By Randy Bayne

The Bayne of Blog

Governor Arnold Schwarzenegger received a gift of nine works of art by local school children yesterday. The artwork was created “to save public education” by children and their parents at the Davis farmer’s market and third-graders at Dry Creek elementary in Roseville and included a piece titled, “Evil Money-Grubbing Robot Seeking to Destroy Public School.”

Twenty students participated in the presentation and asked for the governor’s help to get the framed paintings put on display in the Capitol.

While the children went inside to deliver the paintings, more than 1,000 members of the California School Employees Association (CSEA) and other supporters of public education rallied outside after a march from the Sacramento Convention Center where CSEA is holding their annual convention. On the final leg, marchers were escorted by school children pulling wagons loaded with broken and outdated school equipment, including broken music stands, outdated textbooks and flat soccer balls.

All of these children standing here with us today deserve the best chance we can give them to achieve their hopes and dreams for the future,” said CSEA President Allan Clark. “It’s time for our elected leaders to step up and commit to saving education.”

Parent Lonnie Buck from Plumas Lake said he is worried that his 10-year old won’t get the “gold standard” education that drew the father to California from Mississippi.

“I understand better than anyone the irony of California and Mississippi resting at the bottom of the school rankings,” Buck said. “I’ve watched our schools trying to keep up with less and less all the time.”

Student Mariana Rojas said budget cuts are having a disheartening effect on students.

“The budget cuts have undermined the determination and the inspiration and the spirit that we all need so much,” Rojas said. “Some of my classmates have become hopeless – hopeless in a land that was built on dreams and hopes. My goal has become the goal of so many others – we should all be fighting for our education.”

California continues to rank nearly last in the nation in per-pupil spending. Thousands of local schools have cut art and music programs, school transportation, tutoring programs, school libraries and countless other programs and services. Speakers called on state legislators to keep the promise they made to students in last year’s budget agreement and reject the $4 billion cut to public education proposed by Gov. Schwarzenegger in his May budget revision.

I’ve just received word that US District Judge Claudia Wilken has issued a preliminary injunction against the IHSS (in-home support services) cuts that were supposed to go into effect on November 1.  

The suit was brought by SEIU four disability rights groups, UDW and three SEIU locals in response to the summer budget cuts.  The California Disability Community Action Network has more information about the lawsuit. More details coming.

UPDATE: I’ve just seen that Josh Richman beat me to the punch by a few minutes.

U.S. District Judge Claudia Wilken issued the preliminary injunction. In making the decision, she found that a written notice she stopped the state from sending out last week would have been constitutionally inadequate – too hard to understand, and giving too little time for appeals. She also found that the plaintiffs – advocates for disabled and elderly Californians, along with several labor unions – are likely to be able to prove at trial that the state was using inadequate standards to determine whose services would be cut. (CCT 10/19/09)

This in no way saves these cuts from going forward, it simply says that the methods that the state was going to use to make the cuts was all sorts of screwy. The “functional index” was going to be used to determine who gets what level of services, but many people would be cut off without really understanding what was happening. This is a vulnerable population, and to set them loose without a clear understanding of what is going on is even more unconscionable than the original cuts themselves.

In the aftermath of the May 19 special election Senate President pro Tem Darrell Steinberg claimed a mandate from voters to make cuts – and as he said, “cut we will.”

As we’ve seen, that hasn’t worked out so well for California. Our economy has worsened as government has contracted, leading to increased unemployment along with the financial and even physical distress that comes with reduced availability of health care services.

Perhaps Steinberg has learned from these mistakes, because in an article in today’s Sac Bee, he says “I’m done cutting”:

Steinberg said he’s not at all happy he had to cast votes for cuts – and he added, “I’m done cutting.”

“I feel very strongly,” he said, “that we’ve gone beyond what is reasonable when it comes to cuts.”

But he is, as [Marty] Omoto suggested, proud that he pushed for “surgical” cuts and that California government remains standing despite all the talk about the state being ungovernable.

California’s government is like a punch-drunk boxer. Sure, it’s standing, but not for much longer. The cuts Steinberg agreed to have weakened the state immensely, leaving us not only deeper in recession but making it unlikely we will see economic recovery anytime soon. Most employers and economists I’ve spoken to are convinced California will be among the last states in the country to recover from this recession.

That will exacerbate the looming budget crisis in 2011, when the combination of the expiration of the temporary tax increases approved in February and the borrowing gimmicks done in the last three budget deals come together to produce a budget deficit that could be as high as $20 billion – assuming the economy doesn’t get any worse between now and then.

