Swap Meet: Keeley Blows Whistle on Parsky
You 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.
Emergency 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.
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 for 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.
I’ve heard the same argument Dresslar cites enough times to believe it true. Unfortunately, it doesn’t seem to be gaining much traction with bond buyers. My broker tells me the state had to up the interest rate offered when the first sale fell flat.
Which leads me to a much bigger concern than the state defaulting on our debt. What else will we have to cut because of the bigger debt payments? Because of the higher interest we have to pay as potential buyers lose interest in our red ink? How bad will our infrastructure and our education get?
But, if this doesn’t worry you as much as it does me, go right ahead and vote for the $11.4 billion debt increase to build dams and a peripheral canal that will allow big agribusiness to further pollute the Central Valley aquifer and make millions selling water to developers. Go ahead and add to state debt when better, cheaper alternatives are available. After all, what’s a few billion more on the state line of credit?