On November 19th, 52 UC Davis students were arrested after peacefully protesting the new 32% fee increases established by the UC Regents. As a second year undergraduate, I was hopeful that students were beginning to see the bigger picture: California is broken.

   Students, so far, have been forcing most of the blame on the UC Regents. While it is true that the 20 Regents who voted for the increase certainly deserve a heaving portion of the blame for borrowing tens of millions (from a non-CA bank, NY Merrill Trust) while forcing students into a cycle of debt in order to protect UC’s eerily superb bond rating, the only way for students to move towards enacting change is to recognize that UC’s woes are symptomatic of the larger disease that has infected the entire state.

   The UC student, to widen the umbrella for a movement that might have the capability of rallying support for reform, should understand that he or she risks turning people off by angling attacks towards the Regents and the Regents only. It is important to recognize that while it is a travesty that UC is becoming an unaffordable option for many California families, it is nearsighted to think that UC fees are anything more than a slice of the pie that is California’s broken political system. The state workers that have been furloughed, the elderly Californians that are losing their access to Medicare, the thousands of previously middle-class Californians that have had their homes foreclosed, and the over 12% of California that is unemployed might tell students that UC is not the only government program that is underfunded, mismanaged, and increasingly unavailable to the people who need it.

 To the single mother making $30,000 a year or the undocumented immigrant working in poor labor conditions for a less-than-legal salary, the plight of the students might seem distant and unimportant. The reality of the situation is that students are making valid points, but they are doing so in a way that turns off the millions of Californians that should be turned on by the students’ overarching message of reforming California.

   When the student recognizes that the immediate and long term problems caused by UC’s fee increases are tied together with the struggles of working families, immigrants, the elderly, homeowners, borrowers, the unemployed, water drinkers, and dozens of other California communities and interest groups, then, perhaps, we will see forward progress.

   The first point that needs to be made by students (that might catch on) is that the programs that made our state great in the 50s and 60s cannot continue to exist without proper funding.

   The message should be loud and clear: raising revenue does not mean higher taxes for everybody, it means looking at who and what gets taxed in this state, and what kind of people are hurt when programs lose funding. Here are three problems that have been generally accepted among the progressive community to be at the heart of the problem:

   Lack of an oil-severance tax in California. Who wins? Big Oil. Who loses? The People. AB 656 (Torrico) would use a 9.9% tax on Gross Product to generate up to $1 billion annually for programs like UC, CSU and CCC.

   2/3rds majority required to pass anything that raises revenue. Who wins? The CaGOP and Big Business. Who loses? Again, The People. Republicans who are indebted to special interest groups that represent Big Business are able to crush the programs that help make the California Dream a reality for many working Californians. AB 656 is expected to be an easy kill for the Republican minority, even though California is the only state in the union that does not have an oil severance tax (including Sarah’s AK and GWB’s TX).

   Proposition 13. Who wins? Big Business. Who Loses? The People. The remains of the Jarvis Taxpayer Revolution act as the most regressive and harmful tax policy in the state. With the veil of providing economic safety for elderly residents without a fixed income, the anti-tax era cursed California’s future with budget shortfalls and program cuts. It is apparent, now, that Californians can’t have our cake and eat it, too.

   So, students should be asking the question: Why is it that Chevron, Monsanto, and Walmart are allowed to raise revenue while the State of California isn’t? Why is it that CEOs are getting pay raises while the People are getting both pay cuts and program cuts?

   The students are right: the State of California has left them for dead, but they are not alone. Almost every Californian uses some sort of state-sponsored program, whether that be a UC, a public elementary school, a library, or the DMV. If you’re one of those people, and if you haven’t gotten a pay raise, then you should be ticked off, too.

After a year of public discussion and behind-closed-doors drafting, the Bay Area Council has filed their two initiatives for the November 2010 ballot to allow Californians to call a Constitutional Convention.

The first and fairly noncontroversial initiative would change the existing constitution to allow voters to themselves call a convention. Currently only the legislature can do so.

The second initiative is the biggie, the one that actually convenes the convention and lays out how it operates, including how delegates would be picked and what the scope would be.

The delegate selection process would be as follows: 3 delegates randomly selected from each AD (total of 240) and delegates selected by county Boards of Supervisors, one delegate per every 175,000 in a given county, with cities of over 1 million (currently LA and SD, maybe San Jose) get to pick some of their county’s delegates. Federally-recognized Indian tribes get to send a total of 4 delegates (they decide themselves who the 4 will be). This is interesting, since tribes’ primary relationship with with the federal government, and states are very strictly limited from regulating tribal affairs or lands. Still, better to have them in the process than outside it, especially since they were banned from the 1849 and 1879 conventions.

