Brown was asked why education would be targeted for cuts if tax increase measures fail on the November ballot, and Brown basically answered: ‘Because that’s where the money is.’

Unfortunately, California voters don’t seem to be aware that the schools are at the top of the pecking order when money is handed out by Sacramento — an advantage for Brown as he gears up his tax increase campaign “to save education.”

Voters support education and many believe education is not given its fair share by the state. A January 2012 Public Policy Institute poll asked voters of four listed categories, which represents the area that receives the most state spending. Topping the poll was Prisons and Corrections at 47%.  The second largest category chosen by those polled was Health and Human Services at 27%. Finally, K-12 Public Education was tabbed by 16% and Higher Education was named by 5%.

The two education categories were selected last. Only one out of five voters thought that education gets the most money from the state general fund.

What if the voters knew the truth about state spending? Would they be as susceptible to the threat of education cuts that will come with the tax increase campaign?

At the Economic Summit held in Santa Clara last week, Republican Assembly Leader, Connie Conway, said she was afraid the governor called for education cuts in a purposeful way to encourage votes on his tax increase plan. Conway noted in a Flash Report article, “total spending in his May Revise budget would be $12.4 billion more than last year’s enacted budget.  In fact, the Governor forecasts a 5.6 percent one-year increase in General Fund spending.  So we need higher taxes to spend more?”

One more thought. What if the taxes fail and education receives less money than the governor’s budget calls for? How will education dollars be managed?

A Pepperdine University study last year said that statewide less than 60-percent of the education dollar gets into the classroom and that percentage has been dropping.

Now is the time to rearrange those education dollars to make sure more gets into the classroom where they are most needed.

Balancing the budget of one of the largest economies in the world isn’t easy. There’s absolutely nothing you can do that won’t outrage a significant part of the electorate. That’s why Governor Brown is smart to protect his friends—teachers and government employee unions—in his latest budget proposal.

Those groups effectually run state government after funding the elections of Brown and the Democratic majority in the Legislature. They’re also the groups the Governor needs to fund his tax hike in November, which is why it is no surprise they are the only groups happy with his proposal.

K-12 education actually gets an increase in spending. SEIU President Yvonne Walker says she looks forward to negotiating the state worker cuts (with the very same elected officials she helped put into office–how nice). And according to public employee labor lawyer Tim Yeung the Governor’s Mini-Me furlough plan “(is) fairly union-friendly.” (via Jon Ortiz, Sacramento Bee).

Who’s not happy with his proposal? Those he doesn’t need for his tax hike campaign. Business owners and job-creators. College students. The poor, sick, and elderly and everyone else who has a lousy lobby in Sacramento.

To be fair, there are no good choices for the Governor. He inherited a huge shortfall and the state is still recovering from the worst economy since the Great Depression. And, after four years of constant budget deficits, the cupboard is pretty much bare on cuts and gimmicks. He doesn’t have the luxury of, say, pushing the June 30 payroll to July 1 and into the next fiscal year.

But he didn’t help himself by deciding early in his term that he was not going to talk to Republicans, eliminating a Legislative tax hike from the table. My old boss, Governor Schwarzenegger, was certainly guilty of signing budgets that papered over the problem, but unlike Brown he wasn’t a partisan working with a Legislature run by his own party. Brown should be able to get a better deal from the Legislature than we did.

Brown’s current plan is a re-run of his plan from last year that didn’t work: Hope high-income earners have really good years. He may believe that is good politics but it is horrible policy, as we saw over the past year, when his rosy projections fell short by nearly $16 billion and the state pulled less than half of the coinciding trigger cuts.

Brown has spent a year and a half doing very little outside of pushing for a tax increase. It is a totally valid solution to our fiscal mess, but absolutely pointless without pension, regulatory, budget, or tax reforms attached to it. Pouring billions more into a broken system won’t solve anything.

Schwarzenegger may have signed flimsy budgets, but at least he always won reforms in the process in an attempt to stabilize our long-term finances and stimulate economic growth.

