I happened to catch Which Way L.A., one of the few public affairs programs in California, and after about 20 minutes of listening I considered the unique method we have of running a 38 million-person nation-state with almost a total media blackout on government’s inner workings to be maybe a good thing.  Because this was the most fantastical 20 minutes of drivel you could possibly conjure, and I’m pained by the thought that anyone was exposed to it.

Warren Olney had his usual insider flaks on, with pollster Mark Baldassare, Fred Silva from California Backward Forward and Neal Johnson, Director of the “public performance” project at the Pew Center on the States.  You can listen to it here, but please, please don’t.  Let me summarize.  Basically the problem with state government is that nobody gets along.  If we’d only all pitch in as a team and work together to move things forward, everything would be dandy.  Also reviewing the performance of every single public program would eliminate the budget deficit, or something.

I don’t remember the words “two-thirds requirement” in the 20 minutes I heard, or “tax pledge,” or the sundry other characteristics that make California completely ungovernable.  The idea that you’re going to get people with the ability to hijack the budget with a tiny minority to willingly give up their power in the spirit of “working together,” when they’ve organized themselves around precisely the opposite circumstance, is so ridiculous and unserious that I’m surprised anyone can make the argument when they’re not teething.

Here’s the extremely simple point.  California isn’t allowed to govern itself, by its own rules.  If you want any possible solution without the same kind of gridlock and delays, CHANGE THE RULES and allow elected lawmakers to do their own jobs.  It’s not about being friendly or reforming on meaningless margins or “restoring voter’s trust” (whatever the hell that means).  It’s about allowing government to govern.  Talking about anything else is just verbal masturbation.

I mean, if Dan Walters can see the frickin’ light on this, it’s not locked away in some formula.

It is what those in the Capitol call – and what California Forward identifies as – a “structural deficit.” This is, in brief, a unique situation and what any governor did in the past means absolutely nothing today. Until and unless California resolves its underlying crisis of governance, the budget crisis, along with the crises of water, education, transportation, housing and everything else, will continue to bedevil us.

That’s the message that California Forward should be driving home.

No kidding.

Last fall I took the LA Times to task for framing the state budget crisis as a problem of “automatic” spending, and not being sufficiently attentive to the structural revenue shortfall that is the true cause of the budget problem.

While the LA Times has shown some improvement – George Skelton’s column today is mostly if not completely on target and the incomparable David Lazarus always has some good insights – the rest of the state’s media seems slower to follow.

Take, for example, Sunday’s SacBee column from Daniel Weintraub, California  Budget 101: What went wrong, when. Weintraub’s column purports to be a “a fuller explanation of the dimensions of the problem” – but winds up repeating the same discredited arguments, namely that this is primarily a spending problem:

But the economic issues only worsened a basic, structural problem in the state budget: Spending is programmed by law to grow each year at a rate that is generally faster than tax revenues can match. Current state law would push general fund spending to $113 billion next year if nothing is done to slow it, according to the Schwarzenegger administration. Revenues, meanwhile, are projected to decline further, to about $95 billion. The budget Schwarzenegger celebrated last summer would have bridged the gap for one year at best.

Weintraub then goes on to detail the education, health care, prisons and transportation spending that makes up that growth. But nowhere in his column would you see the following:

• Tom McClintock and Arnold Schwarzenegger’s $6 billion VLF cut
• Another $6 billion in tax cuts made to the state budget after 1993
• And of course, the start of the state’s budget problem: Prop 13.

In other words, Weintraub makes it sound like the state is in a budget crisis because it is overspending, instead of because it is undertaxing. This is especially important when we consider what the state has been spending on – education, health care, and transportation – the very things California needs to remain competitive in a globalized 21st century economy.

The aforementioned George Skelton column provides an excellent contrast, showing what a more accurate explanation of our budget problem would look like:

People, one place it [additional spending under Arnold’s administration] went was for Schwarzenegger’s car tax cut. Yes, that tax cut counts as spending — about $6 billion annually. It’s because revenue from the car tax — the vehicle license fee — had gone to local governments, not the state. The governor generously agreed to replace the locals’ lost revenue with money from the state general fund. But he never replaced the tax he grandiosely whacked. Big hole. Big mistake.

