Daily Archives: February 27, 2009

Budget

Regressive Tax Burdens – Brought To You By The California Legislature

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With the unemployment rate soaring to double digits and less revenue flowing to the state, it was clear that some taxes would have to be raised in the last budget.  To the extent I have criticized those taxes, it’s because they are flat or regressive, increasing burdens on those with the least ability to pay.  Via California Budget Bites, it turns out that it’s even worse than I thought:

One of the last-minute changes to the budget agreement substituted a 0.25 percentage point increase in each of the state’s basic income tax rates in place of a 5.0 percent income tax surtax. The enacted change would increase each of the tax rates for two or four years, depending on whether the spending cap that will appear on the May special election ballot is approved by the voters. For example, the 4 percent tax rate would be 4.25 percent under the new law and the 9.3 percent rate would go to 9.55 percent. As discussed in yesterday’s blog post, the increase would be cut in half – to 0.125 percentage points – if the Treasurer and Director of Finance certify that the state will receive at least $10.0 billion in “flexible” funds from the federal economic recovery bill. In contrast, the proposal under consideration until the final night of budget negotiations would have required all personal income taxpayers to add an amount equal to 5.0 percent of their tax liability for the two- or four-year period.

Because of this seemingly minor change, lower-income households will experience a much larger tax increase than under the previously considered proposal. The tax liability of a married couple with a taxable income of $40,000 will rise by 12.9 percent under the enacted policy, as opposed to 5.0 percent under the proposal previously under consideration. In contrast, the tax liability of a married couple with a taxable income of $150,000 will rise by 4.0 percent under the final agreement, instead of 5.0 percent under the original surcharge proposal. High-income earners will experience the most significant change – their tax liability will only rise by 2.9 percent under the enacted policy.

It is somewhat likely that the stimulus trigger will be reached – we will know around April 1 when the Governor’s Finance Director and Treasurer Lockyer make the decision.  Still, this is an outrageous undermining of the public trust.  We are essentially reacting to a yawning budget gap with taxes that mostly hit the middle class and below.  That’s true of the penny increase in the sales tax (which will now reach close to 10% in LA County) and it’s true of this income tax increase.  This is the conservative veto in action, folks.  And it’s not going to change until it’s eliminated.

Uncategorized

Regressive Tax Burdens – Brought To You By The California Legislature

With the unemployment rate soaring to double digits and less revenue flowing to the state, it was clear that some taxes would have to be raised in the last budget.  To the extent I have criticized those taxes, it’s because they are flat or regressive, increasing burdens on those with the least ability to pay.  Via California Budget Bites, it turns out that it’s even worse than I thought:

One of the last-minute changes to the budget agreement substituted a 0.25 percentage point increase in each of the state’s basic income tax rates in place of a 5.0 percent income tax surtax. The enacted change would increase each of the tax rates for two or four years, depending on whether the spending cap that will appear on the May special election ballot is approved by the voters. For example, the 4 percent tax rate would be 4.25 percent under the new law and the 9.3 percent rate would go to 9.55 percent. As discussed in yesterday’s blog post, the increase would be cut in half – to 0.125 percentage points – if the Treasurer and Director of Finance certify that the state will receive at least $10.0 billion in “flexible” funds from the federal economic recovery bill. In contrast, the proposal under consideration until the final night of budget negotiations would have required all personal income taxpayers to add an amount equal to 5.0 percent of their tax liability for the two- or four-year period.

Because of this seemingly minor change, lower-income households will experience a much larger tax increase than under the previously considered proposal. The tax liability of a married couple with a taxable income of $40,000 will rise by 12.9 percent under the enacted policy, as opposed to 5.0 percent under the proposal previously under consideration. In contrast, the tax liability of a married couple with a taxable income of $150,000 will rise by 4.0 percent under the final agreement, instead of 5.0 percent under the original surcharge proposal. High-income earners will experience the most significant change – their tax liability will only rise by 2.9 percent under the enacted policy.

It is somewhat likely that the stimulus trigger will be reached – we will know around April 1 when the Governor’s Finance Director and Treasurer Lockyer make the decision.  Still, this is an outrageous undermining of the public trust.  We are essentially reacting to a yawning budget gap with taxes that mostly hit the middle class and below.  That’s true of the penny increase in the sales tax (which will now reach close to 10% in LA County) and it’s true of this income tax increase.  This is the conservative veto in action, folks.  And it’s not going to change until it’s eliminated.

