What have they got to hide?

Loren Kaye
President of the California Foundation for Commerce and Education

“Trailer bills” are legislation passed to ease implementation of the budget, such as bills to suspend cost-of-living increases or raise taxes or other revenues. But because they are numerous and voluminous, trailer bills are also convenient vehicles to slip in language that might not otherwise survive the legislative process.

So it comes to pass that buried within one of the dozen or so trailer bills, on page 57 of the 133-page AB 1389, is a provision that repeals the designation of the Business, Transportation and Housing Agency to be “the primary state agency responsible for facilitating economic development in the state.”

This bureaucratic face-slap may be of little consequence, except to note that the Legislature has been singularly unsupportive of state economic development leadership, having abolished the Trade and Commerce Agency earlier this decade after less than ten years in existence. (Disclosure: I was an official in the original Trade and Commerce Agency.) California has been struggling ever since to create a unified, effective voice on economic development. Removing that leadership designation from a member of the Governor’s cabinet certainly sends a discouraging signal, and may indicate even more dysfunction below the surface.

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They have some ‘splainin to do

Loren Kaye
President of the California Foundation for Commerce and Education

The Education Establishment has announced their intent to sue the State Board of Education for adopting an 8th grade Algebra 1 requirement.

I say bring it on! It’s about time that the state’s school leaders – school board members and administrators – go on the record in sworn testimony as to why they cannot and should not teach algebra to 8th graders.

In 2007, California’s eighth graders ranked 44th in the nation in mathematics achievement. Internationally, eighth graders in the United States are outperformed in mathematics by their counterparts in Singapore, South Korea, Hong Kong, Taiwan and Japan, as well as Belgium, the Netherlands, Estonia and Hungary.

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Cutting greenhouse gas emissions – for free

Loren Kaye
President of the California Foundation for Commerce and Education

California environmental regulators have proposed a multitude of new rules that aim to reduce greenhouse gas emissions below their 1990 levels. Virtually every measure would cost a lot of money, either through mandated new investments in alternative energy or energy efficiency technologies, or in foregone economic opportunities to expand industries in California.

However, there is at least one strategy for reducing greenhouse gas emissions that costs absolutely nothing, could save workers and businesses time and money, and even make people happy — the use of four-day/ten-hour work weeks.

Imagine: by shortening the work week by one day, a worker would not only free up that day for personal use, she would spend less money on gasoline and automobile expenses, reduce congestion on the roads, and reduce smog-forming pollution and greenhouse gas emissions.

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How to repeal the two-thirds budget vote requirement

Loren Kaye
President of the California Foundation for Commerce and Education

With the state budget now more than 50 days late, the usual suspects have again lined up to decry the two-thirds vote requirement to pass the state budget. But the problem isn’t a late budget – it’s an unbalanced, undisciplined budget.

The typical defense of the supermajority vote is that it promotes consensus and restrains overspending or tax increases. But in practice it has done neither: taxes are already checked by a two-thirds vote, and spending has obviously not been constrained by the budget vote hurdle.

So maybe the time has come to jettison the two-thirds budget vote, and replace it with some legitimate budget reforms that would actually control spending. After all, the fundamental cause of the budget debacle has been persistent bankrolling of workload budgets that have exceeded even extravagant revenue increases: to illustrate, a 44% increase in General Fund tax revenues between 2003 and 2007 was not enough to cover all the spending demands.

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Lions and tigers and tax reform. Oh my!

Loren Kaye
President of the California Foundation for Commerce and Education

You know that real reform is about to happen when opponents let loose their menagerie of hobgoblins and boogeymen.

Today’s LA Times was the forum for the tax raisers to complain about common sense tax policy. But they had to dress it up as a give-away, because that’s what you do when common sense is not on your side.

The common sense part: taxpayers pay taxes on income (profits) and can write off losses. But for many business taxpayers, their business cycles do not conform to the arbitrary dates of a tax year. Federal tax law has long recognized this fact of economic life, and has allowed taxpayers to write off losses going back two tax years and forward up to 20 years. (The latter is particularly helpful for businesses with long gestation periods, like biotech firms.)

