Tag Archives: enterprise zones

GOP Needs to Offer More to Budget Crisis than “No”

( – promoted by Brian Leubitz)

by California Labor Federation Legislative Director Angie Wei

Assembly Republican leader Connie Conway has an answer to just about any question directly relating to our budget crisis. “No.” No revenues. No vote of the people. No Republican budget proposal. No closing corporate tax loopholes. No spending cuts. No, No, No, No, No.

Conway explained her caucus’ flurry on “No’s” to the LA Times recently:

The reality of it is, if we put up a ‘budget’ of our own it will get picked apart, criticized.

That may be a good answer for a politician. But it’s the last thing we need to hear from a public servant.

Poor Conway says she might get “criticized.” But isn’t that part of the job when you’re working in the public arena? You put your ideas out there, you speak your values, some may agree with you, some may not. That’s the point of public discourse.

Conway doesn’t respect the public enough to engage in that discourse. Because she knows the math doesn’t add up.

There is no way to prevent cuts to education, public safety, and programs for the vulnerable from cuts without maintaining our current revenues. Conway flat-out lies to the public when they claim that there is some magical solution to the budget crisis involving the elimination “waste, fraud and abuse” or attacking public workers pensions. No one who has looked at the budget deficit objectively agrees. If we fail to extend existing taxes, our schools and universities get cut. It’s that simple.

The truth is, benefits for poor families, health care for the working poor and home care services for the disabled and the aged have already been decimated with over $11 billion in cuts made this year alone. Further cuts not only put families on the streets, those cuts would also lead to the loss of billions of federal matching dollars. This is the classic pennywise, pound foolish scenario. Or billions of pennies given up for tons of idiot pounds.

Making the shortfall worse, Conway and her big corporation-loving allies won’t give up costly and ineffective big business tax giveaways. Enterprise Zones have been proven to create no net jobs, instead cannibalizing jobs from one area of the state to another. Costing taxpayers nearly a billion dollars, Republicans have been defending them to the cliff of fiscal failure.

Allowing companies to elect how they want to pay state taxes is another terrible plan, again defended by Conway and her caucus.

Conway isn’t willing to extend existing taxes. She won’t let the people vote. She won’t issue her own proposal. She didn’t even vote for the governor’s spending cuts.

Is this political cowardice? Childishness? Incompetence? All of the above? If all Conway and her hardline Republican colleagues want to offer to the budget crisis is the word “No,” I guess that’s their business. But we shouldn’t be paying legislators to say “No,” we should be paying them to do their job by working together to prevent devastating cuts to schools, public safety and other important services that serve the public.

We pay elected officials to make tough choices. Conway has shown she’s unwilling or unable to make the choices that will move our state forward. Here’s a “No” that Conway should have to hear from taxpayers if she continues to obstruct solutions to our state budget crisis: No paycheck for politicians who don’t do their jobs.

State Declares Five New Enterprise Zones, Wastes More Money

The state declared five new enterprise zones today. The big news was that Sacramento has been declared an enterprise zone, but Hesperia, Tulare, Pittsburg and Taft were also on the list. Good thing for all the folks out of work, right?

Well, not so much.  To put it simply, enterprise zones don’t work. They never have, and won’t start now. And we have some good data on that from right here in California from the PPIC. A snip from the accompanying press release:

The PPIC report contrasts employment growth in enterprise zones with comparison areas and concludes that the program, on average, has no effect on job or business creation. The report recommends a re-examination of the program, which offers tax credits and incentives to businesses in 42 designated zones throughout the state. The program’s cost in the next fiscal year is estimated at nearly half a billion dollars.

We’re handing out half a billion dollars and getting what in return? A good feeling and a hope that some jobs will show up? The data shows that it doesn’t work yet we keep pouring money down this rabbit hole. Why?

The cynical answer would be to say because these things sound good. Conservatives love it because they include a bunch of tax breaks. Progressives usually tolerate them because they are focused on disadvantaged communities.  But in the end, the money gets pocketed without actually doing anything to accomplish the stated goal: increasing employment.

It is well past time, considering all the cuts we’ve made, to reconsider the enterprise zones and whether they are worth retaining at all. Policy experiments are good, but we must understand when we need to kill them.

UPDATE: To emphasize how big this is, and how much of a waste it is, take this for scale. If the state eliminated it, there’d be enough money to restore all the cuts to the Healthy Families program and the recent budget’s 2009-10 cuts to the CSU. Glad we have our priorities straight.

What The Democratic Budget Didn’t Do

I mentioned in passing that I didn’t particularly like the Democrats’ budget counter-proposal.  Let me go into some detail on that.  

The Democratic budget provides a $3.8 billion dollar reserve.  I recognize that, with state personal income tax revenues falling off the cliff (though by more in several states – man, Arizona’s getting crushed – than here), that $3.8 billion will probably need to be used down the road, when this budget projection fails to match reality.  But we’re on fire right now, and using more of that reserve in this package would eliminate cuts that will probably contribute to more of an economic slowdown and bigger deficits down the road.

