Process looks set for this weekend

by Brian Leubitz

The budget deadline is this weekend, and without the need to pull a few Republican votes, harmony seems to reign. Well, not so much real harmony, but something that passes for harmony in Sacramento when you look at the past budget fights before the majority vote budget and Prop 30 votes.

With closed-door negotiations bearing fruit, the joint budget committee is expected to meet Wednesday afternoon to nail down more details on state spending.

“We’ll get through most of it,” Assemblywoman Nancy Skinner (D-Berkeley), who is chairing the committee, said in an interview.(LA Times)

Everybody seems to be all happy-go-lucky on getting a deal done. But to be clear, there are a lot of tough choices to be made. K-12 funding is still too low. Court funding is getting a boost, but is probably still too low. Skinner and Steinberg are still fighting Brown’s intention to end overtime pay for homecare workers.

The bigger issue overhanging much of this is whether to include an additional $2.5 billion in projected capital gains revenue, with some sort of compromise likely.

Yes, the negotiations are more civil than in the past, but the issues are very real. Gov. Brown seems to be a bit hesitant to restore funding levels anytime soon, but there is a lot of gap to fill between how much the state needs in services and how much we are providing. The higher end of our economy has clearly recovered, but that is far from universally true across the income spectrum.

Amazon wants to overturn rules requiring they collect sales taxes, but is it possible through referendum?

by Brian Leubitz

The following provision of the California Constitution will get much scrutiny over the next few weeks (and months) as Amazon seeks to overturn the requirement that they collect sales taxes:

SEC. 9.  (a) The referendum is the power of the electors to approve

or reject statutes or parts of statutes except urgency statutes,

statutes calling elections, and statutes providing for tax levies or

appropriations for usual current expenses of the State.

That’s from Article II of the California Constitution.  While a quick reading would indicate that Amazon could not, in fact, put the tax statute to a referendum, quick readings don’t always win the day.  And while Amazon’s attorney, Steve Merksamer, spouts off about how the right to referendum is “sacrosanct,” it isn’t quite that simple either.

The measure is now in the capable hands of Attorney General Kamala Harris, who will determine whether it can proceed to the signature gathering phase.  If she determines that it is not a valid referendum, then Amazon will likely sue.  If she finds it is valid, well, expect a suit in the opposite direction, after all these are some high stakes:

Whichever way she rules, the losing side could end up suing.

“I’m sure there will be litigation on this,” said Assembly Majority Leader Charles Calderon, D-Whittier.

Calderon, Assemblywoman Nancy Skinner and several area retailers crowded into Swanberg’s on J, a small midtown clothier that specializes in Hawaiian shirts, to blast Amazon’s sales tax stance. By not collecting the tax, Amazon is harming brick-and-mortar retailers, they said.

“It’s a fairly big issue,” said Swanberg’s owner Lauren Lundsten, wearing shorts and a Hawaiian shirt.(SacBee)

The automatic 9% discount that Amazon gets is made any more fair through all of their machinations.  They’ve blocked other avenues to charge sales tax on their products, so what choice is left?

We should hear sometime soon from the AG’s office, and then shortly thereafter in the courts.  But this is not a battle that should have to be fought for the sake of an unfair advantage for an out-of-state corporation.

One of the interesting stories to emerge from the Class of 2008 has been Asm. Nancy Skinner. In fact, a few weeks ago, she was named the “Rookie of the Year”. The reason for this is fairly simple: She does stuff.  She’s held a series of press conferences and other assorted actions to call out some of the Extreme Stupid coming out of the Horseshoe these days.

One target of her ire has been the ridiculous furloughing of workers from the Employment Development Department (EDD) and a few others in the budget dispute. Now the Extreme Stupid comes in with the fact that these agencies have NO impact on the state budget. They are federally funded, and only state administered.  Furloughing these workers not only doesn’t save the state any money, it ends up costing the state in the end. We pull down fewer federal dollars and less money gets to where it should: the pockets of Californians who need it.