Budget, California, education

This Week’s Education Coalition “Reality Check”: 15,500 Pink Slips Issued

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This Week's Education Coalition “Reality Check”: 15,500 Pink Slips Issued to Teachers, Reading Programs Eliminated, Class Size Reduction Programs Slashed, Music Programs Gone

The budget deal passed by state lawmakers and signed by the Governor includes deep cuts to education unlike any we have seen in our state’s history, to the tune of $11.6 billion dollars in cuts to K-12 public schools alone.

Time and again, the Education Coalition has tried to explain the magnitude of these cuts and how they will directly impact students, but every day that reality becomes even more stark. That’s why we’re issuing a weekly “Reality Check” to highlight some the consequences of these devastating cuts.

As of this week – 15,495 pink slips have been issued to California’s teachers as well as 9,000 layoff notices sent to bus drivers, custodians, food service workers and other school employees.

According to the Orange County Register (2/24/09): $16 million in cuts to the Fullerton School District will result in a 20 percent reduction in gifted and talented programs, eliminating all elementary music programs, cutting school psychologists, school nurses, counselors and special education teachers.

According to the Los Angeles Times (2/23/09): The Saddleback Valley Unified School District may have to eliminate a critical reading program that helps struggling students, along with sports teams, smaller class sizes and school librarians.

According to the Contra Costa Times (2/25/09): The Pleasanton School District must cut its Barton Reading program and reading specialists by 50 percent, class sizes will increase, library assistants and technology specialists will be eliminated, and athletic stipends for coaches will be axed.

According to the Daily Journal (2/26/09): The San Mateo Union High School District is considering cutting athletics, increasing bus fees and shortening the school day by eliminating seventh-period.

Uncategorized

FAQ: COBRA Premium Reduction (Health Coverage for the Unemployed)

Recession-related job losses are threatening health coverage for many families. To help workers maintain their health coverage while they are between jobs, the American Recovery and Reinvestment Act (ARRA) provides a 65% reduction in the premiums payable by involuntarily terminated workers and their families for health care continuation coverage under COBRA. This premium reduction will last for up to 9 months.  Workers who have been involuntarily terminated during the period from September 1, 2008 through December 31, 2009 and their families are eligible. This premium reduction also applies to health care continuation coverage that may be required by states for insurance policies sponsored by small employers (so called state mini-COBRAs) and public employees.  This provision will help 7 million people maintain their health insurance by providing a vital bridge for families when workers have been forced out of their jobs as a result of the recession.

1.    QUESTION: Who is eligible for the premium reduction?

  A.    To be eligible for the premium reduction, you must be a COBRA qualified beneficiary who meets all of the following requirements:

      •    Is eligible for COBRA continuation coverage as a result of Federal or State law at any time during the period beginning September 1, 2008 and ending December 31, 2009;

      •    Elects COBRA coverage (when first offered or during the additional election period); and

      •    Was involuntarily terminated during the period beginning September 1, 2008 and ending December 31, 2009.  

  If you are eligible for other group health coverage (such as through a spouse’s plan) or for Medicare, you are not eligible for the premium reduction.  In addition, your same year (2009 and/or 2010) modified adjusted gross income must not exceed $125,000 (or $250,000 for families).  If your income exceeds this limit, all or part of the amount of your premium reduction may be recaptured by an increase in your income tax liability for the year.  

2.    QUESTION:  How do I know whether or not I have been involuntarily terminated from employment?

  A.    Involuntary termination is a termination that is at the direction of the employer.  Note that termination for gross misconduct will generally disqualify an employee and his/her family from COBRA coverage.  For more information on whether your termination is involuntary please call the Department of Labor’s Employee Benefits Security Administration’s Benefits Advisors at 1-866-444-3272.

3.    QUESTION:  How does the premium reduction work?

  A.    It works the same way as standard COBRA coverage.  However, instead of paying the full premium to the former employer/insurer, you will pay 35% of the premium.  The former employer/insurer will be compensated for the other 65% of the premium by the federal government.  

  The premium reduction is available as of your first period of coverage beginning on or after February 17, 2009, the date of enactment of this law.  Some plans may have already sent out bills for the full premium.  If you get a bill for the full premium and pay it, you will either be reimbursed for the overpayment or receive a credit toward future premium payments.

4.    QUESTION:  How do I sign up for the premium reduction?  

  A.    To sign-up for the premium reduction, you must enroll in COBRA coverage and fill out the premium reduction enrollment forms provided by your health plan.  Generally, under COBRA the employer must notify your health plan that you are being terminated within 30 days.  After that, your health plan must notify you within 14 days regarding your COBRA eligibility and provide you with materials regarding enrollment.  After February 17, 2009, plans will also begin sending out information regarding the premium reduction.  If you have not yet received information from your health plan, you can contact your plan directly.  

