State may end April $3B ahead of schedule

by Brian Leubitz

The news that April revenues are higher than expected is unambiguous good news. However, this being budget news, there are always caveats. First, the bottom line:

California’s tax revenues began 2013 stronger than expected and will end the all-important month of April some $3.5 billion ahead of Gov. Jerry Brown’s assumptions.(John Myers / News10)

Given the past decade, you can’t help but smile upon those numbers. However, Gov. Brown has already said that he isn’t keen to spend any of the excess quite yet. First of all, much of that money will be automatically diverted to make up for funds cut out of Prop 98 K12 education guarantees. And there is still speculation that a lot of the money was one-time bonuses given out by businesses before the Prop 30 tax increases took hold.

There are sure to be debates in the Legislature about providing additional funding for some of the very worthy programs that were slashed over the last few years. However, don’t expect Gov. Brown to go along with most of that additional spending, as he has already indicated that he’d prefer to save any excess revenue.

All that being said, it is certainly refreshing to be in the situation of discussing excess revenue than our tired budget slashing debates of past years.

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

Decision of Nicholas Berggruen’s good government committee means one less possible revenue measure

This morning, CalBuzz released polling data showing the revenue measure of the Think Long committee to be trailing two other measures.  CalBuzz posited that they would probably just go along with Brown’s when push comes to shove. And, well, I guess the push came quickly, as this afternoon they just announced that they won’t be pursuing their measure for the time being.

Therefore, we have decided to proceed as follows:

1)      Continue communicating the necessity and benefits of the Tax and Revenue Reform Plan and engage a diverse range of stakeholders, with the goal of releasing draft ballot-measure language for comprehensive public and fiscal review during 2012, for the purpose of filing the strongest-possible measure for the November 2014 ballot.

2)      In the meantime, a high-turnout election is a terrible thing to waste.  California voters deserve the opportunity in 2012 to begin the long process of reforming state government.  Therefore, in the coming days, we will be announcing our intention to partner with other organizations by generously supporting one or more reform measures that have already been filed for the 2012 elections, consistent with our Blueprint.

My guess would be that Berggruen will write a check to Brown’s campaign and then participate in the gentle nudging of the other measures to the side.

Full release over the flip

STATEMENT OF THINK LONG COMMITTEE FOR CALIFORNIA REGARDING THE 2012 BALLOT, BUDGET AND TAX REFORM AND NEXT STEPS

“Six weeks ago, the independent Think Long Committee for California concluded more than a year of investigation and deliberation by releasing ‘A Blueprint to Review California,’ a list of bipartisan recommendations for fixing the state’s dysfunctional government and rebooting California’s future.  Most importantly, we invited all Californians to openly engage in this process by reviewing our proposals and providing immediate feedback.

We’ve been vigorously discussing and developing a viable action plan and timeline for implementing our broad range of proposals ever since.

Consistent with our collective view that California needs to think, plan and act for the long term, we’ve been guided by the cardinal rule that it is far more important to get our reforms done ‘right’ than ‘right away.’

In the case of two of our proposals – our long-term tax and revenue reform plan and a proposal to establish a new, independent Citizens Council for Government Accountability – we have been gratified by the overwhelming interest from elected leaders in both parties, including Governor Brown, stakeholders and everyday citizens in these bold, broad-based changes.  It is clear from public reaction, stakeholder meetings and our own public opinion research that Californians are hungry for real reform and are more willing than ever to support a sweeping plan that is fair and will put an end to California’s perpetual financial volatility and suffocating wall of debt.

At the same time, we recognize the practical constraints of the 2012 election calendar – and have come to the conclusion that it will take more time to perfect these proposals, eliminate unintended consequences and provide every stakeholder and everyday Californians a meaningful voice in that process.

