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Posts Tagged ‘PPIC’



Why Tax-On-Millionaires Measure Is a Slam Dunk

Monday, April 4th, 2011

Vanity Fair, the monthly organ of opulence that chronicles,  celebrates and caters to the self-indulgence of the uber rich, seems a strange place to encounter a learned and astute analysis of wealth inequality in America.

VF’s current issue, however, features just such an insightful piece, by Nobel-winning economist Joseph Stiglitz, who not only  presents the latest evidence that the world’s oldest democracy is morphing rapidly into the biggest oligarchy on the planet, but also dissects the unhappy social implications of this economic and political transformation.

It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.

One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone.

All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

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The case in California: Since our last discourse on the subject, the massive gap between the wealthiest 1% and everyone else in the population has gained more traction as a political issue in California.

Paradoxically, the recent idiocy of Capitol Republicans, who blocked a popular vote on whether to extend a few modest taxes and fees that would  affect almost all Californians, has now made the GOP’s natural base among the very wealthiest taxpayers a far more narrow, rich and inviting target for pols and interest groups who are looking for Plan B to balance the budget while heading off even more cuts to education and other services; Plan B’s  Exhibit A is last week’s announcement by the California Federation of Teachers that they will push for a 1% income tax hike on the state’ richest 1%, a proposal that a new Ben Tulchin poll shows is backed by nearly three in four voters.

Such a proposal would find fertile political ground, in part because the dramatic national trend of growing wealth inequality is, if anything, more pronounced in California.

The Legislative Analysts’ most recent substantive report on the matter, published in 2000, found that in the previous 15 years, the adjusted gross income of the wealthiest 1% of Californians tripled, from 7% to 20%; while the overall wealth of the top one-fifth of taxpayers increased during the period, from 18 to 33%, it declined for the other 80% of taxpayers, at a time when governments were routinely cutting income and capital gains taxes for the wealthy and for corporations.

Talk about the government picking winners and losers.

Self vs. selfish interest: Beyond the moral queasiness such statistics brings on for social justice types, there are many practical reasons, based upon rudimentary self-interest, why this state of affairs represents a clear and present danger to the country and the state.

For starters, the tax-cut, no-regulation policies that have accelerated income disparity in recent decades also triggered the financial meltdown that set off the worst economic downturn since the Great Depression. Also, the steady, decades-long decline of inflation-adjusted incomes for the middle class shrinks the pool of confident consumers, keeping dollars out of the economy and making recovery more halting and problematic. More broadly, the wealth gap does violence to what Stiglitz recalls Alexis de Tocqueville labeled America’s “self-interest properly understood.”

The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.

For much of its recent history, the U.S. has been a place where the government literally provided the concrete underpinning for economic expansion and growth. Now that the no-taxes-ever-again crowd is gaining ascendance and – amazingly – recycling failed economic policies that crashed and burned the economy, the public-private partnership model that underwrote widespread business success for decades has fallen apart:

A modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.

None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves.

In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.

Why it matters: In California, the impact of these “lopsided” policy changes are seen most visibly in public education or, more accurately, in the decline of public education. With the state financing 40% of the cost of public schools, which have seen the real dollar amounts of that support decrease for several years, policy shops from PPIC to UCLA’s Institute for Democracy, Education and Access and the Center for Economic Research and Forecasting at California Lutheran University have described and analyzed the destructive impacts that reductions in education and training programs have on the California economy.

At present, California completely fails its lower class population.  It begins with an educational system that many don’t complete, while many of those who do are often unprepared to participate in a 21st century economy.  It ends with a lack of opportunity and upward mobility.

California’s K-12 program is a failure.  Dropout rates are extraordinary, and those who finish are often unprepared for employment or college.  The failure continues when the few who do manage to prepare for college find that the price has gone up and is now unaffordable for many.  Just as bad, classes are often not offered at times that are convenient for working students.

The arguments against: To be sure, there are policy arguments to be made against increasing the taxes on the rich, as the CFT proposes, starting with the fact that it may create an incentive for them to pick up and leave (although another PPIC study has presented data showing this is not the huge problem the Coupal/Fox axis would have us believe ).

Politically, however, that’s beside the point: if Republicans and conservatives hew unwaveringly to their unserious, I’ve-got-mine refusal to help govern the state, both the pressure on, and the demonization of, their core constituency will only increase.

Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them.

It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else.

All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.

The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

Jerry Brown, meet Bob LaFollette: Having been bitch-slapped on budget negotiations by legislative Republicans, Jerry Brown has belatedly taken our earlier advice and is going on the road to campaign on behalf of his balanced plan to ease the deficit. Given the above, don’t be surprised to see him strike a populist tone, ala his “We the People” winter soldier 1992 campaign for president.

It’s worth recalling that shortly after the 1900 election, in which Robert La Follette was elected governor of Wisconsin, our hero Lincoln Steffens, the native San Franciscan who had become America’s greatest muckraking journalist, visited the “little giant” to write about what he expected to be a corrupt, demagogic, socialist, dictatorial boss, as he had been portrayed by the Establishment Republicans of the day.

After spending some time in Milwaukee and Madison, however, Steffens came to a very different conclusion:

La Follette from the beginning has asked, not the bosses, but the people for what he wanted, and after 1894 he simply broadened his field and redoubled his efforts. He circularized the state, he made speeches every chance he got, and if the test of demagogy is the tone and style of a man’s speeches, La Follette is the opposite of a demagogue.

Capable of fierce invective, his oratory is impersonal; passionate and emotional himself, his speeches are temperate. Some of them are so loaded with facts and such closely knit arguments that they demand careful reading, and their effect is traced to his delivery, which is forceful, emphatic, and fascinating.

As a political matter, it’s time for Jerry Brown to reach for his inner La Follette and start sounding some good, old fashioned, Wisconsin style populism. Instead of going after the railroads, as La Follete did, however, Brown should aim at the ultra-wealthy, the oil companies and other greedy corporate interests who have a) allowed the California Republican Party to gridlock the budget process and b) fought to keep special corporate loopholes, including outrageously low property tax rates from Prop. 13.

Sic temper tyrannis.

Hasta la Vista GOP, or Why Cesar Chavez Lives On

Monday, March 28th, 2011

As a union organizer, Cesar Chavez, whose birthday we commemorate today, was no friend of immigrants who slipped across the border illegally to provide cheap labor in the fields of California that undercut the drive for living wages for farm workers.

Hell, the United Farm Workers was known to have reported illegal strike-breakers to “la migra,” and in 1973, they set up a “wet line” (imagine the outrage if anyone else had used the term) along the US-Mexico border to stop immigrants from sneaking into the country illegally and undermining the UFW’s work organizing field hands.

But Chavez – especially in his later years — was a strong proponent of allowing illegal immigrants living and working here to become legalized, and today would surely be fighting for a path to citizenship, as his granddaughter, Dr. Cynthia Chavez, made clear in a TV ad for Jerry Brown during the 2010 governor’s race.

Which makes today the perfect opportunity to focus on an issue that Calbuzz has hammered on repeatedly – the need for California Republicans to support a path to citizenship for illegal and undocumented workers. Not because it’s the right and decent thing to do – never a powerful argument with the knuckle-dragging wing of the GOP — but because it’s a matter of their party’s political survival.

Failure to communicate: Don’t take our word for it. Some of the smartest Republicans around make the case. “A pathway to citizenship for those who have entered the country illegally is the most important element of immigration reform for Latino voters,” wrote Marty Wilson and Bob Moore, after a recent Moore Information survey of Latino voters in California.

According to the non-partisan Public Policy Institute of California, about nine in 10 Latinos (86%) favor giving illegal immigrants “a chance to keep their jobs and eventually apply for legal status.” That’s a position shared by 68% of Democrats and 62% of independents but just 41% of Republicans.

What we have here is a failure to communicate. And the political effects are profound.

“Latino voters are widely negative about the Republican Party (26% favorable/47% unfavorable/27% no opinion) and widely positive about the Democrat[ic] Party (62/22/17),” Wilson and Moore wrote. Nor is the GOP “going to win many Latino voters by stressing conservatism; only 22% suggest that Republicans should, ‘stick to core values and nominate true Conservatives.’

Fully a third of Latino voters say they will never vote for a Republican although another third would consider GOP candidates if “Republicans move toward the center and nominate candidates who are less conservative.”

The big picture: To appreciate the magnitude of the challenge for the Republicans in California, it helps to understand first the national context.

