“I’m going to have all the [health care] negotiations around a big table.  And it will be televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents and who are making arguments on behalf of the drug companies or the insurance companies.” – Barack Obama, 2008

2008 was the Year of Change – when voters ushered in a new progressive era.  But a year later, health care has been hijacked by extortionists – just so we can “cut a deal” to get 60 U.S. Senators.  In Sacramento, a back-room state budget deal likewise sold progressives down the river.  And in San Francisco, the City and Muni budgets were also made behind closed doors – letting the powerful still call the shots.  We can’t elect candidates who promise “change” – unless it also comes with a public and transparent decision-making process.

What’s Killing Health Care Reform?

Barack Obama always said “change” would only come if we demand it.  His campaign was inspiring because he said it was more than about himself.  Like FDR told activists in 1933 to “make me do it,” Obama would keep his volunteers engaged after the election – and would mobilize the base to help him, and make him pass a successful progressive agenda.

But we never had those health care negotiations on C-SPAN.  If we’d had, the grassroots could have followed what was going on and played a meaningful role.  Instead, Obama ignored the lessons of community organizing by letting the process play itself out the old Washington way – behind closed doors, where private insurance lobbyists have undue influence.

I don’t recall how or when single-payer was taken “off the table” – except that Senator Max Baucus said it was.  Without single payer, progressives focused on the public option – which although a compromise, could have held insurance companies accountable.  Everyone knew it was tough and compromise would happen, but we were supposed to be part of that decision.

And there was no way for the grassroots to remain engaged in an effective way – because none of the details of “compromise” were vetted in a public forum.  We instead had to rely on unsourced rumors in the news and blogs about whether the public option was still alive.  Now that it’s dead, we don’t know who killed it – because it was all done behind closed doors.

Consider what Obama told the San Francisco Chronicle back in January 2008 before the California primary.  After promising to put health care talks on C-SPAN, he explained that it “builds accountability in the system.  Now that Congressman is put on the spot.  I would not underestimate the degree to which shame is a healthy emotion, and that you can shame Congress into doing the right thing if people know what’s going on.”

Instead, Max Baucus wasted everyone’s time by drafting a “bi-partisan compromise” that even the Republican Senators he handpicked opposed.  Then, Harry Reid convened a “Gang of Ten” Democrats (5 progressives and 5 conservatives) to craft something that could get 60 votes.  That’s how we got the Medicare compromise, but Joe Lieberman and Ben Nelson – who were in the Gang of Ten – backstabbed everyone by opposing it.  Incredibly, the White House then pressured Reid to cave into Lieberman’s tantrum.

What should they have done?  Call their bluff.  Over 51 Senate Democrats support the public option, so bring it to the Senate floor – and force Lieberman, Ben Nelson, Mary Landrieu and Blanche Lincoln to filibuster it in broad daylight with Republicans.  Let the public see who’s obstructing change, and who should be blamed for it.  As long as Reid remains obsessed with getting 60 votes, these “Democrats” evade the responsibility of ever having to cast a “no” vote.  And of course, the insurance companies laugh all the way to the bank.

Sacramento: Two-Thirds Rule Leads to Faustian Bargains

We all know the problem in Sacramento.  California is a very blue state – so Democrats have permanent control of the legislature, but not enough to have the two-thirds required to pass a budget.  So the Republicans (who are more right-wing than Republicans in any other state) hold the budget hostage by refusing to vote for a single tax increase, even if the state has to make unconscionable budget cuts.  They have nothing to lose, and don’t get held accountable – because they are “the minority party” so don’t run the legislature.

But Arnold Schwarzenegger doesn’t help things, and inevitably the budget gets crafted by the “Big Five” – an extra-legal group that includes the Governor, Assembly Speaker, State Senate President and Minority Leaders in each house.  Democrats are outnumbered three-to-two, and none of their meetings are public.  Republicans won’t support any taxes at all, and don’t care if the state falls off a cliff.  As a result, we get the kind of budget that gets worse every year – and we don’t know why particular concessions were made.