Even Dan Walters, the dean of California conservative columnists, has recognized the role tax cuts have played in the budget shortfall:

The 2000 decision to spend most of a one-time, $12 billion tax windfall on permanent spending and tax cuts that could not be sustained, leading to the state’s chronic budget deficits, is another [wrongheaded move].

And to his credit, Walters has argued for higher taxes, although as part of a holistic budget reform package that contains some problematic ideas.

The fact is that if we are to finally end 30 years of budget crisis, we have to find new revenues. The notion that any new taxes cripple economic growth is absurd – both California and the federal government hiked taxes between 1990 and 1993 and it didn’t prevent the 1990s economic boom. The investment in education and mass transit helps create more investment while saving commuters, students, and workers money; and universal health care (or even a modest expansion of government-provided care) creates significant savings for businesses and employees.

A focus on spending, however, blinds us to the structural revenue shortfall and leads Californians and their politicians to assume the only way out is to slash spending – which would make the cost of doing business in California, and the cost of living here, significantly higher.

Without solving the revenue problem, we will never cure this chronic budget crisis.

We’ve mentioned the recent increase in Democratic registration across the state in the past couple of years several times. Dan Walters, the “big guy” in Sacramento punditry, was very dismayed about said surge:

Torres and other Democratic leaders are also elated that two counties that had acquired Republican pluralities during the decades of Democratic decline, Ventura and Stanislaus, now have moved back into the Democratic column by narrow margins.

What neither they nor anyone else knows, however, is whether it’s a permanent trend or merely a temporary lull in the long-term erosion of Democratic Party strength, which has been much more dramatic than the losses suffered by Republicans. Both parties have been losing ground to the rising ranks of independents aligned with no party, who now constitute just under 20 percent of voters.(SacBee 5/5/08)

Walters goes on to make a bunch of excuses why Democratic registration gains are temporary and illusory.  Unfortunately for him, they are, in fact, real.  While nobody can say what’s going to happen in the future, but in the current political climate, Dem numbers are up. Sure, in the future, things may change. But guess what, that’s called politics. Things change. And while Dan wants to discount this, it is part of a greater movement away from Republicans nationally.

I think it’s notable that the budget gap is so wide this year that the SacBee’s house conservative Dan Walters felt the need to actually come up with a proposal himself rather than carp and gainsay everyone else’s.  That alone shows you the gravity of the situation and the wideness of the budget hole.  And I have to say, I think Walters came up with some half-decent ideas, or rather bit off some of them from elsewhere:

We devote too much money to prisons, with eight times as many inmates and 20 times as much spending as when we launched California’s massive prison-building program a quarter-century ago. Schwarzenegger is on the right path in suggesting the release of low-security inmates, especially those with drug problems, into treatment and transition programs. Spending $40,000-plus per year to keep a drug addict or a geriatric inmate in prison is ludicrous.

We spend too little on K-12 schools, and we spend it badly. We should raise per pupil spending to at least the national average, which might cost $4 billion to $8 billion more a year. We should also eliminate or consolidate billions of dollars in so-called “categorical” programs and redirect funds toward the kids and schools needing them most and toward proven educational strategies […]

We should expand Hill’s modest recommendations on tax loopholes, ruthlessly closing those whose only bases are political pull or bad habit, to finance what we really need and/or reduce overall tax rates to encourage economic investment.

A $10 billion-plus loophole-closure effort would be justified. But to overcome special interest resistance, we may need an independent commission, such as the one Congress created to close unneeded military bases. While we’re at it, we should rework the tax system to align it with the real economy, such as extending sales taxes to services and reducing the sales tax rate […]

Finally, we should stop financing infrastructure with bonds to be repaid from a deficit-ridden general fund. We should raise gas taxes, impose levee improvement fees on property owners and bill water users for the costs of supplying their needs.

