Anti-tax groups get ready for big push in November

by Brian Leubitz

While President Obama won’t be spending a lot of time here in October, you can bet there will be a lot of money spent here.  With the Special Exemptions Act, the death penalty, several contested Congressional seats and the Governor’s revenue measure on the ballot, it will be a busy campaign season. But for Howard Jarvis’ corpse, it will be the same ol’ same ol. It’s what they do every day, slam the goverment, tell them how  terrible it is and bam, there you go.

There, at a news conference to announce the formation of “Californians for Reforms and Jobs, not Taxes,” Jon Coupal, president of the Howard Jarvis Taxpayers Association, previewed the campaign against the governor’s November ballot initiative to raise taxes. It will rely on messages, he said, that “quite frankly, are short and sweet.”

Brown’s opponents, Coupal said, will remind Californians of the state’s relatively high tax burden, challenge the Democratic governor’s claim that his tax increase is for schools and publicize unflattering examples of government spending.(SacBee)

Of course, take any large organization and you can find some dumb stuff going on. And, the California government is such and organization. But, just because there is a small stupid thing going on, doesn’t mean that we should just toss the big, smart things that go on every day. Like, you know, educating our children, maintaining our streets, and so on. California government is simply too big to fail.

Yet, that is where we are headed. With the continued pessimism and me-first attitudes of the anti-tax organizations, we are stuck on a 20th century budget in a 21st century reality. We have neither the flexibility nor the wherewithal to continue with budget disaster after budget disaster. And, yeah, the current budget is a mess.

The governor’s measure doesn’t fix that, and doesn’t totally save the budget, but it is a step that we must take.

At the University of California’s request, the Governor’s budget proposes to:

1. Shift $2.5 billion of existing state-supported debt onto the University of California’s books for capital projects paid for through State Lease Revenue Bonds.

2. Let UC take on more debt without legislative oversight in the future.

UC management’s proposal would kill essential state oversight of borrowing and take unnecessary risks that would leave taxpayers and students on the hook.  By rolling $2.5 billion of existing state-supported debt into UC’s budget, UC’s Wall Street management executives claim they could use the University’s superior credit rating to refinance the debt and save money this year.  In fact, UC’s credit rating is only a notch higher than the State of California’s.

Under this proposal, UC would be allowed without Legislative approval or even notification, to use General Fund dollars for any capital projects, not just to pay debt on the restructured bonds.

That hotel UC is pushing for at UCLA? Paid for with your tax dollars!

An additional financial burden of $2.5 billion in outstanding debt would put a squeeze on UC’s budget at a time when programs and jobs are being cut. It would also allow UC to take on even more debt without Legislative oversight. Transferring repayment of state-supported debt currently paid by the State to UC would not shield UC from future market volatility. Higher interest rates could increase debt service costs and divert already limited funds away from normal operating costs and core academic programs.

Runaway Debt Creates Pressure On Budget

Greater debt, future market volatility, and rising interest rates could create pressure on a limited pot of money. Higher education debt service costs in CA have already doubled in a decade, from $516 million in 2000 to $1.1 billion in 2010. Without adequate Legislative oversight, UC would be at risk for runaway debt.

If this is so bad for California’s taxpayers why is this still on the table?

This is a good question for Governor Brown and his staff. His office is the only current entity pushing this privatization bill. Anyone with any policy sense who reads the proposal sees immediate red flags. Anyone who remembers the Enron scandal or who has suffered at the hands of Wall Street over Main Street can see that this is a bad idea for all of California’s taxpayers.

Call the Governor and tell him no to UC’s debt privatization 916-445-2841 Tweet him at @JerryBrownGov #CABudget  

Increased budget deficit means big cuts with or without tax initiatives

by Brian Leubitz

With the recent announcement of a bigger than expected deficit, Gov. Brown has announced bigger than expected cuts are coming in his May revision of the budget.

The gap grew, the budget revision states, because Brown over-estimated tax revenues by $4.3 billion and the federal government and courts blocked $1.7 billion in cuts the state wanted to make. The remainder of the difference reflects an increase in the amount of money the state is mandated to spend on education under a complex voter-approved formula.

To close the wider gap, Brown has heightened the cuts he wants to make to Medi-Cal, to $1.2 billion, and maintained another $1.2 billion in welfare and child-care savings he proposed in January.

He also wants to slash payments to people who care for the disabled by 7% and reduce the state payroll through a shorter workweek or wage concessions. He proposed $500 million in cuts to the state’s struggling court system, including a one-year freeze on all new construction projects.(LA Times)

That’s just the best case scenario there. As horrendous as that may be, if the tax measure in November doesn’t pass, Brown is set to do a triggered cut of $5.5 billion and $3b other cuts.  