5.    QUESTION:  I was involuntarily terminated after September 1, 2008 and am enrolled in COBRA now.  How do I get the premium reduction?

  A.    As of your first period of coverage beginning on or after February 17, 2008, you are only required to pay 35% of your total premium.  You should immediately contact the former employer/insurer that administers your COBRA to obtain the documents necessary to establish eligibility for the premium reduction and explain that you intend to take advantage of the premium reduction and pay 35% of your premium.  If you have already paid the full amount for the next pay period, your former employer or insurer is required to reimburse you or credit a future payment.

6.    QUESTION:  What if I was involuntarily terminated after September 1, 2008 but didn’t elect COBRA within 60 days as required by law?

  A.    If you were involuntarily terminated from September 1, 2008 through February 16, 2009, but failed to initially elect COBRA you will get a second chance to elect COBRA and receive the premium reduction. No later than April 18, 2009 health plans should notify individuals about the second election period, in addition to providing any forms and information needed to enroll.  You will have 60 days after receipt of that notice to enroll in COBRA and the premium reduction.  However, you can contact your former employer now and say you want to take advantage of the second chance election period.  In either case, your coverage begins with the first period of coverage beginning on or after February 17, 2009.  

7.    QUESTION:  What if I was involuntarily terminated after September 1, 2008, elected COBRA within 60 days as required by law, but dropped the coverage?

  A.    If you were involuntarily terminated during the period from September 1, 2008 through February 16, 2009 and initially elected COBRA, but dropped the coverage (for example, because it was unaffordable), you will get a second chance to elect COBRA and receive the premium reduction.  No later than April 18, 2009 your health plan should notify individuals about the second election period and should provide any forms and information needed to enroll.  You will have 60 days after receipt of that notice to enroll in COBRA and sign up for the premium reduction.  However, you can contact your former employer now and say you want to take advantage of the second chance election period.  In either case, your coverage begins with the first period of coverage beginning on or after February 17, 2009.    

8.    QUESTION:  Who can take advantage of the additional election period?

  A.    Only plans subject to the Federal COBRA provisions are required to provide an additional election period when certain involuntary terminations occurred from September 1, 2008 through February 16, 2009.  ARRA does not require coverage provided under state continuation coverage provisions (including state mini-COBRA coverage) to offer an additional election period.  States may choose but are not required to offer a second election period.

9.    QUESTION:  Is death considered an involuntary termination?

  A.    No.  While death of an employee can be a qualifying event for that person’s beneficiaries to be eligible for COBRA coverage, death is not an involuntary termination of employment.  The beneficiaries would be required to pay the full premium amount if they elected COBRA.  However, if an employee dies after an involuntary termination, the employee’s beneficiaries may be entitled to the premium reduction for the remainder of the 9 month period that would otherwise be available.  

10.    QUESTION:  How long can I receive the premium reduction?  

  A.    Generally, individuals who qualify can receive the 65% premium reduction for up to 9 months.  COBRA coverage is still available for up to 18 months and 36 months in some cases.  If you remain on COBRA after the premium reduction period expires, you may be responsible to pay the full premium amount.  

  In certain situations, however, you would not be eligible to receive the premium reduction for 9 months.  If one of the following events occurred, the premium reduction would end at the earliest occurring event:  

      •    your employer (which in this case includes any responsible related or successor employer) no longer offers any group health plan to employees;

      •    you fail to make your premium payment; or

      •    you become eligible to receive health care through Medicare or another group health plan (such as the plan of a new employer or a spouse’s employer).  

  It is important to note that if and when you become eligible for coverage through Medicare or another group health plan, you must notify the plan administrator immediately.  While you remain eligible for COBRA when offered new coverage, you will no longer be eligible to receive the premium reduction.  Continuing to receive the premium reduction after becoming eligible for other coverage could result in a penalty equal to 110 percent of the premium provided to you after your eligibility ends.

11.    QUESTION:  What do I do if I think I qualify for the COBRA premium reduction but my plan tells me I do not?

  A.    If your health plan finds that you are ineligible for the premium reduction, you can apply for review of that determination by the Secretary of Labor or by the Secretary of Health and Human Services depending on your type of plan (see following question).  The Secretary will review your application and make a determination within 15 business days.  

12.    QUESTION:  Where do I send my appeal?

  A.    The Departments of Labor (DOL) and Health and Human Services (HHS) are currently developing processes and an official form that will be required to be completed for applications for review.  

