Crisis Reveals Big Financial Shortcomings

Dan Walters
Columnist, CALmatters

The rapidly expanding COVID-19 pandemic threatens the lives and livelihoods of Californians, but it also lays bare some multi-billion-dollar shortcomings in state government finances that have been ignored for decades, despite many warnings.

The most obvious is the state budget’s unhealthy reliance on taxing the incomes of a relative handful of wealthy Californians. Income taxes generate about 70% of the state’s general fund revenues and about half of those taxes are paid by the 1% of Californians atop the income scale.

Much of their income is generated by capital gains — profits on their investments — and as the Great Recession demonstrated a decade ago, those gains decline or even vanish in an economic downturn, resulting in sharp drops of state revenue.

With the stock market in freefall and the overall economy declining sharply, Gov. Gavin Newsom last week essentially set aside the expansive 2020-21 budget he had proposed in January and directed state agencies to hunker down, citing “a potentially severe drop in economic activity, with corresponding negative effects on anticipated revenues for the upcoming 2020-21 fiscal year and beyond.”

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COVID-19 and the Coming Rent Control Initiative

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

A move to prevent evictions from rental apartment units during the coronavirus crisis could gather steam now that the governor has pledges from some of the biggest banks to give victims of the coronavirus a reprieve on mortgage payments. Landlords, with an eye on a coming rent control ballot measure, would find it in their long-term interests to avoid evictions of tenants and implement other protective measures for those affected by the economic consequences of the virus. 

While the election is months away, the rent control measure has qualified for the ballot and any missteps by landlords during a time of the current national emergency surely would become campaign fodder in the Fall. 

A rent control initiative, Proposition 10, was defeated handily two years ago. The newly qualified initiative that would override current state law and give local governments more power to implement rent control, is sponsored by the AIDS Healthcare Foundation, the same group that was behind Proposition 10. 

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Governor Deems Construction as “Essential”

Timothy L. Coyle
Consultant specializing in housing issues

It’s every elected official’s dream to be in a position of ultimate power – dictating to a manifestly needy electorate what it can do and when.  Incidentally, the longer that authority lasts, the better for the politicians.   

This power-hungry desire knows no jurisdictional or partisan boundaries, either.   Legislative bodies – including the U.S. Congress and the California Legislature – like to think, for example, that the actions they regularly take have consequences across the land, in every corner in the nation and state.  

Done right, a power-play like this can do good things.  In 1992, when civil unrest overtook inner-city neighborhoods of Los Angeles, then-Governor Pete Wilson acted immediately to deploy the National Guard to keep the peace on City streets – even advising Guard soldiers how to load and fire their rifles.   

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AB 5 Needs to Be Suspended

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)

Transitioning to the new AB regime was already proving to be extremely difficult before the COVID19 pandemic hit.

Now, the transition is impossible.

Workers are having their lives upended. People are being told not to go to offices, to work remotely. And many people, facing the prospect of furloughs and layoffs, are going to be looking for work in whatever form they can find it.

AB 5 could stand in their way. Perhaps, in desperate times, they can find work from people who don’t much care to comply right now. But such arrangements are likely to become legal targets in the future.

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Trump, Cuomo and Leadership

Bill Boyarsky and Sherry Bebitch Jeffe
Fox&Hounds Contributor

President Donald Trump and Gov. Andrew Cuomo each put a different face on the handling the Coronavirus pandemic. What makes a leader?  Bill and Sherry discuss this and look back at the Kennedys and others who demonstrated great leadership.

Check out our new podcast on Inside Golden State Politics here.

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In a Crisis and Beyond: All for One; One for All

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

A number of newspaper columns have emerged since the struggle with the coronavirus took hold praising both government’s crucial role in a crisis and the sacrifices of workers who are in the front lines. They should be acknowledged. But also brought into clear focus is the importance of business to our everyday way of life beyond the period of emergency. 