Even worse, Democrats consistently get the blame – because virtually every legislator feels compelled to vote for the budget.  Meanwhile, most Republicans still vote “no.”

San Francisco: Supes Got Played Behind Closed Doors

I spent a lot of time this year at City Hall on budget matters – and nothing convinced me more about the folly of back-room deals.  Progressives have a majority on the Board of Supervisors, and if they stick together – while building bridges with “swing votes” like Sophie Maxwell and Bevan Dufty – can challenge a Mayor who has been disengaged, unwilling to work with progressives and dead-wrong on the City’s budget priorities.

Board President David Chiu’s performance at the May 6th Budget & Finance Committee was admirable, and showed the value of public meetings.  After grilling MTA Chief Nat Ford about the Muni budget, he made it clear that the Supervisors had seven votes to stop fare hikes and service cuts.  The mistake he made was to think the Mayor would negotiate in good faith.

One week later, the hope and promise that came out of that meeting was gone – with a backroom deal that barely improved the awful MTA budget.  Newsom got Chiu to go along based on a manufactured threat, and it didn’t help that Chiu was the lone progressive negotiating in the room.  John Avalos tried to salvage the situation, but by then it was too late.  An agreement had been reached.

When the Board tackled the City budget in June – combing through Mayor Newsom’s awful proposal – I expected the Supervisors to make substantive changes at the Budget Committee, using the spotlight of a public meeting to amend the budget.  And for a while, they were on the right track by taking the symbolic (but unprecedented) step of tinkering with the Interim Budget.  But with notable exceptions, little was changed in those Committee meetings to the Mayor’s proposal.

On July 1st, John Avalos and David Chiu concluded marathon budget negotiations with the Mayor’s Office – all behind closed doors.  The Budget Committee even started 10½ hours past schedule, because everyone was waiting for the deal.  When we learned all the details, it fell short of where we should have been.  Crucial programs were saved, but the Mayor’s Office still had five press secretaries – although a majority of Supervisors would surely vote to cut them.  But rather than do just that in a public meeting, it died a quiet death in Room 200.

It’s hard being a progressive – at the federal, state or local level – because you’re always fighting.  You were elected to bring social change, but our system of government allows the powerful to maintain a status quo.  That’s why it’s so important to push for an open and transparent process – to maximize public accountability when politicians undercut change.  If these decisions and votes are made out of the open, progressive officials can get more help from the media and grassroots activists to achieve the change that we need.

2008 was the Year of Change, when America elected Barack Obama and expanded the Democratic majorities in Congress.  We did not elect Olympia Snowe, Joe Lieberman and Ben Nelson (none of whom were elected last year) to dictate our health care policy.  

California is a deep blue state, but we allow right-wing politicians who act more like Teabaggers than public servants to decide our budget.  And San Franciscans last year voted to keep a progressive Board of Supervisors, not to let the Mayor undercut them.

But when deals are made behind closed doors, progressives lose the levers of influence.  2009 was the year that backroom deals sank change.  In 2010, it’s time to let the sun shine in.

Paul Hogarth is the Managing Editor of Beyond Chron, San Francisco’s Alternative Online Daily, where this piece was first published.

From today’s Beyond Chron.

Governor Schwarzenegger’s May “budget revise” last week – which proposed more mass layoffs, more painful cuts and more reckless borrowing – had all the makings of the end of a Shakespearean tragedy, where the protagonist has run out of options due to troubles of his own making.  One could also view it as the definition of insanity – doing the same thing over again, and expecting a different result.  But Arnold was never a good actor, and he’s turned out to be a worse Governor – whose mark will be leaving the state in a maddening fiscal crisis.  From his first day in office, Schwarzenegger set off a chain of events by rolling back the Vehicle License Fee – which has cost the state $6.5 billion a year.  Then, he convinced voters to pay off one year’s budget deficit – with a $15 billion bond that we’re now paying with interest.  And with Republicans in the state legislature refusing to support any taxes whatsoever, Arnold vetoed a “majority-vote” budget in December that Democrats proposed – forcing everyone back to the drawing board.  With the May 19th propositions going down, he has tried scaring voters with no success – and now is proposing more of the same.  When Schwarzenegger leaves office next year, this catastrophe will be his lasting legacy …

