is likely to come of the election at this point.  Of course, Arnold Schwarzenegger controls the Budget Reform Now Campaign.  And he has shown himself to be completely indifferent to the short-term needs of the state in favor of writing a long-term, right-wing spending cap into the state Constitution.  Because instead of abandoning all the other measures in favor of 1C, Budget Reform Now has jettisoned everything in favor of 1A & 1B.  I saw this ad a couple days ago, out of nowhere, and Budget Reform Now dropped it without a press release.  The ad tries to use the 2005 special election imagery which killed Arnold's Prop. 76 (substantially the same proposal) in favor of this spending cap, with the firefighter warning of "$16 billion in cuts" without bothering to mention that those "cuts," really lost revenues, would be two years off.  And the new "Yes on 1A and 1B" logo makes an appearance.

I think we can finally figure out what Arnold Schwarzenegger wants from this election.  He could care less about the $6 billion in short-term budget solutions - but his corporate partners want that spending cap, and his new pals in the CTA want their out-of-court settlement locked in (it would've cost them less just to take the Governor to court for falsely calculating Prop. 98 revenues, with more of a chance of winning).  So all this talk about how we have to vote Yes or the budget hole will grow deeper was a ruse.  The Governor clearly supports the deeper budget deficit, or at least he could give a crap with coming up with a solution.  He and his Chamber of Commerce puppet masters want that cap.  They have wanted it for four years.  Anyone lining up with these interests should understand what they really support.  Good job, Democratic leadership.

Prop 1A: Too Clever By Half?

by: Robert Cruickshank

Thu Apr 23, 2009 at 06:57:44 AM PDT

Conservatives would have Californians believe that Prop 1A is in trouble with the voters because it would extend some temporary taxes for a couple more years. That may well be true for some voters. But it isn't the full story.

In order to get the February budget deal done, Democrats agreed to put a spending cap on the ballot. But they knew that progressives would never support a hard spending cap along the lines of what Arnold wanted in Prop 76. So staffers from the Legislature and the Governor's office got together to write what became Prop 1A - designed to accomplish all the effects of a spending cap, but with enough sleight-of-hand and possible loopholes to hopefully convince skeptical Democrats and progressives to back it.

And when that didn't seem to be enough, they linked it to Prop 1B, a $9 billion carrot to CTA to back the budget package, despite the very real possibility that Prop 1A (whose effects will last indefinitely, whereas Prop 1B will run out around 2014).

Grassroots progressives are beginning to see through this, as more and more organizations join the No on 1A coalition. George Skelton quotes several of them in his column today:

"We see 1A imposing a spending cap that assures that California schools remain among the most poorly funded in the country," says CFT political director Kenneth Burt.

And he adds, echoing what other public employee unions have complained about: "CTA went behind closed doors and cut a secret deal with the governor without talking to anybody."

Another opponent is the California Faculty Assn. Education already "is in a hole," says President Lillian Taiz. "Now they're dropping a manhole cover on us" with 1A. "This is madness."

The California School Boards Assn. also opposes 1A. Executive Director Scott P. Plotkin says a rainy day reserve would prevent schools from obtaining "adequate funding."

What about the $9.3 billion the props would provide to schools? "That's money we're entitled to anyway under Proposition 98," Plotkin says. Go to court and get it, he asserts.

Democratic supporters of Prop 1A, including legislators and their staff, have been working overtime trying to convince progressives, including yours truly, to support Prop 1A. Their argument has been that Prop 1A isn't like Prop 76 (and they are correct), and that with a Democratic governor and a large Democratic majority in the legislature, its effects will either be blunted or simply irrelevant.

But that is asking voters to take an enormous risk with the government services they need to prosper and even to survive. Prop 1A DOES create a kind of spending cap, let's be clear. It's not at all certain that we'll have a Democrat in the governor's office in 2011 (and even if we did they may not want to raise new revenues anyway). Prop 1A immediately gives the governor the authority to make mid-year cuts, meaning Arnold could slash UC and CSU spending during an academic year, or a Republican governor elected in 2010 could do deeper damage.

Further, we have no idea yet how the idiotic redistricting plan set up in Prop 11 will affect the composition of the legislature in 2013 and afterward. Although I don't see how California Republicans can make a significant comeback even with Prop 11's gerrymandering, they might well be able to reduce Democratic numbers so that a 2/3 vote is not within reach even by cutting further deals.

Skelton argues that the problem with Prop 1A is its complexity, which confuses and therefore turns off voters:

The lesson: When writing a ballot measure, keep it simple. Make sure it can be easily grasped by voters.

Fast forward 36 years. The core measure on the May 19 special election ballot, Proposition 1A, suffers from a similar affliction: lack of simplicity. That's because it has been burdened with so much Byzantine baggage that there's no consensus interpretation of what the measure is all about....

But the product was not a prime-time package ready for the voters. The trade-offs that click inside a legislative chamber aren't always easy to explain outside the Capitol. Voters tend to become confused or enraged.

And that may well explain how some voters approach the issue. But for many others, the concept of a spending cap that nobody really understands, and that progressives and Democrats are supposed to support on the faith that Democratic legislators will always be there in sufficient numbers to ensure this doesn't destroy government, is just not something we can swallow.

Especially when you consider that the California Budget Project estimates that Prop 1A will lead to immediate budget shortfalls between at least now and 2012-13 (and could be as high as $21 billion that year), there really seems to be no case whatsoever for Prop 1A. Voting no on this one is an easy move for progressives to make.

Ultimately I have to wonder about the political wisdom of Democratic legislators campaigning on a "Yes on everything" platform. Schools will get their money, either via Prop 1B or via the courts. The only propositions that might affect the size of the existing deficit are Props 1C-1E, and though they have their considerable problems as well, they might fare better if they were decoupled from Prop 1A.

But that's now what the leadership has chosen to do, and as a result, it seems likely the entire package will be shot down by voters. That wouldn't be because of voter ignorance or confusion, either. It'd be because voters understand a bad idea when they see it.

Dem Leadership Flacking for May 19 Props-Why it Makes No Sense

by: PeteB2

Sat Apr 18, 2009 at 15:00:31 PM PDT

Our leadership was obviously at a big disadvantage in trying to negotiate a budget that was favorable to us.  Republicans had all the leverage:  we needed their votes to pass their budget, they were extremely unified in opposing any budget deal with tax increases, and when they threatened to make the state collapse if they didn't get what they wanted, everyone knew their threats were credible.  The Democrats had next to no leverage against Republicans.  The media weren't paying attention to their extremism and obstructionism, and what coverage their was tended to blame both sides equally ("the legislators in Sacramento").  They knew we'd blink first - and they milked that for all it was worth.