Therefore, we have decided to proceed as follows:

1)      Continue communicating the necessity and benefits of the Tax and Revenue Reform Plan and engage a diverse range of stakeholders, with the goal of releasing draft ballot-measure language for comprehensive public and fiscal review during 2012, for the purpose of filing the strongest-possible measure for the November 2014 ballot.

2)      In the meantime, a high-turnout election is a terrible thing to waste.  California voters deserve the opportunity in 2012 to begin the long process of reforming state government.  Therefore, in the coming days, we will be announcing our intention to partner with other organizations by generously supporting one or more reform measures that have already been filed for the 2012 elections, consistent with our Blueprint.

We will also pursue implementation of other elements of our “Blueprint” by:

·         Co-sponsoring the California Economic Summit in May to develop a statewide job creation and competitiveness implementation plan.

·         Supporting a coordinated regulatory reform effort – including CEQA reform – that maintains California’s environmental leadership while expediting permitting for job-creating new and/or expanded projects.

·         Forging a partnership with the Governor, Lieutenant Governor, as well as federal and local officials, to establish “plug-and-play” pre-permitted zones to attract new investment to California.

Pursuing reform on these multiple fronts and engaging a broader coalition will exponentially increase our reach, effectiveness and odds for success.

We are extremely pleased by the progress we’ve already made in a relatively short period of time – and look forward to supporting and helping to lead the hard, time-consuming work of achieving California’s comeback.

Because, in the end, Think Long means acting long, as well.”

The Think Long Committee for California is: Nicolas Berggruen (Founder), David Bonderman, Eli Broad, the Honorable Willie Brown, the Honorable Gray Davis, Maria Elena Durazo, the late Matthew Fong, the Honorable Ronald George, Antonia Hernandez, the Honorable Robert Hertzberg, Gerry Parsky, the Honorable Condoleeza Rice, Eric Schmidt, Terry Semel, the Honorable George Shultz and Dr. Laura D’Andrea Tyson.

New Poll shows Millionaire tax fares best, while Brown is forced to re-file initiative

by Brian Leubitz

Not an entirely good news day for Jerry Brown’s attempt to get some revenue in the system.  First, he is forced to refile his measure because of drafting errors:

Gov. Jerry Brown is taking a mulligan, tripped up by a typographical error and forced to re-file his ballot initiative to raise taxes.

The Democratic governor on Friday filed paperwork with the state for “The Schools and Local Public Safety Protection Act of 2012- ver. 2.” The measure is identical to one Brown filed in December, the governor said in a filing with the attorney general’s office, “except that we have corrected a typographical error that resulted in two numbers being transposed.”(SacBee)

While this is a bit of annoyance for his efforts to get the measure onto the signature gathering process, his team has allowed plenty of time.  I can’t imagine there will be any major issues caused by the re-filing.

The other big news comes from a leaked poll from the center-right Think Long Committee (funded by rich dude Nicholas Berggruen). The results of a seemingly well-considered scientific poll, just published by CalBuzz, show that the CFT/Courage Campaign “Millionaire’s Tax” leads the pack at a 70/30 split.  Brown’s package is ahead by 62-37, and Molly Munger’s taxes for education just above water at 51-45.  Think Long’s own proposal to extend the sales tax to service was ahead 57-30.

I would have to agree with the Buzzers sentiment that Think Long would probably defer to Brown eventually, especially armed with these numbers.  As I mentioned before about Molly Munger, she is a bit of a wild card. Whether she intends to move forward on her income tax increase for education will play an important role in the fall campaign for these measures.

The CFT/Courage Campaign measure has some broad grassroots support, and has received some positive media attention. However, whether the progressive coalition can come up with enough money to get it on the ballot is an open question.

The revised Brown measure appears over the flip.

Tax Initiative

Valuation of tax measure adds to uncertainty

by Brian Leubitz

In case you were asleep for the past few years, we have a revenue problem with our budget.  Namely, we don’t have enough cash coming in to pay for our state’s priorities.  Gov. Brown is hoping to clear the field for his own measure, but it seems he has a lot of work to do on that front judging from the news of the day.