The Governor may be keeping his friends happy with this plan, and that very well could prove smart in November. But he’s not doing anything to fix our current or long-term economic woes.

Recently, I was driving down pot-holed, two-lane, non-freeway 101 near Monterey (unchanged since the 1960s) when the radio blared that on a recent science test administered to public schools, California scored 47th in the nation. As I looked at the congested traffic on the decrepit highway and digested the idea that our public schools are competitive only with Mississippi and Alabama, I wondered — is that what we get for a more than 10 percent income tax, 10 percent state and local sales taxes, and the highest gas taxes in the nation?

To sum up why California has yet another deficit — this time a $16 billion whopper — is pretty easy: The number of demonized one-percenters who pay over 10 percent in their salary to the state has been shrinking, as thousands flee with their ideas, energy, business, and capital to nearby no-tax states, and others make less money due to more and more costs and regulations — while the number of those receiving all sorts of state housing, food, medical, education, and legal support is soaring. (In crude parlance, California increasingly is seen by some as a very bad deal, in terms of the sort of schools, safety, transportation, and housing per taxes paid in comparison to Reno, Tahoe, or Austin, but by far more people as a very good deal in comparison to the costs versus benefits in, for example, Oaxaca or El Salvador.)

In the last two decades, the number added to the prison rolls (ca. 115,000) was not that much smaller than the number of new tax-filers (150,000). And of the last 10 million added to the state’s population, 7 million are on Medicaid.

But California being California, such reductionist thinking is taboo, and we are not allowed to make any suggestion that there is a connection between fleeing entrepreneurs, massive and illegal influxes of undocumented foreign nationals in recent years, and record public salaries and unfunded pensions.

So that said, are there any out-of-the-box things California might do to save or make a few billion dollars, other than the obvious measures of slashing spending and dismantling burdensome regulations?

1) Slap a user tax on the some $10–15 billion that is estimated to leave the state in remittances to foreign countries, or at least through executive action make foreign cash remittances grounds for disqualification from state public assistance.

2) Cancel high speed-rail asap.

3) Open up immediately the estimated now off-limits 35 billion barrels of oil off the central California coast, the vast majority of which can be safely and cleanly exploited by on-shore horizontal drilling.

4) Cap the amount one can receive from a California public pension, or multiple pensions at $100,000.

5) Eliminate three-quarters of the thousands of public California board members, who stymie commerce and are mostly costly and unproductive term-limited insider politicians.

6) Mandate one official language for state publications and office business.

7) Cut by 75 percent the number of administrators at the UC and CSU systems (their numbers from 1993 have grown by 212 percent), and pay them at the commensurate twelve-month faculty rate.

Clamp down on the vast underground and untaxed cash economy that has exploded to the point that one can buy tax-free almost anything needed, from a new lawn mower to a four-course meal, at roadside emporia and canteens.

9) Deport the 20,000 plus illegal-alien felons now in California state prisons to their countries of origin.

10) Have George Clooney do another $40,000 per head Hollywood fundraiser, but with Sacramento, not Barack Obama, as the beneficiary.

JP Morgan Chase has enough egg on its face to make omelets for an entire country.  Mystery abounds.  Total trading losses may have reached $2.3 billion, and could well hit $4 billion, said the The Wall Street Journal.  What in the world happened here?!?

Chase, in an irony worthy of a Hollywood screenplay, is led by Jamie Dimon (Chairman and CEO), who is at the forefront of the charge to resist, or at least, to water down, the specter of more regulation of what banks should be able to do and what they shouldn’t be able to do.  Dimon has been quite visibly prominent on that frontier – for this to happen under his watch would be funny, if it weren’t so menacing.

What happened?  How do you lose over $2 Billion, and perhaps as much as $4 Billion dollars in the world of Big Banking?