So, today she sent a letter to a former California Legislator who might be in a position to help: Secretary of Labor Hilda Solis.

The purported reason for these furloughs-that they are necessary to close California’s budget deficit– is found in the Governor’s Executive Order S-16-08 (December 19, 2008) and Executive Order S-13-09 (July 1, 2009). As CUIAB and EDD personnel are federally funded, I question whether these furloughs save the state money, and whether they are in compliance with federal guidelines.

Skinner is requesting a meeting, but that’s not really the point. The point is to call out a stupid policy that is hurting California.

Full letter over the flip.

Asm. Skinner Letter to Department of Labor –

As the Governor has tried to hijack the budget crisis to serve his own ends of punishing union workers and shredding the social services net, over the last couple days we’ve seen Democrats fighting back.  For example, Dean Florez surgically took apart the Governor’s idiotic smear attempt on legislators for doing their job of legislation.  Considering that the Governor has never invited all 120 lawmakers into his smoking tent for a pow-wow, I think there’s room for multitasking here.  But understanding that would involve basic knowledge about how government works, as Florez said:

Assembly bill 606 creates a commission to serve the marketing interests of the blueberry industry. Another bill defines “honey” to mean the natural food product resulting from the harvest of nectar by honey bees, and a third bill adopts regulations establishing definitions and standards for 100-percent pomegranate juice.

“Look, we’re pro-condiment, we’re pro-fruit, but the focus needs to be on the budget crisis,” McLear said.

Senate Majority Leader Dean Florez (D-Fresno) called Governor Schwarzenegger’s criticism “childish” and said he is fed up.

“The governor’s turned from an action hero into just another politician,” Senator Florez said. “He should really, really take a course on fundamental government on how the legislature works.”

“The fact that he doesn’t understand these things worries me,” he added.

Asm. Nancy Skinner held a press event with small business owners, again using the imagery of Arnold Antionette smoking a stogie in his Jacuzzi to contrast with the state’s struggles:

Skinner called a news conference at the corner of Solano Avenue and The Alameda in Berkeley, outside the vacant storefront formerly occupied by A Child’s Place. Near her podium was a poster of Arnold Schwarzenegger with a cigar in his mouth, with the headline “While the state drowns in IOUs ARNOLD DOESN’T CARE” and featuring a quotation from this past Sunday’s New York Times Magazine article on the governor’s method of coping with the stress of the budget crisis: “I will sit down in my Jacuzzi tonight. I’m going to lay back with a stogie.”

Skinner said that’s pretty cheeky talk for a governor who nixed bills that would’ve helped solve the state’s cash crisis, avoided the need for the IOUs now going out and kept the deficit from growing by another several billion dollars. And it’s particularly distasteful, she said, to small businesses that are struggling through this recession even as Schwarzenegger proudly talks about vetoing a plan to collect sales tax from large online retailers doing business through California-based affiliates.

You can debate AB 178, the plan to collect sales tax on affiliate sales (I don’t sell enough in affiliate sales to have much skin in the game, but there are decent arguments on both sides), but aligning with small business to attack a supposedly business-friendly Governor has good optics.

For the wonks, the Assembly produced an analysis of the Governor’s so-called “reform” agenda, showing that most of it would be completely irrelevant to the current budget year, and all of it uses math that magically eliminates implementation costs but assumes outrageously oversized savings years down the road.  These are cuts to social services pretending to be reform.  I guess it’s a step up from completely eliminating programs like CalWorks, but it’s fundamentally dishonest.

Moments after the Governor’s press conference yesterday about CalWorks “reform” (fact-checked here by the CBP), welfare advocates held their own press event that made most of the news items:

“I’ve never liked when people pick on the poor because they haven’t got the ability to fight back,” said John Burton, the state Democratic Party chairman and former Senate leader known as a fierce advocate for the poor. “It’s a Republican syndrome. It isn’t tough for Republicans to beat up on poor people. When finances are terrible, they go after the poor and blame the poor. Republicans constantly use that and don’t worry about all the benefits government gives to businesses.” […]

Welfare advocates countered that nearly two-thirds of recipients are working or participating in training, and that half are making some kind of income. They also said that the governor’s own May revised budget proposal estimated an annual savings of $100 million with that reform.