I’m glad to see Steinberg realizes we can’t make any more cuts. It’s time to embrace sensible, populist revenue solutions and become aggressive – even fearless – about selling them to the people of California.

(Welcome Sen. DeSaulnier – promoted by Brian Leubitz)

At the Contra Costa County United Democratic Campaign CD 10 candidates’ forum last week, the candidates were asked to list examples of when they had defied Democratic party leadership in order to stand up for progressive values and make real change.  I told the audience of Contra Costa Democratic activists that I had a history of doing so, and in fact might have to do so if the leadership put an all-cuts budget up for a vote this week in the Senate.  Yesterday, I kept my promise and did not vote for the all-cuts budget that was brought to the floor.

Progressive values and commonsense dictate that we have a budget that combines cuts with increases in revenue.  A cuts-only budget is a recipe for disaster in California and severely hurts the most vulnerable of our fellow Californians.  In an era of “yes we can,” the Governor and Republican legislators are telling Californians “no they can’t” have sensible solutions to California’s budget crisis.  They have pushed Democrats into a “through the looking glass” scenario where Democrats are on the record voting for $11 billion in cuts and Republicans are on the record voting against them, but there is no record that in fact the Republicans want even deeper cuts and refuse to support any tax increases whatsoever.  Only in Sacramento could such an Alice in Wonderland scenario unfold.

The truth is that standing up for progressive values sometimes dictates that we go against the decisions of our leadership.  I cannot in good conscience vote for a budget that does not include significant revenue increases.  In the next few days, we will have votes on raising revenue through an oil severance tax and an increase in the tobacco tax.  I will vote for those because proposals to increase revenue to the state must be part of any solution to California’s deficit.  

In addition, I joined with Senator Lois Wolk in writing the Legislative Analyst’s Office seeking advice on the most efficient way to close corporate tax loopholes in California.  There are approximately $50 billion – $50 billion! – in tax loopholes that exist right now.  

It’s time to push back hard against the ideological inflexibility of the Governor and the Republicans in the legislature and make them take responsibility in front of the voters for their efforts to drive California over a fiscal cliff.  There is no proposal that will create a budget that is pain free.  But an all-cuts budget is the most painful for the people who are the most vulnerable.

We can do better for California.  Yes, as progressives, we can stand up to make a bad budget better.  That was my promise to the Contra Costa Democrats last Friday and it’s my promise to you today.

Mark DeSaulnier

Dave Johnson, Speak Out California

I’ve been asking around and it seems that most Californians don’t know that the budget deal that fires so many teachers also has a huge tax cut just for big, multi-state and multi-national corporations.

But it’s true.  Last month’s budget deal that fires teachers, cuts essential government services, and guts the investments that bring future economic benefits also has a huge tax cut for the largest of corporations.  While this part of the deal has been kept pretty quiet, the LA Times had a story, Business the big winner in California budget plan.  From the story,

The average Californian’s taxes would shoot up five different ways in the state budget blueprint that lawmakers hope to vote on this weekend. But the bipartisan plan for wiping out the state’s giant deficit isn’t so bad for large corporations, many of which would receive a permanent windfall.

About $1 billion in corporate tax breaks — directed mostly at multi-state and multinational companies — is tucked into the proposal.

But wait, won’t a big corporate tax cut cause companies to come to California, creating jobs?  No, they are already here and it will drive them away, because it is paid for by firing teachers.

A study by the nonpartisan Public Policy Institute of California, released in 2005, found that most companies decide where to locate based not on tax breaks but on factors such as the availability of a highly educated workforce. California’s proposed plan would cut spending on higher education by hundreds of millions of dollars.

So how did this happen?  This was part of the deal to get a few Republican votes.  And why did the Republicans want this so bad?  Because they understood who really elected them.

If you look at the independent expenditure reports for the 2008 California election you’ll see a massive amount of last-minute money.  For example, in the 19th Senate District, a political action committee (PAC) named “Californians for Jobs and Education” put almost $1 million into just one race: $570,653 into defeating Democrat Hannah-Beth Jackson, and another $373,778 to help elect her opponent, Republican Tony Strickland.  When you look this group up on ElectionTrack you learn that this money came from corporations like Arkansas’ Wal-Mart, Blue Cross of Ohio (Ohio?), Reliant Energy, major real estate companies, and from other PACs.