Back when there was effectively no federal regulation of banks, we were accustomed to having bank ‘Panics,’ every half dozen years or so. ‘Panic’ is a quaint word that suggests a mental disorder for which drugs await you at your doctor’s office after you hear that soothing voice on your TV, amid butterflies and Springtime, to ‘ask your doctor if ____ is right for you.’  But some of these ‘Panics’ back in the Gilded Age wiped out businesses and wreaked untold hardship on bank depositors who were told there was no money left for the banks to make good on their deposits.

After the Great Depression, we learned that federal bank regulation would act to calm down financial markets when times got tough.  We did not have anything like the Great Depression of the 1930’s again until the Fall of 2008, when, for a few months or more, it seemed like our financial system was imploding into a supernova of trouble.

In the very late 90’s we did away with federal bank regulation that some say could have helped us avoid the 2008-2012 period, now charmingly called the Great Recession.  And, in the mid-2000’s, came “Liar’s Loans,’ and NINJA loans (no income; no job; no assets) – when some people’s gardeners were buying a couple of houses on ‘spec’ – and the securitization of box-fulls of home loans marketed in ‘tranches,’ yet another charming name, all over the world as exotic financial instruments “of mass financial destruction,”  as Warren Buffett put it.  Physics and math grad students left academia, going to work on Wall St. instead, and driving Ferrari’s and Porsches, putting their talents to better use dreaming up exotic financial instruments for banks to sell than continuing to argue over String Theory and just how many universes exist.

To clean up the mess, the Fed opened it’s money window and the banks lined up for nearly free money which they could then lend out, perhaps on credit cards, for interest rates up to and over 30%.  After all the Bailouts, this has continued to the present day.  Banks like Chase, were under the usual pressure from their competitors and stockholders, to earn huge profits, to pay some of their trading employees amounts yearly well in excess of $10 million dollars.

A week or so ago, Chase first reported a 2 Billion dollar trading loss.  Chase’s shareholder’s meeting was Tuesday.  Dimon said there in his address that “no clients suffered as a result of our mistakes.”  Maybe that is true, but the US taxpayers, whose money the Fed lends out nearly for free to behemoth banks like Chase, surely did suffer, didn’t they?!?  Interestingly, Dimon is also a NY Fed Board Member – is this a conflict?

But, shareholders of Chase had foreclosures on their minds; asked one of Dimon: “If Chase can afford to gamble with $ 2 billion then why can’t it reduce principal on mortgages?”  A shareholder asked why Chase almost always denied requests for principal reductions on mortgages.  “Particularly worrisome is that qualified borrowers are being unnecessarily foreclosed on, in urging more oversight in loan servicing.”

Dimon labeled the $2 Billion (or more) loss reported by Chase from trading gone south as “Sloppy,” and “Stupid.” Many now ask if anything has changed on Wall St. since 2008 if such a loss can happen to bankers who still think they are smarter than anybody else.  But, viewed together with the sharp drop in Chase’s stock prices since the trading loss was announced, the loss could actually be $20 Billion – a drop in excess of 11 percent as this is written; making about $17.5 Billion in Chase’s market value vanish into thin air.

Dimon had a good reputation for managing risk before this trading loss – he managed to avoid much of the risky betting that likely caused the Great Recession, starting in 2008.  Remember too that Chase’s revenue was some $90 Billion over the past year.  But, good reputations can vanish in thin air just like the market value of a behemoth bank, and it is far too soon and the wounds are yet all too raw from the crashing and burning of Lehman Bros., Bear Stearns, and so many others over the last few years, to make any definitive pronouncements.

Should banks be continuing to risk our taxpayer dollars, coming to them by way of the Fed, on extreme bets to try to keep earning outsized profits?  How does one go about losing $2 Billion?  What is the amount of Chase’s total loss from this trading debacle and how exactly did it happen?  Will federal regulation for banks now be re-examined with new urgency in the wake of this unexpected financial meltdown?  We will all have to wait and see as more information is learned and shared over the coming weeks and as investigations of Chase’s bad trading days proceed.

The governor said that things are getting better and, in an odd way, when you look back at California’s sorry budget story the last few years you can see how he makes that argument. However, the campaign to raise taxes without coupling reforms will not lead California out of the fiscal forest, which is the governor’s goal.

