Author: Joel Fox

The negotiated change in the pensions for four public employee unions announced by Governor Arnold Schwarzenegger is a good first step in fixing a major component of California’s fiscal problems.

The deal negotiated by the governor and four unions representing 23,000 workers is like slowing a portion of that Gulf oil leak, but not stopping the flow all together. There are hundreds of thousand of more public workers who must agree to reforms. Other unions falling in line would stem the flow of red ink leaking from the budget.

The proposal, which still needs rank-and-file member approval, increases payments made by current union members toward their retirement from 5% to 10%; determines a worker’s pension benefit based on the three highest salary years instead of just one; and requires retirement age to increase by five years for new hires.

Hello from Illinois — or is it California?

Quite a bit of the troubles and quarrels occurring in California seems to be repeated here in Illinois.

The Chicago city council voted not to do business with Arizona because of that state’s new immigration law. But the council decided not to break all contacts with Arizona. Seems the Windy City gets its photo street enforcers from Arizona and the city needs the revenue because its finances are in a mess.

Meanwhile, a local talk radio host blasts the council for spending time on the Arizona issue while ignoring the many problems of financially stressed Chicago.

In his first post primary press conference, Democratic gubernatorial candidate Jerry Brown told the press: "I am saying here and now for everyone to hear, including the legislators and the unions, that I am going to be an independent servant of this state, and I will do whatever it takes to get this budget aligned with the revenue."

What will it take to balance the budget? Unfortunately, the AG and former governor hasn’t told us that, yet?

Will spending be cut further on programs around the state? Will taxes be raised? I know, Brown doesn’t intend to raise taxes without a vote of the people, but that will not stop him from proposing tax measures to be put on the ballot. What kind of taxes is he thinking about? Taxes on upper income taxpayers? Or businesses?

No sooner than California voters put one set of initiatives behind them, than the next group appears on the horizon. While the voters probably don’t think about what initiatives are coming down the road in November, policy and political types are already measuring potential effects and political consequences.

This comes to mind with the release of the Legislative Analyst’s Report on the Single Sales Factor tax formula for business. The budget agreement in February 2009 changed a business tax formula used to calculate taxes on California businesses that also operate in other states. The current formula considers a firm’s sales, property and payroll. Under the budget agreement, starting in 2011, businesses will have the option of considering only their sales in determining their California taxes.

So, why did Abel Maldonado easily win his primary for Lt. Governor while fellow legislator Mike Villines failed in his bid to secure the nomination for Insurance Commissioner?

Both men were pilloried for their votes to raise taxes in 2009.  In addition, Maldonado demanded that the top-two primary be put on the ballot for his budget vote, which was adamantly opposed by party activists.

There are a number of theories. One argument points out that Maldonado had five opponents while Villines only had one so opponents of Villines knew whom to support.

Meg Whitman was in the Howard Jarvis Taxpayers Association suite at the Universal City Hilton giving a short talk to the HJTA Board of Directors and invited guests, but purposefully positioned next to the television so those in the room could both listen and look at her without missing the final minute or so of the Lakers-Celtics playoff game.

An aide entered the room, Blackberry in hand, and interrupted to say the Associated Press had just called the Republican gubernatorial race for Whitman. Those in the room burst into applause and the basketball game was ignored.

A close fought basketball game is a good metaphor for the coming gubernatorial race, because that’s what it promises to be – back and forth, one side getting ahead then falling behind, and the contest stays close to the end when the winner pulls away by a couple of points. And there will be plenty of intentional fouls.

Arnold Schwarzenegger barreled into the governor’s office seven years ago after winning an unprecedented gubernatorial recall campaign and immediately accomplished a major reform in fixing the workers compensation system. As he nears the end of his two terms in office, Schwarzenegger is attempting to go out by notching another big time reform of the public employee pension system.

There are similarities to the two efforts. One is the jump in costs in each of the systems and how they do damage to the fiscal situation in California. Workers comp premiums paid by California employers roughly doubled between 1999 and 2003. This dramatic increase pressured many businesses to cut employees or reduce inventory to cover their costs. Some businesses even packed up and left the state. Reduced business meant reduced tax revenue for governments.

The private sector was not the only one to feel the workers comp pinch. Public entities also had workers comp costs and the more they paid for increased premiums the less they had to pay for programs under their control.

Will the roiling debate over the Arizona immigration law produce an unintended consequence of sinking a Los Angeles school tax proposal?

In response to the Arizona law, the Los Angeles Unified School District voted unanimously to condemn the Arizona law. At the same time, the school board ordered that the Arizona immigration law be taught in the classroom.

While LAUSD Superintendant, Ramon Cortinez, said the classroom instruction would present both sides of the controversy, citing an LAUSD spokesperson, the L.A. Times said, "The issue would, in essence, be dealt with in a manner similar to the way other broadly accepted episodes of racial and cultural intolerance and discrimination are discussed."