The background noise at CalPERS

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

When legislatures and governors make big mistakes, it’s often because they are focused on the wrong thing. The state’s budget shortfall of $15 billion is at the center of attention these days. But that problem would pale in size to the hidden troubles of unfunded pension liabilities in the state.

That brings me to CalPERS. I can barely balance my checkbook, so look for financial expertise elsewhere. But each day seems to bring unsettling news about the pension fund. A month ago, there were a string of resignations of top executives.  This week, we’re hearing more about a $1 billion land investment gone bad. The Wall Street Journal recently has turned up examples of conflicts of interest among actuaries in other states (though not California). In the face of all this news, CalPERS hums along, its officials saying that there’s nothing for taxpayers to worry about.

But we should worry. And so should the governor and state legislature. If CalPERS fails to perform, this state faces a fiscal disaster that would make us forget the current budget predicament. But the legislature is not being persistent enough in holding hearings and asking questions. When the pension fund gets attention, it’s usually during political debates over legislation requiring divestment from this country or that. One reason for the lack of scrutiny, unfortunately, is that CalPERS is an important source of power for the state’s labor movement, which dominates the politics of the state’s Democratic party.

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Reading Arnold’s Mind

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

People have been asking your blogger the following question: what’s the difference between working at the LA Times (I quit earlier this year) and being a fellow at New America? The answer is easy: technology. Because New America is a think tank, I have access to the Mind Reading Machine (MRM), a little-known device. This weekend, I got to use the machine for the time, and I decided to point it at the brain of Gov. Arnold Schwarzenegger. Last week was a big one for him and for California: a revised budget proposal that was widely panned, his renewed push to get his budget reform plan on the November ballot, and a state Supreme Court ruling permitting gay couples to marry in the state.

Here’s what the Mind Reading Machine spit up:

"You know when something good happens at the wrong time? I can’t admit this to anyone, but that’s how I think about this gay marriage ruling.

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Is there a Gay Marriage Stimulus?

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

The California Supreme Court has just ruled, 4-3, against California law that bars same-sex marriage. This is a profound moral and personal question for people, and I respect views on both sides. (To put my own bias on the table, my reaction to the ruling was to feel joy for people who may now be able to marry those they love. The right to marry seems to be crucial to any notion of individual freedom).

But moral choices have economic dimensions. And one question the ruling triggered in my mind is economic. I don’t mean to be crass, but could California profit through the legalization of same-sex marriage? Would the state become a draw for gay couples? Would those couples bring more wealth to the state, start more businesses, add to the tax base? Or do they consume services that negate that effect?

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Doubling Down on Budget Reform

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

There is no longer any doubt about one thing in California politics: Gov. Schwarzenegger is willing to die on the cross of budget reform.

My conversations with people inside and outside the administration, and a review of news leaks in advance of his revised budget proposal this afternoon, make it clear that he is doubling down on budget reform. For a man with a reputation for twisting with political winds, he is doing the opposite here. He is so determined to pursue his budget reform (a spending-side proposal based on a rainy day fund and more power for governors to make mid-year cuts) that he is risking what’s left of his governorship.

One piece of the approach is undeniably smart. As the Sacramento Bee reports, he’s pulled back from his proposal for including education in his cuts and is proposing to meet the Prop 98 minimum on education. Schwarzenegger’s cuts might have been more fiscally responsible–but they were politically poisonous to his project of budget reform. By dropping the unpopular education cuts, he is making a strategic move that shows the depth of his commitment to budget reform — or bust.

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A Modest Proposal: Sales Tax, Lobbyists

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

I was talking this week with a gentleman, who is registered to lobby our elected leaders in Sacramento. He was decrying the possibility that the sales tax could be applied to services, including perhaps the lobbying services he provides.

"That sounds like a fantastic idea," I said, goading him.

"We’d just pass that cost along to our clients," he said, desperately.

The light bulb went on in my little head. The governor wants budget reform. The governor needs more tax revenue. While his people deny it, they are clearly looking at the sales tax. Why not combine all three policies into one?

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