Now it gets interesting.  Many of the contributions to that PAC came from other PACs, especially one called Jobs Pac.  When you track down Jobs PAC you find that it is a conduit for huge, huge amounts of money coming from large corporations like Philip Morris, ATT, Chevron, Safeway, Sempra Energy, Verizon, big insurance companies, big pharmaceutical companies, big real estate companies  … and other conduits like the Chamber of Commerce.

Why did these huge corporations put so much money into California state elections?  Because we let them, and because of the return on investment they receive from tax cuts like the one that is forcing us to fire so many of our teachers.

There is a key lesson to learn from this.  When it comes time to choose, that is when you can really see who is for or against something — where their priorities really are.  And in this case, when push came to shove, in the end who did the conservatives come through for?  The large corporations.  They danced with the ones that brung them.  

Click through to Speak Out California

In a move telegraphed in their previous meeting, Treasurer Bill Lockyer and Director of Finance Mike Genest decided that the $10 billion federal stimulus “trigger” was not met – that will cause billions in additional cuts and new taxes as part of the February budget deal. Here’s the logic used by Genest in not pulling the trigger:

After a legal and fiscal review of recently enacted federal legislation, and in coordination with the State Treasurer and his staff, the Director has determined that the amount of additional federal funds available to offset General Fund expenditures through June of 2010 is $8.17 billion,” said Ana Matosantos, Department of Finance chief deputy director. “This amount is below the $10 billion established in (budget language) as the amount required to eliminate a portion of the personal income tax surcharge and specific spending reductions previously enacted by the Legislature.

But is this the right move? Speaker Karen Bass doesn’t think so:

I am disappointed with the narrow reading of the trigger and the decision made today by the Director and the Treasurer. But it was the last minute changes to the budget demanded by Republican Senators that put the trigger level out of reach and all but guaranteed the higher taxes and cuts to critical programs. We agree with the Treasurer that a portion of the cuts should be restored, and we will work through the budget process to find alternative solutions to a portion of these cuts.

This is better framing than we’ve seen from the Sacramento Dems in some time – blaming Republican budget demands for making it difficult to clearly reach the trigger level, and arguing that the cuts should be restored.

Along with Speaker Bass, the California Budget Project argued that Genest and Lockyer were using too narrow a definition of the trigger language:

However, the DOF’s methodology excludes ARRA funds that will support programs and services that suffered deep reductions in the 2008-09 and/or 2009-10 budgets. In many instances, these same programs and services have experienced significant cuts repeatedly in recent years. The CBP believes that the calculation of federal funds that may be counted toward the $10 billion threshold should include ARRA funds that will support programs and services that received funding reductions in the 2008-09 or 2009-10 budgets and/or that are experiencing higher costs due to the economic downturn – costs that would, in the absence of federal funds, fall on the state’s General Fund.

The result is devastating. 3 million California parents, seniors, and people with disabilities will lose dental, podiatry, psychology and other Medi-Cal benefits the federal government does not mandate but that are nevertheless necessary to economic recovery and a decent human standard of living. Marty Omoto lays out the full impact, which includes further cuts to education and the courts.

It didn’t have to be this way. Even putting aside the “narrow reading” issue, this is a failure of both the state and the federal government. Democrats agreed to a bad deal, and the Yacht Party did their best to make the Great Recession worse by destroying the very governmental services that we need to stop the downward spiral and start a recovery. And the US Senate has blame to share, for stripping out $40 billion of the state stabilization funds and generally not being aggressive enough in dealing with the crisis facing all levels government.

California keeps cutting spending, and the recession keeps getting worse. We at Calitics understand that’s no coincidence. When will Sacramento?

Dave Johnson, Speak Out California

Here is an idea for solving California’s budget crisis.

What if the California legislature temporarily budgeted for districts according to the wishes of the district’s legislators.  If an Assembly or Senate representative demanded cuts to schools, fire, etc. then the schools, fire, etc. in that representative’s district receive the entire cut!  This would be an honest application of representative democracy, allowing the citizens of an area to be governed according to their wishes without it affecting all of the citizens in the state.

Wait, you say, why should only certain districts be punished with cuts?  Why should only a few citizens shoulder the burden of balancing the budget through cuts?  The answer is because those are the people who elected the extremist minority who are forcing the cuts, while refusing to ask the rich to pay their fair share and actually cutting taxes for huge corporations.  (Yes, the budget “solution” included a huge tax cut for the Wal-Marts and Exxons.)

