Pension Time
The governor has put the question of out-of-control public employee pensions square in the middle of the budget fight. Good for him. The pension question must be tackled and there is no better time.
While public employee unions create a list of 31 tax increases and cry “corporate greed,” in justifying some of the tax increase proposals, it is time to balance the discussion with an examination of what might be labeled “pension greed.”
I don’t know of anyone in the private sector who enjoys retirement benefits anywhere close to those offered to retired public employees in health care benefits or early retirement age. Many who use Social Security as their retirement fund are doing the math and putting over retirement not at age 62 or 65, but hoping they can reach age 70 to get a fuller benefit. That payout still pales against the public retirement dollars paid out at age 55, or even 50 for many public employees. Let’s not even talk about the health benefit.
Waiting for a Democratic Governor To Deal with the Budget? Don’t Count on It
The “kick the can down the road” cliché is making the rounds in Sacramento as the governor and legislature try to get a handle on the budget mess before the state runs out of cash. The can has been “kicked down the road” too often in the past using budget gimmicks to delay the hard choices necessary to fix the budget.
But some Democratic politicians see a strategic advantage in stalling real fixes to the budget problem now. They want to employ temporary patches to the budget like deferrals and accounting maneuvers until after the next general election when they anticipate Democrats will not only keep strong majorities in both houses of the legislature, but see one of their own elected governor. Then Democrats can implement their agenda of budget solutions.
However, even in this Democratic leaning state there is no guarantee that a Democratic governor will be elected in 2010. In fact, over the last 45 years Republicans have served in the executive chair more than two-thirds of the time. This phenomenon has similar precedents in an even bluer state than California.
Is This Any Way to Run for Governor?
Can Tom Campbell be serious about running for governor? After all, the guy has a detailed plan on how he’ll handle the budget mess. And he says we need to temporarily raise taxes! No one REALLY running for governor puts that stuff in writing, or tells it to an audience of business people at the Los Angeles Chamber of Commerce.
But that’s exactly what Campbell did yesterday.
Campbell knows he is running an unorthodox campaign. He readily admits that every political consultant would tell him not to talk about raising taxes. Campbell told a lunchtime gathering at the L. A. Chamber that voters want to vote for someone who is optimistic and uplifting. Well, Campbell admitted with a smile, his candidacy was testing that proposition.
It’s Not a “Cuts-Only” Budget, but More Taxes are Futile
As the debate heats up over budget proposals, the legislators and public must be reminded that the current budget is not a “cuts only” budget. The budget deal passed in February and designed to deal with this year and next year’s budgets included a whopping $12-billion worth of new taxes. Since the tax increases implemented so far have not brought in anticipated revenue, more tax increases to solve the immediate crisis is futile.
As the majority party brings its budget plan up for a vote, arguments ring through the capitol that some of the deficit must be closed with taxes…that cuts cannot do the job alone. Increased sales taxes and vehicle license fees are already paying for the current budget. The sales tax increase kicked in April, VLF in mid-May.
Raising any taxes now would not produce the revenue needed to balance the budget before the state runs out of cash the end of July.
Budget Solution: Cut and Restructure
The California Journal of Politics and Policy, published electronically by the Berkeley Electronic Press, is out with its edition on California’s Budget Crisis. The editors asked experts and insiders from many different perspectives to write a short essay on how to deal with the budget crisis.
My solution was summarized in the title of my article: Cut Spending and Restructure. You can read my essay here.
To read other ideas and perspectives go to the contents page here and click on the title and author you want.
The Tax Commission “Crap Shoot”
Listening to the discussion on complex tax restructuring proposals floating around the UCLA meeting hall at the Commission for the 21st Century Economy, I concluded, in the end, the commission’s plan better pass the Rotary test. That is commissioners better be able to succinctly explain the plan to a Rotary Club meeting in 20 minutes. They’re not there yet.
That last comment is probably unfair, since there is no plan, yet. There are pieces of a plan. Many pieces in fact, and how they are glued together will determine if the final proposal comes out looking like a sleek speedboat or an awkward Junk.
Legislature Listen Up: CA Gets Jobs and Tax Revenue from Successful Business
A Milken Institute study focused on the Chevron Corporation shows the effect on both job creation and tax revenue when a business runs successfully. Milken economists measured the ripple effect of doing business using the Chevron Corporation as an example. The study showed jobs were created not only by the company, but also jobs that came about to service both the company and its employees. With the legislature looking at a tax on oil, they should consider the possibilities of a reverse ripple effect: tax increases resulting in the reduction of jobs at Chevron and those that service the company.
Click Here to read my full commentary on the Milken Institute report that appears in the Sacramento Bee today.
Paying for the Lakers’ Parade
Once upon a time, when a major sports team from Los Angeles won its league’s championship there was no question that the city would cover the costs of a celebratory parade. However, in these difficult financial times, questions have been raised about springing for a parade to honor the 2009 NBA Champion Los Angeles Lakers.
The city has agreed to split the cost with the team for a two-mile parade and rally at the L.A. Coliseum. (The rent for the Coliseum will work toward reducing the state’s massive deficit by a few dollars because the governor hasn’t gotten around to selling it, yet.)
The Police Protective League issued a news release that declared it was “foolish” for the city to spend one million dollars on a three hour parade while every tax dollar is needed for essential services. It’s hard to debate that logic. The city council is considering major cuts and layoffs to deal with the hole in the city budget.
Reaching Back in Time for a Government Reform Plan
With all the talk of government reform and the possibility of a constitutional convention, Assemblyman Felipe Fuentes (D-Arleta) decided there is a better way to seek a restructuring plan. Revive the recommendations of the Constitutional Revision Commission of 1996.
The commission of 23 members met for two years during the last deep fiscal crisis to hit the state. At the time, many believed that the state’s fiscal problems could best be solved by revising the way government works. Sound familiar? Instead of calling a constitutional convention, Governor Pete Wilson and legislative leaders created a commission to suggest revisions to the state’s constitution. Bill Hauck, now the president of the California Business Roundtable, chaired the commission.
Fuentes wants to take the commission’s recommendations off the shelf and give them a good hearing. He believes the recommendations could lead to important constitutional changes and improve governance in the state without resorting to a constitutional convention. He is urging the Assembly Democratic Caucus to get behind the commission’s recommendations.
Business Will Fight Tax and Fee Increase Threat
More than one-hundred representatives from different segments of the business community convened at the California Chamber of Commerce yesterday to discuss forming opposition to proposed business taxes and fees. Public employee unions and advocacy groups have started a campaign to push for higher taxes. SEIU sponsored a television ad calling for higher taxes. Members of the business community at the meeting vowed to respond with a vigorous effort of their own opposing tax and fee increases.
Wary of a strategy that would try to divide the business community by focusing taxes or fees on one or two particular industries, California Chamber president, Allan Zaremberg, argued that the coalition must stick together and oppose all the various tax and fee proposals. Like water rushing through an opened dam, a multitude of revenue proposals have flowed forth from legislators, public unions and advocates since the May 19 special election.
The group’s opposition effort is not only prepared to take on tax and fee increases, but also will be ready to oppose efforts to lower the two-thirds vote on taxes, and oppose a split roll property tax raising taxes on business property.