At this point, the waste is gone. We are cutting vital services that won’t just magically reappear when times get better. We are fundamentally changing how we treat each other, and we are letting social darwinism run amok. It’s a tragedy of immense proportions, and no saviors are riding in from the horizon.

Money would be directed towards carbon emissions

by Brian Leubitz

AB 32, our landmark climate change legislation, will have some enormous impacts on the state’s economy and the government. However, there’s this:

The amounts are potentially enormous: from $1 billion to $3 billion a year in 2012 and 2013, jumping to as high as $14 billion a year by 2015, according to the nonpartisan state Legislative Analyst’s Office. By comparison, the state’s current budget deficit is $9 billion.

But like thirsty castaways on an island surrounded by ocean water they can’t drink, Gov. Jerry Brown and state legislators face strict constraints on how they can spend the money. More than 30 years of court rulings and ballot measures — dating to Proposition 13 in 1978 — limit its use, probably only to projects that reduce greenhouse gas emissions.(Media News)

The state already has some spending lined up, including helping to pay for cleaner burning trucks for the ports. There is likely to be some benefit for the budget, as spending for climate change programs are shifted away from the general fund. However, unless the legislation is changed, it isn’t the solution for the deficit.

Combined measure raises hope for a progressive victory

by Brian Leubitz

Governor Brown for a long time has known, and publicly stated, that he wanted to eliminate the other competing revenue measures.  When he wasn’t able to do it by sheer publicity, apparently he found it necessary to strike a deal:

After weeks of battling in public and negotiating behind the scenes, Gov. Jerry Brown and the California Federation of Teachers have reached a tentative compromise on a November tax initiative, sources close to the deal said.

As currently structured, the deal would result in a smaller sales tax hike and larger tax increase on the wealthy than the Democratic governor wanted. CFT had been circulating an initiative with no sales tax hike and a two-step increase on earners starting at $1 million.(SacBee)

Now, Molly Munger still has her revenue measure that would raise taxes on pretty much everybody. And considering she just dropped another $300K into the account, it doesn’t seem like she has any interest in backing away now.  It certainly doesn’t seem like she’s posturing, but considering where her measure is polling, it is a long shot at best.

CFT and the Courage Campaign worked quite hard on this more progressive Millionaire’s tax, and they both deserve a lot of credit for pushing the Governor on this.

Large protest at Capitol draws attention, results unclear

by Brian Leubitz

If you have been paying attention, you have noticed the appalling cuts that the state’s university systems have taken. In fact, a recent study showed that for most middle class students, Harvard is now more affordable than the CSU system.  No matter what your goals are for the CSU system, this is a very bad thing. It is not functioning as a way to improve the lives of middle and lower class Californians, and it is not providing the resources for economic development that it should.

And so we get yesterday’s protests from students of both university systems and their supporters:

Another day of protests played out at the state Capitol on Monday with thousands of demonstrators denouncing soaring higher education costs and a select group spending most of the day inside the rotunda to achieve one goal: getting arrested.

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The main group of arrestees, who will be charged with trespassing, apparently felt they had made their point, although it was unclear at times exactly what that was.

The ballooning cost of attending public colleges and universities in California was the primary focus, but at times the leaderless Occupy movement supporters discussed issuing demands on a range of issues, from the repeal of Proposition 13 to being allowed to use Capitol restrooms during their sit-in.(SacBee)

Occupy is very good at actions and getting attention. But in this case, and in others, the message got overpowered by the theatrics.  And maybe that’s fine, as there are more than enough wonks in Sacramento. Maybe the theatrics will be just the thing to open a few eyes.

But those eyes are just as recalcitrant as ever. The Republicans just look out on this, behind their anti-tax pledge suits, and glaze over.  Will this be the action that breaks through?  Or will there be more actions until it does? This protest was something of an organizing nightmare. But whether the state can continue to ignore the protests, when the function of our higher education systems continues to dwindle, is the larger question.

But as Dan Walters points out, higher education has taken a drubbing:

The thousands of college students who marched on the Capitol on Monday to protest rising fees and decreasing state support had a point: Higher education has taken a disproportionately heavy drubbing in recent years as politicians attempted – and largely failed – to balance the state budget.

The Legislature’s budget analyst has calculated that under Gov. Jerry Brown’s 2012-13 budget, state general fund spending on the University of California, the state university system and community colleges will have dropped 21 percent in five years, while fee and tuition revenue will have increased by 64 percent.(Sacbee)

There are a number of reasons for this, but you can mostly chalk it up to the fact that cutting higher education is the easiest. It involves the fewest lawsuits, and so the students get screwed over and over again. It is just one more piece of the dysfunctional governance by committee that gives the legislature strange cues.

We need more revenue, and we have two initiatives that would do that.  However, the Millionaire’s tax would actually get some of that to higher education for a change. Gee, isn’t that a novel idea.