With this plan the residents of Santa Clarita (the right-wing bastion of northwest LA County) could get their wish to have no schools, police, road maintenance, firefighters, etc. while the residents of San Francisco could keep their government services.  And the residents of both areas would have what they want.

Or, at least, they would have the opportunity to understand just who they elected.

Click through to Speak Out California

As Arnold Schwarzenegger starts the campaign for the May 19 special election ballot measures, the Legislative Analyst’s Office points out that the budget deal will come up short by $8 billion and that it hasn’t solved our structural revenue shortfall problems:

“Unfortunately, the state’s economic and revenue outlook continues to deteriorate,” the Legislative Analyst’s Office (LAO) said in a review of the package, which covered the remainder of this fiscal year and all of the next.

“Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the Legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance.”

Taylor had some more bad news for the state’s political leaders. Because so many of the “solutions” adopted last month are temporary, “without corrective actions, the state’s huge operating deficits will reappear in future years – growing from $12.6 billion in 2010-11 to $26 billion in 2013-14.”

The full LAO report in fact makes some assumptions I would consider rosy, such as a recovery in employment and personal income in 2009, when many economists do not expect this to occur until the second half of 2010 at best.

What this means is that the budget situation is still a total mess, and that improvement is far away. The May 19 election will have little meaningful impact on the state’s financial health, although a spending cap would ensure that services will continue to be gutted. Republicans and Arnold Schwarzenegger are likely to use the deficit projections as an argument for Prop 1A, when all that will accomplish is an even worse destruction of core services, such as schools which could face larger cuts than what we’re seeing now, a truly frightening thing to consider.

This also means political leaders who deny the need to find tax solutions, like Jerry Brown, are not being realistic. Fundamental change is necessary, and perhaps a constitutional convention alongside the elimination of the 2/3 rule conservative veto can help get us there.

One thing is certain – if anyone thinks California can remain a competitive place to do business and attract jobs and employees with the worst school system in the nation and no ability to address our water, transportation, or health care crises, they are deeply deluded.

In an interview with KGO-TV in San Francisco Republican gubernatorial hopeful Tom Campbell suggested a higher gas tax as a solution to the state budget deficit:

Former State Finance Director Tom Campbell will be offering legislators his idea of a partial solution — an 18 cent temporary gasoline tax.

“The price of gasoline has now fallen in our state. Last June it was about $4.60. If you were to put on a gasoline tax of about 18 cents, so we’d still be well under two dollars a gallon,” said Campbell.

It would be nice if KGO explained that the Democrats’ budget deal – which Arnold vetoed – would have basically done the same thing, replacing the current gas tax with a “gas fee” that would result in a net 13 cent increase to the taxes paid on gasoline. But it’s good to see Campbell proposing an eminently sensible plan like this.

Whenever higher gas taxes – or higher taxes of any sort – are proposed, some progressives react with criticism, pointing out that some of these taxes are regressive. They’re not wrong – when you’re talking about taxes, progressive income taxes and property taxes are generally a fairer way to obtain revenue than excise and sales taxes.

But if you stop there, you’re missing the point.

Because when you include the whole equation – the effect of spending cuts as well as tax increases – it becomes clear that even sales and gas taxes are much better for the economy, and especially for working and poor people, than spending cuts.

Such is the point Nobel Laureate Joseph Stiglitz makes, in work cited in this California Budget Project report. Stiglitz demonstrates, using hard evidence, the following points:

• The economies of states that substantially increased taxes in recent years performed as well or better than states that did not
• The economies of states that enacted large tax cuts in the late 1990s and early 2000s performed worse than other states
• Personal income taxes are better than spending cuts as they don’t have as harmful an effect on consumption or local economies.

Much of this ought to be common sense. We are facing a recession driven by rising unemployment and folks having less money in their pocket. While the right-wing ideologues would have us believe taxes take money out of that pocket the amounts pale in comparison to the money lost to spending cuts.

In the early 1990s recession both California and the US government raised taxes. It didn’t worsen the recession, and it didn’t prevent an economic boom from emerging after 1993.

Spending cuts are really just a euphemism for mass layoffs. When you fire tens or hundreds of thousands of public employees that means they are spending less money. Fewer shopping trips, fewer visits to restaurants, fewer people paying their mortgage. That creates a spiral of job losses and business failures, which in turn mean fewer tax revenues. Spending cuts ultimately leave the budget worse off, not better off, than before.