During the past decade, the Latino population in the U.S. grew 43 times faster than the non-Hispanic white population, the Census Bureau reported last week. Between 2000 and 2010 the U.S. Hispanic population grew 43%, to 50.5 million from 35.3 million. Latinos’ share of the total population rose to 16% from 13% — accounting for more than half the total U.S. population growth in the decade.

At the same time, Census Bureau officials reported, the non-Hispanic white population grew by barely more than 1 percent, dropping as a portion of the total from to 64% from 69%.

“The states with the largest percent growth in their Hispanic populations include nine where the Latino population more than doubled, including a swath in the southeast United States – Alabama, Arkansas, Kentucky, Mississippi, North Carolina, Tennessee, and South Carolina. The Hispanic population also more than doubled in Maryland and South Dakota,” reports the Pew Hispanic Center in an analysis of the Census Bureau report.

“In six states, growth in the Hispanic population accounted for all of those states’ population growth; if the Hispanic population had not grown, those states would not have grown,” Pew added. “They included Illinois, Louisiana, Massachusetts, New Jersey, New York and Rhode Island. In Michigan, the state population declined over the decade but the Hispanic population grew.”

No place to hide: While Latinos in Florida, New York, Illinois and California cannot be viewed as a monolithic voting bloc – voters of Cuban, Puerto Rican, Haitian and Mexican ancestry, for example, cannot be easily categorized politically – surveys consistently find a common thread is a belief that there ought to be a mechanism for allowing illegal immigrants to become legal residents and/or full citizens.

And with the continued growth of Hispanics, red states are becoming less reliable safe harbors for Republicans (consider Nevada, for example) and so too are formerly “safe” Republican districts in California.

“Increasingly for California Republicans, there’s no place to run, no place to hide,” said Democratic consultant Garry South who, with former Republican state Sen. Jim Brulte, recently analyzed the changing electoral landscape for their partners at California Strategies.

“The demographics are moving so heavily against them, it’s becoming very difficult to maintain a meaningful number of completely safe GOP seats almost anywhere.

“Most of the huge Latino growth between 2000 and 2010 was in inland areas normally considered Republican, not along the coast,” South said “And Asians grew by even more than Latinos. Together, Latinos and Asian Americans now constitute an absolute majority of Californians. Republicans are getting on average about 30-35 percent of their votes. Do the math.”

Said South and Brulte in their analysis:

Based upon the historical standard of “safe” verses “competitive” districts, there will likely be a few more competitive legislative and congressional districts. That said, given that the top two vote getters regardless of political party run off in the November general election, the historical notion of “safe” districts now no longer applies.

 

While many GOP legislators, donors and activists, believe a “fair” redistricting presents a great opportunity, there is also a huge potential downside risk for the GOP as well. If the Democratic Party’s consistently overwhelming financial advantage is not countered at the legislative level, it is possible that Democrats [will] obtain a two-thirds majority in one or both houses of the state Legislature in 2012.

 

The GOP has not experienced a net pick up of legislative seats in a presidential election since 1984.

The Elephants’ elephant: In their analysis of Latino voters, Wilson and Moore call immigration “the elephant in the GOP living room.” The Arizona immigration law is widely unpopular among Latino voters, immigration reform is widely popular and Democrats are more likely than Republicans to be trusted, by a ratio 0f 57-21%, to reform immigration laws.

And the central issue is a pathway to citizenship.

Why is it so hard for Republicans to move on this issue? Because – partly in fear of an influx of Democratic-leaning voters – they’ve spent years railing against illegal immigration and appealing to the most nativistic and xenophobic impulses of their base voters. Steve Poizner and Meg Whitman – who otherwise might have been quite moderate on the issue – tacked so far right on immigration they made themselves pariahs among Latino voters in the 2010 governor’s race.

Even Mike Murphy, who made a bloody fortune leading Whitman’s disastrous 2010 campaign for governor, seems to have gotten the point. The GOP is saddled with a “base-driven strategy that has injected red-hot rhetoric into our party’s message on immigration” he told the Washington Post. “Primary politics have made the situation even worse,” Murphy said, suggesting as Chris Cillizza reported,  that GOP opposition to some sort of path toward legalization is a “non-starter” for Hispanic voters. No duh.

Wilson and Moore tested one message they believe can help the GOP find greater favor among Latinos. “A candidate who says, ‘secure the border first, stop illegal immigration, then find a way to address the status of people already here illegally’ gets a favorable reaction from 73%,” they found.