Of course, the reserve is so big because that’s clearly the back-up plan for the legislature in case the $2 billion in taxes on oil severance and cigarette companies, so they can pay for their externalities, fail.  I guess the problem is that those tax increases are only $2 billion dollars, and only around the margins instead of actually moving to a more progressive tax structure.  However, there are of course short-term exigencies here – e.g. the 2/3 rule.  But I’m assuming that putting the oil and cigarette taxes up is designed to provide fodder for future campaign ads – “X voted against kids and for Big Oil and Big Tobacco.”  Well, why wouldn’t you HEIGHTEN those contradictions, then?  There are plenty of other options – a nickel a drink alcohol tax, adding tax brackets between $47,500 and $1 million, etc. – that could be put into a model budget.  Why not create the budget you WANT instead of the one you have to have, at least at first?

Finally, the budget sets aside the $2.5 billion dollar annual tax breaks for the largest corporations in America, secured in the last two budget agreements in the middle of the worst economic downturn since the Great Depression.  That doesn’t come close to sharing sacrifice, and it’s really disappointing to see the Democrats shield big business on this.  Their tax hikes are so small that all of them could have been covered by repealing the tax breaks.  And a point of information – while normally repealing such tax breaks would require a 2/3 vote, because this is a modification of an existing budget and not a new budget, I’m not so sure that remains the case:

A couple of other points worth noting. First, the package of proposals is a modification of the state budget; the new fiscal year spending plan was actually enacted in February. As such, all proposals that are not a tax increase — most notably, the spending reductions — can be passed with a majority vote in each house. Trouble is, that would mean they wouldn’t take effect for 90 days… thus delaying aid to the cash-strapped state. For the cuts to kick in immediately, it will take a supermajority vote — which shifts some of the pressure over to the GOP about matching votes to their rhetoric about cuts, even if the rest of the package isn’t to their liking.

Looking for some information on whether that applies to repealing tax cuts as well, I’ll get back to you.

UPDATE: John Myers writes in to tell me that his understanding is it would take 2/3 to repeal those corporate tax credits.  I pretty much figured this, but it seems weird that you cannot cancel what was enacted in the same budget cycle with a simple majority.  In addition, treating repealing a tax cut like a tax increase and covered by Prop. 13 sounds just very wrong to me – an extension of conservative dogma that ought to be challenged in court.  But yes, that’s the most perverse part of our budget dysfunction. Hat tip to John for the info.

(As a side note, we will see what it’s like if you lowered the 2/3 threshold for the budget and not for taxes – and that is, EXACTLY THE SAME.  Taxes are part of the budget process.  Walling them off makes it just as hard to pass a budget, especially if you’re in the kind of hole that California is in.)

That the failed enterprise zone program is still funded at $500 million dollars annually is a sin.

Finally, there are very few solutions here – outside of the vehicle license fee for state parks – that incorporate the majority-vote fee increase items passed in January and vetoed by the Governor.  They have veto bait in this deal, so I don’t see why you wouldn’t add the fee increases as well, which would have savings in the billions.

Some of the solutions that the Democrats came up with are fine, some gimmicky (delaying paychecks for state workers one day from June 30 to July 1, 2010 “saves” the state $1.2 billion dollars in this budget), but some still unconscionable – basically all of the education cuts sought by the Governor remain.  There are $1 billion in Medi-Cal cuts that would need a federal waiver.  And there were options to cancel those cuts.

The Democratic leadership thinks Schwarzenegger will cave and accept this budget.  Keep in mind that, other than the $2 billion in tax increases, Republicans are somewhat irrelevant in a modification, and the fight will focus on whether that $2 billion will come from the budget reserve or additional cuts.  Republican votes are needed to put the modifications in immediately, which maximizes their savings.  So all these fiscally conservative Republicans can say now and waste the state lots of money.  Their choice.

Thursday Open Thread

Links?  I’ll show you some links!

• The latest Don Perata story concerned money he took from his own ballot campaign account into his legal defense fund.  He’s entitled to do that for the time being, but the Fair Political Practices Commission is considering new rules to strengthen the campaign finance laws around these kinds of accounts.  I think “abolished” might be a good way to go for these slush funds.

• Supervisor Mark Ridley-Thomas has a pretty cool tribute to Martin Luther King on his website today, on the occasion of his 80th birthday.  Eight elected officials in LA County answer the question, “What is the significance of this year’s Martin Luther King Day to you?”

• New Rep. Duncan Hunter, following in the legacy of his father, is whining about potential Guantanamo detainees behind held temporarily at Camp Pendleton.  He claims their presence would “distract” the Marines there.  Considering these detainees have been held in what amounts to a concentration camp and tortured, I think “distraction” is but a small price to pay.

• On yesterday’s SCHIP vote, which passed resoundingly in the House, Hunter joined most California Republicans in voting against medical care for children.  Only Mary Bono Mack defied her Republican counterparts.

• The CBP blog thinks we should look at enterprise zone programs as a good place to start cutting the budget.  A new study by the PPIC claims they are completely ineffective.  I’m all for eliminating useless tax breaks.

• There is a Los Angeles municipal election on March 3, and the only race worth following is a crowded contest for Jack Weiss’ old city council seat.  Six candidates (including progressive former Assemblyman Paul Koretz) all raised roughly the same amount of money in the last quarter.

• This is a pretty big ruling for environmentalists, as an Australian firm has bowed to pressure and scrapped their plans for an LNG terminal off of Santa Monica Bay.

• And then there’s the story about the California man who tried to sell his 14 year-old daughter into marriage for cash, beer and meat, and then attempted to have the groom arrested when he wouldn’t pay up.  Hey, I didn’t know that the dowry was back in fashion!