by Sara Flocks, California Labor Federation

“Proposition 13 set up an unfair and dysfunctional two- tiered system of property taxes. It choked off a source of revenue, and the lack of that revenue has brought California to the edge.” –Kevin Starr, historian and California State Librarian Emeritus

Many Californians would agree with Kevin Starr that our state is teetering on the edge of disaster. Unemployment remains the second highest in the nation, 32 percent of all mortgaged homeowners are underwater, public schools have been cut to the bone and public universities are unaffordable for the middle class.

Big business and their Republican allies have repeated the laundry list of why California’s economy is struggling so many times that it is practically written in stone—Taxes, Regulations, Public Employees. These are the unholy trinity that supposedly crashed California’s economy and threatens to smother any business growth in the future.

The facts, however, contradict the well-worn talking points of big business. The Council on State Taxation, a business-friendly group led by CEOs of major corporations, found that California has a moderate tax burden, taking less in taxes from business than many other states, including the sweethearts of the right, Texas and Florida. 

Many experts look at regulations as job creators, in addition to the benefits to public health and worker safety. Roger Noll, co-director of the Program on Regulatory Policy at the Stanford Institute for Economic Policy Research breaks down the GOP’s obsession with regulations:

The effect of regulation on jobs has nothing to do with the mess we’re in. The current rhetoric about regulation killing jobs is nothing more than not letting a good crisis go to waste.

He goes on to state that regulations may affect job distribution, but not the total number of jobs, eliminating the possibility that California’s landmark environmental laws crashed the global economy causing the current recession. 

As for public employees, it requires leaps of logic to understand how laying off thousands of teachers, nurses, home health aides, crossing guards, librarians and public works crews makes the state a better place to do business. California already has the 4th fewest state employees per capita as any other state—even Texas has more state workers per capita than we do! And more than a third (37 percent) of those public employees are at UC or CSU—I doubt laying off professors, economists and business school personnel will please the business community too much. 

That begs the question, then, why is California on the edge? Putting aside the deregulation of Wall Street and their subsequent destruction of the global economy through risky and irresponsible gambling, why is California in such a dismal economic state?

A reporter recently put that question to state historian Kevin Starr.  He traced the beginning of California’s decline to 1978, the year Proposition 13 passed. Prop 13 capped property taxes, limited local governments’ ability to raise revenue and imposed a two-thirds majority to raise revenue.

Prop 13 has had profound negative consequences for California on all levels. Local government is starved of revenue and dependent on the state to keep schools open and local employees on the job. In turn, the budget crunch forces deep cuts to UC, CSU and every public program that impacts the lives of Californians. At the same time, elected officials can’t vote to raise revenue without a supermajority, giving the minority of anti-tax Republicans disproportionate veto power. 

While Prop 13 was seen as a populist measure, corporations have been the true winners. Across the state, the burden of property taxes has shifted radically from corporations to homeowners. A recent report by the California Tax Reform Association (CTRA) cites numbers for all counties showing how homeowners have taken on a significant burden of funding public services, while corporations have shirked paying their fair share.

The report goes on to outline how corporate property owners can exploit a loophole in the law to avoid paying what they really owe in property taxes. The law requires a 50 percent “change of ownership” to trigger reassessment, which corporations conveniently avoid in many transactions. The Bloomberg article describes a number of billion dollar commercial property owners that have avoided paying millions in taxes, including the owners of the luxury hotel the Fairmount Miramar. 

The CTRA summarizes the extent of the problem in their report “System Failure:”

We have found major changes of ownership in major properties which have gone without reassessment. The ones we examined are predominantly those of private equity buyouts, corporate purchases of companies, and bank mergers which have avoided reassessment….We believe that there are many properties, particularly the banks and other commercial properties, which should have been reassessed but have not been….