Others have suggested the GOP could favor legal residency, but not full citizenship with the right to vote, for undocumented workers. Still others say if an illegal immigrant serves in the U.S. military or graduates from college, he or she ought to be able to become a citizen.

How the keepers of the John Tanton anti-immigrant flame in California would react to a movement within the California Republican Party (or by a statewide GOP candidate) toward a more moderate line on immigration is, sadly, predictable. The phrase “head on a stick” comes to mind.

“I don’t think a Republican candidate can win on this issue either way in California,” said South “If they support a path to citizenship, they enrage and alienate their lily-white base. If they oppose it or try to straddle the issue, they just become the typical anti-immigrant Republican who wants to deport every Latino back to Mexico. They’re fucked. Hee, hee.”

Happy Cesar Chavez Day!

Press Clips: Krusty’s Koans Stir Up Stormy Weather

Friday, March 25th, 2011

Jerry Brown shifted into full Zen mode this week, offering increasingly cryptic commentary amid a political atmosphere that grows ever more cloudy and gray.

As nicely illustrated by Calbuzz meteorological doodler Tom Meyer today, the cold front arising from  long-stalled talks over the Capitol’s budget mess has built up a mass of cumulonimbus thunderheads that threaten at any moment to erupt into a tempestuous political storm.

Press corps forecasters were hampered in their task of wringing clarity out of a muddy situation by contending reports offered by the Field and PPIC* polls, the Doppler radar twins of California political augury. (We refer you to a) our post-graduate dissertation on the high priest polling methodologies that generally account for some of the differences between the Two Marks and b) the secular humanist explanation offered Thursday by Joe Garafoli:  “Confused? Get in line”).

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Far more than clashing public opinion surveys, however, it was a series of odd and oblique  public utterances by Gandalf himself that blew a thick layer of mystifying mist over the political high pressure area (think we’ve tortured the weather metaphor enough yet? -ed.). Brown suddenly transformed his earlier Catholic rhetoric about the budget fight into a flurry of widely-reported Buddha-like pronouncements, which offered precious little enlightenment about what was going on with the budget in the here and now, let alone what would  happen in the next moment.

In a brave effort to end the epidemic of head scratching that followed Governor Gautama’s pronouncements, Calbuzz conducted its own unscientific polling, the better to capture a snapshot in time of what ordinary Californians think about whatever the hell it is Krusty’s been talking about the last couple days. Among the key results:

1-“Whichever way I look, I see bears in the forest.”

Four of 10 of those surveyed (40%) believe that Brown actually meant to say that he sees “bears shit in the woods” wherever he looks, while nearly one-third (32%) agree with the NRA argument that his statement proves there are way too many bears, and one-in-five (20%) back the Sierra Club position that he should not be walking in the woods without filing an EIR.

2-“We’ll know the deadline when we’ve passed it.”

Voters polled were evenly divided about the meaning of this gubernatorial  comment. One-third (33%) believe he saw a “teaching moment” opportunity to educate the public about the illusory nature of time; one-third (33%) felt  he was referencing the ultimately subjective nature of reality, and one-third (33%) said it was likely the first time Brown had ever used the word “deadline” and clearly had no idea what it meant.

3- “I can confirm I am not unconsidering anything that I ought to consider.”

A large plurality of Californians (49%) told our researchers that Brown has quickly tired of serving as governor and is auditioning to be the press spokesman for Meg Whitman’s next campaign. Nearly as many (48%) said that the governor was spiritually channeling Donald (“there are things that we know, there are known unknowns”) Rumsfeld, while a tiny minority (3%) felt he was just being plain inconsiderate.

4 “There is not as yet a clear delineation as to what will seal the deal. We’re still waiting for what I’d call a term sheet. What’s the bedrock of what Republicans need to put this before the people?”

Brown’s uncharacteristic use of business world phrases like “term sheet” and “seal the deal” convinced six in ten (60%) registered non-voters that he had stayed up too late trying to plow through one of wife Anne Gust’s old Management by Objective handbooks, while three in ten (30%) unregistered voters felt “very strongly” that he’d been spending way too much time with the “The Dictionary of Cliches”; the remainder (10%) of non-registered non-voters said the governor was quoting Dr. Irwin Corey.