Mostly, we should accept the reality that there’s no free lunch and if we want something from government, we must pay for it.

I excised the more dodgy ideas about increasing student fees on four-year colleges and reining in “out-of-control” public pension obligations.  But there’s a decent amount of common sense here, and it brings into balance the conversation needed about the budget by focusing on services instead of taxes, at least as related to education and water and infrastructure improvements.  The day that a conservative writes “we should accept the reality that there’s no free lunch” is a rare day indeed.

At the same time, there’s a lack of focus here on economic growth and in more innovative budget solutions that would make California a proper 21st-century state.  Judy Chu’s proposal to apply the sales tax in the same manner as New York, Texas and Florida would wipe about $10 billion dollars off the books at the drop of a hat.  The services in question, including health club dues, landscaping, and taxidermy, are in general utilized by the higher-income residents of the state, and thus the taxation will be somewhat progressive.  Moreover, the services California could provide would have a substantial economic impact to practically everyone who lives here.  Indeed, there is no free lunch, and taxes are the dues we pay for a free society.  It’s as patriotic an action as you can make, and those who want to avoid taxes actively hate America and don’t think it’s worth paying for.  As far as I’m concerned, April 15 is Patriot’s Day.  And it can be a windfall for the people of this state if we manage our finances in such a way to provide equal opportunity and economic justice for the 38 million who live here, which will lift up all of us.  Dan Walters is coming around to this, believe it or not.

Originally posted at my high speed rail blog

On Monday Sacramento Bee columnist Dan Walters devoted his column to the high speed rail plan. Unfortunately he showed a total lack of understanding of the reasons to build it.

So Dan Walters needs our help in grasping why this project is so necessary to California’s future.

After describing some of the very real issues with the overall funding plan, he devotes the second half of his column to an attack on high speed rail:

The most romantic bullet train vision is the lightning-fast trip from downtown Los Angeles to downtown San Francisco. But how many people really want to make that trip each day, and would it represent a marked improvement over the very frequent air travel now available?

I can anecdotally provide him with about two dozen names of CDP convention attendees who expressed the desire for a high speed train to connect San José to their homes in SoCal. But we can answer this charge much better by explaining why HSR will be not just an attractive – but necessary – transportation option.

First, attractiveness. I dealt with that last week when discussing the 5% increase in Acela market share on the Northeast Corridor. Acela isn’t even a true high speed rail system – ours would provide double the speed of Acela. LA-SF is one of the busiest air corridors in the country, and if a flawed high speedish train can take nearly half the market share from airlines in the Northeast, that suggests it’ll work here too.

Second, necessity. Walters assumes that present conditions will last for some time to come. But nowhere in his column are the words peak oil mentioned. Nor does he discuss soaring gas prices. Both will make it difficult and unattractive to continue flying between the two halves of our state, causing either supply disruption or fare increases beyond the ability of most Californians to pay. Walters may not believe in peak oil, even though it is a fact. But the constant rise in oil prices is going to have to eliminate cheap fares sooner or later.

He goes on to try and undermine the CHSRA claims on air travel:

The High-Speed Rail Commission’s environmental impact reports contain some underlying air travel projections that are very difficult to swallow. It would have us believe that air travel demand between Northern and Southern California would nearly double between 2000 and 2010.

That flies in the face of actual airport traffic figures and seems to conflict with another commission projection that in the absence of building the bullet train, air travel times would increase only fractionally between 2000 and 2020.

This passage essentially says nothing. Demand may well have increased, but traffic figures have not met demand. Airports are congested – witness LAX or OAK on a weekend. Most California airports lack the capacity to add slots – Orange County is limited to 14 gates, LAX expansion has languished for three decades, SFO and OAK physically cannot expand any further into the bay. If peak oil is not real, then that means our population really will continue to expand – and without new terminals and runways, and in the absence of airplane innovation (most airplane R&D goes to fuel economy, as supersonic transport appears to be a dead concept) air travel times cannot physically increase.