Compare the recently announced $16-billion deficit to the $42-billion Governor Schwarzenegger faced in the latter years in office or even the $26-billion Governor Brown dealt with when he took over.  However, in those past instances, the deficit shrunk from the projected January budget deficits to the May revise budget. This time the May revise was worse that the governor’s original budget.

Things should be better. As the Wall Street Journal editorial, California Ugly, pointed out yesterday, while the Golden State was suffering a 20.2% drop in April tax collection projections, other states nationwide were seeing increased tax collections over the year.

The governor’s hope to fix the state’s fiscal situation with taxes and without reforms would be a fool’s bargain for taxpayers.

Brown said his goal is to fix California’s structural deficit. He said the problem was not created overnight and would take some time to fix. However, he is not laying out a plan for a long time fix but is just applying tape to a rickety structure. He is probably making the situation worse by not first seeking reforms.

How are things going to get better when spending in the initiative will be earmarked for local public safety, creating another constitutionally mandated program with a revenue source that will disappear?

How are things going to get better when there is no spending reform, when Brown himself said at the press conference that California continues to live beyond its means?

How are things going to get better when there is no reform of pension and employees’ health benefits that are eating away at the budgets of local and state governments forcing those governments to cut back services?

Without reforms, taxes will not solve the state’s problems.

The first order of business is for Sacramento to build up confidence in the legislative process by making major policy reforms and encouraging business growth to create jobs and produce dollars for the state treasury. The first order of business should not be a call for taxes. Yet, that was what the governor did at the top of his remarks. He has it backwards.

SACRAMENTO–Setting the stage for the Legislature to pass another phony majority vote budget, Democratic Gov. Jerry Brown presented a bleak picture of the state’s finances today during his May Budget Revision conference, and then challenged the press to come up with a better plan.

Despite his repeated claims that he was increasing austerity by calling for higher taxes, cuts to health and welfare programs, as well as a 5 percent furlough cut to state employees, Brown’s budget cuts will still not spare taxpayers.

The governor reported that California’s budget deficit has grown to nearly $16 billion, shockingly higher than the apparent guesstimates of $9 billion in January.

“The May Revision is based on the assumed passage of the Governor’s tax initiative,” the plan from the Department of Finance said. “The Governor’s proposal “temporarily increases tax rates on the highest income Californians, and temporarily increases the Sales and Use Tax rate by 0.25 percent,” resulting in the anticipated $8.5 billion in additional tax revenue to the state coffers.

And if you believe that the taxes are temporary, I’ve got a bridge to sell you.

Tax the millionaires… I mean the ‘affluent’

“Please increase taxes on the most affluent,” Brown asked. “It’s reasonable and fair.”

What is not fair or even reasonable is that the voters have not been participants to the historic spending by the state. The increased spending and budget deficits, according to Brown, has gone on since Earl Warren was governor (1943-1953). The deficit spending is largely spent on welfare programs, including education welfare give-aways, and on growing state employee pensions.

The revised budget includes a $91.4 billion general fund spending plan, a one-time infusion of funds from the multi-state mortgage abuse settlement with large banks, Brown’s November tax initiative and more cuts.

Total spending in the state budget is $4.6 billion more than Brown’s January budget proposal, leaving many to ask if Brown’s call for more taxes is just to be able to continue increasing state spending.

“The budget is a pretzel palace of complexity.” Brown said.

Brown posted a youtube video over the weekend and said that the budget he signed last year was an improvement in ending budget deficits. But it still was dramatically unbalanced by $4.6 billion. ”By the time I leave here, California’s budget will be balanced and the state will be back on road to prosperity,” Brown insisted. ”I am a buoyant optimist.”

The tail is wagging the dog

Last week, the Sacramento Bee reported that SEIU Local 1000 President Yvonne Walker said she had been in talks with Brown about the revised budget, and refused to agree to state worker furloughs.

