Here’s a head-scratcher

Loren Kaye
President of the California Foundation for Commerce and Education

The Brookings Institution just published a national ranking of metropolitan areas, based on their per-capita carbon emissions, and guess what?  Six of the 12 "cleanest" large cities are in California.  There’s more: when measuring per capita carbon emissions from residential energy use, 10 of the top 12 metro areas are in California.

Now this shouldn’t surprise anyone familiar with California’s tough residential energy efficiency standards and our reliance for electricity on natural gas, hydro and nuclear power (rather than coal).  And here’s one of the state’s best-kept secrets: our annual vehicle miles traveled per capita is the fifth-lowest of the 50 states.

All of which begs the question:  how in the world can California reduce its carbon footprint by another 29% by 2020 when our per capita energy use and carbon emissions are already relatively puny?  (Hint:  it won’t happen inside the borders of California!)

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Mandatory Sick Leave bill carries $22bil+ price tag

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

Check out this post by the OC Register’s Jan Norman on her Small Business blog detailing the cost of the Mandatory Sick Leave bill that recently passed in the State Assembly:

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Proposed service tax is a dangerous prospect

Loren Kaye
President of the California Foundation for Commerce and Education

When politicians spend money as if the money was there, then they don’t have to raise taxes.  California leaders have practiced this sleight-of-hand for years, and now the bill has come due.

The California Legislature went on a spending spree that has nearly doubled outlays since 1998.  Now, faced with a $15 billion budget deficit, many elected officials and interest groups are advocating tax increases to pay for overspending.

With California sales and income tax rates among the nation’s highest, and its corporate tax rate in the top ten, the tax-and-spend lobby is reaching for more creative – and economically damaging – sources to feed the beast.

Topping the list is a new sales tax on services – an idea that has failed miserably when attempted in other states.  But the promise of a tax windfall is so alluring that the tax spenders cannot help themselves.

An elected leader of California’s top tax collection agency has prepared a list of services that when newly taxed would raise more than $8.7 billion, just for state purposes.  Another $5.8 billion would be raised for local government coffers.

Trouble is, these numbers don’t add up economically or politically.

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Cowboy Diplomacy, Cowboy Ethics and Cowboy Values

Patrick Dorinson
Host of The Cowboy Libertarian Radio Talk Show in Sacramento

Before the budget process swings into high gear and Sacramento becomes consumed by the back and forth haggling between the Governor and the Legislature, Big 5 meetings and press conferences decrying the coming catastrophe if we cut too much and the competing ones saying we need to cut more, I want to take a moment to talk about something that in my mind is every bit as important.

It is something that has been sticking in my craw for years, and I just have to spit it out. It has to do with not just "what" we are doing in politics, business and government, but "how" we are doing it. Because the "how" is every bit as important as the" what".

Now stay with me on this one and I hope it will make sense.

The other day I heard yet another jack-legged East Coast political pundit talk about President Bush and his "cowboy diplomacy" symbolized by his "reckless" foreign policy. What this person knows about real cowboys you could fit in a thimble. Barack Obama and Hillary Clinton also have this phrase in embedded into their political lexicon.

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Is California headed down the same road as Detroit?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Sounding much like a gubernatorial candidate who wants to fix the way California government works, Insurance Commissioner Steve Poizner addressed an audience of a few hundred small business owners at the California Small Business Day in Sacramento.

California is headed down the same road as Detroit, and that’s not a good thing, Poizner said. Pointing out that, in 1950, Detroit was one of the richest areas in the country and led the world in automobile manufacturing, he said that people have fled Detroit in droves, the car industry has fallen behind Japan and Europe and Detroit registers on the bottom of nearly every measurable category of civic life.

Poizner sees California traveling down the same road. While population has increased because of immigration and births, he said 1.2 million California entrepreneurs and workers have left the state over the last eight years. He said California has dropped from the sixth largest economy in the world in 1999 to seventh in 2003 to eighth today.

