Archive for the ‘California Deficit’ Category



How Climate Change Law Shapes the Gov Race

Monday, January 11th, 2010

megkissingsarahAlthough a 12.3% unemployment rate and $20 billion budget deficit ensure the economy will dominate California’s race for governor, Republican front-runner Meg Whitman has guaranteed that the environment will also be a high-profile issue in the campaign.

Whitman, the former CEO of eBay, declared in September that her first act as governor would be to suspend the state’s pioneering climate change law, AB32. It was a high-risk political move for Whitman, putting her campaign at odds with the views of a large majority of California voters while, more broadly, re-igniting a statewide debate about the impact of strong environmental regulation on economic growth.

AB32, which Gov. Arnold Schwarzenegger signed into law in 2006, sets increasingly stringent caps on greenhouse gas emissions, leading to a 25% reduction by 2020. The governor’s office described the bill as “a first-in-the-world comprehensive program of regulatory and market mechanisms to achieve real, quantifiable, cost-effective reductions of greenhouse gases.”

050-702

Percentages in favor. Source: PPIC

That’s not how Whitman sees it. The law, she says, “will lead to higher energy costs at a time when we can least afford them. They will discourage job creation and could kill any recovery.” Schwarzenegger, who encouraged the measure, answered Whitman’s statements with sharp criticism for all those who assert a conflict between the economy and the environment:

“I think there are people that just don’t believe in fixing and working on the environment,” he said. “They don’t believe there is such a thing as global warming, they’re still living in the Stone Age.”

Whether the measure is the best approach to reducing greenhouse gases – about which there is considerable debate – Whitman’s stance against it flies in the face of California political trends in recent decades. Like abortion rights, environmental protection is strongly favored by independent, decline-to-state voters, as well as by large majorities of Democrats. As with the issue of choice, taking a stance in opposition to popular opinion can kill the general election chances of a statewide candidate.

Already, the liberal Courage Campaign has attacked Whitman in a radio ad, comparing her position on carbon reduction targets to that of Sarah Palin. Significantly, Whitman used the ad by the leftist grassroots organization as a fundraising tool, positioning herself as a free market champion under attack.

As a political matter, the candidate’s AB32 opposition may make some short-term tactical sense. Her first challenge is to win the Republican primary contest, where right-wing voters dominate, and where she faces Insurance Commissioner Steve Poizner and former Rep. Tom Campbell. The Public Policy Institute of California recently reported that, among Republicans, support for AB 32 has fallen in recent years, from 65-to-20% in favor in 2006 when it was passed to 43-to-46% against the measure in 2009.

As an aside in the GOP primary but a harbinger for the general election, Democrats in the state stand 78-to-12% in favor of the law and independents are 67-to-23% in favor of it.

And while 89% of California Democrats and 75% of independents say “it is necessary to counter the effects of global warming right away,” Republicans are split on that issue, with 44% favoring immediate action and 46% saying it isn’t necessary to take steps yet.

Whitman’s strategy could ultimately backfire. It is difficult to see the environment as a determinative issue in the GOP primary, where Poizner more quietly takes the same position as Whitman while Campbell favors AB32. Republicans historically have not picked candidates according to their positions on the environment

But Democrats and independents do, and they will be voting in the general election.

PPIC reported that about nine in 10 California Democrats and eight in 10 independents say the government should regulate greenhouse gases from sources like power plants, cars and factories to reduce global warming. Whitman might call that a “job killer,” but she would do so at her political peril: even 54% of Republicans favor such measures, according to PPIC polling.

It’s not hard to envision an anti-Whitman ad quoting Schwarzenegger:

Some have challenged whether AB 32 is good for businesses. I say unquestionably it is good for businesses. Not only large, well-established businesses, but small businesses that will harness their entrepreneurial spirit to help us achieve our climate goals.

While Whitman has been raising the issue’s profile, the state Senate Select Committee on Climate Change and AB32 Implementation, headed by Sen. Fran Pavley, a Democrat who represents Malibu, Santa Monica, West Hollywood and other L.A. beach enclaves, has begun hearings on Schwarzenegger’s implementation of the measure.

“It’s time to figure out whether we mean what we say or not,” said committee member  Sen. Joe Simitian, a Democrat from Silicon Valley and Santa Cruz.