Shorter Bass And Steinberg: Booga Booga!

by: David Dayen

Fri Apr 17, 2009 at 16:21:45 PM PDT

There seems to be a great deal of misinformation about Proposition 1A, the spending reform measure. This is NOT a spending cap, but rather a mechanism to force savings in good years to protect funding for services when our economy sours.  If California had a rainy-day fund like most other states, $9 billion in cuts could have been avoided this year. In the long-run, Proposition 1A will stabilize state spending for critical services.

Um, actually, folks, that's what a spending cap IS.  It caps spending and puts money into a rainy day fund.  Of course, the way this cap is structured, the rainy day fund would have to take money even in DOWN budget years, due to its stringent, restrictive nature.  The line about how $9 billion in cuts could have been avoided this year with rainy day fund money is offered without the knowledge that the money would have had to come FROM somewhere, and would have meant $9 billion in cuts in years prior.  Not to mention the fact that it would have had to be replenished almost immediately.  With this spending cap - yes, Madame Speaker and Mr. President pro Tem, sorry to burst your bubble but that's what it is - spending will be forced $16 billion dollars below the Governor's baseline budget next years.  That's the ENTIRE gain of the $16 billion in temporary tax increases in just one year.  And the cap goes on and on and on.

Pathetic.  About the only good thing here is the shout-out to eliminating 2/3 for budgets and taxes.  I appreciate that, but would appreciate some honesty about the spending cap even more.

UPDATE: Funny, Steinberg and Bass' pal Mike Villines, who has been going around the state with them promoting 1A, has some different thoughts about what the measure would do:

Proposition 1A represents a significant victory for taxpayers at a time when our state needs it most. Proposition 1A ties the hands of legislative liberals, and it forces our budget into a fixed formula and a hard spending cap. That means, for the first time in decades, that liberals will have to make tough spending choices and cut their pet projects.

It also means the taxpayers will no longer be treated like a giant ATM machine. Consider this fact: if we had Prop 1A in place today, our state would not be $31 billion in the red. Instead, our state would have a much more manageable $5.4 billion budget gap. That means that during the worst economic recession since the Great Depression, Proposition 1A would have ensured that our budget gap was manageable. That's the proof that Proposition 1A protects taxpayers.

Villines is wrong about this being a good idea, but he happens to be right on the numbers.  With a spending cap, approximately $27 billion MORE would have had to been cut in the years leading up to the current budget.  That's more than half of the entire education budget.

Did you guys think we wouldn't notice the diametrically opposed arguments, depending on the constituency?

LACDP Doesn't Bow To Fear

by: David Dayen

Wed Apr 15, 2009 at 15:02:06 PM PDT

And the LACDP went neutral.

It's quite remarkable to see practically the entire establishment of the Democratic Party selling fear and so few people buying.  My fear is that they will chalk up their failure to the typical right-wing anti-tax bias, when the real indictment here is a failure to lead, to articulate an actual solution instead of the same nonsense that does nothing to effect structural reform.  The first ads for 1A and 1B only have one unequivocally true statement in them - that the budget is "A total mess, and we all know it."  And yet the prescription for solving the mess is nothing more than making people afraid of some amorphously bigger mess, while neglecting the clear disaster that would arrive with the passage of a spending cap.

This is not about an aversion to two years' worth of sales taxes.  It's about an aversion to more demonstrably awful solutions to layer onto an already dysfunctional system.  Maybe instead of dictating to their constituents, the leadership in Sacramento could bother to listen to them.

Torrance Democratic Club endorses NO on all May 19 Propositions

by: PeteB2

Wed Apr 08, 2009 at 21:51:06 PM PDT

Most of the discussion focused on Proposition 1A and 1B - and despite broad agreement that education was definitely suffering, the votes against the propositions indicated that members didn't think this was the solution.

Can You Buy An Election?

by: David Dayen

Tue Apr 07, 2009 at 11:34:09 AM PDT

Led by Governor Schwarzenegger and a strange bedfellows coalition of big business and educators, the main campaign committee now reports donations of almost $3.7 million over the last six weeks.

Tops on the donor list is former Univision CEO Jerry Perenchio, a longtime Schwarzenegger campaign donor, who dropped $1.5 million into the campaign late last month. But more recent big players are also worth noting. Last Friday, official campaign finance reports showed a $500,000 check written by Chevron and a little more than $250,000 from political switch-hitter Reed Hastings. Hastings, the founder of online video rental giant Netflix, is a former member of the state Board of Education and has a track record of contributions to both the GOP governor's causes and to a bevy of California Democrats [...]

Meantime, there's pretty much zippo reported so far in the way of money in opposition to any of the six budget-related ballot measures. Tops in cash seems to be the campaign opposing Proposition 1E, the temporary transfer of mental health money to the state's general budget needs. That campaign reports a little more than $120,000 on hand.

The use of the Prop. 1B bribe (I really don't know what else to call it) to split the labor coalition, and the co-opting of the legislature through predictable fearmongering has made this a virtual clean sweep for the Governor in the fundraising battle.  

Additional support for the Yes side will be provided by the bipartisan fetishists in the media, whose "not too hot, not too cold" approach to problem solving should be completely discredited by the absolute and total mess made of California in its name, but which somehow still has some cachet.  Dan Weintraub, good little centrist that he is, decides that a spending cap will - by itself - save the state from boom-and-bust budget cycles, when the history of such measures clearly shows that they ratchet down state spending to an unsustainable level that ruins quality of life for the broad mass of citizens.

TABOR, a (Colorado) state constitutional amendment adopted in 1992, limits the growth of state and local revenues to a highly restrictive formula:  inflation plus the annual change in population.  This formula is insufficient to fund the ongoing cost of government.  By creating a permanent revenue shortage, TABOR pits state programs and services against each other for survival each year and virtually rules out any new initiatives to address unmet or emerging needs.

Declining services since TABOR's enactment have become increasingly evident in most major areas of state spending:  K-12 education, higher education, public health, and Medicaid.

""[Business leaders] have figured out that no business would survive if it were run like the TABOR faithful say Colorado should be run -- with withering tax support for college and universities, underfunded public schools and a future of crumbling roads and bridges."" Neil Westergaard, Editor of the Denver Business Journal

This fanciful notion that you can just sock money away for a rainy day and not then be restricted by the complete refusal to raise taxes, combined with tying long-term future growth to the worst three fiscal years (this year and the next two) in the state's history, and the fact that the rainy day fund would have to be replenished even in DOWN fiscal years, does not comport with the facts.  We have verifiable data showing what happens when you artificially limit the size and scope of government and it's neither pretty nor desirable - before Colorado repealed TABOR, they were last or nearly last in spending in almost every major category across the board, with disastrous real-world effects on quality of life.  The rainy day money never gets spent, it becomes another part of the budget out of the hands of lawmakers, and will only increase the deficit while crippling Californian's ability to cope with the downturn.