California only recently agreed to partially conform to federal law, allowing write-offs of losses prospectively for ten years. But as part of their initial $8 billion tax increase to close the budget gap, Democrats proposed to suspend the ability to write off these losses for two years, but offered to extend the carryforward to 20 years. The suspension would amount to a $1.5 billion increase on business taxpayers.

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The Perils of Initiative Tax Increases

Loren Kaye
President of the California Foundation for Commerce and Education

Rose King is a well-regarded policy consultant and advocate for mental health treatment. She has written a stinging indictment of the "botched implementation" of Proposition 63, the Mental Health Services Act of 2004, which blames both state bureaucracy and the use of the initiative process itself. King makes some cogent points about the pitfalls of policy making by initiative.

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NewsFlash: Field poll finds voters are kindly

Loren Kaye
President of the California Foundation for Commerce and Education

The most notorious workplace benefits bill of the year, AB 2716, will be considered by a key Senate committee today, and on behalf of supporters, the Field Research Corporation has released a doozy of a poll. By a three-to-one margin, voters support a state law to guarantee that workers receive a minimum number of sick days from their employer. Also, three-quarters of voters “are concerned” about the millions of estimated workers without paid sick days. Moreover, the same 75% – 25% margin finds voters believe paid sick day laws will significantly increase the cost of doing business and the costs will be passed on to customers.

So voters are basically a sympathetic bunch, and when asked they acknowledge that new benefits aren’t free. But the poll doesn’t ask what would be the only useful question: given a choice between a compassionate benefit and certain job losses or pay cuts, which is a higher priority?

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Schwarzenegger move not a pay cut, and Chiang’s computers add but don’t subtract

Loren Kaye
President of the California Foundation for Commerce and Education

The state employees are marching. The editorial boards are wringing their collective hands. The Controller is standing firm. But guess what — Governor Schwarzenegger’s executive order on state spending issued last Thursday does not cut anybody’s pay.

Typical of the reporting is a story in yesterday’s Sacramento Bee which says, inaccurately, that the Governor instituted “a temporary pay cut.”

If anyone took the time to actually read the executive order, one would discover that it merely orders the Director of the Departments of Finance and Personnel Administration to
“work with the State Controller to develop and implement the necessary mechanisms, including but not limited to pay letters and computer programs, to comply with the California Supreme Court’s White v. Davis opinion to pay federal minimum wage to those nonexempt FLSA employees who did not work any overtime.”

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NewsFlash: The Market Works

Loren Kaye
President of the California Foundation for Commerce and Education

Spread the news, especially to the Air Resources Board. California drivers respond to price signals. Judging from its skepticism of market solutions – embodied by the draft blueprint for greenhouse gas controls, which minimized the role of markets in achieving emission reductions – the Board doesn’t buy this. But recently-released gasoline sales data for California demonstrate that drivers do respond to higher gasoline prices.

The State Board of Equalization recently released its March, 2008, gasoline consumption report, which shows taxable gasoline sales falling by more than three percent from a year ago, and by 5.5% per capita from two years ago.

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And the Prize for Missed-Followup-Question-Opportunity-of-the-Week Goes to …

Loren Kaye
President of the California Foundation for Commerce and Education

George Skelton. The LA Times columnist yesterday recounted his recent lunch with Speaker Karen Bass, who pitched her excellent idea for a tax commission by among other things stating, "I’d expect it to come up with more stable ways to generate revenue so we are not completely dependent upon the upper income brackets."

Never reticent when sensing a possible inconsistency, Skelton no doubt asked her why then has she proposed nearly $6 billion in new taxes aimed directly at upper income taxpayers, increasing even more our dependence on high earners? It’s a shame the Speaker’s response to that pointed question did not make the column’s final cut.

Kudos to Skelton for detailing the increasing dependence of the California budget on the personal income tax, especially on high earners. But in discussing the smaller role of the state sales tax, he draws the wrong conclusion: the reason the state is less dependent on the sales tax is quite simply because we’ve become more dependent on the PIT.

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