Further driving the environment onto the front burner is Gov. Schwarzenegger’s renewed effort to gain approval of the controversial Tranquillon Ridge offshore oil project in Santa Barbara which — whether is has merit or not — will almost certainly serve as a rhetorical line of demarcation between environmental purists and appeasers.

At the same time, the governor’s Office of Planning and Research has been instructed to promulgate guidelines by which cities and counties can evaluate the effects on global warming of new development – a result of lawsuits brought by Attorney General Jerry Brown. The presumptive Democratic candidate for governor, Brown with his actions has forced consideration of global warming into local planning decisions.

Whitman may please Republican conservatives on the issue, but she is up against broader political forces that favor policies to slow down climate change, including a huge portion of general election voters who want California to lead the way.

A version of this post was published today in the Los Angeles Times.

Arnold’s Alliterative Aspirational Adieu Address

Thursday, January 7th, 2010

stateofstate2The best commentary on Governor Schwarzmuscle’s State of the State Address came in the form of Capitol Alert’s word cloud.

Thanks to them, we know that Arnold used at least 31 words beginning with “P,” more than any other letter. For those who missed the SOS – and why wouldn’t you? – here’s the Calbuzz  15-word recap:

Pigs & pony
Persevere & prosper.
Painful priorities,
Prudent policies,
Privatized prisons,
Pension problem.
Patriotism!

The pig & pony show: Except for his opening, an endless and near-incomprehensible tortured metaphor comparing the Legislature to his household pets, the governor’s final SOS was pretty much the same as every other such address ever delivered (OCD memo:  pig and pony intro accounted for 269 of speech’s 2,947 words, or 9.1 percent). Aspirational in tone and theme, it included three mandatory elements: elevated rhetoric about the California Dream, a big heap of self-congratulation and a laundry list of legislative proposals.

The devil, to coin a phrase, is in the details, of course, so the real opening bell of this election-year session won’t come until Friday, when Arnold’s Department of Finance minions release their $20 billion deficit budget, and he runs like hell out of town.

“Every year, in spite of whatever challenges are before us,” he said in the meantime, “I stand up here and tell you how much I believe in California’s future.”

Exactly. In fact, he could have given the same speech back in 2004. Oh wait, he did.

Schwarzenegger 2010Let’s do lunch: The gov made sure to give lawmakers a little love, applauding their approval of education reform (of the small caliber variety), and of water legislation that calls for $11 billion in new bond spending (boosting the state’s annual interest payment obligation, the fastest growing item in the budget). Having invited them all to lunch at the Sutter Club, he tried not to spoil their appetites by dwelling on the unpleasant fact that they’ll once again be taking the deficit out of the hides of California’s least fortunate citizens.

“Which child do we cut? The poor one? The sick one? The uneducated one? The one with special needs?”

How about all of the above, governor?

Now there’s a thought: As for what he wants to accomplish this year, The Terminator’s best ideas were to “protect education,” whatever that means, and to put a higher priority on the UC/CSU/Community College systems than on prisons:

Thirty years ago 10 percent of the general fund went to higher education and 3 percent went to prisons. Today almost 11 percent goes to prisons and 7.5 percent goes to higher education. Spending 45 percent more on prisons than universities is no way to proceed into the future. What does it say about a state that focuses more on prison uniforms than caps and gowns? It simply is not healthy.

No duh.

Two problems with Arnold’s big, blinding insight: 1) His notion for a constitutional amendment to require this policy keeps California locked in the same old ballot box budgeting box that helped get the state in the mess it’s in; 2) why didn’t he think of this earlier?

Most of his other big ideas were based variously on lies, damn lies and statistics:

“The worst is over for the California economy.” Really?

Even if you accept the argument that the recession is technically over, the lack of real economic growth in the form of new jobs, or a decline in the state’s 12.3 percent rate of unemployment, makes the case an empty, statistical claim, as everything from retail sales to real estate is forecast to sag at least until the fourth quarter in California.

“We cannot have a robust recovery while banks are not lending,” said Bill Watkins, our favorite, hard-headed economist. “So, fixing our banks should be our first priority. Unless we do that, we’re just going to muddle along.”

The feds will pay for it. Really?