5-”There’s a sense on the part of some that they’re going to come up with something good…There are positive vibes.”

A slight majority (51%) among those surveyed believe that Brown believes it is still 1976 and was feeling “groovy” when he made his remark to reporters, while the rest were divided evenly between those (44.5%) who said he’d been told there was going to be a Beach Boys concert in Capitol Park and those (44.5%)  who’d heard that Jacques Barzaghi will soon be joining the administration.

The Calbuzz survey has a margin of error of plus or minus 179%.

PS: The famous bear reference we think Jerry may have been trying to evoke was from the anti-Soviet 1984 Hal Riney ad for Ronald Reagan that began, “There is a bear in the woods.”

* What PPIC poll actually shows:

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There was a lot of breathless reporting about the PPIC finding that shows support for Brown’s proposal to hold a special election on tax extensions dipping to a mere 51% among likely voters, from 66% in January.

But if anyone explained what was behind the shift, we missed it.

Here’s what happened: there was a relentless, two-month partisan campaign against Brown’s idea and it worked; the move against the idea was double among Republicans what it was among voters overall.

With anti-tax jihadist Grover of Norquist, radio clowns John and Ken, Howard Jarvis Wannabe Jon Coupal and GOP gunslinger Jon Fleischman screaming their lungs out against the idea of putting a tax-extension measure on the ballot, lo and behold, Republican voters (and some independents who lean Republican) responded to the call.

While the net drop in support for placing a tax measure on the ballot was -7% among Democrats and -23% among independents (as self-identified by PPIC), the net drop in support was a massive -41% among Republican likely voters.

Among Democrats and independents, a little number crunching reveals,  57% of likely voters – about six in 10 – still support the notion of putting a tax measure on the ballot. It’s mainly Republicans who have been brow-beaten away from the idea.

Governor Brown has proposed a special election this June for voters
to vote on a tax- and-fee package to prevent additional state budget cuts.
In general, do you think the special election is a good idea or bad idea? (PPIC)
January March
Good Bad Good Bad
Likely Voters 66 31 51 40 -24
Democrats 75 23 68 23 -7
Independents 65 32 50 40 -23
Republicans 53 43 30 61 -41

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Press Clip Three Dot Lounge:

Sportswriter starts prostitution ring – publishers see new revenue stream to save ailing newspapers.

Just asking: Is a story about incendiary racist hate speech by a half-wit city council member really the best place to employ on-the-one-hand-on-the-other false equivalence journalism?

Jay Rosen reports that many cringeworthy MSM types still haven’t gotten the memo that Y2K has come and gone.

Stewart offers full coverage of the real inside stories unfolding in Japan and Libya.

ICYMI: To the moon, Alice.

The Case for Why Redevelopment Must Go

Monday, February 21st, 2011

To hear mayors, council members and bureaucrats from throughout California screech and squeal about Gov. Jerry Brown’s call to shut down redevelopment agencies in favor of schools, the elderly and disabled, you’d think Krusty had proposed bulldozing Main Street.

As John Shirey, executive director of the California Redevelopment Association, put it the other day:  “I must be clear: we are stridently (sic) opposed to the governor’s proposal to abolish redevelopment and our singular goal is to defeat this proposal that will destroy hundreds of thousands of jobs and billions in economic activity.”

Strident, indeed. Hysterical, overwrought and hyperbolic, too. Seldom have we witnessed such widespread, collective urban self-centeredness coupled with apparent disregard for the social fabric.

There’s no way to know for sure, but it appears redevelopment agencies have already done what they can to hoard their loot by slapping together and hastily approving projects that would consume the same $1.7 billion in property taxes that Brown’s budget would use to keep from having to make further cutbacks to schools and social services as the state struggles with a $27 billion deficit.

San Diego officials are cooking up a plan to sequester $4 billion for a Charger’s football stadium and Los Angeles is trying to lock up $1 billion and other panicky RDAs are scheming to do the same.

Their bet is that Brown won’t sue them to recover those funds (even if the agencies are on shaky legal ground) because he won’t want all of those mayors and city officials opposing a June ballot measure to approve his budget by extending $12 billion in taxes and fees adopted two years ago.

How that will play out politically remains to be seen. But we don’t have to wait to understand the debate.