First, Molly Munger dropped half a million dollars on her own measure that aims to raise $10 billion for schools. Her measure raises the entire tax structure in a progressive fashion.  You can read more here, but this is the type of measure that progressives would ordinarily support. However, given the need for budget flexibility, there will be substantial pressure on this measure to get out of the way.

However, Molly Munger is no lightweight. She’s a veteran civil rights litigator who also happens to be the daughter of Warren Buffet’s longtime business partner, Charles Munger.  Her brother, Charles Munger, Jr, spent a bunch of money ($12mil) on Prop 20 to get Congressional redistricting into the commission. Molly Munger has not indicated how deep her pockets on this one will go, but if she’s willing to put up $500K, will she drop the other million or two to get it on the ballot?  As Peter Schrag has said, shepherding this thing through the whole process will be quite the challenge for Ms. Munger.

The other big news today was the joint LAO/Dept. of Finance estimation of the Governor’s proposed revenue measure.  Suffice it to say there are a few problems:

The Democratic governor is counting on a voter-approved tax increase on sales and the wealthy to generate $6.9 billion for the 2012-13 budget. But the nonpartisan Legislative Analyst’s Office says Brown’s plan would raise only $4.8 billion in the first budget cycle.

The Analyst’s Office and Department of Finance included their separate projections in a joint letter to Attorney General Kamala Harris that is required for ballot preparation. (SacBee)

In other words, more uncertainty for a Capitol building that is rife with it now.  Of course, trying to project the economy right now is somewhere between ridiculously hard and impossible right now, but the $2.1 billion gap is larger than the Gov. would have liked to see right now.  We’ll have to see what kind of contingency plans the governor makes for this extra whole that he now will have to make up.  

Might we see “Return of the Triggers”?  If the Governor thinks that the $6.9 estimate is worth gambling on, the situation ends up being remarkably similar to where we found ourselves last year, waiting on cash to come in.  One would hope that the triggers don’t become a regular feature of our budget cycle, but it might be, once again, the easiest way out of a box.

Or, you know, some other random number will pop out of the sky in a few days and the whole scenario will change.  Heisenberg pretty much rules Sacramento these days.

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.

*** **** ***

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.

To avoid ballot fight, State to agree to deal with the online giant

by Brian Leubitz

Amazon had put up over $5 million in a show of force for a potential referendum.  But, they never really wanted to go to the ballot.  And it looks like both parties avoid an expensive ballot fight with an agreement scheduled to be finalized before the end of session:

Under the handshake deal, Amazon won a delay until at least September 2012 but will eventually collect state sales taxes.

The arrangement could lay the groundwork for a national online sales tax law. Amazon and major brick-and-mortar retailers like Wal-Mart and Barnes & Noble agreed to lobby Washington over the next 11 months for an Internet sales tax law that applies across 50 states. …

If no federal deal emerges by July 31, 2012, Amazon would have to begin collecting California sales taxes starting on Sept. 15, 2012.

State lawmakers intend to pass a new bill in the next two days that would delay implementation of the online sales tax law until that date, according to Calderon and several sources. If Congress strikes a deal by July 31, 2012, online retailers would begin collecting taxes starting on Jan. 1, 2013, under whatever federal requirements are approved.(SacBee)

While the governor has previously said that he’s not really all that excited about a deal with Amazon, given that this was negotiated by the Senate leaders, it would seem hard to block.  

The bigger issue is how are we going to deal with the $200 million hole this blows in the budget.  And the fact that we basically only get a promise to lobby for a sales tax measure?  Well, that and a quarter might be able to get you a gumball.

But the reality is that Amazon wasn’t going to collect any sales tax anytime soon.  And were they to collect and submit the signatures, the law wouldn’t go into reality until approved (if approved).  So we are essentially dealing with a bunch of posturing.  Amazon knows that they are going to have to collect sales tax at some point and are hoping to delay it as long as possible. And oh, sure, it wouldn’t hurt to have one national standard.