Not only has Prop 13 starved state and local budgets, caused mass layoffs and created a huge loophole for corporations to shirk paying taxes, but it has also put many new business that WANT to locate in California at a disadvantage. Because of the cap on property at the time it was purchased, property owners, including businesses, pay incredibly different tax rates. So a new business that wants to move into California may locate and have to compete with another business that pays millions of dollars LESS in property taxes than the new business. Some reward for job creation, right? Move to California, create jobs and WHAM pay more than your competitor just because they bought property before Prop 13? That sounds like something free-market business types would oppose!

So what will it take to pull California back from the edge? What can we do to stop our state from falling into an abyss of unemployment, foreclosure, budget cuts and misery? A good first step is to reform the commercial property side of Prop 13. By closing loopholes on “change of ownership” definitions and allowing more reassessment and a higher cap, the state could raise significant amounts of revenue. That would be a good first step to stop the budget hemorrhaging and put California on the road to recovery.

Gov. Brown vetoes high percentage of bills.

by Brian Leubitz

Every year, legislators from each house get a certain number of bills they can carry. It varies from year to year, depending on leadership, but can vary from as little as 10 to well more than double that number.  Every year, legislators basically go shopping for bill ideas. Some of them come in through the normal constituent relationships. Others from lobbyists of sponsoring organizations, and well, various other sources.

The interesting part of this is that legislators typically want to get their total up to the line.  Whether that is to make it appear that they have a lot of accomplishments, or to look busy is a matter of perspective.  However, every year we get a slew of bills at the end of session, many very important. Others, well, less so.

Gov. Brown prefers a less is more approach, and when it has come to vetoing bills that have come across his desk during this bill frenzy, it has shown.

From mid-September to late Sunday night, Brown signed 466 bills and vetoed 97, his office said.

Brown’s veto rate for the year overall was slightly lower, at about 14 percent. In the first year of his third term, Brown signed 760 bills, vetoed 128 and allowed one bill to become law without his signature, his office said. (SacBee)

Now, the 17.2% veto rate isn’t astronomical, as it is far lower than Gov. Schwarzenegger’s rate. However, given that his party is in control of the Legislature, you would expect that number to be slightly lower. But, again…less is more in Jerry’s world.

There were a few bills on the recent action pile that are worth a bit of note.  Sen. Juan Vargas’ bill against supercenters, SB 469, got the veto stamp.  The bill would have required supercenter developers to conduct an economic impact report to disclose impacts upon local economies prior to being approved to build in a local jurisdiction.  But, with the false notion that we don’t want to slow Wal-Mart from “creating jobs”, nobody has really sat back and thought of the real economic toll on the economy.  And apparently, it won’t be happening in 2012 either.

Brown also vetoed a bill regulating “debit card paychecks”.  These debit cards are targeted at low income workers and carry some pretty onerous fees, as part of the high cost of being poor.  But banks generally get their way when their lobbyists are involved, and they were able to get Gov. Brown to kill the bill while saying that he wants to work with the institutions and the Legislature to find a “compromise” for the debit cards.

Finally, in case you didn’t hear, the Governor signed the shark finning ban, at least one bill that environmentalists and progressives could count as an accomplishment.

Three years before the election, Governor already faces scrutiny about his plans.

by Brian Leubitz

While Jerry Brown was busy over the weekend signing bills to ban synthetic marijuana and bar a San Francisco measure to ban circumcision, apparently people are pretty excited about replacing him.  Or perhaps more accurately, people are excited to talk about people who could replace him.

“I’ve extremely enjoyed my first year,” Brown said. “I find it — I don’t know if I’d call it exhilarating — but I find it quite engaging and interesting and fully worthy of my total involvement.”

There had been speculation when the now 73-year-old Brown was first elected to what actually amounted to a third term that he would not run again.

If he does decide to seek another term it would cause serious damage to any number of folks who want to be governor. (LA DN)

Of course, this came up in the context of an interview with CalBuzz a while back, though from their article, the question seemed to be directed more at how Brown was handling his first year back in the Horseshoe.  But, Sacramento being what it is, there are always people eyeing the top spot, and tons more willing to talk about people eyeing it.  From every statewide elected official to a the big city mayors, there will be attention on the 2014 race.

Did I mention that Brown has been in the office less than a year?  Welcome to the 24 hour news cycle.