Schwarzenegger is right to bitch that the state doesn’t get our fair share of federal tax money:

When President Clinton was in office, California got back 94 cents on the dollar from the federal government. Today we get only 78 cents back…This should be more fair and equitable.

Then again, if life was fair, Calbuzz would have big biceps and six-pack abs, too.

Even if the Obama Administration decides to back a too-big-to-fail  sweetheart deal for California, the odds of Congress falling in line in an election year, particularly given growing public concern about the deficit, plus the Anybody But California attitude on Capitol Hill, are slim. Arnold surely didn’t help his case with the White House by launching a surprise attack Wednesday on Democratic health care plans as “a trough of bribes, deals and loopholes.”

The Parsky plan will save us all. Really?conan

The one true outrage in Schwarzenegger’s speech was his demand that the Legislature pass the Parsky Commission proposal for tax reform — some nasty, secretive hide-the-pig-and-pony flapdoodle to which Calbuzz devoted a fair amount of attention.

I sent you the Tax Reform Commission’s plan in late September, but it seems to have disappeared somewhere under this dome. Where is it? Maybe the pig and the pony have taken it.

Or maybe it’s a dog-ass, half-baked, secretly-concocted, serve-the-rich scheme that’s been rightly denounced from every point on the political spectrum, Conan.

Views from the grandstand: Having utterly failed to end deficits or ease gridlock, the two big promises that swept him into office, Arnold is fast running out of time to try to repair his battered image, and it’s not going to help that every candidate for governor will rightfully campaign this year by pointing to him as a fine example of what not to do.

As political scientist Sherry Bebitch Jeffe put it, in a masterpiece of tongue-biting, understated, academic self-restraint:

The best word is ‘disappointing,’ and that’s being very kind. As governor, he’s accomplished little of what he said he wanted to do.

Not so diplomatic was California League of Conservation Voters CEO Warner Chabot., whose comments suggest that environmental issues, including Arnold’s own AB32 plan to reduce greenhouse gas emissions, could prove signficant in the 2010 campaign.

The governor has proposed an outrageous plan to gut California’s landmark environmental protection law with the false hope of job creation. Under his plan, dozens of communities throughout California will lose their constitutional right to question the health and environmental impact of major development projects in their backyard. The notion that we can stimulate our economy by making it easier to pollute the air that we breathe and the water that we drink is just plain false.

Senior Senator Dianne Feinstein joined in, bitch-slapping Schwarzenegger for blaming the feds for California’s problems:

It sounds like the Governor is looking for someone else to blame for California’s budget. California’s budget crisis was created in Sacramento, not Washington. These problems are not going away until there is wholesale reform of the state’s budget process.

Even the enigmatic, not-yet-announced Democratic candidate for governor,  Attorney General Jerry Brown, took a sideways whack at Arnold’s idea to save money by privatizing prisons.

I view with suspicion efforts to take a traditional public sector responsibility, whether it’s in schools or in prisons or maybe even in community health, and turn it over to a profit-making appropriation, particularly when it involves the coercive power of the state.

As a political matter, Schwarzmuscle on Wednesday was speaking, in his Landon Parvin-penned, final State of the State address, to an audience outside the Capitol, not in it.

But with three of four Californians turning thumbs down on his performance, it’s pretty clear they’ve already stopped listening.

Swap Meet: Keeley Blows Whistle on Parsky

Saturday, December 19th, 2009

keeleytestifyingYou may recall the much vaunted, blue ribbon, bi-partisan panel called the Commission on the 21st Century Economy, that Gov. Schwarzmuscle and the Legislature appointed to study California’s tax structure and propose ways to modernize and stabilize the system.

Under the leadership of Schwarzpal Gerald Parsky, the commission was supposed to be transparent, above-board and dedicated to truth, justice and the American way.

Sacramento shocker: That turned out to be a load of crap. Instead of delivering on any of its promises, the commission got itself entangled in a goofy proposal for a business net receipts tax – a quasi,  value-added levy meant to replace the sales tax.

Although an excellent cure for insomnia, the proposal was not only breathtakingly complex, but also had exactly zero political chance of ever being enacted. So we often wondered: where exactly did this idea originate?

The mystery was solved last Wednesday (while the Calbuzz Department of Tax Policy and Coupon Clipping was on a fact-finding mission to Puerto Vallarta), when Parsky and commission member Fred Keeley testified at the Senate Revenue and Taxation Committee.