Let’s review the latest outrage from a Governor who smells defeat at the polls tomorrow: lay off 5,000 state employees, cut $5.4 billion from school spending and borrow $7.5 billion from local governments (as if they didn’t have their own share of fiscal problems.)  He even wants to lease more sites for off-shore oil drilling to bring in $100 million, even though the state doesn’t have an oil severance tax.  No longer content to using scare tactics to get voters to approve his ballot measures, Arnold has said these steps will be necessary even if all Propositions pass – as the deficit now stands at fifteen billion dollars.

So why are we currently in this mess?  The short answer is we’re in a bad recession with 11.5% unemployment, and the bottom has fallen out on the state’s revenue.  Even the SF Chronicle agrees that laying off state workers is not the way to deal with this sudden and sobering deficit, and would probably make the problem worse.  But the long answer is that – through a deadly combination of tax cuts and borrowing money to avoid any tax increases, Governor Arnold Schwarzenegger dug the state into this hole.

In 2003, Schwarzenegger followed up on his campaign pledge to cut the Vehicle License Fee – the so-called “car tax” that had been around since 1935.  That step alone blew an annual $6.5 billion hole in the budget, which to date has added up to $35 billion.  The Governor went on to walk the next five years in lockstep with the legislature’s Republicans, refusing to support any tax increase whatsoever.  It wasn’t until last August that he finally acknowledged a revenue problem, but the only tax he would hike at the time was the sales tax – which adversely affects poor people, and is probably the worst tax to raise when the state is in recession.

But it’s not just a stubborn refusal to support new revenue.  Arnold has compounded the problem by borrowing money – which, of course, the state eventually has to pay back with interest.  In March 2004, when we had $15 billion deficit and the Governor was popular, Arnold persuaded the voters to pass Proposition 57 – a $15 billion bond to pay off that year’s budget gap.  Like the current debate over the May 19th propositions, the argument was that defeat would make awful cuts necessary.  Borrowing money is not always a bad thing, if it goes towards permanent infrastructure – like housing, schools or hospitals.  But Prop 57 was like using a credit card to buy groceries – not a smart idea!

Now, Proposition 1C would allow the state to borrow up to $5 billion in future lottery revenue – which literally means we would be “gambling on gambling.”  It’s an idea that Schwarzenegger has pushed for years, and the only reason many Democrats are voting “yes” is because it’s the only May 19th measure whose defeat would have a major short-term downside.  But now Arnold has outdone himself when it comes to pushing fiscally irresponsible tactics – he wants the state to borrow $7.5 billion from county governments (even though they’re broke), just to balance this year’s budget.

As a “post-partisan” Republican who the media fawns over, Schwarzenegger could have used his bully pulpit to bring fiscal sanity to the state.  He could have pushed a modest raise in the income tax for the rich, which Republican Governors like Ronald Reagan and Pete Wilson did when the state hit hard times.  He could have pushed an oil severance tax, so that California would not be the only oil-producing state to avoid getting its fair share from oil exploration.  And most of all, he could have pushed a repeal of the “two-thirds” rule that lets a minority of legislators hold the state budget hostage every year.

Instead, Arnold passed up every such opportunity to do the right thing.  When Democrats in the legislature pushed a majority-vote budget in December as an end-run around the “two-thirds rule,” he vetoed it because it didn’t allow enough state privatization.  With the May 19th propositions headed to defeat, Democratic leaders plan to re-introduce this proposal.  Will the Governor join them, or will he pursue more bad sequels to his Hollywood gimmicks that fail to materialize?