How about auto travel? The commission projects that driving from Los Angeles to San Francisco, seven hours in 1999, would take eight hours by 2020. But as anyone who makes long-distance drives through the state knows, Interstate 5 is very lightly used now, at least outside urban areas.

This is wrong on two points. First, Interstate 5 is NOT lightly used outside urban areas. Certainly not in the San Joaquin Valley. It is a very heavily used artery. I have on several occasions been stuck in traffic jams in the middle of nowhere in Fresno County on I-5, and on several occasions found it took nine hours to drive from OC to Berkeley.

Second, those urban areas continue to expand. When new development pops up further north on I-5 near Castaic, or in the Tracy area, that adds congestion that a long-distance commuter will encounter on their drive between LA and SF. There never used to be a regular traffic jam on 580 in Livermore, but it’s a fact of life now. One used to be able to drive through the Santa Clarita area on the way to LA without encountering much traffic, but that is now difficult.

California’s traffic congestion is an urban condition, and the most likely patrons of high-speed rail wouldn’t be long-distance travelers but commuters – a poor use of expensive, sophisticated technology.

Again, this is simply not true. Interstate 15 between SoCal and Vegas is another example of a non-urban interstate that regularly sees massive traffic jams. And Walters’ argument that most users would be commuters is itself flawed – either because it is flat wrong (ridership on Amtrak California’s intercity trains has been steadily rising for years now) or because it doesn’t take into account the attractiveness of a quicker commute.

That explains why the most ardent support for bullet train service is to be found in the Central Valley, which is poorly served by airlines and whose main artery, Highway 99, is highly congested with auto and truck traffic.

Bullet trains would make commuting to and from places like Fresno, Modesto and Bakersfield easier. But wouldn’t that merely encourage the sort of sprawl that we are supposed to be discouraging?

Sprawl is a product of land use laws and cheap oil. We’re already losing the cheap oil, which itself is going to stop most sprawl in its tracks. As to land use practices, why should HSR be responsible for the lack of good smart growth planning in the Central Valley? The state ought to step in and subject all local land use planning decisions to AB 32 guidelines on carbon emissions, and localities need to improve farmland protection and infill development rules no matter what HSR’s fate is.

Walters argued that:

even the most ardent advocates have yet to present a persuasive, fact-grounded rationale for spending so much borrowed money on an entirely new transportation system.

Well, Dan, my blog is intended to be exactly that persuasive, fact-grounded rationale. HSR is necessary to our state’s future.

Dan Walters is out with a column arguing that our schools have plenty of money already.  He describes the education community and Democratic legislators as “howling” about Schwarzenegger’s proposed bugdet, which slashes education spending and has already resulted in 20,000 education professionals getting pick slips.

Naturally, the Republicans are attempting to claim that we are already spending too much on school administration costs and education reforms.  They point to California’s poor scores on standardized tests as a reason to cut school funding even more.  Somehow logic seems to be eluding them.

Walters bases his column on numbers released by the Census Bureau, based on what he calls “hard numbers”, but when you dig into them, they actually undermine Walter’s argument.  (check the flip)

The Census Bureau report strongly refutes the oft-cited “fact” that California is near the bottom in per-pupil school spending. The national average was $9,138 in 2005-06. California was at $8,486, with New York the highest at $14,884 and Utah the lowest at $5,437 – one of 22 states, in fact, that fell below California’s level.

In terms of school revenues, California was 25th among the states at $10,264 per pupil, just under the national average. It was above average in per-pupil income from federal and state sources and about $1,700 per pupil below average in local revenues, thanks to Proposition 13, the 1978 property tax limit measure.

Walters is arguing that below average is just peachy.  Keep in mind that these figures are not adjusted for cost of living, just straight expenditures.  The Education Coalition naturally has a few things to say about these numbers and points out a few details that Walters conveniently skipped over.  This is from a press release I received via email, sorry no link.