And there’s probably more bad business news to come. Poizner said states like Nevada have created teams to raid California of its businesses. He cited ads run by Nevada that point out they has no income tax and no corporate tax, and a 30% smaller worker’s comp bill for businesses than California.

While the Insurance Commissioner noted that, due to the workers comp reform signed by the governor in 2004, workers comp dropped from 6% of payroll on average to 3% of payroll, California’s business workers comp bill is still above the national average of 2.5% of payroll.

Even the Silicon Valley economic engine shows signs of hedging its bet on California, he said. For the first time, sixty percent of the Valley’s research investment dollars are being placed outside of California.

Arguing that California must change to fight off stiff international competition Poizner said it was time to overhaul a dysfunctional state government.

Sounding a little like an early version of Governor Schwarzenegger who suggested ‘blowing up the boxes,’ Poizner said the state’s organizational chart follows a scheme established in the 1850s. It was time to bring it up to date.

To strengthen education, he argued that schools must be controlled locally, not from Sacramento. To improve the budget, he told the small business audience that the state must be more business-like and not budget from year to year, but instead use a multi-year budget and incorporate a rainy-day provision to set aside money during good times.

A number of people in the room commented after the speech that Poizner sounded like a candidate for governor.

Poizner did not talk politics or political ambitions during his speech, but there is no question that he has been given some thought to the way California government is faltering and what might be done to turn it around.

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California’s Dire Housing Outlook

Robert Rivinius
Executive Director, Family Business Association

With California on track in 2008 to have the lowest number of housing permits (79,000) issued since statewide records have been kept (1954), and while California continues to grow by nearly a half-million new residents per year, the housing affordability crisis in California will continue to worsen.

Yes, we know that home prices are down as much as 20-30% in many parts of the state, but that will be short-lived. Why, you ask?

Well, there is an alignment of many unfortunate factors. Even though some land ready for development in the fastest growing parts of the state is virtually worthless today, there is not enough land identified for housing to really meet our growth needs, so in the not-too-distant future that land will again be producing $200,000 building lots.

Combine that with impact fees imposed by local governments that range from $50,000 to over $100,000 per new home, and you will have spent around $300,000 before a foundation has been poured.

That kind of expenditure demands a decent size home with nice amenities, so it won’t be long until we’re again looking at $500,000 for a basic new home. Probably about 20% of the households in the state can afford that.

Another factor is that we need at least 220,000 new housing units each year to meet our growing population’s needs. As mentioned above, we will be below 80,000 starts this year. While California’s housing inventory deficit has not been accurately quantified, it is believed to be between 500,000 and 1,000,000 units. That definitely is a shortage!

Add one other phenomenon – new home prices pull existing home prices up like a magnet, so as new home prices rise, especially in light of an inadequate supply, there will once again be upward pressure on the price of existing homes.

Even with all that, many legislators are trying to pass bills that will make the land development process more time consuming and costly and the building of a home more expensive.

Do they truly want the American Dream of a home of their own for their fellow Californians? It sure doesn’t look like it.

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Has the time come for Instant Runoff Voting?

Public Affairs Consultant specializing in Issue Advocacy and Strategic Communications

Here in Los Angeles, an effort is underway to place an "instant runoff initiative" on the city’s Nov. 4 ballot.

As in San Francisco, L.A.’s instant runoff election would allow voters to vote by ranking their choices in numerical order. If no candidate earns a majority of the first choices, the last-place candidate is eliminated and votes are re-tallied based on voters’ preferences. The process is repeated until a candidate has received a majority of the votes for candidates who have not been eliminated.

Sound confusing? Yes, but it’s a system worth considering.

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Prop 34: Did it reduce money’s influence on elections? The verdict is in.

Allan Hoffenblum
Publisher of the California Target Book and owner of Allan Hoffenblum & Associates

In the November 7, 2000 General Election, California voters, by a margin of 60 percent to 40 percent, passed Proposition 34, which placed limits on the amount an individual, corporation, labor union or political committee can contribute to a candidate for the state legislature … currently $3,600, or double that if the contribution comes from what is called a "small contributor committee."

