Author: Loren Kaye

Should
the Governor today propose tax increases to be voted on by the people in June, as strongly rumored, then I will look forward
to answers to several questions:

1.   
How will he place the
question on the ballot? There are only three ways to put a tax measure on the
ballot: (a) citizen initiative, (b) legislative amendment of an approved voter initiative
(by a majority legislative vote), or (c) legislative constitutional amendment
(2/3rds legislative vote).

2.   
If by citizen
initiative, is there enough time and resources to make a June deadline?

3.   
If by amending an
approved voter initiative, which initiatives would be amended?

4.   
If by constitutional
amendment, would the amendment put the actual tax increases in the
Constitution, or would the tax increases be approved by the Legislature
contingent on passage of a constitutional amendment on a different subject
(say, budget reform)?

Californians continue to flee the state.

That’s the message to be drawn from data on the
state’s population growth, newly released by the state Department of Finance.

The state
overall saw a net increase of about 350,000 residents over 2009, reaching an
estimated population of 38.8 million residents this year. But in a continuation
of a recent trend, more Californians left the Golden State for elsewhere in the
country than moved here from other states. Since 1991, the net loss of
Californians has totaled nearly 1.3 million.

In his recent and provocative post, Joel Fox suggested that the
time may be approaching for a "big deal to solve California’s budget problems."
The big deal would include both tax and budget reform, although Fox cautioned
that voters may not look kindly on a complicated measure rushed to the ballot.

I would add another caution. Like Spring, the coming
of a new Administration breeds hope and optimism – which is a good thing. But
tax reform can be nasty business, and should only be attempted during
propitious circumstances. Governor Schwarzenegger’s experience with his Tax Commission
showed that even the best minds producing a creative and worthy proposal were
doomed to failure. Why? The environment lacked two key preconditions for
success.

First, the state was broke. Tax reform should never
be attempted when the budget is seriously out of balance, otherwise every
proposal will be viewed as a way to get well, rather than promoting equity,
efficiency or growth. The temptation to use a legitimate reform effort as a
smokescreen for more net revenues becomes too great, and opponents of reform
can too easily make that accusation, even if not true.

For those who thought Gov.-elect Brown’s budget forum in Sacramento last week was the same old – same old, think again. Here is a dense but fascinating slide prepared by the Department of Finance. It catalogs more than $66 billion in budget “solutions” that have helped create, extend and even worsen the deficit. Far from having cut the budget to the bone over the past three years, as many legislative leaders assert, taxpayers have been victims of a massive shell game.

The implication of this chart is that budget gimmicks have had a more corrosive impact on the state’s budget health than even the recession. They have permitted the Legislature to spend money – money they did not have – for years without coming to terms with the structural deficit. But the meta-message is just as compelling. By condemning this approach to patching the budget, the Gov.-elect has essentially foresworn their use – or at least made it politically much more difficult to take advantage of them in the future.

That is progress.

This article originally appeared in the Washington Times.

On Election Day, the once and future governor of California convinced voters that “I have the preparation, the know-how and the independence to challenge the status quo.” Now it will be up to Jerry Brown to deliver on that claim.

California’s struggles are well-known, as are its causes. We have the nation’s third-highest unemployment rate. Last year for the first time in living memory of most Californians, our economy actually shrank. No longer does the Golden State embody the American dream. People are leaving California at a faster rate than newcomers arrive from other states.

We suffer from some of the highest taxes in the nation. We have seen our education system crumble along with our roads. And the California legislature has piled up budget deficits that will haunt the state for years to come even after raising taxes by $18 billion. These days state government seems to excel only in producing regulations and fostering litigation.

Has the Republican minority in the Legislature been
driven into irrelevance by the passage of Proposition 25? It has – if you
believe the pundits and politicians, who have marked the advent of a
new age of majoritarianism.

After all, starting now, the Legislature may pass a budget bill and any
spending bill identified in the budget with a simple majority vote. It may pass
with a majority vote any substantive bill that implements the state budget and
that takes effect immediately (which incidentally immunizes that bill from a
citizen referendum). And any regular statute may be passed, as before, by a
simple majority vote.

So where can legislative Republicans find their
influence, now that these levers of governance are operated exclusively by
Democrats? I can think of four opportunities.

In the course of explaining how and why California still has a daunting budget deficit – $25.4 billion for the current and next fiscal years – Legislative Analyst Mac Taylor delivered some numbers-free straight talk:
 
On patching over deficits:

“Too often, discussions of California’s budget situation are framed in extreme terms: the state about to go “bankrupt,” debt-service payments hypothetically poised to default, the state government on the verge of collapse. None of these scenarios is remotely likely to occur. History tells us that the state can find ways to temporarily “patch over” its annual budget problems in ways that prove sufficiently palatable to policy makers of both major parties. Periodically, large influxes of capital gains allow for temporary relief, and this too aids in patching over the state’s now-recurrent budget challenges. The Legislature and the new Governor will be tempted in the next few years to continue patching over the budget problems with temporary fixes. Unless plans are put in place to begin tackling the ongoing budget problem, it will continue to be difficult for the state to address fundamental public sector goals—such as rebuilding aging infrastructure, addressing massive retirement liabilities, maintaining service levels of high-priority government programs, and improving the state’s tax system. Accordingly, the state faces a basic choice: begin to address today’s huge, frustrating budget problems now…or defer the state’s budgetary and policy problems to future Californians.”

OK,
maybe I was wrong. In fact, after much careful thought, I’m sold.
I’m willing to take Darrell
Steinberg at his word. And Speaker John
Perez. And Treasurer
Bill Lockyer. And top Democratic lawyer Lance
Olson. And the President
of the California Federation of Teachers. And the Los
Angeles Times and San Francisco Chronicle and other wise
editorialists advise me to relax and not worry. I now believe them all.

Their
conclusions: Prop 25 will not lower the legislative vote requirement for tax
increases from 2/3rds to a simple majority. And Prop 25 will not undermine
the
people’s recourse to a referendum.

Indeed,
the proponents helpfully point out that a Court
of Appeal ruled that ”nothing in (Prop 25’s) substantive provisions
would allow the Legislature to circumvent the existing constitutional
requirement of a two-thirds vote to raise taxes."

So
where does that leave us?