Significantly, all delegates must be citizens. Permanent residents are not eligible to participate. There are a series of other restrictions designed to keep political insiders out of the convention – rules that exclude yours truly (since I serve on a party central committee), but those are much less problematic than the exclusion of California’s considerable non-citizen population.

Preliminary analysis offered to me by Gus Ayer over email, which I hope he’ll share in the comments, indicates that this structure would be highly likely to produce a delegate body that is right of center. California’s large-population counties tend to be in Southern California and have Boards of Supervisors dominated by Republicans.

The convention’s scope is also interesting, and skewed toward the right. Have a look at the language on “Government Effectiveness,” included as one of four items the Convention MUST consider (along with “Elections and Reduction of Special Interest Influence,” “Spending and Budgeting” and “Governance”):

Government Effectiveness, including a method for periodically reviewing each State agency, department, board and commission to determine whether it is performing its functions to meet the needs of the people of the State and whether it should have its enabling legislation modified, be merged into another new or existing entity, or cease to exist.

The convention it would also be barred from altering existing constitutional language regarding taxes (including but not limited to Prop 13) if there’s any chance that the alteration “changes the fundamental nature of” the tax or might cause the tax to rise. In his response to my question during last week’s live interview on Calitics, Gavin Newsom said Prop 13 should be part of a Con-Con.

The initiative also proposes to limit the scope of the convention in this way:

the convention may not include new language, or alter existing language, directly affecting marriage or abortion rights, gambling or casinos of any type, affirmative action, freedom of the press, freedom of religion, immigration rights, or the death penalty.

I don’t know if they simply forgot to include “freedom of speech” or the state’s Equal Rights Amendment or any number of other elements that make our state’s Bill of Rights far, far stronger than the federal bill of rights, or if they deliberately want that to be altered. (Businesses have never been very happy with the Pruneyard decision, which used the state’s freedom of speech constitutional language to extend many speech rights onto private property, specifically shopping centers.)

Needless to say, this is not how I would have written a Con-Con initiative.

UPDATE by Robert: Joe Mathews offers his take on the initiatives, noting that the FPPC will be in charge of the Convention, picking the staff and training the delegates. He also points out that the “clerk” of the convention will be an extremely important role, could be anybody, and can only be fired by a 2/3rds vote of the Convention.

SF Assessor Phil Ting’s “Close the Loophole” event last night was a pretty big success.  Turnout was exceptional with an overflow crowd at the SF LGBT Center’s Ceremonial Room.  It’s clear that a lot of people are very, very frustrated with Prop 13. If you missed it, and would like to get more involved, here is the Close The Loophole website and here is the Facebook Page.

Phil Ting spoke for a relatively short time, maybe 15 minutes or so.  He briefly explained where his focus lay, the split roll.  Basically, the split roll would pull commercial properties out of Prop 13, and change the system for assessing and taxing those properties.  Because of the way commercial properties are transferred, in small percentages at a time or by selling a whole company, etc., they can be transferred without being reassessed. Thus, the “loophole” to which Phil Ting refers in his Close the Loophole campaign. All in all, a splitting of the rolls would in the current fiscal year bring in about $7.5 Billion for local governments.  It would not resolve the budget crisis in one chunk, but that money spent wisely could have helped us mitigate the crisis.

The key to this meeting however, was building a working group to begin the process towards moving past talk and into action. Let us not hold any illusions, messing with Prop 13 will not be an easy task.  Business organizations will spend millions of dollars to defeat a split roll initiative, with some political folks suggesting that the No campaign for a split roll campaign measure could raise over $100 million.  It’s tough to beat such a large and spendy No campaign, very hard indeed. The only way that happens is to a) have a substantial budget of our own and b) build a grassroots wave of support.

So, after Mr. Ting spoke, the group broke up into work groups to discuss important features of the campaign. I joined the fundraising group, and we went over ideas of whom to reach out to and how we could raise the kind of money that we would need to pass this measure.  A coalition group had some good ideas of natural allies and an online organizing group worked on building support through the Politics 2.0 toolset.  A policy group also went through ideas, both on the split roll and a further ideas that could be included in a package of reform.

After getting back together to share ideas from the work group, the group committed to reconvening in September. But, we’ll need to have more groups like this across the state. So, let’s work on getting similar events set up elsewhere. If you have access to a meeting space, and would like to host an event, let’s get that going.  Feel free to post something here, or shoot me an email. I’ll do my best to help you organize an event.

We’ve mentioned Phil Ting’s quest to split the property tax rolls a bunch of times, but I wanted to draw special attention to an event in San Francisco to organize for this vital structural reform. And if this is going to get done, there has to be a real grassroots movement to grab the 1,000 volt third rail of California politics.

And this is an achievable goal, despite whatever the conventional wisdom says. Table 6 in this  Field Poll (PDF) from last year is particularly relevant. So, the good news, is that we have a great shot at fixing the split roll question no matter which way the issue is framed.  But, you can clearly see that framing matters with this question.  