“He’s reinforcing negative stereotypes and scapegoating people for the failure of his own administration,” said Frank Mecca, executive director of the County Welfare Directors Association of California. “It’s a reflection of a bully mentality, to go after the problems of struggling families when he doesn’t get his way. The last thing those families need is to have a powerful figure accuse them of fraud, of not trying.”

Furthermore, the CA Democratic Party has collected budget horror stories to highlight the human cost of the crisis.  Here’s one picked at random:

I am on Social Security Disability and with the amounts allowed to get SSI having been cut, it has also cut my income. Also, my medical coverage is being hit as well as so many of the social programs all of us depend on. Fortunately, I am not homeless yet, but it is a good possibility. I just do not understand how you could make all Californians suffer, especially those of us who are very low income, in favor of giving a huge tax break to oil and tobacco. This is not just or right and I believe that the solution is to sign the compromise bill, and tax the big corporations that are not now paying their fair share! – Christine, Victorville

The structural barriers in the state are so high that I’m not sure any of this can work.  One thing is certain, however – this aggressive strategy creates energy in the grassroots, inspires changes to the system and can leverage public opinion far better than desperately seeking some compromise behind closed doors.

This is interesting. In coordination with the Next10 Budget Challenge, Asm. Nancy Skinner (D-Berkeley) has released some data on how her constituents (PDF) feel about the current budget crisis. Somewhat unsurprisingly, considering this is Berkeley, they think the Governor’s budget proposal is way off track.  Some items of note:

• 78% support balancing with a mix of cuts and revenues
• 55% support increasing education funding, while only 19% support cutting K12 funding.
• 94% support an oil severance tax, such as the one that funded my higher education at the University of Texas
• 80%+ support increasing revenues on tobacco, alcohol, gasoline, and the highest earners.
• Over 70% support changing Prop 13 to “split the rolls” between commercial and residential property.

Now, the Budget Challenge is far from a perfect barometer. In some places it doesn’t let you select from all of the options, and in others it misses some of the revenue options. However, this survey seemed to cover a pretty broad spectrum of options. Skinner is herself a product of the grassroots, and those connections are obvious when you speak to her for a few moments.She knows what her constituents are thinking, and her stated opinions line up fairly well.  Now, getting those opinions into action will prove challenging over the next few years.

Arnold Schwarzenegger’s address to the legislature was notable only for its fatuousness.  He demands the destruction of the social safety net in California and pleads that we have “no choice,” while hiding the decisions he made which brought us to this point. He claims that his budget is not “just about cuts,” then offers the same reforms that the voters have time and again rejected, or half-measures like firing groundskeepers (to privatize school responsibilities to low-wage contractors, incidentally).  Evidently, the May 19 special election, which has been massively over-interpreted and interpreted wrongly by the Governor, was supposedly a call to arms against tax increases, but a spending cap and rainy day fund, which were on the ballot and voted down by 66% of the electorate, are still viable ideas.  He drew a line in the sand by calling for the dissolution of the Integrated Waste Management Board, an organization that IS NOT FUNDED WITH ONE PENNY FROM THE GENERAL FUND but instead with fees on garbage collectors.  He talked about spending less per inmate on the prison population but his budget seeks only to get rid of precisely the services, rehabilitation, drug treatment and vocational training, that would lower recidivism rates, unstuff the prisons, and allow us to spend less on their management.  He admitted that money from the sale of surplus property cannot go toward the General Fund, in a fleeting moment of truth, but claims it would lower our debt payments, which is true, but precisely what Arnold has been increases with borrow and spend policies for the last six years.

Of course, Arnold urged swift passage of all his Shock Doctrine proposals, because that’s how it works.  The goal is to give nobody time to think, only to acquiesce in the face of crisis.  Some, like Assemblywoman Nancy Skinner, will not put her brain on autopilot, mindful of the Depression that would ensue from an all-cuts budget and the drastic consequences for our economy.