Needs in conflict: As long-ago urban affairs reporters, Calbuzz saw the powers of redevelopment used positively, to help revitalize urban areas in desperate need of infusions of investment. So we get that there are good arguments for the continuation of redevelopment, which are being blasted out to media and policy makers by the coalition to “Stop the State’s Redevelopment Proposal” (although we do wonder how much redevelopment money they’re spending on lobbying).

But California is facing a budget crisis of historic proportions that at least two and possibly three previous governors and their concurrent legislatures refused to own. And Brown has concluded that the interests of schools, widows and the disabled should have first call on funds that – according to the best, most objective studies – do little to expand California’s collective economic health when they are funneled into redevelopment agencies.

He’s right.

Redevelopment law allows cities (and counties, but they use it less) to declare a geographic area “blighted” and in need to revitalization. The property taxes in that redevelopment area are frozen and any new property taxes generated above that base may be used to purchase land, build streets and sewers and subsidize development in the project area.

The tax increment above the frozen base can be guaranteed as a source of funds to pay interest on bonds sold on the open market. This is called tax increment financing and it is a hugely powerful tool for urban investment because of its ability to leverage vastly more money at one time than is generated by the flow of property taxes annually.

There are some 400 active redevelopment agencies throughout California diverting more than $5 billion a year away from schools, counties and special districts and into the coffers of those agencies. The economic theory that argues for the process echoes Reaganesque trickle-down: by generating construction jobs, sales taxes and other activity in the redevelopment area, the rising tide is said to lift all boats and the region around the project area is expected to benefit. Like giving tax breaks to the wealthy is supposed to help the middle class.

Spinners for the RDAs argue that redevelopment activities support 304,000 jobs annually, including 170,600 construction jobs; contribute over $40 billion annually to California’s economy in the generation of goods and services, and generate more than $2 billion in state and local taxes in a typical year.

Moreover, since the law requires 20% of the tax increment to be dedicated for low- and moderate-income housing, the RDAs argue that eliminating redevelopment will significantly undermine efforts to provide homes for those who otherwise cannot afford it.

A close look at the numbers: But the most thorough and academically sound study of redevelopment we’re aware of, by Michael Dardia of the Public Policy Institute of California, found in 1998:

After correcting for local real estate trends, the author finds that redevelopment projects do not increase property values by enough to account for the tax increment revenues they receive. Overall, the agencies stimulated enough growth to cover just above half of those tax revenues. The rest resulted from local trends and would have gone to other jurisdictions in the absence of redevelopment.

A study by the non-partisan Legislative Analyst’s Office recently concluded as much and more.

While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts businesses to the state or increases overall regional economic development. Instead, the limited academic literature on this topic finds that—viewed from the perspective of an entire city or region—the effect of this program on property values is minimal. That is, redevelopment may cause some geographic shifts in economic development, but does not increase the overall amount of economic activity in a region. [emphasis added]

The independent research we reviewed found little evidence that redevelopment increases jobs. That is—similar to the analyses of property values—the research typically finds that any employment gains in the project areas are offset by losses in other parts of the region. We note that one study, commissioned by the California Redevelopment Association, vastly overstates the employment effects of redevelopment areas.

Redevelopment agencies receive over $5 billion of tax increment revenues annually. Lacking any reliable evidence that the agencies’ activities increase statewide tax revenues, we assume that a substantial portion of these revenues would have been generated anyway elsewhere in the region or state.

For example, a redevelopment agency might attract to a project area businesses that previously were located in other California cities, or that were planning to expand elsewhere in the region. In either of these cases, property taxes paid in the project area would increase, but there would be no change in statewide property tax revenues.

To the extent that a redevelopment agency receives property tax revenues without generating an overall increase in taxes paid in the state, the agency reduces revenues that otherwise would be available for local agencies to spend on non-redevelopment programs, including law enforcement, fire protection, road maintenance, libraries, and parks. [emphasis added]

The bottom line: In other words, despite the good arguments that RDAs make about the enormously positive local impacts of redevelopment – San Jose’s downtown and its northern industrial area are excellent examples – the evidence suggests that there’s a huge cost to the state (which has to back-fill funds that otherwise would have gone to schools) and little benefit or a substantial cost to counties and special districts.

We’re not even getting to other issues, like the fact that the only “blight” a lot of redevelopment areas had before they were made projects was pear blight, and the fact that there’s virtually no oversight of how redevelopment funds are spent (and millions is spent outside the law’s intent  to subsidize flagging city budgets and improve stable neighborhoods). That’s just piling on.

