Author: Loren Kaye

In the run-up to the election, the Los Angeles Times https:> waterboarded some statistics, and elicited a confession that … wait for it … California corporations don’t pay enough in taxes.

An editorial followedhttps: la-ed-1026-taxes-20101026,0,6229319.story?track=”rss”>, which seems redundant.

The basis of this pseudoanalysis seems to be this truism: voters don’t like "corporations." With that as a premise, any analysis will do.

If a developer trumpeted his commitment to a "green community," promised to scrupulously abide by environmental processes, and then snuck a provision in the state budget agreement in the dead of night to get an exemption from those laws, then editorialists would thunder, politicians’ would fume, and environmentalists would be hiring lawyers.

But substitute "state government" for "developer," and all is silent.

The conventionalhttps:> wisdom https:> in Sacramento is that the budget approved early Friday morning is held together by wishful thinking and accounting gimmicks, not to mention Rosy Projectionshttps:>.

Nobody can deny that the next Governor will be faced with an extraordinary challenge to balance his or her first budget. After all, the Legislative Analyst has said https:> that "well over two-thirds of the Legislature’s 2010-11 budget solutions are temporary or one-time in nature."

You
can tell when the substantive arguments run out of gas – the name-calling
begins.

That’s
happening now in the debate over the California Health Benefit Exchange,
proposed by SB
900 and AB
1602, which would create a brand new bureaucracy with extraordinary powers
to implement a new entitlement program.

Far
from spreading "fear-mongering falsehoods," the California Chamber of
Commerce and former state Director of Finance Michael Genest are flagging
legitimate concerns about how this Exchange will function: its
accountability to the Legislature and the Governor, and its ability to obligate
new state spending without any recourse by elected officials.

The Legislature may
vote on a legitimate (if not balanced) budget proposal in the next
couple weeks. Or it may not. But in any event the lack of a budget for
nearly the entire first fiscal quarter should not prevent us from
war-gaming the budget for the next fiscal year.

Jerry Brown has said on many occasions that he would only raise taxes with a vote of the people. At a recent editorial board he floated the idea of a special election next spring (Joel Fox predicted
May 17, 2011, to coincide with the LA mayoral election) to "tee up
some key decisions," presumably meaning voter approval of tax increases
tied to a budget. If Prop 25 passes in November, the Legislature could approve a budget by a simple majority vote. But
wouldn’t he still need a two-thirds vote to place a tax increase on the
ballot?

Maybe not.

The
National Bureau of Economic Research announced that the recession that began in
December of 2007 ended in June of 2009. While the economic contraction lasted
only 18 months, job losses in California have lasted for twice as long.

The
peak of California employment was in July 2007. Through August of 2010, total
nonfarm employment continued to drop, although the major losses seem to have
abated since last December.

Joe
Mathews unearthed
a nugget Thursday – turns out the 99-year-old referendum power in
California may have a more distant provenance than we thought, older than even
the state itself.

That
news could be bittersweet, though, because a measure on the November ballot  would effectively
prevent the referendum from celebrating its centenary.

On
its surface, Proposition 25 is fairly simple – it reduces the vote
requirement to pass a budget from two-thirds of the Legislature to a simple
majority.  However, Prop. 25’s language also eviscerates the
referendum, one of Governor Hiram Johnson’s great reforms enacted to
counteract the power of special interests, and a critical check that voters
have on the actions and power of the Legislature. 

I agree with the Planning and Conservation League.
But first, a little background.

San Francisco Mayor Gavin Newsom is considering asking the Legislature
for an exemption from the California Environmental Quality
Act (CEQA) so his city won’t have to prepare an environmental impact
report to host the America’s Cup yacht race in San Francisco Bay in
2014.

That’s right. An EIR for a yacht race.

A
recent report that the Governor is considering borrowing $2 billion from
the giant state pension system may seem incongruous with his earlier statements
advocating full funding of pension obligations – not to mention sound
fiscal management. But if these reports are true, then the Governor may have
found a way to thread the pension reform needle to the long-term benefit of the
state.

I
should know – I was Governor Wilson’s Cabinet Secretary in 1991
during California’s last Great Recession. Then – as now – the
state’s contribution to the CalPERS system was seen as a legitimate
source of temporary revenues to balance the budget. Then – as now –
the Governor sought to make structural reforms to the state’s retirement
system to control spiraling pension costs yet maintain a fair and adequate
benefit to retirees.

The
difference today is we’ve had hard-knocks experience with what happens
when the path to reform is not taken: a $650 million estimated
obligation turns out to cost taxpayers $3.5 billion – and counting.