Internet retailer ends long stalemate with California

by Brian Leubitz

You may have noticed that in the article below, I have an Amazon.com link to a book about a horse.  Which, mostly I just found kind of cute,  but tangentially related to the story.  But, why Amazon, you ask?  Well, remember that deal I mentioned a few weeks back, well, it’s official and Amazon has reopened their affiliate program to Californians.

Gov. Jerry Brown signed legislation Friday that postpones new sales taxes rules that would have affected online purchases in California, granting more time for traditional and online retailers to lobby Congress for a national standard on the high-stakes issue.

The bill, crafted as a compromise among Amazon.com, traditional retailers and California lawmakers searching for ways to raise revenue, delays until at least September 2012 online tax rules that were implemented as part of this year’s state budget package.

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Under the deal, the retailing giant will rekindle its relationship with its California affiliates and has promised to create at least 10,000 full-time jobs and hire 25,000 seasonal employees in the state by the end of 2015.(AP)

So, you can now go back to wondering whether the Amazon tablet will be the iPad killer and getting free shipping.  That being said, buying in local, independent stores is still your best choice for economic development in your own community.

Jerry talks anti-tax doctrinaires with CalBuzz.

by Brian Leubitz

The Republicans and the Democrats, at least in the venue I know best, California, have a very different relationship with their respective bases.  The Democrats raise money from their activist base, gets volunteers, and then generally ignores them.  The Republicans, well, it is a very different story.  Sure they get money and volunteers, but the tail wags the dog.  The right wing activists of the Republican party controls them.

As a long-time blogger, I suppose I have a bigger megaphone than most.  However, I have nowhere near the power (nor earning power) of Jon Fleischman, my right-wing counterpart at the FlashReport.  He says something, and all of a sudden, legislators are looking around to make sure that they didn’t cross him. Me, well, sometimes I get an “attaboy” when I am of some use, but let’s just say that Calitics isn’t lucrative, and that nobody is calling me a horseman of anything but the cartoon variety http://1.bp.blogspot.com/_dj0Q…

So, it is interesting, that, in an interview with CalBuzz, Governor Brown called out the Republican base as the proverbial tale wagging the Republican party.

Invoking the infamous symbols of Conquest, War, Famine and Death from the Book of Revelation, the former seminarian identified the anti-tax fearsome foursome to whom the Republicans submit as 1) DC anti-tax crusader Grover Norquist; 2) Jon Coupal of the Howard Jarvis Taxpayers Association; 3) LA radio spewers John Kobylt and Ken Champiou and 4) FlashReport, GOP operative Jon Fleischman’s right-wing blog.

“It’s emotionally quite wrenching for any of the Republicans to embrace anything opposed by the Four Horsemen of the Tax Apocalypse,” Gov. Gandalf told Calbuzz. “If that group, or even maybe any one or two of them, invoke the dreaded ‘t’ word, they do cower.”

Of course, this is really nothing new.  If you’ve taken a bit of time to really consider the California right-wing over the past two decades, it doesn’t take a PhD in political science to see their slide from pragmatic dealmakers to ideological extremists.  Jerry likely knew this before he retook the Horseshoe, but perhaps the breadth and depth of this takeover took him by surprise.

To be honest, in many ways, the right-wing has more power over the Democratic Party than the left-wing base.  Under the 2/3 rule, revenue legislation must be tailored to hold all of the conservative Democrats. Nobody can take a walk, even if we did have the 2/3 Democratic chambers that we have been lusting after for so long.

Fleischman has a post today excoriating former Senate minority leader Dave Cogdill for agreeing to temporary sales tax increases.  He states, and perhaps daydreams, of what California would have looked like if we had a 2011 budget in 2009.  And the thing is for Fleischman, perhaps the world may have looked slightly better.

But that is only if you are doing well.  After all, California (and the US in general) is a great place for those who are doing well financially.  But ask those Californians who are alive today because they got a helping hand from state services, and you would see a very different picture of that 2009 vs 2011 budget debate.