      •    DOL will handle appeals related to private sector employers who are subject to ERISA’s COBRA provisions.  For more information or assistance determining where to file your appeal, visit www.dol.gov/COBRA or contact DOL at 1-866-444-3272.

      •    HHS will handle appeals for all government employees (federal and non-federal) as well as for those individuals covered by so-called mini-COBRA (insurance policies offered by employers with fewer than 20 employees).  

13.    QUESTION:  How does the income cap work?

  A.    The income cap is designed to ensure that the premium reductions are going to people who most need the help.  If your income for the year in which you are receiving the premium reduction (2009 and/or 2010) is more than $125,000 (or $250,000 for married couples filing a joint federal income tax return) all or part of the premium reduction may be recaptured by an increase in your income tax liability for the year.  If you think that your income may exceed the amounts above, consult your tax preparer or contact the IRS at 1-800-829-1040.

14.    QUESTION:  If I elect COBRA and receive the premium reduction, can I change my coverage or do I have to retain the coverage I had while employed?

  A.    Group health plans are permitted, but not required, to allow qualified beneficiaries to enroll in coverage that is different than the coverage they had at the time of the qualifying event.  Changing coverage will not cause an individual to be ineligible for the COBRA premium reduction, provided that: the premium for the different coverage is the same or lower than the coverage the individual had at the time of the qualifying event; the different coverage is also offered to active employees; and the different coverage is not limited to only dental coverage, vision coverage, counseling coverage, a flexible spending account, or on-site medical clinic.  If the plan permits individuals to change coverage options, the plan must provide the individuals with a notice of their opportunity to change.  Individuals have 90 days to elect to change their coverage after the notice is provided.

15.    QUESTION:  What if I was laid off before September 1, 2008, can I receive the premium reduction?  

  A.    No.  To be eligible for the premium reduction you must have lost your job on a date between September 1, 2008 and December 31, 2009.  

16.    QUESTION:  What if my employer went out of business and did not continue the company health plan, can I receive COBRA coverage and the premium reduction?

  A.    If your employer terminates all its health plans, COBRA continuation coverage will generally not be available unless another related or successor employer sponsors a group health plan responsible under COBRA for providing coverage to you.  

17.    QUESTION:  As an employer, how can I get more information about how the premium reduction works and how I will report the reductions on my quarterly federal tax return Form 941?

  A.    Contact the IRS at 1-800-829-4933.  

18.    QUESTION:  Where can I get more information if I have additional questions about the COBRA premium reduction?

  A.    Contact the Department of Labor’s Employee Benefits Security Administration’s Benefits Advisors at 1-866-444-3272.  In addition, the Employee Benefits Security Administration has developed a dedicated COBRA web page www.dol.gov/COBRA that will contain information on the program as it is developed.  Subscribe to this page to get up to date fact sheets, FAQs, model notices and applications.

This FAQ was jointly released by several U.S. House committees, including the Committee on Education and Labor, and is cross-posted on the EdLabor Journal.

California

10.1%

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That’s California’s unemployment rate as of January, a 1.4 percentage point increase (i.e. an enormous leap) over the December numbers, and a big increase over the 6.1% rate as of January 2008.

The Employment Development Department will not release the county-based stats until next week, but based on earlier reports we can assume that the hardest-hit parts of the state are those that happen to be represented by Republicans – the Central Valley, which is suffering from a grapes of wrath kind of economic crisis as well as Sacramento, which is being hit hard by the Republican attack on government. Spending cuts have wide consequences.

This is the bitter harvest of 30 years of flawed  policy. Since 1978 California has not only embraced an economy based on debt, but thanks to Prop 13’s tax rules and its conservative veto, has forced the state government to rely on that debt.

That has made California more vulnerable to this crisis than almost any other state in the union, aside perhaps from Michigan (which has been in a Depression for a few years now).

Just as President Obama reminded Americans earlier this week that the current crisis was created by Republican policy, we have to remember that because of the conservative veto and a Republican governor, we too are suffering.

Something to keep in mind when Meg Whitman or Steve Poizner come calling, offering cures worse than the disease.

Orange County

Los Alamitos Mayor To Resign Over Racist Email

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Dean Grose, the mayor of the small OC suburb of Los Alamitos (located just east of Long Beach) and who sent a racist email to a black businesswoman showing the White House lawn replaced with a watermelon patch, now plans to resign:

Grose said in an e-mail sent to the Orange County Register on Thursday that he will resign at Monday’s City Council meeting.

“The attention brought to this matter has sadly created an image of me which is most unfortunate,” Grose wrote. “I recognize that I’ve made a mistake and have taken steps to make sure this is never repeated.”