This is true especially for lower-income families. A sales tax or gas tax hike will have some bite. But as much as a school closure? As much as a father being laid off from his job on a state infrastructure project, or a mother being laid off from her job in the county government office? I strongly doubt it.

For example, the cost to a family of a restored VLF, between $150 and $300 a year, is chump change compared to the cost of having to provide health care to an uninsured family kicked off of state assistance. If a school closes or higher education is priced out of reach that is going to have a far larger cost to a family both immediately and over the long-term than any tax increase.

This is common-sense stuff, obvious to anyone willing to give even a cursory glance at reality. But 30 years of anti-tax rhetoric has blinded us to these realities. Spending cuts are the most regressive form of budgeting there are – and while we need as progressive a tax code as possible, we need to keep in mind that this is a continuum of progressivity:

Income and property taxes > sales taxes > spending cuts

While there are differences among kinds of taxes and spending cuts, the above is a good shorthand to keep in mind as we push back against 30 years of ruinous policies and bad priorities that have brought California to the brink of a Depression.

With the latest figures about the state budget deficit – $28 billion over the next 2 years – it seems beyond all doubt that Arnold Schwarzenegger is a failure as governor. The sole justification he gave for replacing Gray Davis in 2003 was that Davis faced a similarly large budget deficit and failed to solve it. Arnold promised to end this, and it is clear he has failed to deliver. Instead the state of California stands on the precipice of bankruptcy and crippling service cuts that will dramatically worsen the economic downturn.

And it is clear this is primarily Arnold’s fault. His first act as governor was to roll back the VLF, blowing a $6 billion annual hole in the state budget (roughly half the annual deficit – remember that the $28 billion figure is for two years). That act of irresponsibility was compounded by using borrowing to close the rest of the 2003-04 deficit. As the budget deficit returned in 2007 Arnold stubbornly refused to admit the need for new revenues.

He has also refused to engage in the necessary lobbying to produce a budget solution – instead he wishes and hopes Republicans will see the light despite years of evidence suggesting they instead see a budget crisis as an opportunity to ram through far-right ideas that nobody really wants.

The Legislative Analyst Office, under its new leader Mac Taylor, directly calls for taxes as the solution to the budget deficit. The report is a bit too favorable to Arnold’s plan and suggests too many cuts, but it makes this all-important point about spending cuts:

The state’s main options for addressing its budget dilemma-cutting expenditures and/or raising revenues-would both have adverse effects on the economy. Either type of option would reduce money held by or received by individuals or businesses that otherwise could be used for consumption or investment purposes. Because the state’s economy totals more than $1.7 trillion in economic activity each year, however, spending reductions or tax increases totaling between $20 billion and $30 billion would have a relatively small impact on the overall economy.

Here again I think the new LAO is being too moderate. The report notes that much of the upward pressure on spending is coming from increased usage of Medi-Cal, for example, suggesting that government services are becoming more necessary in a recession. It’s the safety net at work – and cutting the safety net is the last thing we ought to be doing.

Republicans like Mike Villines might be peddling books by Arthur Laffer, but as the California Budget Project explains the evidence proves that tax increases are the best way to provide a budget fix that doesn’t hurt the economy. Add that to the LAO’s point that $20 billion in taxes “would have a relatively small impact on the overall economy” and we have our answer.

And of course, spending cuts and tax increases hit different Californians. Spending cuts hit working and middle-class people particularly hard, especially the truly insane proposals to increase student fees for higher ed or to cut back Medi-Cal even further. But a return to the pre-1998 tax levels would hit the wealthy while providing the working and middle classes with the safety net and economic opportunities they need.

Some Democrats are looking to a federal bailout to help solve things. Such a bailout is necessary – for example the feds could help meet our Medi-Cal obligations and help with higher ed, reducing dramatically our overall deficit and making it easier for, say, a reinstatement of the VLF to close the remainder. But a bailout isn’t likely to come without state-level solutions.

That we have to face such choices at all is a testament to how epic a failure Arnold Schwarzenegger has been for California. The LAO’s report is damning:

The state’s revenue collapse is so dramatic and the underlying economic factors are so weak that we forecast huge budget shortfalls through 2013-14 absent corrective action. From 2010-11 through 2013-14, we project annual shortfalls that are consistently in the range of $22 billion, as shown below.

Those are shocking figures, and they should indicate to every progressive and Democrat just how important it is to push out our own fairer, sensible, long-term solutions.