The columns usually support a greater involvement of government in our lives and reject the idea of a limited government. As one writer put it in the Los Angeles Times, “We desperately need competence and courage in our government,” and added, Many Americans seem to view government as an impediment to the American dream.” 

No one disagrees that government should be competent and efficient, even those who don’t want government expanded to become too dominate in their lives. But the size and influence of government is a worthy discussion. In fact, the degree of control and reach of government was argued front and center in the recent Democratic presidential debates. 

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West Coast Ports Remain Open, Providing Essential Service to State and Nation

John R. McLaurin
President of the Pacific Merchant Shipping Association

As the novel coronavirus (COVID-19) pandemic continues to unfold, the three of the largest ports in the nation – Los Angeles, Long Beach, and Oakland – continue to operate, allowing for the continued flow of goods into our communities and key industries. 

As the world weathers this crisis, these ports provide a service that has been identified by the federal Cybersecurity and Infrastructure Security Agency (CISA) and the state of California as an essential critical infrastructure industry. 

To meet the current challenges, we have instituted new procedures for the operation of our terminals designed to maintain a safe and healthy working environment.  Safe operations support the flow of needed goods in and out of California allowing our communities to continue to function while we collectively heed calls to shelter-in-place.  

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Stop Obsessing About Lottery Funds and Education

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)

Can we stop pretending that lottery funds mean much of anything to schools?

In recent weeks, we have seen the recycling of a very old faux-scandal—that the state lottery is not producing enough money for California schools. The occasion for this latest news was a state auditor’s report finding that the lottery is not producing all that money for education.

It never has. Lottery funds have represented less than 2 percent of state education money ever since 1984. Indeed, the lottery wasn’t really about schools. As I’ve written previously, the lottery idea was created by a petition company that was looking to drum up its ballot initiative business in the early 1980s; the company convinced an out-of-state lottery company to pay them, and voters went along.

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COVID-19 and California’s Census Count

Eric McGhee
Research Fellow, Public Policy Institute of California

The COVID-19 crisis has upended the carefully laid plans for the 2020 Census in ways that might have disproportionate effects on California’s count. The Census Bureau is making important adjustments, but California needs to be particularly vigilant about the potential consequences.

The Bureau began its self-response period on March 12, when it started mailing out invitations to participate in the census to virtually every household in the country. Self-response remains the safest and simplest way to gather census data because, unlike in-person interviews, it does not raise the risk of coronavirus exposure.

The virus has altered almost every other effort the Bureau had planned. The Bureau always does extensive follow-up with households that fail to self-respond. More people are likely to need follow-up in California than in the average state, so problems with that process will be felt more acutely here. Follow-up is generally in person, which raises risks that didn’t exist just a few weeks ago; at least one census worker has even tested positive for the virus. To accommodate some of these challenges, the Bureau has delayed hiring and pushed back both the start of the follow-up (from May 13 to May 28) and the cutoff date for completed self-response forms (from July 31 to August 14).

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The March Primary: Some Good News for Republicans

Tony Quinn
Political Analyst

Three weeks after California’s early primary, and what seems almost light years ago, California’s left for dead Republican Party is showing surprising signs of life.  Given the hot Democratic presidential primary that was hardly expected, but in fact Republicans emerged from the primary with more than they started with.

For the first time in six years, Republicans actually gained a seat in the Assembly due to California’s top two runoff system.  In Antelope Valley’s 38th Assembly District, being vacated by Democratic Assemblywoman Christy Smith in her race for Congress, two Republicans emerged in first and second place, thus assuring new GOP Assembly member.  Five Democratic candidates split the Democratic vote, and all ran out of the money.

At the statewide level, the loss of Proposition 13, the $15 billion school bond, came as a surprise as there was virtually no campaign against it and a $10 million campaign in its favor.  But polling has shown that Californians feel they are overtaxed, and apparently voters reflected that view by turning down the heavily favored bond issue.

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