Grose sent out the original e-mail from his personal account. It shows the controversial picture of the White House. On its lawn are a row of watermelons, and the caption reads, “No Easter egg hunt this year.”

But no amount of apology or resignation can hide the fact that Orange County has a reservoir of racism a mile wide and a mile deep. OC Progressive collects some links including that of one of my favorite OC writers, Gustavo Arellano, who delved into the KKK history of OC (and didn’t even mention the huge Klan parades in Anaheim and Santa Ana in the 1920s). Huntington Beach has had notorious problems with skinhead gangs going back to at least the 1980s, and immigrant-bashing protests led by the Minuteman movement brought out OC racists in this decade.

Just as important as those more overt expressions of hate is the casual racism that defines life in Orange County, folks like Mayor Dean Grose who would never consider themselves to be anything like a Klansman but who nevertheless see no problem forwarding around emails that traffic in racial hate, or try and dismiss its offensive nature by saying “can’t you take a joke?” It would be unfortunate if the lesson drawn from this was to hide your hate away. But it should be a reminder of how much work not just OC, but California as a whole, still has to do to eliminate racism in our lives.

Uncategorized

Thursday Open Thread

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Time for what you’ve all been waiting for – links.

• Check out Van Jones’ testimony before Congress on how to increase national service.  Very good stuff.

• Yesterday’s open thread included a link that said “Would you believe Congressman Foggo.”  It wasn’t made clear that Dusty Foggo, the former #3 at the CIA, had considered running for Congress in the past before being arrested on various corruption charges.  He’s clearly not going to be in any campaign at this point, and today he was sentenced to three years in prison for steering CIA contracts to lobbyist pals.

• There is an election next Tuesday in Los Angeles, for Mayor, some City Council seats and a variety of other offices, including City Attorney.  Jack Weiss is favored, but Republican Carmen Trutanich is getting a lot of press – even the LA Times endorsement – despite his record as a mouthpiece for polluters.

• The New York Times has an article on Eagle Rock, the one-time working-class community on the Eastside of Los Angeles, once thought to be the next wave of gentrifying hipster enclaves, now fallen on tough times due to the recession.

• Santa Monica, the “home of the homeless,” is experiencing some tangible progress in managing the problem, with an 8% drop in the street population in 2008.  This is mainly happening through an innovative program to find and provide housing and services to the population.

• According to the Sacramento Bee, a state superior court judge has issued a tentative ruling that state workers’ pay can be cut to the federal minimum wage when lawmakers miss California’s annual budget deadline.  Excellent.  Another incentive for the Zombie Death Cult to hold up the budget, and still more leverage to extort concessions when they do.  They won’t be happy until everyone who isn’t rich is basically a day laborer.  

Uncategorized

Asm. Torrico Goes After The Oil Severance Tax – Again

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It was hard to follow what was in and out of the budget in those final hours, but as it turned out, the oil severance tax, which at some point was part of the negotiations, ended up out of it.  So we remain the only oil-producing state in the country to not charge corporations for taking our natural resources out of the ground.  Assembly Majority Leader Alberto Torrico is trying to change that by introducing a bill that would tax oil companies and use the proceeds to fund higher education.  This was first reported on John Myers’ Twitter feed, but now California Chronicle has a full report.

With California spending almost as much incarcerating inmates in prisons as it does educating students in higher education, Assembly Majority Leader Alberto Torrico introduced legislation today to expand funding for community colleges, the California State University and University of California.

“California is on the wrong track heading in the wrong direction,” Majority Leader Torrico said. “Our prisons are overflowing and yet we are turning away students at our universities. The Master Plan for Higher Education is becoming a distant memory. This is not a sustainable path for California. We must invest more in higher education. It is a solid down payment on our economic future.”

The recently passed state budget contained a 10 percent across the board cut for the UC and CSU systems and reductions for community colleges.

The increased funding from the bill, AB 656, would be derived from a severance tax on oil extracted within California. California, the third-largest oil producing state in the country, is the only state where oil is extracted without a tax.

“My bill will bring California in line with more than 20 other oil-extracting states,” Torrico said. “When other states are charging over 12 percent from multi-billion dollar oil companies, we should be doing more to receive funds for our natural resources.”

While I’d rather put the money into the General Fund rather than a specific sector, I can’t imagine a more rational and simple idea.  Nevertheless, I’m sure the Yacht Party will try to block it, as they did successfully last year.  That can be a useful vote for the future (“Which side are you on, students or the oil companies”), but it does nothing to move us forward.  Only by ending the conservative veto can common-sense solutions like this help California progress.