With Amazon and the big retail giants on board, there is likely to be significant movement on the bill.  We’ll end up getting money into the system at some point by 2013, and we can stop messing with this fight.  Covering another $200 million, well, that won’t be so easy.

Online Giant Looks to Avoid Sales Taxes

by Brian Leubitz

Amazon has been publicly piling money into a campaign fund to halt the new legislation that would force them to collect sales taxes.  But, if they could avoid a big fight with California’s brick and mortar retailers by pulling a quick deal, they’d prefer it.  One of the ways they’ve done that in a few other states is to promise some jobs in the state as long as they aren’t taxed.  Queue the rumors of a deal here:

While discussions are still preliminary, sources said legislative leaders have received an Amazon-inspired plan that would give the online retailer a two-year moratorium on the new tax. In return, Amazon would bring 7,000 jobs to the state, these sources said.(SacBee)

Obviously, the retailers are none too pleased, with good justification.  They are facing an uphill battle against a company that has a 8-9% price advantage right off the top.  Whether this actually amounts to a) any new jobs or b)

The problem with this is that Amazon is just shifting jobs from state to state for these deals.  It is a race to the bottom, while brick and mortar retailers continue to lose out, and our main streets continue to look bleaker and bleaker.

Sen. hopes to avoid referendum

by Brian Leubitz

Sen. Hancock (D-Berkeley) has refiled her “Amazon” sales tax measure. Why, you ask? Well, the thing about the referendum process is that you can’t use it against a bill passed by 2/3 of the Legislature.  So, can she get the two votes?

Getting this passed will take the votes of two Republicans in each chamber — votes that weren’t there when the bill passed as part of the budget earlier this year.

Asked if she had secured the needed votes, Hancock said, “We’re talking to people. We have a week and a half left so we’re putting it out there and talking to people.”(SF Gate)

As we’ve mentioned here a few times, the Amazon tax measure raises some really interesting questions that don’t always line up perfectly with the R-vs-D divide.  Specifically, the Big Box stores are quite interested in seeing Amazon’s built-in government subsidy cut.

The question is how much influence do Wal-Mart and Best Buy have over the Republican caucuses in each house?  We’ll see over the next few weeks.

Investment makes it extremely likely to qualify

by Brian Leubitz

There was some thought rumbling around that Amazon was just going to use their measure to overturn the online sales tax measure as a stick to beat politicians with.  But it now seems they are intent on getting it on the ballot:

In a filing Friday with the Secretary of State, {Amazon} revealed it had already contributed $3 million to the More Jobs Not Taxes Committee, which was established less than a month after a state law taxing online purchases took effect.

The committee bills itself as a “growing coalition of taxpayer groups, consumers, small businesses, and online companies,” but so far it has only one funder: Amazon.

The company’s contribution will go toward gathering signatures to put an initiative repealing the tax on the June 2012 ballot, committee spokesman Ned Wigglesworth said. The committee must submit 504,760 valid signatures to the Secretary of State by Sept. 27. (The Bay Citizen)

I think it is at least interesting to note that Wigglesworth is a former staffer for Common Cause, who, you know, advocates for openness and is generally against large corporations buying electoral votes.  But since he also managed the campaign for Prop 26 and the expansion of the 2/3 rule, I guess that Common Cause stint is more the anomaly than the current gigs.  

Returning to the issue of speculation, there is one more side benefit for qualification for Amazon.  As soon as the referendum is qualified for the ballot, the law isn’t valid until it is approved by voters.  Of course, Amazon isn’t obeying the law now, as they aren’t gathering taxes for their California sales, but the referendum puts the legal question off for a while.  Even if they lose on the ballot measure, they likely earn back that $3 million bucks.

Of course, they’ll need to spend more than $3 million to win when this gets to the ballot, but they certainly have the easier side of the argument.