But one guy making that argument on a computer doesn't have the impact of a phalanx of glossy ads warning "Vote for this OR DIE!!!!"  Given the paid media and earned media blitz on the Yes side, we really will see how much money can buy.

California Sinking

by: David Dayen

Wed Mar 25, 2009 at 13:29:14 PM PDT

But that effort will be stymied by the continued erosion of the job market, leading to more unemployed and more people losing their homes.

California unemployment will peak at just over 12 percent late this year, setting a modern record, according to the latest forecast from the University of the Pacific.

Recovery will come slowly. Unemployment won't sink back into single digits until late 2011, or some two years after the recession is expected to officially end, according to a forecast released Tuesday by UOP.

There's typically a considerable lag between the beginning of an economic recovery and a drop in the unemployment rate, as companies are slow to re-hire even after business perks up.

We're talking about two more years, at least, of significantly reduced revenue collection rates.  All the homes selling for pennies reduce the overall property tax revenue.  No projection of future revenues can reasonably be believed in this environment.  And so we'll continue to see yawning gaps, with a governmental structure woefully equipped to deal with them.  The so-called "reform" of Prop. 1A, to hoard revenue in positive economic years to use in down years, will be inoperative for the foreseeable future, and even when the economy retains balance, the revenue forecasts for any spending cap will be increasingly based on these horrible years, leading to a disaster without end.

In years when revenues fall short, the state could use the reserve to cover spending up to the prior year's level, plus an adjustment for growth in population and the Consumer Price Index.

But increases in the state's senior population and health care costs have been outpacing both those measures, said Jean Ross, executive director of the California Budget Project, a nonprofit organization that focuses on the effect of budget policies on low-and middle-income Californians.

Moreover, Ross noted that under Proposition 58, the 2004 ballot measure, the state will continue to send 3 percent of revenues to the reserve, which would be subject to the tighter controls of Proposition 1A.

"It takes 3 percent off the top of the budget, and we don't have that," Ross said.

Ross and Michael Cohen, a deputy legislative analyst who studied the measure in depth, both said Proposition 1A could force revenue into the reserve even in years in which the state faced deficits.

My guess is that this is why the AFSCME local 2620 voted to support the measure and others on the ballot, while the overall union called for rejection.  The lure of easy money might sound nice for the locals, but unions with experience with spending caps in other states know that they accompany disaster.

Simply put, the state's in an enormous amount of trouble and has no structures to deal with it.  This argues strongly for blowing up the boxes, for real this time, and starting over, by repealing the rules that subject the budget to tyranny and building a new vehicle for reform.

Prop. 1A: Stakeholders Line Up

by: David Dayen

Tue Mar 24, 2009 at 08:06:21 AM PDT

Specifically, the politicians don't want you to know all the facts when it comes to Proposition 1A.  This is the ballot measure that would impose a state constitutional spending limit - a concept that is supported by an overwhelming majority of Californians.

However, if the measure passes, it will also extend the huge tax increases recently approved by the legislature. Passage of Proposition 1A means that the near-doubling of the car tax, the 1 cent statewide sales tax increase, the income tax hike and the reduction in the dependent tax credit would continue for an additional two years.  That adds up to an estimated $16 billion in higher taxes.  It's no surprise these taxes are not supported by the majority of Californians.

That's why our state legislators want to keep the truth from you about Proposition 1A and they've stacked the deck in their favor.  So when you read the official ballot description of the measure - what should be an objective description on what is being voted on - you will see no mention of the taxes.  The legislative leadership wrote the ballot description themselves and intentionally omitted any reference to the tax increase extension.  They made sure what you read is biased.

The Yacht Party has been so consumed with tax ideology, as if the only role of government is to decide what not to tax, that they fail to see the spending cap forest through the trees.  Which is fine with me, because as Anthony Wright notes, this cap would painfully ratchet down services and make any economic revival in California extremely difficult.

The revenue forecast amount established by Proposition 1A, which limits spending from the state's existing tax base, would be significantly below the Governor's "baseline" spending forecast, a forecast that assumes that the cuts proposed by the Governor in his New Year's Eve budget release continue. For example, in 2010-11, the first year when the Director of Finance would be required to calculate whether the state has received "unanticipated revenues," the revenue cap would be an estimated $16 billion lower than the Governor's "baseline" spending estimate for the same year. The gap would widen in 2011-12 and 2012-13 to $17 billion and $21 billion, respectively.

By basing the new cap on a level of revenues that is insufficient to pay for the current level of programs and services, Proposition 1A would limit the state's ability to restore reductions made during the current downturn out of existing revenues [...]

Proposition 1A limits the amount that can be used from the reserve in "bad budget" years to the difference between anticipated revenues and prior year's spending adjusted for population growth and the CPI. It does not allow the reserve to be used to support a "current services" or "baseline" budget, even if sufficient funds would be available in the reserve to do so. The discrepancy arises from the fact that the CPI - the inflation measure used by Proposition 1A - is designed to measure changes in the cost of goods purchased by households, not governments.

Thus, the CPI does not accurately measure the year-to-year increase in the cost of delivering the same level of public services. Specifically, the CPI does not take into account the fact that government spends a larger share of its budget on items - such as health care - for which costs have risen faster than the rate of inflation. Between 1990 and 2007, for example, national per capita health care expenditures more than doubled, rising by 164 percent, while the CPI for California, which measures inflation in households' purchases, rose by just 61 percent.

The particular concern for health care is noteworthy. If the formulas in Prop 1A don't take into account medical inflation, an aging population, or other impacts--like the erosion of employer-based health coverage--then existing health programs are threatened.

Read the whole thing.  These are the guts of this awful deal, what you won't hear when you call your legislator and they use buzzwords like "rainy day fund."  At a time when the health care system in California frays at the edges, this spending cap would ultimately stop any progressive reform on anything that costs money, bottom line.  The executive under 1A gets all kinds of new powers to make cuts, and absolutely none to raise revenues.  It's Prop. 13 on steroids.  That's why the Governor likes it so much.