“The Governor’s opening statement that the voters in rejecting the special election measures said, “don’t ask us to solve complex budget issues, that’s your job,” is right,” she said. “He was wrong however in his assertion that Californians want an all cuts solution …We have choices. For instance, restoring the top income tax rate on high wealth incomes of $250,000 and above in place under Republican Governors Pete Wilson and Ronald Reagan would allow us to avoid $4 billion of these cuts. Enacting an oil severance fee on oil drilled in California, revenue collected by every state and country in the world that produces significant amounts of oil, could avoid another $1 billion in cuts.

“The Governor talked of us acting courageously. Acting courageously is looking at all alternatives and making smart, rational choices that lessen the cuts with some sensible new revenues,” she said.

Noreen Evans, similarly, has stepped up, at least rhetorically, to offer a counter-weight to the Governor’s Shock Doctrine tactics:

SACRAMENTO – Santa Rosa Assemblywoman Noreen Evans is emerging as one of Gov. Arnold Schwarzenegger’s fiercest critics, a noteworthy development given her prominent role in the high-stakes back-and-forth over the state budget crisis […]

“I don’t know what the point of that exercise was, really,” the Democrat said immediately after the speech as she stood outside the Assembly chambers.

Schwarzenegger told Assembly and Senate lawmakers that he has “faith in our ability to once again come together for the good of the state.”

But Evans said the governor was not helpful “at all” in bridging the divide between Republican and Democrat lawmakers. Rather, she labeled Schwarzenegger’s approach to budget matters as one of “shock and awe.”

“It’s working because it’s shocking, and it’s awesome, and it’s terrible,” she said.

While there are some voices in the Legislature creating pushback, my experience is that the Democrats fall in line with their leadership (same with the Yacht Party, actually; it’s practically a Parliamentary system).  And given the clear signs from Bass and Steinberg to bend over backwards to enable Arnold’s proposals and get it done quickly, I think the only way to halt this forward march would be to mass support inside the Capitol around specific proposals.  For instance, the California Budget Project today released a report about the $2.5 billion corporate tax cuts included in recent budgets in September 2008 and February 2009, cuts we certainly cannot afford in this economic climate.  If everyone must share in the pain, as the Governor said, that must mean something. And so these $2.5 billion in corporate giveaways ought to be repealed.  Period.  Full stop.  Here are some of the gems from these tax breaks:

Nine corporations, dubbed the “lucky nine” in the CBP’s analysis, will receive tax cuts averaging $33.1 million each in 2013-14 due to the adoption of the elective single sales factor apportionment, according to estimates by the Franchise Tax Board.

Eighty percent of the benefits of elective single sales factor apportionment will go to the 0.1 percent of California corporations with gross incomes over $1 billion.

Six corporations will receive tax cuts averaging $23.5 million each in 2013-14 from the adoption of credit sharing.

Eighty-seven percent of the benefits of credit sharing will go to the 0.03 percent of California corporations with gross incomes over $1 billion.

Are there 27 Democrats in the Assembly, or 14 in the Senate, willing to go to the mat to force the repeal of these unnecessary corporate giveaways, providing revenue that can go to the poor, the sick, the infirm, the elderly?  Rank and file Democrats never think to show their power in these negotiations.  In a time of crisis, they should – and force the Governor toward a more equitable solution.  Richard Holober’s post, which I referenced earlier, closes with this:

It’s time to re-unite a fractured progressive movement – based on hope, not fear. We need leadership that can think beyond the imminent crisis, reach out to build a coalition, and organize for budget justice. Labor and community based activist organizations must supply the leadership.

Let’s mobilize behind broadly supported values: require corporations to pay their fair share of taxes; increase the progressivity of our tax system; and eliminate undemocratic super-majority budget and tax rules that give a handful of reactionary politicians a stranglehold over funding our schools, health and public safety services. The campaign may take years. We can win, but first we need to get out of the budget crisis bunker.

Which politicians will enable us to escape that bunker?