Walker published a memo about the upcoming budget revise, as well as her demands for state workers. ”Under the previous governor, our input was not sought, in fact, it was dismissed. Under Gov. Brown, we have a seat at the table,” Walker’s memo stated. “We have offered our own proposals to deal with this crisis.”

Walker specifically recommended cutting private vendor contracts, eliminating the use of retired annuitants and, only if necessary, implementing a four-day, 40-hour work week.

Walker’s recommendations are coincidentally what Brown proposed in his May Revise budget.

However, Brown said he will ask state employees to work four days a week, 9.5-hour shifts for a weekly total of 38 hours. This recommendation will undoubtedly be challenged by the state’s labor unions.

The dog is wagging the tail

The governor said that, if his tax initiative is not approved in November, K-12 schools and community colleges would be cut by $5.5 billion.

“Schools will suffer,” said Brown.

The University of California and California State University systems would split another $500 million cut–$50 million less than Brown proposed in his January budget.

The one positive cut in Brown’s revised budget is the proposed cuts to Cal Grants, which would result in the imposition of tighter high school graduation requirements and more stringent proof of family income.

Cuts to the Courts

California courts are already burdened with a crumbling infrastructure. Brown’s revised budget will make this worse. He proposed cutting $544 million from the state’s trial courts, $300 million from their reserves and $240 million by further delaying court construction.

This is bad news for the overburdened court system, which has already delayed the construction of several much-needed courthouses, as well as decades of deferred maintenance.

Brown also proposed increasing court employee retirement contributions from 5 percent to 8 percent.

And Brown is asking for another cut to In-Home Supportive Services, and further cuts to Medi-Cal hospitals and nursing homes.

Responses to the May Budget Revision

“Tax revenue is up two years in a row, but not enough to satisfy the spending demands of Sacramento Democrats,” retorted Assembly Republicans. “It will be interesting to see if the liberal majority in the Legislature accept the Governor’s cuts, or reject them as they did earlier this year when they blocked the Governor’s health and welfare reforms and grew spending by $1 billion,” wrote Assembly Minority leader Connie Conway, R-Visalia, and Assemblyman Jim Nielsen, R-Biggs.

However, there was no acknowledgment by the governor of the steady exodus from California over the last 20 years, resulting in the substantial loss of tax revenues. Four million taxpaying residents have left the state in search of less government intrusion, fewer regulations and lower taxes.

“Our government is not structured to quickly and effectively respond to an economic crisis of this magnitude,” said Sen. Pres. Pro Tem Darrell Steinberg, D-Sacramento. ”We are so balkanized that the people don’t know who collects the taxes and who provides the services.”

Steinberg also admitted that “the share of corporate income tax paid in California has fallen by nearly half since 1981. Personal consumption in California has fallen by the largest percentage since 1980,” Steinberg said.

“Amazingly, a year and a half into Brown’s governorship and we still hear nothing of the unemployed,” said California Republican Party Chairman Tom Del Beccaro. “California will continue to face chronic budget deficits because so many people remain out of work; the conversation about revenues should always begin with how to restore jobs. So many people are wondering when Brown will offer plans to make California competitive, so that business will return to this state and bring jobs with them.”

Before the ink was even dry on the Governor’s speech, California Labor Federation leader Art Pulaski called for a review of corporate tax breaks. Calling for voters to approve Gov. Brown’s tax initiative in November, Pulaski said, “The state has to eliminate the maze of loopholes, carve-outs and tax-dodges that corporate lobbyists have written into law over the years…”

“It’s high time that our system reflects the interests of middle-class Californians, not the special interests of corporate CEOs and their lobbyists,” Pulaski said. But he said nothing about the special interests of union lobbyists, union attorneys and union politicians.

It is hard not to ask if Brown’s tax increases will force more to exit the state and further deplete California of tax revenues, especially when California tax increases take hold, and federal tax cuts expire.

One Twitter follower asked, “Is this the perfect storm for financial ruin?”

The elephant in the room looms large: Is California hoping for a bailout? Are we too big to fail? Some say that $5 trillion in new debt under Brown’s turn as governor makes a bailout impossible, leaving only tax and fee increases.