The Census Bureau numbers show that California still spends $652 less per student than the national average, even though their figures on “student spending” include funds from outside the state that never make it into the classroom, which arguably inflate the figures.  The Census Bureau estimates lump in payments made into the state retirement system, as well as federal funding beyond what the state spends. But even including those calculations, California’s significantly below-average spending on students is abysmal. By comparison, the non-partisan national publication Education Week issued a report showing that California spends $1,900 less than the national average, because it only includes the actual funds spent by each state on each student.

Back to the cost of living discussion….even though we have extremely high costs, housing in particular, our teachers are still paid below the national average on a per pupil basis: $3,479 in California – compared to the national average of $3,811.

More from the Education Coalition:

The report also shows that California ranks 49th out of 51 states in the amount of funds spent on “general administration,” which includes spending on the Board of Education and Executive Administrative Services, including the office of the Superintendent.

Those figures directly undercuts the arguments of the Republicans about our school administration.

California also ranks dead last in funds spent on transportation services, according the Census Bureau.  This is a budget item that many school districts are having to cut even further with the proposed $4.8 billion in funding cuts, making it even more difficult for students in both rural and urban areas to get to school.

Remember the heralded studies that the governor put together in advance of his “year of education”, guess what they said about education spending?  We need more investment in our students and our classrooms not less.

The legislature needs to hold the line on the budget.  We cannot afford not to invest in our future.

UPDATE by Julia: Watch the video on the Yacht Party.

UPDATE by Robert: Arnold’s now getting in on the follies – the SacBee reports he said he agreed with Elizabeth Hill’s call to close $2.7 billion in tax expenditures but then backtracked a little while later.

Judy Lin at the SacBee took a look at the Yacht Party’s bankrupt arguments about how we simply have to enable tax evasion or poor people are going to starve.

“The immigrant who sprays fiberglass on a boat will lose his job. The small-business owner who installs avionics on an airplane will lose his business,” state Sen. Dennis Hollingsworth of Temecula told GOP members during a Feb. 15 floor debate. “Those are the people who are going to be affected by this. It’s not the rich.”

You know, never does a day go by that the Yacht Party doesn’t show its deep respect and concern for immigrants.  Somehow, though, I have the sneaking suspicion that they’re being, what do I call it, completely disingenuous.  The Legislative Analyst has correctly described this as tax evasion, the Governor has correctly described this as tax evasion, even the TAX EVADERS have correctly described this as legalized tax evasion.

Chuck Lenert, 57, of Sacramento saved nearly $30,000 in taxes when he bought a used 58-foot Kha Shing motorboat near Victoria, Canada, three years ago. It came with a docking slip in Canada, he said, so it was cheaper to leave it there and pay an attorney $2,500 to ensure his tax status was in order with the state.

“I was just following the rules of the state of California, so why should I pay sales tax?” Lenert said. “I wasn’t trying to do anything but follow the law.”

For a year, Lenert, who sells hardware for a living, would travel every few weeks with his family and friends and take the $376,000 vessel, named Knots and Bolts, around the waters off Vancouver Island to catch crabs, salmon, oysters and shrimp. After a year, he moved the boat to Washington state.

“I would say that the 90-day guys are more cheaters,” said Lenert, who has since brought the boat down to Sacramento. “I had a bona fide use.”

Not that it should even be a question, but contrary to the Yacht Party’s protestations, actually making yacht owners pay their sales tax would have no material effect on sales whatsoever.

The analyst’s report found that a longer exemption period had little impact on manufacturers and sellers because their products sell nationwide.

Tim DeMartini, owner of DeMartini RV in Grass Valley, said the length of the exemption doesn’t affect his business because two-thirds of his orders come from outside California. The average 40-foot big diesel, he said, sells for $150,000.

“It won’t make that much difference to us,” DeMartini said, adding that the impact might be greater for the buyer.

Due to this “conflicting” information, Yacht Party members are just so gosh darn confused about the issue that they’d rather just walk away from it, which has the added benefit of, you know, saving Commodore Ackerman’s yacht tax.