But 1A has been structured to sidestep vigorous opposition through a series of bribes, particularly to the teacher's union.  Prop. 1B, which would repay $9.3 billion dollars to schools starting in 2011-2012 can only pass if Prop. 1A passes.  This has led the CTA to support all six budget measures on the May ballot, severing the united front that labor used to beat Arnold's special election measures in 2005.  Interestingly, the California Federation of Teachers (CFT) will only support Prop. 1B, and in a pique of schizophrenia, denounced 1A as a "power grab" by the Governor.

Of course, the CFT is substantially smaller than CTA.  And while the California Nurses Association's opposition to the whole special election ballot is noble and appreciated, ultimately some of the stakeholders with money will need to enter the arena.  We leave a shameful legacy to the children of this state if the spending cap passes.

Does The Next Governor Matter?

by: David Dayen

Wed Mar 18, 2009 at 12:35:46 PM PDT

First, let's be clear that Newsom is running with someone else's platform.  The first policy mentioned last night as a reflection of his record is the Healthy San Francisco effort toward universal care for the uninsured in his city.  That is not his plan to tout, and the simultaneous description of it as a savior for the state's residents while cutting $100 million dollars from the city's Department of Public Health and programs aimed at the needy is nothing short of troubling.

"It's not that Healthy San Francisco is wrong its the mayor's obvious ..." (Tom Ammiano) pauses. "Look, he's running for governor and taking full credit for it. It's not true. The labor community, my office, community activists, health people -- some of the same people who are unhappy with him now -- worked with him on this. When he goes out there and claims full credit, that pisses people off, especially people who are dealing with [health care in the city] every day. ... The reaction is really based on the mayor boasting and overselling Healthy San Francisco." [...]

"Healthy San Francisco -- I think people should be very proud of it. I think it's going to meet its full potential. The rollout is going to be incremental and there's going to be little tweaks that it needs. But, you know, that's not the target [...] Unfortunately, it's getting tainted because of the mayor's boasting and overselling of it."

The neighborhood clinics at the heart of the Healthy San Francisco plan are at full capacity while funding is being slashed, and additional "woodworking" - residents coming out of the woodwork to seek services.  The revenues aren't meeting the expenses, and the General Fund of the city, now facing a $590 million dollar shortfall (less per capita than Los Angeles'), has to make up the difference.  As the economy continues to slow and the ranks of the unemployed swell, those at the bottom of the income ladder are already seeing service cuts.  I would simply call it bad politics to put so much emphasis on a program you can barely claim ownership to and are cutting funding for at the same time as more services are desired.  And this is sadly part of a pattern of the whole story being left out.

But let's set aside the issues for a moment.  As focused as I am on process, I awaited Newsom's response to the inevitable questions about budget reform.  He asserted support for a 50% + 1 threshold for the budget process, using the line "You need two-thirds of the vote to pass a budget, but only a simple majority to deny civil rights," referring to marriage equality.  It's a good line, but he leaves out that he was shamed into changing his position after the initial proposal for a 55% threshold was slammed by just about everyone.  The first instinct was to half-ass reform.  There was also no explanation that there are two thresholds requiring two-thirds, the budget and tax increases, leaving his answer fairly vague, as it has been in the past.  

But far worse than this was his flippant approval of Prop. 1A, the draconian spending cap that would effectively eliminate what amounts to half of the state school budget within a few years, and his dishonest rendering of the initiative as "a rainy day fund," without explaining how the rainy day fund is created.  On the other ballot measures like 1C, 1D and 1E, which would privatize the lottery and raid voter-approved funds for children's programs and mental health, he gave a Solomonic "on the one hand, on the other hand" soliloquy and ended saying that he would be a bad spokesman for them.

This, then, is what needs to be kept in mind when Newsom urges a call for a constitutional convention.  We see by his stances on the May special election what he would reasonably be expected to get out of that convention - a constitution that includes a "rainy day fund" created by a spending cap, coming at it from a right-wing perspective and ultimately resulting in a fake reform.  This is essentially the position of Arnold Schwarzenegger, clueless media elites, bipartisan fetishists who assume without evidence the midpoint of any argument is automatically the best option, and most tellingly, the Bay Area Council, which makes perfect sense.

Meantime, the Schwarzenegger-sponsored political campaign in support of the six measures announced today an endorsement from the Bay Area Council, the business-centric public policy organization that is the impetus behind calls for a constitutional convention. Last week, Schwarzenegger made it quite clear that he supports the first convening of a state constitutional convention in some 150 years... a way to focus on multiple ideas for government reform at one time.

These two announcements certainly play to the idea of another "business vs. labor" narrative in California politics. Another possible fuel for that storyline comes in a $250,000 donation to the pro-budget measure committee on Friday by wealthy Orange County developer Henry Segerstrom. The donation from one of his companies is easily his largest campaign contribution in recent years, which saw smaller checks written to both the guv's 2006 reelection efforts and to the California Republican Party.

I support a Constitutional convention because I know what my principles are.  I don't support mealy-mouthed calls for "reform" that are essentially corporate-friendly back doors to advance the interests of the powerful over the people.

Ultimately, Randy Shaw has this right - the people of California could elect Noam Chomsky, Warren Buffett or Howard Jarvis, and nothing would fundamentally change until the structures that restrict anyone in Sacramento from doing their jobs are released.  And our assessment of who would be best to lead that reform should be based on deeds and not words.

If California's future is measured by our education system, we are in deep trouble. And we are in this difficulty because the state's Democratic Party and progressive activists have allowed right-wing Republicans to exert major control over the state's budget.

I say "allowed" because there is no other explanation for elected officials and activists failing to put a measure on the November 2008 ballot removing the 2/3 vote requirement to pass a budget. Although state Republicans made their opposition to new taxes clear, progressives passed up a large turnout ballot whose voters would have approved such a reform. Passage of such an initiative would have avoided the billions of dollars in cuts we went on to face, with more cuts slated for future years [...]

If we have learned anything from the past months, it should be that putting money into state candidates will accomplish less than passing the budgetary reforms and tax hikes needed to return California to its leadership in education and other areas [...]

It's time for the people to say "Yes We Can" to a new progressive future for California. Once the people lead, the politicians -- particularly those seeking their votes -- will follow.

It is senseless to discuss candidates for a race into a straitjacket, which is the current dress code for Sacramento.  Anything less than fundamental reform will not solve the enormous set of problems the state faces - and it will take more than charisma, but an actual commitment, to make it happen.

The Strange Bedfellows Opposing Prop. 1A

by: David Dayen

Thu Mar 12, 2009 at 12:32:20 PM PDT

"Our state capital is a town that feeds on dysfunction. The special interests, left and right, need the process to be dysfunctional. That is how they control Sacramento. That is how they prevent change."
[snip]

"But now we have an agreement, passed by two-thirds of the legislature, that puts on the ballot serious budget reform, including a spending limit and a rainy day fund.