Asked directly where the BNRT came from, Santa Cruz County Treasurer Keeley answered:

That decision was made by the chair, who apparently entered into a contract somehow with Ernst and Young to produce a fully-formed BNRT without any consultation with the commission and then present it and then suck all of the oxygen out of the room for any discussion.

As far as we can tell, no one on the commission was ever asked to approve the $185,400 paid to Ernst and Young to craft the proposal. It seems neither members of the commission nor the public even knew about Parsky’s secret and apparently unauthorized contract.

What a bloody waste of peoples’ time, energy and commitment. And, oh yeah, taxpayer’s money.

EmergDanger-Steep-Cliff-Sign-131129ency health warning: Those afflicted with Seasonal Affect Disorder are advised to avoid close readings of Dan Walters’ column through the holidays, in order to avoid risk of hurling themselves from the roofs of tall buildings.

In several recent scary columns, Walters has hammered away at the  dangers posed by the ever-increasing size of the fiscal nut California must meet for interest payments on its borrowing, noting that the annual cost for the vig on general obligation bonds alone now runs about $6 billion a year, or about the size of the current year deficit, conveniently enough.

On Friday, the Big Fella let fly with a real Old Testament-level jeremiad, which had Calbuzz reaching for the hemlock, until we gulped down another cup of spiked coffee:

So we’re squandering our limited debt capacity on nonessential things such as stem cell research and bullet trains while our existing infrastructure is crumbling, demand from an increasing population grows, politicians’ credibility is almost nil, and bankers deservedly treat us like a Third World country.

Ouch.

billwatkins

Teaming up with economist and sometime Calbuzzer Bill Watkins, Walters also triggered a mid-week Capitol kerfuffle when he reported on a new forecast by Watkins and his team at California Lutheran University that suggested scenarios whereby the state could default on its debt obligations.

That loud noise you heard next was the sound of Bill Lockyer’s head exploding. Within hours of Walters’ blog post, Treasurer Bill and outgoing Department of Finance chief Mike Genest both went nuts denying and denouncing  the very thought of a default.

Lockyer’s spokesman, Tom Dresslar, said in a statement that Watkins’ commentary “was nothing more than irresponsible fear-mongering with no basis in reality, only roots in ignorance.”

Dresslar noted that the state Constitution mandates that tax revenue go first to pay education expenses and second for debt repayment. All other expenses come after debt service.

“After paying lockyerfor education, the General Fund has tens of billions of dollars left to pay debt service,” Dresslar said. “Even at historically high levels, debt service does not come remotely close to needing all the funds left over after schools get paid.”

We’ll leave it to greater minds than ours to sort through the fiscal and constitutional issues embedded in the exchange, although we do admire the sang-froid and snark with which Watkins answered the caterwauling of California’s ranking financial gurus.

“There is also a constitutional requirement to have a balanced budget by every June 30,” he said.

Today’s sign the end of civilization is near: Anchorwoman gets the giggles as husband chops wife into teeny little pieces.

What’s Wrong with the Parsky Panel Tax “Reforms”

Monday, September 14th, 2009

threecardmonteBy Jean Ross
Special to Calbuzz

The Commission on the 21st Century Economy,  the “blue ribbon” panel chaired by Republican Gerald Parsky and charged with recommending changes to California’s tax system, appears poised today to  recommend a massive shift in the cost of financing public services from the wealthy and corporations to middle-income families.

The biggest winners would be the state’s millionaires, who would receive personal income tax breaks averaging $109,000 per year. The biggest losers would be middle-income families who would receive a tiny, if any, reduction in their personal income taxes and who would pay substantially more for goods and services due to the new “value-added” tax the Commission proposes to replace revenues lost due to the tax cuts for the wealthy and repeal of the corporate income tax.

The magnitude of the shift proposed by the Commission is nothing short of stunning. The changes to the personal income tax structure alone would reduce income taxes paid by the poorest 62 percent of California taxpayers by $4 per year, on average, while providing six-figure breaks to the millionaires. The bottom 81 percent of the income distribution – the vast majority of all Californians – would receive 10 percent of the personal income tax cut, while the top 0.2 percent would receive 27 percent of the benefits.