“I haven’t been able to conclude which argument makes the most sense,” said Assemblyman Roger Niello, R-Fair Oaks, who abstained from the vote.

As for Dan Walters’ predictable media “he said, she said” argument, I think there’s a slight difference between yacht owners avoiding sales tax and income tax credits for children for working-class families.  Call me nuts.

UPDATE: Well, I spoke too soon. Dan Walters apparently got some blowback on the re-enact the VLF theory.  From today’s Capitol ALert PM email:

Dan Walters backs away from an earlier column suggesting the governor could reinstate the vehicle license fee, because a deal with local governments prevents that. “The net effect of this complex deal was to punch a semi-permanent, $6 billion hole in a budget that was already dangerously out of balance. So while Schwarzenegger was still promising to end ‘crazy deficit spending’ and balance the budget, he was, effectively, making it virtually impossible to do so,” he writes.

Oh well, so much for another one of Dan’s brilliant ideas. Maybe he’ll retract his global warming denials soon. /update

I can’t believe I am writing this. I’ve not hidden my general distrust of Dan Walters. But, he makes a good point yesterday, and so…what Dan Walters said:

Rescinding the car tax cut would be both the easiest way for Schwarzenegger to close the budget gap because it wouldn’t require a legislative vote and, politically, the most difficult, given his vociferous advocacy during his 2003 campaign for governor.

He is, as the old saying goes, hoisted on his own petard – which literally translates into being hurt by his own gaseous emissions.(SacBee 12/9/07)

Of course, most of us understand that if the VLF had not been eliminated back in the day, we wouldn’t be dealing with a budget “crisis” today. It’s just that simple.  But, given his harsh rhetoric, it would be challenging for Arnold to pursue such a course.  But a bold course it would be. But let’s back up a minute:

Schwarzenegger has indicated in private conversations with budget stakeholders that new revenue would be considered in return for spending cuts. The conventional wisdom is that new taxes are politically impossible because Republican legislators would never supply enough votes to meet the required two-thirds margin.

Whoa, while Walters generally veers in bizarre directions on his analysis, his information is generally solid. So, at least the germ of considering increasing revenue is in his head. That’s a start.  But, it’s also true that Republicans in the Legislature will have nothing to do with increasing revenue.

The interesting thing about the VLF is that there is no vote required. You see, it was never really a tax cut, it’s a state backfill to local governments. And if the governor declares that we can no longer afford that backfill, municipalities can resume collection of the VLF.  And the state can hold on to their billions of backfill.  See, one stroke of the pen killed the VLF, and one stroke can bring it back.

The only question here: Does the action hero have the courage to look past his past bravado and see what’s best for the state. I wouldn’t hold my breath on this one, though.

I really, really don’t like to agree with Dan Walters. He’s quite obtuse, but I suppose that’s neither here nor there for the purpose of this particular insight: the GOP has managed to leverage the 2/3 supermajority for the budget requirement to extort other compromises. Compromises for which they don’t otherwise have the vote. We talked about this briefly on the Calitics Show with Mark Leno on Wednesday, so maybe Dan was listening to me when he wrote this in today’s SacBee:

Initially, trailer bills were just boring bits of legislative ephemera. But politics being what they are, someone eventually noticed that the trailers, drafted and enacted quickly and secretly, made them perfect vehicles for “lowballing” other stuff.

Trailer bills have proliferated, filled with provisions that either have nothing to do with the budget or change it in mysterious ways, and are routinely enacted without any analysis of their effects, much less any opportunity for outside input. They are, moreover, “urgency” bills that take effect immediately upon being signed by the governor.

This year, the Senate Republican caucus is trying to get bills limiting Atty General Jerry Brown’s power and to drastically cut back on the California Environmental Quality Act (CEQA). They would have no leverage outside of the budget process to demand these changes, so they use the only process where they have some sort of governable size: the budget.

It is unacceptable that a minority should be attempting to kick and scream their way to overrule the majority’s decisions.  It’s just one more reason to get rid of the 2/3 requirement.