Author: Joel Fox

San
Jose Mayor Chuck Reed, declaring his city is facing a state of fiscal
emergency, seeks powers to act quickly to solve the problem by amending pension
and public sector benefit packages. Some, such as Fox and Hounds blogger Joe Mathews
on another site, called Reed’s position a "kamikaze
maneuver, certain only to hurt himself and the city."

Reed
indeed has taken a gamble. Given the obstacles the Mayor faces, Mathews could
well be right about the outcome. However, Reed’s is a bold move and, under the
circumstances, worthy of consideration. If it pays off not only would he
succeed in putting his city’s fiscal house in order, he may have etched a
formula for other communities to follow. As the New York Times
noted, Reed’s approach "may become a test-case with national implications."

Looking at the most recent Public Policy Institute poll on
the state budget situation, it is clear not much has changed in the public’s
view. The numbers have bumped a few points here and there but generally the
poll respondents have stayed on the same road they have been on: we want to
vote; we like Jerry Brown’s overall thinking, but when it comes to specific tax
increases-no thanks. Oh yeah, those spending limits and rainy day funds are a
good idea – and we should cut prisons.

Comparing these results to recent polls, Yogi Berra’s famous
saying comes to mind: it’s déjà vu all over again.

For those who would argue that the people’s vision is
blurry, if not downright dim-witted, I would submit the response to the first
question PPIC reports on: The state’s biggest problem is jobs and the economy.
52% of likely voters make that judgment. Budget and taxes is a distant second
at 16%. The people understand that if jobs increase and the economy improves,
the budget and tax situation will be taken care of.

Matt Fong could throw a snowball with accuracy. I know. I
was on the receiving end of a couple of sharply tossed snowballs sliding down a
hill in Big Bear when our families got together years ago. Matt was a spirited
guy, a dedicated public office holder, and an example of someone who could
paddle through strong political currents with his character unscathed.

I asked Matt once how, as a Republican who served as
California’s Treasurer and ran for the U.S. Senate, he dealt with politics with
his mother, March Fong Eu, longtime California Secretary of State and a
Democrat. Matt explained that his mother respected his political beliefs as he
respected hers. I assumed his confidence came from the certain feeling that he
had his mother’s vote in the privacy of the ballot booth.

I read with interest John
Seiler’s column last week in CalWatchDog.org in which he described the
plans of the California Federation of Teachers to raise taxes – many taxes:
higher income taxes on the rich; oil severance taxes; business property taxes;
taxes on services. Seiler was quoting from an article written by Marty
Hittelman, president of the CFT.

What particularly caught my attention was Hittelman’s
comment from the magazine article that passing Proposition 25 for a majority
vote budget last year was only a first step. The goal is to lower the two-thirds
vote for taxes.

I debated Hittelman a number of times on Prop 25 when it was
on the ballot. I pointed out Prop 25’s flaws, that it opened up the possibility
to new taxes and that the ultimate goal was to get at the two-thirds vote on
taxes. Hittelman denied this.

I found myself observing Memorial Day at Gettysburg, Pennsylvania yesterday, the site of the decisive battle of the Civil War. President Abraham Lincoln months later in his Gettysburg Address outlined the “New Birth of Freedom” secured by the soldiers of that battle — a freedom that has been continuously defended by America’s soldiers and sailors that we honored and remembered yesterday.

Gettysburg has one of the oldest, continuous Memorial Day parades.

Below are a few quick phone/camera shots from yesterday.

In less than a fortnight, the much celebrated/often maligned
(depending on one’s viewpoint) Proposition 13 will mark its 33^rd
anniversary. Ironically, a couple of days ago, the first-year Democratic governor
of New York engineered a deal to establish one of Proposition 13’s key
protections for taxpayers in the Empire State. Governor Andrew Cuomo cut a deal
with the legislature to cap most yearly property tax increases at 2-percent.

The New York proposal is not an exact replica of
California’s iconic property tax reform measure. But the yearly cap
acknowledges one of the important features of Proposition 13’s tax shield –
stop limitless property tax increases on defenseless taxpayers. Especially,
since property taxes often measures value of property and profits on paper only
but do not measure the taxpayer’s ability to pay.

In an echo to the Proposition 13 tax revolt, it was reported
that some seniors on fixed incomes were in jeopardy of being taxed out of their
homes under the current New York property tax system.

It is not just seniors, however, who feel the pain when
crushing property taxes are levied. The whole economy suffers.

Governor Jerry Brown surprised the state political world
with his May budget revision that calculated a revenue surge of $6.6 billion.
Welcome news to a state that had to fill a budget hole more than twice that
size. But, what happens if that unanticipated revenue is just the beginning?

Less than a week after the governor’s press conference, the
LinkedIn IPO sent the stock market into a dither with LinkedIn stocks soaring
to unexpected heights. While it has settled back, the stock is still about
double the original offering.

Last week, Kathleen Pender wrote
an insightful article in the San Francisco Chronicle questioning whether
this IPO could open the floodgates for more of the same from other social
networking companies in the Silicon Valley. 
Pender pointed out if the match is lit on an IPO explosion, the state
could see a gusher of money from capital gains taxes. Some analysts have
suggested the surge acknowledged by the governor is made up in large part by
capital gains taxes.

Los Angeles County election officials say we won’t know
until at least Friday who will be in the runoff for the 36^th
Congressional District seat. This race could prove the first test of
Proposition 14 and not merely in the sense of having two members of the same
party facing each other in the general election.

Los Angeles City Councilmember Janice Hahn, a Democrat, is
safely the frontrunner with 13,137 votes. Republican businessman Craig Huey is
second with 11,648 votes. Democrat Debra Bowen, California’s Secretary of
State, ranks third just 206 votes behind Huey. There are 9,811 ballots yet to
count, some mail-in ballots, provisional ballots or damaged ballots.

Proposition 14 calls for the top two vote getters to face
off in the general election, which is July 12. Should Bowen surpass Huey in the
final count then Proposition 14 would be in full effect – two Democrats facing
each other because they captured the top two spots in the primary.

Governor Jerry Brown put up a new budget plan that contained an eye-opening $6.6 billion in new revenues, a reduction in his previous income tax proposal, boosts to job creation, and an argument that California still needed a five-year tax extension to whittle down a “wall of debt.” Brown moved in the right direction but he should have gone further.

The governor should have embraced the unanticipated revenue as a hopeful sign and offered not only the pro-business measures he did, but also other provisions to spur the economy.

With the economy delivering new revenues, the five-year tax plan is hard to justify. The governor might have shortened the time he was asking for all the taxes contained within his proposal. He could even have suggested a trigger mechanism to capture new revenues only if the economic growth and tax revenue surge flattened instead of seeking the five-year extension.

He offered no such creative approaches but chose to hold tight to the five-year tax increase plan minus the one-year he removed from the income tax.