And that’s the “good news.” The Commission would repeal the corporate income tax and the state’s portion of the sales tax and replace it with a new tax on business net receipts – a tax that has never been tried anywhere in the US – that the Commission’s own consultant notes would raise prices of goods and services, while exerting downward pressure on wages and benefits.

The Commission’s proposal is designed to tax a broader range of goods and services than the state’s existing sales tax. That’s not entirely a bad idea. There are many services that could and probably should be taxed in order to eliminate some of the biases of the state’s existing sales tax. But the Commission would throw the good “loopholes” out with the bad. It would, for example, tax groceries to finance tax cuts for millionaires, while taxing child care so that oil companies would no longer have to pay the corporate income tax.

The new tax would also encourage relocation of California jobs to foreign firms that would be beyond the reach of California’s tax collectors. Incentives for offshoring could be created by provisions rooted in a highly technical, but extremely important, area of tax law. So-called “nexus” issues are among the most contentious in tax law and govern what activities states can and cannot legitimately tax.

There are considerable grounds to worry that courts would constrain the state’s ability to tax service providers – such as call center operators or consulting firms – located entirely outside of California. Should the courts rule against the state’s ability to collect the tax, billions of dollars of revenues – sorely needed to balance an out-of-balance budget – could be lost, and businesses would receive substantial tax savings from moving jobs out of California.

A letter signed by some of the of the nation’s most prominent tax policy experts notes the potential for the new tax to be challenged based on the “nexus” issues discussed above and notes that “there is almost no experience in the United States or abroad” with a tax similar to that proposed by the Commission. [Note: This important letter, dated Sept. 5, is NOT posted on the Commission web site, where public correspondence is posted only up to Sept. 4.]

Some might be willing to support these changes if they ended California’s persistent budget crises. But again, the Commission’s own estimates predict that revenues raised by the new tax system would grow more slowly over time than those raised by the state’s current tax system. Thus, the Commission’s recommendations would lead to larger, not smaller, budget shortfalls in the future.

Over the five-year period covered by Commission estimates, the difference in revenue growth would be substantial – the increased deficit under the proposed tax code would be approximately equal to what the state spends for today for the University of California and California State University systems combined.

Finally, it is important to note that the Commission totally side-stepped straightforward options for aligning the state’s tax system with the 21st economy that could be accomplished without shifting taxes from the top to the middle or imposing an entirely new, very risky, tax regime.

The Commission could have encouraged lawmakers to aggressively pursue collection of sales tax on out-of-state retailers that currently go untaxed, leaving California businesses at a competitive disadvantage. It could, as noted above, have recommended extending the state’s existing sales Jean-Ross-smalltax to a broader array of services and using the additional revenue raised to lower the sales tax rate.

Similarly, the Commission could have used tax policy as a tool to mitigate, rather than exacerbate, the widening gaps between the top and middle- and top and lower-income households. This, alas, is the path not taken and an opportunity for real progress foregone.

Jean Ross is the executive director of the California Budget Project (CBP). The CBP’s analysis of the Commission’s proposals is available here.

Jerry Retreats, Wally Fumbles, Bruce Cashes In

Tuesday, September 1st, 2009

jerryseminaryHoly Cow! We cried, when we read in the Times of London that Jerry Brown “said that he will retreat to a monastery over the next few weeks to ‘consider my options and what it would mean for me, my family and the state of California.’”

While we knew, of course, that Jerry took vows of poverty, chastity and obedience while he was at the Sacred Heart Novitiate from 1956-1960, it was news to us that he was still hanging with the monks.

As it turns out, however, Brown spends a day or two every now and then at the Abbey of New Clairveaux, a Trappist-Cistercian Monastery in Vina which offers accommodations for visitors.  The Abby’s website explains:

retreat_r4_c1“A guest, whether he or she remains but for a few hours or makes a private retreat of several days, can expect to experience a degree of silence and solitude, separation from the world’s busyness [sic] and distractions, and the daily monastic rhythm between communal and personal prayer, and work. This often makes possible a more effective movement into the interior of one’s heart.”

Hmmm. You don’t imagine a British paper, wanting to make Brown sound quirky and odd, oversold the whole “retreat” deal, do you? So we asked Crusty about it ourselves.