"And the very interests, the far left and the far right, that prefer dysfunction over change have already launched a campaign to confuse people and defeat the reform. But this time they are not going to succeed."

Arnold probably sees this as a selling point, that if Democrats are against his plan, and Republicans are against his plan, then it must be just right.  But this Goldilocks centrism masks the extremism of the spending cap plan, which would ratchet down revenues and cut vital services permanently.  It also represents a serious miscalculation on the part of the Governor, who apparently still thinks his post-partisan message actually works in this state.  That's the same political genius that has Schwarzenegger polling worse than Carly Fiorina in potential 2010 Senate matchups against Barbara Boxer.  And even Schwarzenegger's own strategists seem to know that he cannot be the public face of the special election, lest he doom it to failure.

Opponents of the measures say their private polling has shown linking the initiatives to the governor drives down support of the measures. That has been echoed by some supporters of the ballot measures, who have also started testing potential campaign messages.

But (campaign strategist) Adam Mendelsohn said Schwarzenegger's star power and his ability to get news coverage is still a great asset for the campaign.

"There is no elected official in this state capable of dominating coverage like Arnold Schwarzenegger. The chattering class loves to look at his approval numbers and then cast dispersions, but communicating in a campaign is a lot more complex than just looking at approval numbers."

Uh, yeah, Mr. Mendelsohn, that's the PROBLEM.  He's extremely unpopular with everyone but the Dan Weintraubs of the world.  And there aren't 17 million Dan Weintraubs living here.

The spending cap, with something for everyone to hate, is particularly vulnerable in the special election.  Republicans have been calling for a hard cap for years, if not decades, but they've become so blinded by the Heads on a Stick faction of their party that they cannot look past the short-term of two years of tax increases and realize what they would be getting.  But the Yacht Party infantry clearly doesn't care: heck, they're trying to recall Roy Ashburn, who's termed out in 2010 anyway.  So their entire side, or at least everyone who wants to be elected in a primary, is lining up against 1A.  Meg Whitman has come out against it.

Republican gubernatorial candidate Meg Whitman has already announced her opposition to Proposition 1A, and Whitman spokesman Mitch Zak did not rule out the possibility that Whitman would spend money against the measure.

"She's been very outspoken in her opposition to 1A," Zak said. "We've not made a decision how that opposition manifests at this point. We're keeping our options open."

The Flash Report is claiming that Steve Poizner will oppose the measure as well, and he is hinting at contributing funding.

They will be joined by at least some segment of Assembly Democrats.

After a long, closed-door meeting Tuesday, Assembly Democrats remain divided over the budget-balancing ballot measure at the heart of the May 19 special election, Proposition 1A, which would impose a cap and raise taxes.

"Our caucus had a very long discussion on this," Assembly Speaker Karen Bass told Capitol Weekly. "There are a number of members who are supportive of 1A, there are several members who are opposed to 1A, and there are many others who are trying to decide. We are working through this and we will have another caucus next week," she said Tuesday evening.

Looks like Bass will have a lot more colleagues to boot out of committee assignments.  You'll remember that she punished the three Democrats who actually voted against the spending cap on the floor back in February.  Now a good bit of the caucus is revolting.

The caucus did vote to support 1B through 1F, and that's probably because they know that there's going to be more cuts coming down the road, and voters opposing the revenue-enhancing items on the ballot will make their job harder.

But, she added, "I'm hearing that we are going to have a $4 billion dollar (revenue) hole, so if the ballot measures don't pass, then it becomes  $9 billion or $10 billion hole."

As I said, the crisis continues.

So I'm seeing the anti-tax groups, progressive advocates, the big money in the GOP, half the Assembly Democratic caucus, all against 1A.  On the pro side, Arnold, George Skelton, and Steve Westly, who says 1A will "instill much needed fiscal discipline".  Yeah, poor people and the blind, get some fiscal discipline, you scumbags!

The wildcard remains the unions, who with even a little bit of financial backing could tip the scales on 1A.  SEIU and AFSCME have delayed formal positions until later this month.  But the Administration is trying to intimidate them into going along with it.

Here's why it matters to state workers: Last week, the Association of California State Supervisors asked administration officials if the governor would still lay off employees, or if he would abandon the plan since lawmakers have passed a budget.

(Remember, state workers' twice-monthly furlough is just part of how the governor wants to cut costs. Layoff warnings went to 20,000 of the state's least senior employees last month. Half could lose their jobs, officials have said.)

The administration's answer, from notes taken by an association representative: "We hope the five budget-related propositions pass ... . If the propositions do not pass, we will be in a worse situation, with more furloughs and layoffs."

This is despite the fact that 1A would have NO IMPACT whatsoever on the immediate bottom line; in fact, passing it would hurt the budget for state workers more than defeating it.  "Vote like your job depends on it... because it does."  That must be the working motto.

The question is, will the intimidation work?  Obviously, the fact that the tax increase extensions in 1A are practically hidden on the ballot is going to arouse anger amongst the Heads on a Stick crowd.  And progressive advocates are sticking to principle that an artificial spending cap has failed wherever it's been tried and is wrong for the state.  In the mythical middle you have the vain Mr. Schwarzenegger, desperately trying to stay relevant.  Ultimately, this is a referendum on him.

UPDATE: And here we go.  The League of Women Voters just announced they're opposing 1A, along with 1C, 1D, and 1E (selling the lottery and moving money from voter-approved funds for children's programs and mental health).  This is big if it's a harbinger of how other groups will line up.

More Ballot Measure Courtroom Action!

by: David Dayen

Thu Mar 05, 2009 at 15:03:33 PM PST

The May 19 ballot measure to temporarily take money from a 2004 mental health initiative has a new overview that will be presented to voters, after a settlement to a legal challenge was reached this morning.

The challenge to Proposition 1E's ballot title and summary, and its ballot label, was centered on charges by opponents that the Legislature wrote a "false and misleading" overview, in order to make Prop 1E's redirection of some $450 million in mental health funds more palatable.

The new summary makes it more clear that earmarked mental health funds will be taken away from the voter-approved Prop. 63 and used to balance the state budget.  Earlier, the weasel words "provides temporary flexibility" were used.

The other dispute is over Prop. 1A, the state spending cap.  John Myers is Twittering from the courtroom, and the plaintiffs are making the same clear and obvious points about the legislature's treachery in this matter that George Skelton made this morning.  The title makes no reference to the spending cap OR the extension of tax increases that was part of the deal, and the summary only alludes to the taxes near the end of the description as part of the fiscal analysis.  The summary uses words and phrases like "rainy day fund" and "overspending" and "reform" in ways clearly designed to persuade the voter.  Defense lawyers claim that the fleeting reference to revenue in the fiscal analysis is all that is needed, and anyway voters "already understand all the underlying budget issues" so there's no need for any changes.

