Archive for 2011

Time for Krusty to Explain How He’ll Fix the Budget

Friday, April 29th, 2011

UPDATE: Gov. Brown was unable to speak to the California Democratic Party convention because he was home recuperating from surgery to remove a basal cell carcinoma from his nose. Calbuzz wishes him a speedy recovery.

When Gov. Jerry Brown speaks to the California Democratic Party at their convention this weekend in Sacramento, it’s time for Krusty to lay out to his fellow Democrats just how he intends to lead the state out of its budget impasse and what role liberals, labor unions, environmentalists, minorities, women  and civil rights advocates must play in the process.

Brown didn’t have to run for governor again. He could have kept his job as Attorney General for two terms and remained on the sidelines. Instead, he decided he had the experience and the know-how to bring Californians together to solve the intractable partisanship that has ground government to a halt in Sacramento.

How’s that working out? Not so great. After nearly six months of getting nowhere – except proving that Democrats were willing to swallow $12.5 billion in disgusting budget cutbacks in an attempt to meet Republicans half way – Gov. Gandalf is no closer to a solution than he was on the day he was elected. (Even though we have, at no charge, spelled out the Calbuzz Plan for Budget Reform and World Peace.)

Polls – from the Los Angeles Times/USC and from the Public Policy Institute of California – find that most California voters agree there ought to be an election to determine if temporary increases in sales and income taxes and vehicle license fees ought to be continued for five years to prevent further cutbacks. But getting two lousy votes in the Assembly and the Senate from the Republicans has proved a non-starter.

What worries California voters – and especially parents of public school children – is that cutting the budget further will hurt public schools, the PPIC poll demonstrates. Nine in 10 public school parents are concerned – 66% of them very concerned – that the state budget standoff will lead to significant cuts in K-12 education.

Three-fourths of those parents say the quality of schools will suffer if cuts are made.

Of course, California voters – including those public school parents – want someone else to pay for keep schools afloat: 62% of likely voters say they’d support increasing income taxes on the rich while nearly every other tax proposal bites the dust.

Meanwhile, Brown has an opportunity in his speech on Sunday to explain to his own people that despite the nasty cutbacks they’ve already allowed, they’re going to have to do more, on public employee pensions and budget controls to win public support.

We’d like to believe that if Democrats lined up behind those ideas for real, that the Republicans would met them half way. But as we’ve argued before, there is no evidence that Republican legislators have any interest in compromise, which many of them view as capitulation. They’re like birthers run amok: show ‘em a birth certificate and they want to see report cards. Brown has to accept the sad truth that until their constituents start applying pressure, no Republican is going to seek common ground on the state budget.

So, Jerry, tell the Democrats what they have to do. If you have a clue.

In the meantime, take a look into the future for public schools through the eyes of Calbuzz cartoonist extraordinaire Tom Meyer.

(You can click on it for a larger version.)

Voters May Know Nothing, But They Want to Vote

Wednesday, April 27th, 2011

Public opinion polling can reliably tell us about voters’ views on just about anything, but public opinion itself is only as informative as it is informed.

So when 75% of California voters say they’re following the Great Budget Debate but only 16% are aware that state spending has declined by billions in the last three years, you’d be well advised to take voters’ opinions with a big honkin’ chunk of salt.

It makes sense that six in 10 voters in the latest LA Times/USC survey – including (knuckledragger alert) 51% of Republicans and conservatives – agree with Gov. Jerry Brown that there ought to be a special election to decide whether to renew increases in income and sales taxes and vehicle license fees.

That view is statewide – from a low of 55% in the Central Valley and 56% in Southern California outside of LA, to 63% on the Central Coast to 70% in the Bay Area. What we don’t know – and this is something tightwad Gov. Brown ought to pay his pollsters to find out – is how voters in swing legislative districts (where Republicans need independent and some Democratic votes) view the issue.

Jjust because people say they want to vote on the budget, however, doesn’t mean they have any actual knowledge about the budget, the budget process, where California raises and spends the most money, how big public employee pensions are or any other actual factoid. Remember, one of our three rules of politics is, “Nobody knows anything.”