The exodus of 4 million California residents in the last 20 years will continue to rise commensurately with higher taxes, until only state workers and welfare recipients are left.

Brown said the state and the nation has been living beyond its means. “There has to be a balance and a day of reckoning,” Brown said. “This is the day of reckoning…We have to take our medicine.”

“What government does is good,” Brown said. “I did my best.”

That’s because Austin Beutner, the hope of business types, dropped out of the mayor’s race Tuesday. That leaves us mostly with a gaggle of career politicians who don’t know a business asset from a hole in Wilshire Boulevard.

In many ways, Beutner was an ideal candidate. He’s an outsider who had a very successful private-sector career, yet he’s a bit of an insider who spent more than a year as Mayor Antonio Villaraigosa’s first deputy mayor. He’s a moderate Democrat with pro-business leanings. He is wealthy enough not to be too beholden to those who would bankroll him.

True, if you could somehow hook him up to a charisma meter, you may not get a pulse. On the other hand, he is intelligent and quietly competent. He led a State Department team during the Clinton administration to help transition Russia to a market economy. And he founded a successful investment banking firm, Evercore Partners.

Economically vibrant cities tend to be business-friendly. But Los Angeles is barely business tolerant, and Beutner expressed the frustrations of business people here. He talked about changing the culture in City Hall, lowering the gross receipts tax and blowing up the city’s East Bloc-like permit process. Little wonder Beutner was immediately endorsed by the likes of David Fleming, the local business leader, and Richard Riordan, L.A.’s last mayor from the business community.

But the broader community never embraced him. His poll numbers reportedly were in the low single digits.

In his announcement, in which he cited unspecified family issues as the impetus for his withdrawal, Beutner – refreshingly – cut to the real problem in the city.

“We need a city which can live within its means and can effectively provide core services like police and fire,” he wrote. “And we need once again to make Los Angeles a city where private-sector employers can prosper – creating good paying jobs and providing the tax base to pay for the services the city has to provide.”

Stop and savor that for a moment. A city that lives within its means. Provides core services. Allows employers to prosper.

Contrast that with what we’ve gotten out of the Los Angeles City Hall. A city so broke it wants to make people pay to fix broken sidewalks on their property. A Fire Department with slowed response times. Eighteen months to get routine business permits.

Business people now turn their lonely eyes to Rick Caruso, the developer who seems reluctant to run for mayor and hasn’t even announced, and Kevin James, the lawyer and radio talk-show host, who’s got about a snowball’s chance on the Venice Beach boardwalk in July.

The other candidates may be intelligent and well intentioned and love the city, but most are City Hall lifers out of touch with the private sector. It may be painfully clear to you why the number of payroll jobs in Los Angeles has been dwindling for 20 years. But it’s a mystery to them.

Beutner is one of the few who understands why.

Charles Crumpley is editor of the Business Journal. He can be reached at ccrumpley@labusinessjournal.com.

Former United States Secretary of State, George Schultz, conference co-chair, said that not only should the conference attendees expect no help from Sacramento, “If Sacramento people find out we’re solving problems, they’ll come in and stop us.”

Carl Guardino, President of the Silicon Valley Leadership Group, pointed out that all 120 members of the legislature were repeatedly invited to attend the conference. However, only three were in attendance: Assembly Members Connie Conway and Kristin Olsen and Senator Michael Rubio.

Lt. Governor Gavin Newsom also attended, interviewing New York Times columnist Thomas Friedman, and participating in the breakout sessions as participants gathered around separate tables representing fourteen different regions of the state to discuss solutions. Newsom reported that 800 different ideas were floated over a two-hour period and said that the varying solutions from the different regions proves that “one-size fits all” proposals are not the way to go.

Regional leaders put committee reports forward on regulations, infrastructure, workforce, innovation and capital formation. The ideas were collected in a Summit Playbook, which can be found here.