Of course, the fact that the Rich need the state is hardly reported. But California without the economic engines that are the UCs, CSUs and the community colleges is a markedly different (and worse off) state.  A California without the public infrastructure is a worse off state.  We all need the public goods that only the state can provide efficiently. Denying that might be convenient for the Right, but it is devastating for California.

Governor makes quip, Democratic Legislators get nervous

by Brian Leubitz

Well, we’ve completed a full legislative session with a Democratic governor, so folks had great hope that we could finally get some legislation that had gone to die on Governor Schwarzenegger’s desk might stand a chance with Governor Brown.

But Jerry Brown, ever the mercurial sort, had some bad news for those legislators and groups with legislation landing on his desk: get ready to sing the “veto blues”:

“I’m going to veto a lot of bills over the next 30 days,” Brown told reporters after an event to reward schools with high physical fitness achievements.

“So I have to say to some, fasten your seat belt cause this is going to be a rough ride. They’ve given me 600 bills and there’s not 600 problems that we need those solutions for,” he said. …

The governor declined to say whether he would sign or veto specific bills, but he added, “You’ll hear soon enough. I think they’ll be playing the veto blues before we’re finished.” (SF Gate)

While he was coy about specific bills he did say that his response to the state aid for the “dreamers”, students who were brought to California by their parents without documents, but graduated from California high schools, was to consider the song “California Dreaming” by the Mamas and Papas.  

Get ready for a very interesting 30 days.

In looooong session, Jerry Brown is unable to muster 2 GOP votes

by Brian Leubitz

If you are like me, and follow a lot of Capitol reporters on twitter, you will see a slew of tweets ending around 2AM last night.  That would be because that is when the Senate finally closed its day and finished up this Legislative session.

But through all that, Brown’s big last-minute goal went down in the Senate:

Gov. Jerry Brown’s corporate tax package failed to clear the state Senate in the final hours of the legislative session.

The plan, contained in Senate Bill 116, fell five votes short of passage, by a final tally of 22-15.

The Democratic governor had proposed changing a corporate tax formula to require that multi-state companies calculate their tax liability based on the portion of sales in California. The roughly $1 billion expected to be raised annually through the change, mostly from out-of-state companies, would have been directed to specific tax breaks, including a sales tax exemption on manufacturing equipment. (SacBee)

The Governor wasn’t even able to hold all the Democrats and one (I’m trying to figure out who) actually voted no.  The question now for Brown is how he gets anything done with a Republican minority that understands their one (and only) power to block revenue legislation.  But, of course, even if the Senate is 2/3 Democrats next year, we now know that is no guarantee of anything.

Governor looks to secure two Republican votes for tax changes

by Brian Leubitz

Well, step one for Jerry Brown is complete, as he got 2 Republican votes in the Assembly, but the job is far from complete.

The Democratic governor’s revised tax plan raises about $1 billion in corporate taxes, mostly from out-of-state companies, and redirects that money toward tax breaks for California businesses and individuals.

He enlisted two Assembly Republicans to support the package, but he still must find votes from at least two reluctant Senate Republicans for his plan. The Legislature is scheduled to close its regular session tonight.

Brown and lawmakers hailed the plan as a jobs creator, though they offered few projections on its economic stimulus impact. Brown was joined at a news conference by GOP Assemblymen Nathan Fletcher and Cameron Smyth, who voted Thursday evening to put the legislation, Assembly Bill 1X 40, over the top in the lower house. The measure passed on a 54-10 vote, with the bare minimum for the needed two-thirds majority. (SacBee)

Sen. Dutton is apparently not ok with taxes being raised on anybody, even if the taxes are just being shifted.  Apparently taxes on any one person can only go down in the world of Sen Dutton, and then proceeded to call for a special session to review the measure beyond Friday.  Because then, you know, he could stall it forever and make sure nothing happens.  That’s kind of his deal, don’t you know.

The likely targets for this measure will be Sen. Cannella, maybe Sen. Aanestad, and whomever else Jerry can drag along for the ride.  2 votes is doable, but certainly will take much arm twisting.