Because Schwarzenegger only has 18 months left in office, and he’s leaving California nothing but a bigger debt.  And it’s largely his fault …

(A spending cap would most certainly not be a positive for our budget mess. – promoted by Brian Leubitz)

From today’s Beyond Chron.

With the state bankrupt and giving I.O.U.’s instead of tax refunds, the California legislature is expected to vote on a mid-year budget later this week.  It’s bound to have horrific cuts, but no one has details because it’s being crafted in secret negotiations with the “Big Five” (Governor + party leaders in each chamber.)  Democrats control 63% of the legislature, but the “two-thirds rule” lets Republicans run the show.  And the minority refuses to vote for a single tax increase – unless Democrats agree to kill the eight-hour workday (and other similar extortions.)  Everyone thinks a statewide special election is inevitable, which could help us get meaningful budget reform.  But June 2nd would be a terrible time to do it, because none of the needed fiscal reforms would be on the ballot.  Instead, we’d have the Governor’s awful proposal to borrow money off future lottery revenue – and a deeply insidious proposal to cap state spending.  While San Francisco has no choice but to call a June special election (or else cut half of its General Fund), the state musn’t go full speed ahead.

After writing a piece last week that argued the need for California voters to approve budget reforms, I developed a weird sense of dread that my article was written in vain.  Of course we must abolish the “two-thirds rule” so the state can pass a sane budget, and the political mood is ripe for some fiscal reforms that would save local government.  But op-ed pieces alone don’t put good things on the ballot, and the fact we may have a statewide special election soon doesn’t guarantee voters will get the chance to weigh in on these ideas.

To place an amendment on the California ballot, you either need (a) a two-thirds vote of the state legislature, or (b) a petition with 700,000 valid signatures, i.e. eight percent of how many voted in the last gubernatorial election.  Placing an initiative statute – such as restoring the upper-income tax bracket – would require 430,000 signatures, or 5% of the last turnout.  The first option isn’t likely (why would two-thirds of the legislature vote to scrap the “two-thirds” rule?), so the realistic approach is to start collecting signatures.

Democrats have submitted an initiative to lower the threshold to pass the state budget from two-thirds to a 55% majority, and are in the process of gathering signatures.  But if we have a June special election, voters still won’t have the opportunity to pass it.  Because in order for ballot initiatives to qualify for an election, all signatures must be turned in 131 days beforehand – and June 2nd is 120 days away.  Our only hope to have this passed is to delay any statewide special election until August, or possibly even into November.

As for other budget reforms that are desperately needed (and politically winnable among voters), no one has even started collecting signatures for them yet.  Progressive activists must file these initiatives with the Attorney General’s Office for review immediately – so that we can start the expensive and time-consuming process of gathering nearly a million signatures.  Otherwise, they won’t be on the statewide special election – and it will all be academic.

What initiatives would we expect to see on a June 2nd statewide special election?  According to the Secretary of State’s Office, four propositions have already qualified.  Two are budget related, and both would make the fiscal crisis worse.  One is Arnold Schwarzenegger’s idea to borrow money from the state’s future lottery revenues – which would sink us even further into debt.  But a recent poll has voters not liking it, so hopefully it would go down in flames.

The second proposal – however – is far more dangerous, because the same poll showed 70% of respondents calling it a “good idea.”  Authored by State Senator Roy Ashburn (a Central Valley Republican), it would impose a mandatory state spending cap – putting California in a fiscal straitjacket that would render us impotent at addressing our needs.

Spending caps have been tried elsewhere.  Colorado passed a spending cap in 1992, and the disastrous results include: (a) teacher salaries plummeted from 30th to 50th in the nation; (b) children receiving full vaccinations fell from 24th to 50th; (c) and low-income adults with health insurance dropped from 20th to 48th.  “By creating a permanent revenue shortage,” said the Center on Budget and Policy Priorities, a spending cap “pits state programs and services against each other for survival each year and virtually rules out any new initiatives to address unmet or emerging needs.”