As I've said, this now is starting to look more like a cover-up, which is very bad for a legislature and a Governor who aren't seen by the voters as trustworthy, and in at least the Governor's case, for good reason.  If the aftermath of the ruling is a court order that the legislature deliberately wrote the title and summary in a way to obscure the truth about what Prop. 1A would do, there's your fodder for commercials for the next 2 months.  And it's a potentially fatal blow.

We're awaiting a decision...

UPDATE: So here's the answer - the judge would like some of the more misleading language removed, but isn't inclined to add in big bold letters "THIS MEANS YOUR TAXES ARE GOING UP."  This obviously can be exploited by whatever campaign coalesces around the No side - the "hidden tax," et al. - but it won't be on the ballot beyond the bit in the fiscal analysis.  We'll see what the final language will read.

Save The Spending Cap Three

by: David Dayen

Wed Mar 04, 2009 at 11:12:21 AM PST

Like a military commander busting down insubordinate troops, Assembly Speaker Karen Bass (D-Los Angeles) has stripped committee chairmanships from a trio of wayward lawmakers after they refused to join fellow Democrats in support of a key budget provision.

The three assemblymen -- Sandre Swanson of Alameda, Warren Furutani of Gardena and Tony Mendoza of Artesia -- voted last month against a measure to cap state spending, which will appear on a special statewide ballot this spring [...]

By removing the three lawmakers from their posts, Bass takes away key staff assistance, clout on policy issues and potential fundraising power.

She's hurting those lawmakers, but as the above sentence makes clear, she's hurting their constituents as well.  All because they couldn't go along with a plan that will make it impossible to deliver basic services to Californians, even in good economic times.  And the spokeswoman for Bass trying to sidestep the rationale for this is pathetic.

"Having now had a couple months to see this class in action," the speaker felt changes were needed "to ensure the Assembly can continue to do the best job for the people of California," said spokeswoman Shannon Murphy.

She declined to elaborate, calling the changes "an internal caucus matter."

You'll notice that Darrell Steinberg did not mete out this punishment to, for example, Loni Hancock, who voted against the spending cap in the Senate.

I understand the desire for leadership to have control of their caucus, but unless we're concluding that Karen Bass really really wanted to cap state spending, there is no good reason to enforce party discipline on a terrible vote.  When the spending cap goes down because of the arrogant way that Bass and the legislature hid the true costs, both on the spending side and on the taxation side, these three members who were right all along will appear to be the only ones who suffer.

I think it's worth writing or calling the Speaker and asking her why she wants to punish progressives for voting to protect services for Californians.  And you might ask her, politely, to reinstate the Spending Cap Three.

District Address
5750 Wilshire Boulevard
Suite 565
Los Angeles, CA 90036
Phone: (323) 937-4747
Fax: (323) 937-3466

Capitol Address
P.O. Box 942849
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Phone: (916) 319-2047

May 19 Special Gets Field Polled

by: David Dayen

Tue Mar 03, 2009 at 08:04:09 AM PST

Proposition 1A (Spending cap/tax extension)
Registered voters
Yes: 54 percent, No: 24

Likely voters in May special election
Yes: 57, No: 21

Proposition 1B (Education funding)
Registered voters
Yes: 59, No: 27

Likely voters
Yes: 53, No: 30

Proposition 1C (Lottery)
Registered voters
Yes: 48, No: 37

Likely voters
Yes: 47, No: 39

Proposition 1D (Early childhood services funding (Prop. 10))
Registered voters
Yes: 62, No: 20

Likely voters
Yes: 54, No: 24

Proposition 1E (Mental health funding(Prop. 63))
Registered voters
Yes: 61, No: 23

Likely voters
Yes: 57, No: 23

Proposition 1F (No raises for officials in deficit years)
Registered voters
Yes: 74, No: 17

Likely voters
Yes: 77, No: 13

The softest support is for Prop. 1C, the measure to sell the lottery, cashing in now to fill a budget hole in exchange for a long-term revenue loss.  That's under 50% and could easily be tipped over if a No campaign explained that this will hurt long-term future revenues.  A loss on this measure would put a $5 billion dollar hole in the signed budget that would have to be dealt with by June 15.

Most interesting is the case of Prop. 1A, the spending cap.  The ballot language is going to be crucial here.

when told that the "rainy-day" measure, Proposition 1A, triggers as much as $16 billion in higher taxes through 2013, four out of 10 initial supporters said they were less inclined to vote for the measure, particularly Republicans and fiscal conservatives.

"I'd vote 'no' on that," said William Tate, 49, a South Lake Tahoe voter who said he'd support Proposition 1A before learning of the taxes. "They should just save some money and put it in a 'rainy-day fund' without taxing people. We've got too much bureaucracy in this state."

This of course is an expression of magic pixie-fairy Santa Claus conservatism at its worst, but there's no doubt that a sliver of the electorate will view things this way.  And unlike other potential ballot measures around taxes, this is very tangible (your taxes will go up X) and there's no counter-argument of what voters are getting in return.  In fact, they're getting an unpalatable spending cap that would ratchet down state services and tie the baseline to a budget put together during the worst economic crisis since the Depression.  There's something for pretty much everyone to hate in Prop.1A, and the construction of it was a pure play to keep interest groups on the sidelines, and just to make sure no mere voter knows about it, they hid the truth from the ballot language.

When the Legislature places a measure on the ballot, however, it often bypasses the attorney general by specifying the ballot title and even indirectly designating those who write ballot pamphlet arguments. In other words, the Legislature, in league with the governor, tries to fix the election by fixing how measures are portrayed.

Cases in point are the six measures that the Legislature and Gov. Arnold Schwarzenegger are asking voters to approve in a hurry-up May 19 special election to implement much of their state budget deal.

The most important of the measures, Proposition 1A, would create a state spending limit and direct excess revenue into a "rainy day" account to be used when the economy and state revenue dip. But a very important provision of the package is that billions of dollars in new taxes would be short-circuited if Proposition 1A is rejected.

That "poison pill" is designed to discourage unions and other left-of-center groups - which despise state spending limits - from campaigning actively against the measure. But it indirectly gives conservative anti-tax groups, which despise the new levies, a potential weapon.

Voters won't be told any of that in the official title written by the Legislature, which reads this way: "RAINY DAY BUDGET STABILIZATION FUND. Reforms the budget process. Limits future deficits and overspending by increasing the size of the state 'rainy day' fund and requiring above-average revenues to be deposited into it, for use during economic downturns."