Governor releases poll showing measures would fail if all three on ballot

by Brian Leubitz

Of course, the question then becomes which measure you actually put on the ballot. Brown’s poll has some interesting figures on that:

Both Brown’s temporary tax hike — a half-cent rise in the sales tax coupled with increased levies on higher earners — and a proposed tax increase on millionaires sponsored by some unions score more than 50% on the poll. Brown’s measure is at 53% while the millionaire’s tax polls at 55%, according to a statement from Sacramento-based pollster Jim Moore.

The third proposed tax hike, an across-the-board income tax hike to fund public education pushed by civil rights attorney Molly Munger, lags with only 31% support.

But if all three appear on the ballot, the release states, none cross the 50% threshold. Brown’s wins 43% support, the millionaire’s tax 42% and the income tax 17%. (LA Times)

Munger seems not to be interested in backing off, despite what poll after poll shows: her measure really can’t pass. And, really, it should be no surprise. It increases tax increase for everybody making any amount over about $7750.  That really isn’t going to fly with any electorate really.

Now, as to the question between Brown’s measure and the millionaire’s tax, the issues become closer.  Both sides seem intent on their own measures making it on the ballot.  While Brown’s has considerably more resources to get on the ballot, there is still a strong chance of both making it.  Unless somebody backs off, we stand a chance of seeing all three measures on the ballot.

For reasons of confusion and principle, having three on the ballot makes it even tougher to get one through to 50%.  And at this point, I’m not sure the little discussion through the media is really working.

As Conservatives play games with the former President’s legacy, what would Ronald Reagan do in today’s California?

I probably wouldn’t have known it was “Reagan Day” but for the helpful tweets of @GeorgeRunner. The former legislator and current member of the Board of Equalization isn’t really much of a tweeter, but on occasion he gives us such helpful words as “Happy Reagan Day!” after a few weeks of silence other than an announcement of his “e-newsletter.” (By the way, if you call it an “e-newsletter,” you are doing it wrong.)

Anyway, I thought I would take a moment to remind Mr. Runner and his #tcot friends about a few facts of the Gipper’s tenure here in California. In a blog post, Bruce Bartlett, a Reagan domestic policy adviser, points out some of the false tax mythology:

Reagan’s record on raising taxes began almost the moment he entered politics. Elected governor of California in 1966, he inherited a large budget deficit from his predecessor, Pat Brown. Although a conservative, dedicated to shrinking government, Reagan nevertheless found the magnitude of spending cuts that would have been necessary in 1967 to be beyond reach. This led him to endorse a $1 billion per year tax increase, equivalent to a $17 billion tax increase today – an enormous sum equal to a third of state revenues at that time. Journalist Lou Cannon recounts the circumstances:

“No amount of budget reductions, even if they had been politically palatable, could have balanced California’s budget in 1967. The cornerstone of Governor Reagan’s economic program was not the ballyhooed budget reductions but a sweeping tax package four times larger than the previous record California tax increase obtained by Governor Brown in 1959. Reagan’s proposal had the distinction of being the largest tax hike ever proposed by any governor in the history of the United States.”1] ([CG&G Feb 2011)

Let’s stop with all the beatification and think about what really happened 45 years ago, and what is happening now.  Like Reagan, Gov. Brown inherited a big deficit from his predecessor. Schwarzenegger’s mish-mash of policies left the state without direction and with a huge deficit to show for it. Brown the Younger in his third time has a similarly daunting challenge as he did in 1978 after Prop 13 and as Reagan did in 1978. And like Reagan, he understands the impracticality of a cuts-only budget solution.  And the tax increases that Brown is proposing today is less than half of the Reagan 1967 tax increases.

Runner and his fellow Republicans need to really take a deep look about their presidential saint and how he was able to objectively look at a situation and be more than ideologically dogmatic.  Perhaps then we could really govern the state, and the GOP could return to relevance.

If you’d like to see more debunking of the religion rapidly building around Reagan, read the entire post. Think Progress also has a great post about Reagan’s real legacy last year for his centennial.  Let’s

Controller John Chiang sounds the alarm bells

by Brian Leubitz

While tax season is gearing up, the state government is now running low on cash reserves. Controller John Chiang announced today that without payment delays and other tactics, the state will run out of cash in March:

California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today.

The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June.

But Chiang said additional cash management solutions are needed because state tax revenues are $2.6 billion less than what Gov. Jerry Brown and state lawmakers assumed in their optimistic budget last year. Meanwhile, Chiang said, the state is spending $2.6 billion more than state leaders planned on. (SacBee)

To some extent this happens every year. Last year we had to borrow $10B to tide us over until tax revenues came in.  And heck, Chiang thinks this year will only be $5.4billion. The world is getting better, hooray.

Unfortunately, with the continuing high demands on state services, this is really to be expected. And, Chiang, as he has always done, will have to find a way to balance the state’s checkbook.  Fun job, isn’t it?