An analysis by the California Budget Project projects that, if voters approve a Republican spending cap, the state would have to cut $40 billion a year – “eliminating all General Fund support for higher education; the judiciary; child support services; health care services; resources – including fire protection; and environmental protection.”  This is no accident.  The sponsors’ true intentions are simply to starve the public sector, shrinking the size of government (as their mentor famously said) so we can “drown it in the bathtub.”

But that’s the reality we would face with a June 2nd statewide special election.  Voters like the idea of restricting how much the government can spend, knowing we are in bad budget times and sacrifices must be made.  It won’t be impossible to defeat this proposal, but we’ll have to work hard (and devote a lot of resources) to educating voters about its dire consequences.  And it will be far more difficult, and quite infuriating, if there are no sensible alternatives on the same ballot – while everyone is asking for solutions.

A statewide special election makes no sense – unless progressives can also qualify their own budget reforms (eliminate the “two-thirds rule”; restore the upper-class tax bracket; amend Prop 13 to exempt commercial property; amend Prop 218.)  But going full speed ahead doesn’t give us that opportunity.  It only poses the risk of doing more harm than good – and we can’t afford to screw it up.

The same, however, cannot be said about San Francisco’s independent effort to hold a special election on June 2nd.  Facing a $576 million deficit that could mean cutting half its General Fund, the Supervisors have no choice today but to move ahead.  While the City has its own fiscal straitjacket that will hamper its ability to raise revenue, we don’t have the luxury of time to make sure the state can fix its own house in order.  We’ll have to walk alone for now.

From today’s Beyond Chron.

Because Governor Schwarzenegger is impotent at brokering a budget, the state will be out of money on February 1st – and will start issuing I.O.U.’s.  That means no tax rebates, no financial aid and no other means of assistance.  Now we are looking at a statewide special election to get out of this mess.  If all we get is more Arnold gimmicks to delay the problem another year, it will be a tragically wasted opportunity.  Because now, more than ever, the public is willing to consider tax reform to get us out of the right wing fiscal straitjacket.  Beyond the Democrats’ effort to scrap the archaic two-thirds budget rule, legislators must consider placing ballot measures to amend Prop 13 (by exempting commercial property) – and eliminate Prop 218’s onerous requirement that local revenue measures get a two-thirds vote by the electorate.  With the recession wreaking havoc on our fiscal health, the public has finally woken up to the horror of right-wing tax policy.  For the first – and possibly only – time, voters might approve progressive ways to raise revenue.

Scrapping the Two-Thirds Budget Rule

Liberal bloggers were ecstatic yesterday to report that a new PPIC poll shows a majority of Californians would abolish the two-thirds requirement to pass a state budget.  And they should be.  Despite California being a solid blue state, Republicans in the state legislature from the Central Valley and Orange County have blocked our budget each and every year – because they adamantly refuse to vote for a single tax increase whatsoever in any way, shape or form.  This “tyranny of the minority” has blocked any effort to raise revenue during hard times – forcing the state to make painful cuts and borrow more money.

Specifically, the poll in question showed that a 53-41 majority of likely voters would support lowering the budget vote requirement down to 55%.  The Public Policy Institute of California (PPIC) has been asking this question every year since 2005, and it’s the first time that a majority of voters approved this idea.  As recently as May 2008, the question failed 39-53, with similar poll results in earlier years. Clearly, a seismic shift in public opinion has occurred.

Getting rid of the “two-thirds” rule is a priority for Democrats in the state legislature, who have tried in vain to forestall this crisis.  In a bout of desperation, they finally crafted a manipulation of the tax rules to get around the two-thirds requirement – only to have Schwarzenegger veto it right before Christmas.  If the Governor calls a special election, Democrats have said they will place a Proposition on the ballot to abolish the two-thirds requirement.

But it would be a lost opportunity to stop there …

Local Revenue Raising Reform:

Scrapping the “two-thirds rule” would make it easier to pass a state budget, but it would do nothing to solve the perennial revenue crisis that local governments face – a crisis that comes from state law.  Prop 218, which passed in 1996, requires all special taxes at the local level to get a two-thirds vote of the electorate.  Prop 13 also requires most local tax increases to be on the ballot.  So when San Francisco faces a $576 million deficit, these fiscal straitjackets mean requires us to have an election to raise taxes – which is never an attractive prospect.  