Schultz argued that people in the local community know what programs and institutions work and don’t work. He emphasized that a cultural change is needed to make change through the regions.

Schultz stated that it was “blindingly obvious” that education was the key to turning the state around. He said the current education system was hurting students and he called for a more decentralized education system that would reduce bureaucracy and increase choice and competition. He gave an example of an Oakland mayor who had to fight the education bureaucracy that attempted to strangle the mayor’s school reform program before he finally succeeded. The mayor was Jerry Brown.

Thomas Friedman also cited education as one of the five pieces of a formula for success to turn around a struggling economy. He included infrastructure, a more open immigration policy, incentives for risk taking but regulations to prevent excesses, and government funded research. Friedman said a hybrid policy of cuts and tax increases were necessary to accomplish the goal. He said a third party is probably necessary to produce hybrid solutions.

Schultz hit a theme presented often on this site—the need for a business friendly state. While regulations are needed, he said, business people need an easier path to get through the regulations so that they don’t have “to go to Texas to build their plant.”

The legislators who took part in a panel moderated by former Speaker Bob Hertzberg confirmed the earlier sentiment expressed at the conference that no solutions are likely to come from the legislature this year. Senator Rubio said too much focus is put on what the media sheds its light on instead of dealing with core issues. Assembly member Conway argued there should be a limit of five bills per legislator per session.

Michael Rossi, the Governor’s Senior Advisor for Jobs and Business Development, represented the Brown administration. Rossi said the construction industry hurt woefully by the Great Recession is making a comeback, with 2011 its best year in six years. He pushed back against the recent CEO magazine survey that said California was the worst place to do business. Rossi argued that the states that did well in the survey where not comparable to California.

A few observations from the Summit:

Over and over we were told California was the ninth largest economy in the world. The standing was expressed proudly. Yet, I remember when California was tagged the seventh largest economy in the world a decade or so back. Slipping in the rankings doesn’t seem to be something we should be proud of.

The conversation dealing with the legislature indicated that bi-partisan working relationships on big issues are often scrambled by outside interests and the pressure they bring to bear. Perhaps the Stop Special Interest Money initiative on the November ballot can take a step in improving that situation.

Michael Rossi promoted the administration’s support for the High Speed Rail. He said the new estimates on the rail program were “bluntly honest” and that positive changes have been made in the scope of the project. But if the project has changed, and the original estimates presented to the voters were not so up-front when the bond measure was on the ballot, shouldn’t the people have another vote on whether they still want to proceed?

On a future date, I hope to post other articles from participants to the conference.

Here we go again. As frenzied as the tax-hike obsessives have been in recent months and years, Jerry Brown’s weekend warning that the 2012-13 budget is $16 billion short is sure to ramp up their intensity. So get ready for the media/Dem onslaught, folks, and prepare to be reviled.

Will Jerry Brown get lots of blame for his $4-billion-in-extra-revenue fantasy that he concocted last June? It’s made a dire situation much worse.

Will anyone in the media point out that contracts with gov unions that Jerry approved this fiscal year not only continue providing “step” increases for time on the job — in other words, just for showing up — but overall pay hikes?

Will anyone in the media point out that the people with power in this state have blocked all fundamental reforms — except the one (prisoner “realignment”) that allowed them to shift costs to the state government?

No, no and no.

Instead, we’ll see the usual one-two punch to explain all that is wrong with California.

1. Those damn Republicans who oppose tax hikes are to blame.

No. They’re. Not. For all the alleged insurmountable obstacles to raising taxes in California, the state has among the nation’s highest income, sales and gasoline taxes; and the highest corporate taxes in the West. Property taxes are about average, thanks to Prop. 13. We should be able to live within our means. Most other states can pull this off. Which brings us to the next refrain in the Dem/media litany…

2. Prop. 13 is to blame. It ruined the state.

No. It. Didn’t. The limit on the annual increases has not prevented property tax revenue from going up by more than population growth and inflation for more than 30 years. Yes, the state may have a screwed-up tax structure. But that’s not Prop. 13′s fault. That’s the fault of the status quoists in Sacramento who like things as they are, no matter what, just with more money from taxpayers.