That's misleading on a whole host of fronts, not just on taxes but on the role of the spending cap.  Our friend Anthony Wright at Health Access is teaming with the Howard Jarvis Association to file a lawsuit to overturn the ballot title and summary.  The question is whether the larger groups will jump into the fray.  That the legislature allowed this subterfuge can only empower the argument that they are trying to stealth tax everyone and will hurt future efforts at reform.  It may well cause someone like a Meg Whitman with designs on the Governor's mansion to spend some of her fortune to beat it, and given that support drops from 57% to 34% at the mere mention of the tax issue (and particularly how its hidden from view), it wouldn't take that much.  With progressives like Loni Hancock committed to killing the spending cap, this could be a strange bedfellows election.

The Faustian Bargain of Prop 1A

by: Robert Cruickshank

Mon Mar 02, 2009 at 07:44:49 AM PST

In the 2005 special election they made it easy for labor unions and progressives to unite to defeat his proposals. The attacks on unions were like red cloth to a bull, and that enabled a big and broad coalition to come together to deal Arnold a significant defeat.

Arnold never abandoned his goals of breaking the power of his Democratic and progressive enemies. This time he and his Republican allies in the Legislature decided on a different approach - offering unions a Faustian bargain designed to screw them no matter which option they choose, as today's Sacramento Bee explains:

Unions last month were attacking the budget deal for including a limit on future state spending growth and $15 billion in cuts to state programs. The spending limit must be approved by voters in Proposition 1A to take effect.

Fearing that unions could mount a successful opposition campaign, lawmakers and Schwarzenegger crafted the budget deal so that increased taxes on income, sales and vehicles would last up to an additional two years if Proposition 1A passes.

The strategy assumed that the additional state tax revenue, worth as much as $16 billion between 2011 and 2013, would provide enough incentive for unions to let Proposition 1A go unchallenged.

The deal even included a specific deal with the devil for the California Teachers Association - Proposition 1B, which would restore $9 billion in educational funding in 2011 and afterward, which is also predicated on the passage of the spending cap. CTA has taken an "interim support position" on Prop 1B but like SEIU has not taken a position yet on Prop 1A.

These tactics on the part of Arnold and the Republicans is part of a broader strategy to force progressives and Democrats to defend bad deals, and leave room for conservatives to score points by opposing them. The Howard Jarvis Association and Meg Whitman have both come out against Prop 1A and may spend some money to try and defeat it.

To me the answer for progressives seems clear - reject the deal with the devil and strongly oppose Prop 1A. (In fact, there is a strong case for opposing all the propositions on the May ballot but right now my focus is the spending cap.)

The tax increases would not immediately disappear, but would expire in mid-2010 along with the rest of the current budget deal. Since we're going to have to mount a big fight anyway at that time, why agree to a crippling spending cap that will at best provide just a few years of new revenues at a truly enormous long-term cost?

Keep in mind this chart from the California Budget Project on the likely effect of a spending cap on future budgets:

Those are enormous cuts that we'll face in the next decade. If Democrats, progressive activists, and labor unions don't oppose this thing, then we'll be letting the devil get our soul.

Deeply Unpopular Legislature Stumps For Their Unpopular Budget

by: David Dayen

Thu Feb 26, 2009 at 14:33:35 PM PST

Overall, just 33% of California adults give Schwarzenegger a positive job rating, barely above the record low of 32% that he hit in 2005 after pushing a package of failed ballot measures in a special election. As recently as January, Schwarzenegger's favorable job rating was at 40%.

Faring worse is the state Legislature: Its 21% approval rating matches the record low it set in several previous polls.

There are a number of other questions in the poll regarding the right to choose and birth control, which you can see here (Short version: Californians still support the right to choose, though parental notification gets narrow support.  I would imagine that how the question is asked accounts for that, although this will probably give hope to the forces that have lost parental notification on the ballot three times in a row to try yet again).

What I want to focus on for the moment is those appalling numbers for our political leaders.  Given that, as well as the public tendency to vote down ballot initiatives, you'd think the last thing they'd want to do is put the public faces of lawmakers on the budget items in the May 19 special election.  You'd be wrong.

Gov. Arnold Schwarznegger, Senate President Pro Tem Darrell Steinberg and ex-Senate leader Dave Cogdill will join hands today for the first campaign event before the upcoming budget special election.

The trio -- alongside other advocates for the package -- will host a press conference this afternoon at a Sacramento-area child development center.

Now, maybe Darrell Steinberg has some grand design where the limits in the spending cap part of the package can be overcome.  Or maybe he's perfectly content with ratcheting down spending and making it impossible to revive it no matter what the economic situation.  Whatever the reason, it seems like terrible strategy as well as bad policy.

On the flip side, SEIU editorializes against the spending cap in Capitol Weekly:

One of the most troubling aspects of the budget deal to us is the budget cap, which promises to make the cuts permanent by making it virtually impossible to restore them in better times. For SEIU members that translates into year after year of higher caseloads for social workers who help children endangered by neglect or abuse; ongoing cuts to healthcare for families struggling with unemployment or low-wage work; a future of shrinking support for families who have children with autism or cerebral palsy; ongoing cuts to hundreds of state services from parks to oversight of hospitals and nursing homes, and ongoing cuts to home care, higher education, K-12 schools, and other vital public services.

We know that we are not alone in our concerns. In fact, Californians do not support the inevitable result of a budget cap - each of these cuts is deeply unpopular; yet legislators have already voted for the cap without a single hearing on the cap's effects, without explaining its effects to their constituents, and without asking for detailed analysis from the Controller, the Treasurer, or independent outside experts.

This is not the way such a serious measure should have been considered or passed. It reflects poorly on the Legislature as a deliberative and transparent body.

With the Governor trying to get in on the Constitutional convention, and offering a vision of reform that trades majority vote for the spending cap, essentially one horrible outcome for another, it's beyond clear that, if the spending cap passes, it will be locked in for a very long time no matter what other reforms are undertaken, and with a baseline spending level "established during one of the, if not the, worst budget crisis in the state's history," as the author writes.  This would cripple the state in a fundamental way.

Who Will Fight The Spending Cap?

by: David Dayen

Wed Feb 25, 2009 at 10:29:21 AM PST

Although the budget contains a number of spending cuts, it also contains a mechanism to restore some of those cuts using federal funds authorized by the American Recovery and Reinvestment Act of 2009 (ARRA) signed by President Obama on February 17, 2009. The mechanism requires that in order to restore cuts, the state must receive at least $10 billion in federal funds to offset General Fund costs. In other words, $10 billion of federal funds are needed to "trigger off" some of the cuts.