“It’s a place I’ve been to many times,” Brown said, noting that he’ll likely go for a day or two. “I’m not ready to make a decision (about running for governor) until I’ve thought this through and all the consequences that flow from it.”

Calbuzz is outraged –- outraged we say! – that a political figure would spend time “thinking” about whether he wants to run for office. What next? Reading the bills? Active listening? The mind boggles.

Retreat Update: We are informed by the SF Chronicle’s Carla “Whirling Dervish” Marinucci that it was she, not the Sunday Times, which first reported Jerry Brown’s planned foray to a monastery.


wally-herger

Wally Herger

A not-so-great American: Since his long-ago days in the Assembly, Rep. Wally Herger has been a genial, no-account cipher who represents more cows than people and whose greatest political value is as an argument for term limits. So it’s hard to imagine a less likely figure to ignite a national controversy over terrorism and the limits of the First Amendment.

But as the whole world now knows, Herger did exactly that during one of those annoyingly titled “town hall meetings” about health care in his district. In his 15 minutes of You Tube fame, Herger responded “Amen, God bless you, there’s a great American,” after a constituent named Bert Stead had delivered an anti-government screed including the statement that he – Stead – is a “proud right-wing terrorist.” (On Monday, he said he meant to say “extremist,” not “terrorist.”)

At which point the hysterical left, led by the increasingly over-bearing Keith Olbermann, went nuts, accusing Herger and the Republican party of aiding and abetting enemies of America while also managing to turn the whole thing into a political fundraising bonanza.

As all erudite Calbuzzers know, Webster defines “unctuous” as “characterized by affected, exaggerated or insincere earnestness,” and the D’s reaction to the Herger video must be judged as a case of extreme unction.

They knew, or should have known, that Stead’s comment — intended or not — was a vamp on a recent statement by Indiana congressman Baron Hill – a Democrat – who was the first to throw around the T word, when he told the Post’s Peter Slevin why he wouldn’t hold a public meeting about health care: “What I don’t want to do is create an opportunity for the people who are political terrorists to blow up the meeting and not try to answer thoughtful questions.”

But when has context ever mattered in the politics of unctuousness?

That said, the Dems do have a legitimate beef in complaining about the massive double standard with which the O’Reilly-Limbaugh-Hannity right-wing sleaze machine deals with such matters: One can only imagine the phony outrage with which they would greet such a comment by a liberal Democrat – let alone what they would have done with footage of guys carrying guns, fercrineoutloud, to an event featuring President W.

malkenhorst-1977

Bruce Malkenhorst

Remember this name: With the latest projections of state deficits far, far into the future it seems clear that regardless of the issue du jour in Sacramento – Early release of felons! Water! Offshore oil! – the core issue of the 2010 campaign for governor must surely be the sorry-ass state of the state’s finances.

Woe to the political consultants working on the race, who make more money than Calbuzz, if you can imagine that. Where in the world are they to find vivid symbols and sound bites to package into powerful emotional messages that sum up the demagoguery of their candidates in such a complicated, confusing and boring policy issue?

No worries – that’s why God made Bruce Malkenhorst.

Malkenhorst is the former administrator of Vernon, Ca, the smallest city in Southern California, who has a pension of $499,674.84, ranking him number one on the list of nearly 5,000 CalPERS retirees who get more than $100,000 a year. (He’s also been indicted for embezzling city funds, but that’s a story for another day).

With reporters and anti-tax groups around the state filing blizzards of public records requests to divulge the names of those cashing in on the pension Big Casino – look here, here and here for a few examples – the issue of sweetheart retirement packages represents pure gold for campaign message mongers trying to harness free-floating voter outrage at government.

Dr. H predicts: 2010’s most popular drinking game – man up every time you hear the name “Malkenhorst.”

mark twain

Mark Twain

Oh, never mind: It was just a few weeks ago that parched Central Valley denizens and wildfire weary Southern Californians were cheered by predictions that meteorologists were projecting a drenching El Nino fall and winter. Now comes weather egghead Bill Patzert to call the whole thing off.

Never ones to pass up un cliché juste, Calbuzz at this point in the item was prepared to chuckle warmly and recall that Mark Twain said, “Everyone talks about the weather but no one does anything about it.” Unfortunately, as with many famous things Mark Twain said, he didn’t say it. So we’re calling that off too.



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