Gov. Brown’s budget would ensure that RDAs will receive enough money to cover the debt service on bonds they have already issued  (although the structure of the agencies that will make those payments still must be worked out).

But in an era when California is faced with draconian cutbacks to higher education, schools, parks and public safety, the diversion of property taxes to redevelopment agencies is a luxury the state can no longer afford.

Brown Works Inside Sac; No Budget Bully Pulpit Yet

Wednesday, February 9th, 2011

You might think that Gov. Jerry Brown’s appearance tomorrow evening at a dinner hosted by the Los Angeles Area Chamber of Commerce will mark the launch of Krusty’s “outside” campaign for his proposal to put $12 billion in tax and fee extensions on the June ballot. But you’d be wrong.

Although his State of the State address was aimed as much at building broad support for his proposal as it was designed to speak directly to legislators, Team Jerry’s continued emphasis for at least the next few weeks will be on the “inside” game in Sacramento.

“He’s disciplined and focused on things that matter the most,” said his political adviser Steve Glazer. That’s the strategy for now. As another Brown ally put it, “The outside game could push the Republicans into a corner right now.”

So on Tuesday Brown met with Senate and Assembly Democrats. And he’s scheduled to meet with Senate and Assembly Republicans on Wednesday, all the while working on individual and small groups of legislators in hopes of convincing them that it’s in their interest to place his tax and fee measure on the ballot. To do that, he needs agreement from all the Democrats plus two Republicans in the Assembly and three in the Senate.

Thus far, there’s no sign any Republicans want to give him their votes, although some GOP strategists and others have suggested that in exchange for pension reform and perhaps a spending cap of some sort, Brown might wheedle that handful of votes.

One possible scenario, according to a Brown adviser, would be for the governor to continue working the Cul de Sac for a couple more weeks and see what happens when his proposal is brought to a vote in the Legislature. If it fails to pass in the first house where it’s raised, then all hell breaks loose and Republicans in marginal districts get hammered for denying their constituents basic democratic rights.

Predictably, no Republican has yet put forth a formal legislative proposal on pension reform and there’s not a lot of time to consider one if one were forthcoming.

On the other hand, you want pension reform? Just check out Brown’s own campaign web site where he advocates: stopping pension spiking and abuse, renegotiations for a two-tiered system, and end to retroactive benefit enhancements, increased employee contributions, prohibiting pension “holidays,” independent oversight of pension funds, tightening of pension investment standards and a curb on investment placement agents.

All the Republicans have to do is get Brown to agree he will see that legislation seeking all of the above gets introduced and that he’ll fight tooth-and-nail for it and they’d have a pretty good deal to swap for a vote that just gives people a chance to decide if they want to extend some taxes and fees practically nobody is even aware of.

While only about a third of Californians are aware that some taxes and fees notched up a bit a couple of years ago, even fewer have any idea how California is financed or where the money is spent. Worse, according to the most authoritative study known to humankind on the issue of peoples’ knowledge about the California budget, it doesn’t friggin’ matter.

That’s what Eric McGhee at the Public Policy Institute of California demonstrated in “How Much Does the Public Know about the State Budget, and Does It Matter?” published in the California Journal of Politics and Policy. Here’s McGhee’s depressing conclusion:

The real driver of opinion on budget items is politics, not information. Popular programs like K-12 education receive strong support among all groups of voters, and unpopular ones like prisons do not. Within this variation, Republicans and conservatives oppose taxes and spending, while liberals and Democrats are more supportive of both. None of these conclusions is especially surprising, but the contrast with the weak effect of information is important nonetheless.

Overall, the results suggest no easy way out of our current budget impasse. The public might be confused about aspects of the California budget, but they have largely committed themselves to one side or the other in the budget wars. To the extent that they break ranks—for example, Democrats opposing spending or conservatives supporting taxes—it is tied to specific issues in a way that information affects only at the margins. As much as we may hope for it, we cannot educate the public and expect a clear path toward a balanced budget to emerge from the effort.

What this suggests is that a giant teach-in about the California budget is likely to have little effect. As we have argued before, what will matter – should Brown’s proposal make the ballot – is whether the issue is framed as a tax increase or an extension of existing taxes.