The precise amount of federal stimulus funds for California is still being determined, however, the Director of Finance and the Treasurer must determine by April 1, 2009 whether federal funds meet the $10 billion threshold to trigger off the spending cuts. Specifically with respect to health care cuts discussed above, if there is sufficient federal funding, Medi-Cal benefits would not be eliminated and public hospital payments would not be reduced. If there is insufficient federal funding, those cuts and others--including steep cuts in SSI/SSP, IHSS, and CalWORKS would be implemented July 1, 2009.

Hopefully, these funds will make it to California's shores to stave off the worst cuts.  Ultimately the federal government should seek a goal of stopping all cuts in public services and layoffs of staff, and should fill the gap in revenue in the short term.  The states are being punished through little fault of their own, and counter-cyclical cuts threaten the success of recovery.

The next element is the May 19th special election.  We'll be covering that in the weeks to come, but Wright lays out the most important initiatives that relate to the budget.

* Proposition 1D would amend Proposition 10, which was passed in 1998 and increased the tobacco tax to be used exclusive for services for children up to five years old. This budget, subject to voter approval, would redirect Proposition 10 funds of up to $340 million in the first year and $268 annually for the following five years to be appropriated by the Legislature. As a result, local First Five Commissions would have to cut the programs they fund, such as county "Healthy Kids" coverage initiatives.

* Proposition 1E would amend Proposition 63, which in 2004 raised the income tax for the upper-tax bracket to earmark funding specifically for mental health services. This budget, subject to voter approval, would redirect Proposition 63 funds of up to $226.7 million in the first year and $234 annually for the following year from Proposition 63 mental health services to backfill the existing Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program.

* Proposition 1A would pass a Constitutional amendment to institute a spending cap, to limit the amount of revenue that can be appropriated for the General Fund. It also would extend the temporary taxes to last from two to five years. Under the spending cap, any revenues above a forecasted amount must be put in a "Budget Stabilization Fund," and can only be accessed under certain circumstances. In other words, the spending cap locks up money making the state less able to fund education, health care, and other core state services.

Wright doesn't mention Prop. 1C, which would sell the state lottery to fill a $5 billion dollar hole in the short term, but cost the state money in the aggregate in the long-term from the loss in consistent revenue.  I've always thought it was a stupid and shortsighted idea and would be unlikely to support it in May.

But clearly, Prop. 1A is the most dangerous measure in the long-term, locking the state into deep cuts into the distant future, which would ratchet down services regardless of demand or growth.  This is the long-sought effort by the far right to drown government in the bathtub.  And yet to this point, no opposition has been found to this measure.

The last time Gov. Arnold Schwarzenegger asked California's voters to permanently cap state spending, organized labor dumped millions of dollars into a successful campaign to defeat his proposals.

Four years later, Schwarzenegger and other proponents are hoping the unions will sit out the May 19 special election in which the governor is again asking voters to enact a spending cap. That measure was placed on the ballot by the Legislature as part of last week's deal to resolve the state's cash crisis.

The official ballot arguments have been submitted, and in what administration officials hope is an encouraging sign, the best-funded labor groups opted not to weigh in against the measure. At least not yet.

In addition, the state's major antitax groups have split over the measure, with at least two supporting it even though it would prolong the tax increase that the Legislature passed last week. The California Taxpayers' Assn. signed the ballot measure backing the spending cap, and Lew Uhler of the National Tax-Limitation Committee said he also favors the measure, called Proposition 1A.

The above-mentioned provision that extends the taxes passed by the Legislature makes for approximately the easiest demagoguery in the history of California initiatives.  Jon Coupal at the Howard Jarvis Taxpayers Association says his group will try to defeat the measure.  The fact that the ballot arguments had to come in so quickly may be driving this perceived silence on the part of slower-moving unions, but they need to make themselves clear.  Do they support a spending cap that will unquestionably take the state backwards in the future, or will they oppose it - and back up that talk with action?  We shall see.

The Abyss

by: David Dayen

Mon Feb 16, 2009 at 10:31:31 AM PST

And we all sit at our computers and type out our "even Dan Walters and George Skelton believe" articles, eternally hopeful that this is the corner-turning event, that the public will find the right people to blame for the sorry state of affairs, and punish them repeatedly forever more.  Only it's wishful thinking.  First of all, I hate to break it, but nobody reads George Skelton and Dan Walters.  They are opinion leaders to about .001% of the electorate.  Second, there was another audience watching Sacramento this weekend, and they were the bondholders, who would be crazy to allow California to borrow one more red cent from them given the political fracturing (and this budget calls for 1.1 trillion red cents, or $11 billion dollars, to be borrowed).  Even if this passed tomorrow there would need to be lots of short-term debt floated to manage the cash crisis until new revenues actually reached state coffers, and with the bond rating the lowest in the country and the dysfunction being played out, I don't see it happening.

The other point is that this is, let's face it, a bad deal for Californians.  Among the sweeteners thrown in the deal to attract that elusive third Republican vote are a $10,000 tax break for home buyers to re-inflate the bubble and set the state economy up for an even bigger crash; weakened anti-pollution laws that will cost the state additional public health and environmental cleanup spending in the long-term; a potential budget cap that will make it impossible for public schools and social services to meet demand; and much more.  The tax changes, which are short-term except for a huge break to multinationals, tax things that we want to encourage in a downturn, work and consumption.  What the federal government is offering to spur demand and get the economy moving again is exactly what the state government will be cutting to balance the budget.  That's not an argument to kill it, but it's a reflection of reality.

So there will be at best a kind of zero-growth stasis, and at worst a further crumbling of the local economy, with shrunken revenues likely to require another round of this by summer.  Ultimately, the media cannot help the Democratic Party solve this problem.  The bill is coming due for 30 years of anti-tax zealotry and the belief that we can provide whatever citizens need without paying for it.  There isn't a light at the end of the tunnel.  That some opinion leaders are coming around about 20 years to late doesn't wash the blood from their hands.  And that the Democratic Party is finally thinking that they should maybe fight against the 2/3 requirement that has relegated them to a functional minority in Sacramento since is was instituted doesn't absolve them for 30 years of inattention.

It gives me no pleasure to bear the bad news, but there's no wake-up call on the horizon.  Even all 38 million Californians coming to the same "Hey, GOP is suxxor" conclusion at the same time doesn't change structural realities.  Those must be fought for over years if not decades, and it is not defeatist to wonder whether it's too late.

...I think Joe Matthews says it fairly well.