A Spending Cap Solution for the Budget Talks

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

One of the main sticking points in the discussions over a budget solution is whether California will adopt a tougher spending cap. The Republicans insist the spending cap is part of the deal. They have argued for years that excessive and automatic spending is greatly responsible for the continued budget deficits the state has struggled with over the years and only the discipline of a spending cap can reverse that trend.

The Democrats have no interest in a spending cap. They argue that a rigid spending cap will prohibit the state from responding to changing needs of the people.

Politically, Republicans are concerned that since Democrats are so adamantly opposed to a spending limit measure, even if the Democrats agree to putting such a measure on a future ballot in exchange for tax increases, the Democrats and their allies will go all out to defeat it when the proposition comes before voters. In this scenario, the tax increase bartered for the ballot measure will already be in place. (The spending cap would be a constitutional change and therefore would require approval of the voters.)

Given the set-in-stone attitudes on both sides, there has been no movement on this important issue.

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Another Tax Commission–And Just Maybe a Different Result

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Another state tax commission has been launched. Will it burn up on re-entry like so many commissions before it? I know something about tax and fiscal commissions. I have served on three and I was an informal consultant to another. All of them turned out to be merely academic exercises.

Reports were delivered and ended up on the shelf or as doorstops. The legislature often didn’t hold hearings, or perhaps, had a courtesy hearing before filing the report away. The commission I worked with as informal consultant was appointed by Governor Davis and delivered its findings on the day Governor Schwarzenegger was sworn in after the Recall. Timing is everything. The others suffered only slightly better fates, but in the end all recommendations were ignored.

President Pro Tem Darrell Steinberg promised at the press conference announcing the names of the 12 commissioners that there would be “no dusty shelf reports.” I hope he’s right. The California tax system can use some updating. If the commissioners are true to their mandate to smooth out the boom and bust cycles generated by the current state tax structure without looking for ways to raise taxes, they can perform a great service to the taxpayers.

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After Unusual Joint Legislative Session, is there a Budget Deal to be Made?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

There was not a lot of new information on California’s dire fiscal crisis laid out by speakers before an unusual joint session of the legislature yesterday. And from the questions from the floor to Treasurer Bill Lockyer, Controller John Chiang, Finance Department head Mike Genest and Legislative Analyst Mac Taylor, there seemed to be little give in the partisan divide on how to solve the problem.

So where do we go from here?

If the four speakers’ unified message is correct, and no one challenged the numbers directly, then where the state goes from here is down, down, down.

Lockyer probably made the most news revealing that, in less than ten days, he is prepared to cut off funding for infrastructure improvements like roads and highways. Chiang talked about the state’s lack of ability to borrow and the need to pay vendors with IOUs by the Spring. Taylor pointed out that solving the deficit problem by increasing sales, income and corporate taxes would make all three categories of taxation the highest in the nation.

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A Reformer Gets His Chance

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Government reform is the theme practically everyone who runs for office uses. But, when someone who spends his work-a-day life striving for government reform gets elected that person is someone to watch. Carl DeMaio our eyes are on you.

DeMaio is a new member of the San Diego City Council. He made the art of government reform his business. DeMaio founded the non-partisan Performance Institute as a think tank dedicated to reforming government through the principles of performance, transparency, competition and accountability. One of the first to warn San Diego officials of a pending city financial disaster, DeMaio created the San Diego Citizen’s Budget Project to examine the city’s financial outlook and improve the city’s service delivery.

Now DeMaio has a chance to practice what he preaches as a member of the City Council. Being one of eight council members and having to deal with the city bureaucracy as well as the executive branch doesn’t insure success. But, DeMaio apparently is intent on making changes by leading by example.

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Riding the Prop 1A Rail with Ms Pauline Kael

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The new Public Policy Institute (PPIC) poll is out and I’m sure there will be extensive analysis of the numbers in the presidential race and the gay marriage measure, Proposition 8. Unlike most other commentators, however, I want to spend one last moment on Prop1A, the high-speed rail bond.

I know what you’re thinking. Get over it. You lost. But, I keep hearing from California political experts and even some tune-in-to-politics-a week-before-the-election types asking the same question: How did a $10-billion bond measure on railroads pass with the state running a massive deficit?

