Author: Joel Fox

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.

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.

With the continuing economic crisis evaporating government treasuries in California, businesses big and small find themselves the targets of advocates who seek more revenue to offset potential budget cuts and officials who must deal with spiraling costs.

There is a well-financed effort led by public employee unions to raise taxes on businesses and products. Public employee unions have been circulating a poll that claims to show voters, who recently rejected a continuation of the budget deal taxes, are willing to raise taxes on certain businesses and products.

Not so fast. Such claims have been made before but when the voters actually have to vote on these tax increases they understand that the taxes will filter down to the consumers.

Public employee unions’ relationship with Democratic Legislators has shown cracks over the results of the Special Election and the on-going difficult state budget. But, the biggest crack may not be on the radar, yet – some elected Democrats hoping that the Open Primary effort a year from now is successful.

It’s one of those whispered comments you hear in the halls of the capitol from time to time, where rumors are as popular as cold beer at a hot Fourth of July picnic. But this one has some weight to it.

Democratic legislators believe they made the difficult but correct choice to put off even deeper budget cuts by supporting the Governor’s budget deal in the Special Election. While the California Teachers Association went along with some of the package, especially the key measure on establishing a spending limit and extending taxes, a number of public unions, including the American Federation of State, County and Municipal Employees and the Service Employees International Union balked. In fact, they put money into defeating the measures.

“It’s all Prop 13’s Fault” chorus is at it again. You can count on them like clockwork during difficult economic times – world recession not withstanding – to blame Proposition 13 for California’s economic woes in commentaries and cartoons. I often wonder where this chorus goes when government treasuries are flush.

Chris Reed of the San Diego Union-Tribune points to statistics in his blog that show property taxes under Proposition 13 have increased faster not only than population and inflation growth, but faster than other sources of state revenue as well, despite the property tax cap.

Yet, while these other state taxes, such as the income and sales tax, are susceptible to volatile swings tracking the economy, under Proposition 13, the property tax has grown steadily and is the most reliable revenue source. That would all change if “fixes” applied to Proposition 13, like a split roll to collect more property taxes on commercial property, were put into effect.

Declaring that California’s “wallet is empty, the bank is closed, and credit is dried up,” Governor Arnold Schwarzenegger today told a joint session of the legislature that it must produce a budget that spends no more than the revenue the state brings in. Pointing out that revenue is down 27% from the previous year this means the budget must be balanced with major cuts.

The governor’s message is not only appropriate, but also practical. Even if the majority believed there is an appetite for more revenue from the voters, there is no way that revenue could be approved and collected before the state runs out of funds in July. So the cuts have to be done and done quickly.

Acknowledging that cuts will bring fear and pain to some Californians, the governor said the legislature must heed the “powerful message” from the special election that the legislature must not come to the voters to solve its problems, but live within its means, create government efficiencies and don’t raise taxes.

Working in relative obscurity since its inception, the Commission on the 21st Century Economy –simply known as the tax commission—will find itself in the spotlight now that the budget debate is back at Square One. Can the commission propose a tax system that taxpayers view as fair; while at the same time bring in increased revenue through an expanded economy?

That’s a tall order, but with the frustration growing over proposed major cuts and a rejection of tax increases in the recent Special Election, there seem few alternatives that would bring about consensus from a majority of Californians to solve the budget dilemma.

The commission took a break from public sessions to await the results of the election. The Governor’s executive order first mandated the commission bring in a report on refashioning the tax code by mid-April. That deadline was pushed back until the end of July.

Former Hewlett-Packard CEO Carly Fiorina spoke to the California Republican Party Convention in February and has since told the San Jose Mercury News that she is “seriously considering” a run for the U.S. Senate against Barbara Boxer. As a journal interested in the confluence of business and politics, Fox and Hounds Daily submitted to her a series of questions about her brilliant but controversial business reputation. Here are the questions and Fiorina’s responses:

1. You were fired by the Board of HP. Why?

To answer why I was fired, it is important to understand why I was hired. I was hired as a reformer, a leader who would challenge the status quo and transform HP from a company stuck in the past to an innovative industry leader. HP’s transformation required tough choices about performance measurement, accountability for competitive performance, streamlining the organization, as well as, the merger with Compaq. While overcoming these challenges and pushing through the changes ultimately positioned HP to become the largest technology company in the world, in the short term they negatively impacted the stock price.

Ultimately, I was fired because I disagreed with some members of the board on management prerogatives, called for an examination of board performance and accountability; and challenged leaks on the board which were undermining the company’s interests. All of the Board’s decisions during my almost six year tenure were unanimous except the decision to fire me. In this case, the Board was bitterly divided, with two Board members resigning over the issue. The three Board members who fought most vigorously for my removal were themselves fired 15 months later for leaking confidential information and conducting electronic spying on both current and former Board members.

Urban scholar Joel Kotkin gives his take on woeful California and how things might turn around in Forbes. Kotkin argues jobs and support for the middle class is the solution to California’s difficulties. And he also takes a shot at the current political leadership, recalling that political leaders in the 1990s were part of the solution in overcoming similar dire circumstances. It’s an interesting read. Take a look here.