Despite their relative ignorance, only one in four voters – and just four in 10 Republicans and conservatives — say the budget should be balanced with cuts alone. Most people think there ought to be a combination of cuts and taxes – as Gov. Brown has proposed.

But the Democrats ought not get too smug about all this, because the same voters who have no idea how much California spends or whether that amount has gone up or down in the past few years also believe state spending should be capped at the rate of inflation while public employee pensions should be reduced or otherwise limited as a drag on state spending.

It doesn’t really matter  — as public employee pension advocates argue – that these costs are NOT the source of California budget woes, that most of those pensions are modest (although some are certainly not) or that public employees, in the main, are no better off than workers in the private sector.

What Brown and his Democratic allies have to worry about is the perception that has already been created that leads about seven in 10 California voters to believe there ought to be a cap on the pensions of future and current public employees.

At best, that’s a perception problem the public employee unions and their allies cannot escape. At worst, it’s a hard opinion that cannot be simply ignored. Still, 45% of voters believe the salaries and benefits most public employees receive are about right or too low compared to 43% who say they’re too high. It’s a split decision on which teachers, firefighters, cops, park rangers and others can base a public education campaign.

But they’re going to have to show some shared sacrifice, too, especially the prison guard and the teachers unions. Their Democratic patrons/supplicants in the Legislature do them no favors taking a hard line against any and all attempts to rein in the real and perceived clout of these major-donor allies.

Voters don’t want to hear Jerry Brown whine about how hard he tried to exact concessions from the prison guards. Whah, whah, whah. Who cares? At this stage of his life, whining is unbecoming.

More on knucklehead voters: A detailed, lucid and insightful takeout on the implications of ignorance among broad swaths of the California electorate is a highlight of “Democracy in California,” a multi-part special report on the state’s governance-fiscal quagmire published by   the Economist.

The longer that people live in California, it seems, the more likely they are to be misinformed, and possibly brainwashed into ignorance. The supporters of Proposition 13, says (Sac State professor Kimberly) Nalder, have for three decades framed the debate as the ‘little guy versus the established powers,’ with images such as that of a grandmother being taxed out of her home. Homeowners who are happy with their low property taxes might therefore ignore the fact that large firms, trusts and hedge funds which own commercial property benefit just as much, because that would “disrupt that clean narrative.”

Written by Andreas Kluth, the magazine’s West Coast correspondent, and only slighter longer than “Remembrances of Things Past,” the package doesn’t break any new ground on the California-is-ungovernable meme, but it clearly and closely examines the multiple roots of the problem with big historic sweep and in considerable depth, all of it written in the Economist’s strong and precise style (undercut only by their consistently non-Amurican spellings of words like “practise,” “programme,” and “centre” – hey, didn’t we win that whole Revolutionary War thing?)

While doing by-now familiar journalistic drive-bys on term limits, gerrymandering and California’s boom-and-bust taxation system, Kluth spends most of his ammunition annihilating the initiative system:

Direct democracy in California is thus an aberration. It has no safeguards against Madison’s tyranny of the majority. It recognises no saucer that might cool the passions of the people. Above all, it is not a system intended to contain minority factions. Instead, it encourages special interests to wage war by ballot measure until one lobby prevails and imposes its will on all. Madison and Hamilton would have been horrified.

But in 1911 none of this was yet clear. The system had the potential to be coercive, but its actual effect would depend on context and usage. Indeed, the number of ballot measures, once the novelty wore off, declined and stayed low as the Southern Pacific’s power faded naturally. For decades, immigrants populated the state, and most problems seemed to take care of themselves. But all this changed abruptly in 1978, with an unprecedented initiative that shapes the state to this day: Proposition 13.

Among Kluth’s collection of usual suspect interviews, MVP honors go to John Mockler, state education expert and Prop. 98 author:

According to Mr. Mockler, it was Proposition 111 that finally made the overall structure for education funding incomprehensible. It multiplied by six the “data sets you need to know” to calculate education spending, he says. He compares the resulting package of legislation to the general theory of relativity, quantum physics and the federal tax code in complexity, and reckons that he is currently one of ten people alive who understand Californian school finance.