And the incredible thing about Prop. 13 is that it just showed its utility all over again during the housing bubble. Home prices in some markets nearly tripled from 1998 to 2006. Imagine the disruption in the lives of retirees and those living on fixed incomes if their property taxes had gone up that fast. Yet I think I’m the only guy in the California print media who has ever mentioned this. That’s incredible, when you think about what that says about media conformity — and stupidity. How is it not news that Prop. 13 saved millions of people from disaster?

Because it doesn’t fit the narrative.

A more honest narrative might occasionally, yunno, note that the revenue crisis could be alleviated with economic growth, but that the Legislature and the governor only care about the sliver of the private sector economy that includes “green” jobs.

A more honest narrative might also note that for the eighth year in a row, the nation’s CEOs have rated California as the most business-hostile state.

But those narratives will give way to the usual media-Dem juggernaut. Everything can be made right in California with higher taxes, and people who don’t support higher taxes are greedy “terrorists.”

This is one case where I’m rooting for the “terrorists” — my fellow “terrorists.”

Tom McClintock saw all this coming in September 2008 in his final major speech to the Legislature:

According to the State Controller’s reports, last year, our tax structure produced $96 billion in actual revenues – a record year. We budgeted $103 billion and spent $107 billion.

In short, our spending exceeded our revenue by $11 billion and exceeded our adopted budget by $4 billion. This year, if the economy gets no worse, we can expect to produce $97 billion in tax revenues. Claims that the revenues will be higher are based on accounting gimmicks that mask the numbers but do not change the underlying reality. ….

So I leave the Senate with this warning. I believe that last year’s budget pushed this state beyond a fiscal tipping point. The unsustainable growth of spending pushed us beyond a point where neither tax increases nor conventional line item reductions can bring us into balance. …

I believe we have now also passed the point where conventional budget reductions can restore our state’s finances. I believe we have now reached the terminal stage of a bureaucratic state where our bureaucracies have become so large and so tangled that they can no longer perform basic functions.

“The terminal stage” has been unfolding ever since. What happens to California? It changes in sweeping, fundamental, unprecedented ways.

Or it collapses.

The state senator from the Central Coast, a moderate Republican who is not running for re-election, recently announced the formation of the California Reform Institute. His think tank will have a focus: supporting California lawmakers who want to work across the aisle on reform legislation that the legislature can pass.

Talk about a narrow mandate.

Is there anyone such a think tank could serve? Is there anything it could work on? Or is this a think tank about nothing?

Those are real questions. In this partisan time, there simply are fewer and fewer state legislators who have any interest in working across the aisle and being bipartisan. Indeed, many of those more recently elected see their role as to take hard lines against compromise. That’s one reason why Blakeslee had such trouble politically. He was one of those inclined to compromise and bipartisanship – and he’s not running for re-election.

But the new think tank’s policy agenda would seem to be even narrower. Blakeslee was quoted by The Tribune of San Luis Obispo [LINK: http://www.sanluisobispo.com/2012/05/09/2061161/california-reform-institute-blakeslee.html]  as saying that his think tank would focus on reforms that would pass the legislature. The think tank “will not craft unrealistic proposals that the Legislature will never pass.”

That sounds fine, but fails to recognize the hard truth. Serious fiscal and governance reforms that would change the California reality have no hope of passing the legislature. Because California’s system requires supermajority consensus for major changes. And such consensus is hard precisely because there are virtually no politicians willing to work across the aisle.

A better focus for Blakeslee’s think tank would be: figuring out how to remake California’s system so that it doesn’t depend on supermajority consensus and people working across the aisle. If there proves to be a way to involve the legislature in doing that, great. But that will require figuring out a way to appeal to strong partisans, not the small number of lawmakers in the middle.

All that said, it’s great to have another institution devoted to thinking about California’s problems. But Blakeslee would be wise to expand the charter and agenda of his new enterprise. Think bigger, Sam.