I guess I fall into the same obtuse category of political observation with the legendary film critic Pauline Kael, who supposedly said of Richard Nixon’s landslide victory over George McGovern, “How could that be? I don’t know anybody who voted for him?”

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The Budget Monster Sequel Will Have a Different Ending

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The sequel, “Special Session 2, The Budget Monster is Still With Us” will have to end differently than “Special Session 1, Taming the Budget Monster.” You remember that one. It bombed at the box office, wasn’t around very long. In the end of that Special Session nothing much happened. The monster won.

So now a new cast of characters has joined the fight against the monster. Fortified by fresh blood from new recruits freshly arrived in Sacramento, the plan is to take down the monster this time. And there’s no question that this sequel will have a different ending. Because if nothing happens to the monster, quite a lot will happen to the state of California.

The state will run out of money to pay its bills. Vendors, recipients of state largess and probably public employees will feel the blow. But, all Californians will feel the effects. Interest rates on state bonds will explode, bankruptcies could ensue. It’s not a pretty picture.

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New Legislators – First, Go Find the Capitol’s Bathrooms

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Welcome new legislators! Here’s the first thing you have to do in the capitol once you are sworn in. Go find the bathrooms. Take a tour. Get a architectural plan of the capitol. Do what is ever necessary to find the bathrooms. Do it now. Why? Because in this era of term limits you have very little time to become experts on governing California.

We’ve all heard the phrase attached to the argument that because of term limits new legislators only have enough time to “find the bathroom” before they are term limited out. That means that the legislators cannot come to grips with the policy and politics of Sacramento to make important changes in California’s governance. They only have time to get their feet wet—then presto, they’re gone.

Whether current term limits are good or not is not the point here. Term limits is the law that the new class of 25 novice legislators will serve under. So there is no time for excuses, they have to get up to speed quickly.

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What Journalists See

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Where do reporters who cover California politics think the state is heading post election 2008? That was the area under discussion behind the Friday lunch time panel at a post election conference held at the University of Southern California sponsored by USC’s Jesse Unruh Institute and Politico.

Unruh Institute Director Dan Schnur and USC Daily Trojan political reporter Catherine Lyons fired questions at a panel of California reporters and editors who combined have been watching Golden State politics for well over a century.

To the question, can President-elect Barack Obama look to California as a model for bi-partisanship or, as Governor Schwarzenegger frequently trumpets in his speeches away from the capitol, a post-partisan world? The answer was a decided No. Amy Chance of the Sacramento Bee noted that in the eyes of Republican elected officials post partisanship means one Republican, the governor, and the Democrats. Capitol Weekly’s Anthony York said the lesson for Obama out of California is to beware of your friends, they are more dangerous than your enemies.

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Small Business to Become a Political Force?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Can small businesses band together to influence policy that relates to their interests? That optimistic hope floated in the air at the first Governor’s Conference on Small Business and Entrepreneurship in Los Angeles last week.

The two day conference led by the state’s Small Business Advocate, Marty Keller, focused on issues important to the small business community.

Listening to experts on business and the need to create an entrepreneurial state, attendees considered a number of areas to improve small business in the state.

The ten issues addressed by the conference were: Concerns over the AB-32 greenhouse gases law; Access to Capital; Entrepreneurial Encouragement; Health Care; Innovation and Technology; Procurement (for small business wanting to do business with the state); Regulatory Reform; Transportation; Taxation; and Workforce Development.

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Car Tax Should be No More than 1%

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Talk in Sacramento is that a deal on the budget deficit has advanced along these lines: Return the vehicle license fee (the car tax) to the former level of 2% from the current tax on a car’s value of two-thirds of 1% and put a population/inflation spending cap on the ballot.

Since the tax goes up before the voters have a chance to vote on the spending cap (probably in June; perhaps March) there is a risk that taxes will be increased but spending will not be capped. Spending interests will surely try to defeat a spending cap measure.

To off set this problem, any tax increase proposed as part of the budget solution should carry a sunset provision in case the spending cap fails at the polls. The sunset could occur at an agreed upon set time following the spending cap election.

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