Calbuzz sez check it out.

Calbuzz Op-Ed: Online Sales Tax a Bad Deal for CA

Monday, April 25th, 2011

Last week, Calbuzz ran an op-ed by Alissa Anderson and and Jean Ross of the California Budget Project arguing in favor of taxing internet sales. Today, we offer a response from Rebecca Madigan of the Performance Marketing Association.

By Rebecca Madigan
Special to Calbuzz

In California there are 25,000 thriving small businesses known as “affiliate marketers” and right now the very existence of this industry is being threatened by misguided legislation; in these economic times can California afford to lose 25,000 more businesses?

The supposition of AB 153 (Skinner) and SB 234 (Hancock) is that by implementing an “affiliate nexus” tax, California will collect additional sales tax revenue.  That is simply not true.

What is true is that if these bills pass, California affiliate marketers will have their incomes devastated, and the state will collect no new sales tax dollars.

Affiliate marketers are California companies that earn income from ads placed on their websites. In 2009, California affiliate marketers earned $1.6 billion and paid $124 million in state income taxes (plus business taxes, employment taxes, etc).  Legislation such as AB 153 and SB 234 guarantees elimination of these fiscal contributions.

Proponents allege that because out-of-state retailers place ads on California-owned websites they should collect sales tax. But placing an ad on a website does not constitute a “nexus,” nor does it obligate out-of-state retailers to collect sales tax in California.

This holds true for California retailers that advertise in other states – they are not obligated to collect sales tax in states simply because they advertise there.

This isn’t a loophole as some assert; it is a component of the U.S. Constitution’s Commerce Clause.  The Commerce Clause protects interstate commerce and says that if a business doesn’t have a physical presence, it doesn’t have to collect sales tax for that state. Why? Because if a business isn’t located in California, it has no electoral voice in California elections, and it gets no benefit from those collected tax dollars. Our founding fathers called this “taxation without representation.”

Should any of the proposed legislation take effect, out-of-state retailers wanting to stay on the right side of the Constitution will simply stop advertising on California websites and, instead, will advertise on competitors’ sites in other states.

When that happens, the impact on these 25,000 small businesses will be devastating: they likely will see a 25-35% drop in income, which would translate into the layoff of thousands of people statewide and businesses moving to other states, or perhaps even closing.  But don’t take my word for it you can view what some affiliate marketers have to say here.

Proposal such as AB 153 and SB 234 are non-starters; in 2009 the governor vetoed comparable legislation and 15 other states have rejected similar legislation. Three states, New York, Rhode Island and North Carolina, tried to implement an online sales tax, only to find such programs unsuccessful.

No additional income was generated for those states while numerous out-of-state retailers simply stopped advertising on in-state affiliate marketer websites. The states didn’t gain sales tax revenue – in fact, they lost income tax revenue. That is exactly what will happen in California if these pass. Further, George Runner, a member of California’s Board of Equalization received confirmation that major out-of-state retailers will follow suit in California should comparable legislation pass.

All California businesses and consumers are obligated to pay sales tax for online purchases where a sales tax was not collected. This is a “use tax” and has been in place more than 75 years. If use tax collection is implemented correctly, it will garner California far more additional tax revenue than these baseless “virtual nexus” schemes. Currently the Board of Equalization is making a pro-active effort to educate and collect additional revenue under California’s use tax. Legislators should focus on reliable income streams such as the use tax rather than spending time on ineffective proposals.

If AB 153 and SB 234 pass, California gains nothing and only loses; new sales tax income will not be collected and 25,000 viable affiliate businesses will be devastated. The bottom-line is this: California will lose much more in businesses closing, further job loss, businesses moving out-of-the state and reduced income state contributions than it will gain in illusory “nexus tax” gains.

Rebecca Madigan is the executive director of the Performance Marketing Association, a trade association for the performance marketing industry.