When voters are asked whether they would prefer higher commercial taxes than residential taxes, 47% of voters say yes. However, when asked if they would prefer having lower residential property taxes than commercial property taxes, which describes the same situation, 61% approve.  Either way, we start with a small lead, but it becomes much bigger when the right question is asked.

The event’s going to be a quasi-focus group, quasi organizing event, quasi-brainstorming kind of session. So, bring your bright ideas, and let’s get started right now on at least one reform.

Here are the details:

Date:   Wednesday, July 1, 2009

Time:   6:30pm – 8:00pm

Location:  SF LGBT Center

Street:    1800 Market St.

City/Town: San Francisco, CA

To follow up on Robert’s post this morning, I wanted to go back to a few words from the Wizard of Omaha, Warren Buffet, from back at the time of the recall election in 2003.  At the time Buffet was an Arnold “advisor”, that is until he suggested that Prop 13 was a sad sack of a holy grail.  If you recall, Buffet’s talk on taxes caused quite the brouhaha.

First, to address the more general comments he made at the time, they weren’t a general “raise taxes” argument so much as a fix the tax system argument.  At the time, Buffet was famously quoted as saying he  ends up paying a lower effective tax rate than his secretary after you count the sales tax and the other range of taxes we pay.  This becomes even more troubling when you put this in the context of the tax commission’s latest ideas to flat tax the state. Basically, the Tax Commission wants to further kneecap the middle class by introducing a flat tax at 6% rather than introducing a more progressive bracket system along with a fair property tax.  The problem with that, besides the initially obvious lack of a progressive system, is that the rich generally have more deductions, even under state law.  So, like Warren Buffet said, the secretaries of the world end up paying more than the invesment moguls

Even taking volatility as a serious threat to the state budget, a flat tax is neither the only solution nor even an obvious solution.  While taxing lower income earners would grade some of the peaks of the valleys of our general fund revenue, it would also impose a far larger portion of the burdern upon those that can least afford it.  I get that such a scheme is a wet dream of all the loyal Bushies, but it is a solution that is far from acceptance in California.  

In most states, other taxes, like property taxes, are used to smooth the curve from income taxes.  And Buffet concentrated his fire on Prop 13. In a response to a Wall Street Journal article, he used his own properties to outline some of the problems with Prop 13:

What I said in respect to property taxes was very specific. I gave him an example of three houses, two in Laguna Beach and one in Omaha. The first Laguna Beach house is a property that I bought in the early 1970s. It has a current market value of about $4 million and, because of the limitations embodied in Proposition 13, carried taxes of only $2,264 in 2003 vs. $2,241 in 2002. The second house, located just in back of the first, is one that I purchased in the mid-1990s. It has a market value of about $2 million and, simply because I bought it later than the first, carried taxes of $12,002 in 2003 vs. $11,877 in 2002. I pointed out to Joe that these figures mean that the tax rate on the second house — same neighborhood, same owner, same ability to pay — is roughly 10 times the rate on the first house.

My sympathies are clearly with the “non-billionaire” family purchasing a $300,000 house in Chico today that faces real estate taxes materially higher than those borne by this non-resident billionaire on his $4 million house in Laguna. This family, because of Proposition 13, has been selected to subsidize me. (WSJ 11/3/03)

In modern-day California, even with declining property values, the middle class is held down on the ladder.  Those who purchased their property decades ago get a subsidy from those who purchase today, even with the newly reduced property values.   A family just starting out is subsidizing those who are already established.

And we have plenty of polling data on Prop 13, like this Field Poll (PDF) from last year. Yet this is what really boggles my mind, that even newer homeowners, who are subsidizing older homeowners and thus paying more than they should be, still support this crap. Let’s put succinctly, so that the 71% of voters who bought within the past 5 years and are “somewhat” or “not at all” familiar with Prop 13 see this: Prop 13 INFLATES your taxes.

Furthermore, there should be no question that the real losers from Prop 13 are renters. While renters would see some passthrough of taxes, they pay income taxes directly, dollar for dollar. In other words, they are hit disproportionately by the income tax.  Yet, at least 41% of renters would vote in favor of Prop 13.

This is the result of third-rail politics, and the failure of liberals, progressives and generally reasonable people, from elected Democrats to grassroots activists to successfuly discuss, qualitatively and quantitatively, the havoc that Prop 13 has wrought on the state.

We have a lot of work to do with Prop 13, and efforts like Phil Ting’s are a nice step in the right direction.  However, even the Wizard of Omaha understands that we simply cannot afford to ignore the “third rail” of California politics anymore. It hurts the middle and working class. It hurts renters, and it devestates state services. Ready or not, it’s time to play with 1000 volts.