Prior to the passage of Proposition 34, there were no limits on the amount that any individual or interest group could give to a candidate, and it was not uncommon for wealthy individuals and others who had an interest in who was elected to the state legislature to, in fact, give large sums of money directly to a political candidate they favored.

Passage of Proposition 34, supporters claimed, would put a stop to this and thus significantly reduce the influence that powerful special interest groups and wealthy donors have on state legislative races.

How has it worked?

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Common Sense CA: $125K Grant Program for Citizen Engagement

Pete Peterson is the Executive Director of Common Sense California

Over the last several years, there have been a growing number of civic engagement projects in California from the city through to the state level. Last August, Governor Schwarzenegger plus top legislative leaders participated with over 3,000 Californians in a day-long survey about health care, entitled, "CaliforniaSpeaks on Health Care Reform".  In San Mateo County currently there is a county-wide campaign to involve residents and commuters in a series of dialogues around the subject of affordable housing. The project, called, "Threshold 2008" was originated by a diverse group of county residents – from business people to open space advocates – who saw a possible crisis in the lack of affordable housing in the region.

And that’s not all, large cities from San Diego to San Francisco, and smaller ones like Chula Vista and Morgan Hill, have convened citizens in "community conversations" around policy decisions ranging from airport planning to budget prioritization.   In most of these instances, municipalities and school districts have been pushed to a crisis point, where a budget deficit or immensely expensive (and controversial) land use decision precipitates public involvement.

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Do a Tax Commission Right This Time

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Assembly Speaker Karen Bass says California is a 21st Century economy laboring under a tax structure mostly built in the 1930s. She’s right. Improving the tax structure for the new era is the right thing to do.

Gold Rush era California economist Henry George had a saying about the tax structure that applies even today. "The mode of taxation is, in fact, quite as important as the amount. As a small burden badly placed may distress a horse that could carry with ease a much larger one properly adjusted, so a people may be impoverished and their power of producing wealth destroyed by taxation, which, if levied in any other way, could be borne with ease."

Speaker Bass said she will convene an independent commission to look at restructuring the tax system. Governor Schwarzenegger likes the idea and says he too will create a Tax Modernization Commission to make recommendations on better aligning the tax system to the modern economy.

I served in some capacity on four state commissions that dealt with California finances. From those experiences, my advice to those planning a new commission is to look at the big picture. That means consider spending formulas and government operations as well as tax structure. The tax system is not the only government function that needs to be modernized for the 21st Century.

Unfortunately, the work of the commissions I served on was never taken seriously by the Legislature or was scuttled by politics and poor timing. It’s not that I agreed with all the recommendations of these commissions. I even wrote a minority report on one commission. But, my sense was, to the legislators, the work of our commissions was no more than an academic exercise.

The Legislature ignored the recommendations of the Constitutional Revision Commission of 1996 the recommendations delivered in the heat of an election year.

Antonio Villaraigosa Speaker’s Commission on State and Local Finance was lost in the revolving door of the speakership. Current L.A. City Councilman Bill Rosendahl’s Commission on Tax Policy in the New Economy created by Governor Davis issued its recommendations on the day newly elected Governor Arnold Schwarzenegger was sworn in. Bad timing. The California Performance Review did not receive follow-though from the administration.

Politics played a role in undermining the efforts of many of these commissions. Of course, politics exists in all policy discussions. However, the Speaker and the Governor ought to get a commitment from Legislative leaders that work of the commission will have clear support and that the recommendations will get a fair hearing.

History tells us reports from commissions such as those now under consideration will end up on library shelves. Perhaps there is a new sensibility to the need for change and the endgame this time will be different, especially if both the tax and spend sides of the equation are considered. I wouldn’t bet on it, but that doesn’t mean we shouldn’t try.

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