How in the world would Californians give up their power to raise taxes at the local level?  The same PPIC poll asked about lowering the requirement to raise special taxes at the local level from two-thirds to 55% (i.e., amend Prop 218 to make it less draconian.)  A majority (50-44) said it was a “good idea,” but the margin was closer among “likely voters.”  Prop 218 passed thirteen years ago with little fanfare – because progressives were too distracted by trying to save affirmative action (No on 209), raising the minimum wage (Yes on 210) and supporting medical marijuana (Yes on 215.)  Its damage has been catastrophic, but now we have a chance – possibly the only chance ever – to undo it.

Reforming Property Tax Revenue

Would voters also repeal Prop 13?  Don’t be silly.  The 1978 tax measure that castrated property tax revenue – and spawned the Reagan Revolution across the country – is still popular with Californians, especially long-term homeowners who enjoy the stability of capped increases.  But a Field Poll from June 2008 showed they’re open to amending it, and I couldn’t imagine a better time – when public opinion is willing to entertain such measures – to put it on the ballot in the name of rescuing the state.

Prop 13 was billed as saving residential homeowners, but by far its biggest beneficiaries have been corporations who own commercial property.  Because commercial property has much lower turnover, they pay much lower property taxes.  Imagine, for example, how much more revenue the San Francisco public schools would get if just one building – the Transamerica Pyramid – were exempt from Prop 13.  In the same June 2008 poll that showed voters strongly support Prop 13, the idea of “split roll” taxation either got 46-43 support or a whopping 61-27 approval (depending on how the question was asked.)

Progressives like Rob Reiner have been talking about a “split roll” amendment to Prop 13 for years.  Now is the moment to finally pass what folks have been saying for years.

For the June special election, San Francisco may put another parcel tax on the ballot – like they did in June 2008 to raise public school teachers’ salaries.  I voted for Prop A, but was not thrilled that every homeowner got levied $198-per-year, regardless of the size or value of their property.  Which means I will now pay the same amount for my 400 square-foot Tenderloin studio that Dede Wilsey pays for her mansion in Pacific Heights – which is unfair.  I’m not against taxing property owners, but let’s have some equity here.

Guess what?  San Francisco isn’t allowed to pass a “progressive” parcel tax, because Prop 13 requires them to be “flat.”  Rather than repeal Prop 13 entirely, allowing cities to pass parcel taxes that are not regressive sounds like a politically possible solution.

Other Budget Solutions for the Special Election

While structural solutions must be the priority, expect the statewide special election to have a lot of specific revenue measures on the ballot.  Schwarzenegger’s fiscally reckless idea to borrow against future lottery revenues is not popular and would fail, but the PPIC poll showed that his alcohol tax proposal would easily pass – and his regressive temporary sales tax is mildly popular.  What’s most interesting, however, is that raising the vehicle license fee by $12 would pass 61-37 – and even Republican voters support it by a 7-point margin.

If the Governor wants the special election to be about tax measures (most of which are just quick fixes), Democrats must demand a Proposition to raise income taxes for the wealthy.  The PPIC poll showed that idea passing by a 40-point landslide, one of the most popular revenue proposals.  Democrats in the legislature tried restoring the upper-income tax bracket to Reagan-Wilson levels last summer, but with the “two-thirds rule” could not muster its passage.  And the Governor never supported it – although he gladly repealed a $347/year tax credit for low-income seniors with the stroke of a pen.

If we’re going to raise taxes, let’s do it right.  Put a tax measure on the special election ballot to restore the upper-income tax bracket, and see if the voters like that better than Schwarzenegger’s ideas.  With the fiscal crisis devastating our state coffers, it’s time for everyone to sacrifice – but let’s demand that those who can afford to pay give their share.