Author: Joel Fox

The Special Election was Act One of a three-act drama that will play out over the next year and a half. When the curtain falls on the final act — the 2010 general election — California will set a new course for its fiscal future.

In Act One, the voters rejected the budget proposals put up by the governor and legislature. Act Two will consist of how the governor and legislature respond.

Those who see this as a chance to finally get California’s fiscal house in order with a more conservative fiscal plan are right. But they must act fast.

Reforms must be presented, implemented, and show some results before the voters make decisions on the November 2010 ballot. That ballot will likely contain a myriad of opportunities to alter direction, or to cement changes that could come out of the newly reinstituted budget negotiations. Of course, new leadership will be offered in the governor’s race. A new group of legislators will be elected. And, undoubtedly, voters will be presented with a number of options to change the way we conduct business in California.

The voters have spoken. All the ballot measures of major fiscal consequences went down to defeat. Most pundits agree the defeat of the key measure, Proposition 1A, was due to the fact that tax increases would be extended for two years.

So what happens on the tax front now?

Taxes will suddenly be referred to by their “nom de plume”: Fees. The voters will not be fooled. If they don’t want taxes they won’t want fees, either. Fees are often aimed at certain products and the added fees drive up the costs the consumers ultimately pay. Fees, in many cases, are disguised taxes.

Another thing we’ll probably see is an attack mounted against the two-thirds vote requirement to raise taxes and to pass the budget. Undoubtedly, the majority in the legislature want both lowered. They may say they just want a majority vote for the budget but that plan has a weakness. See the discussion about Fees, above. If the budget is a majority vote then majority vote fees will be recruited to fund the majority vote budget.

The ballot measures voters will decide on today, for the most part, address immediate problems with the state budget. Proposition 1A is aimed at making a longer term fix. But none of the measures address the core problem with California’s seemingly endless fiscal problems. It’s all about jobs.

If California is to flourish and get past the constant budget battles, state leaders have to concentrate on creating jobs, keeping jobs from fleeing to other states, and improving the state’s economy.

It’s a simple formula: Putting people to work means citizen’s can be more self-sufficient and less reliant on government. At the same time, productive citizens pay taxes and the state and local treasuries are enriched without resorting to tax increases while relieving the stress of budget battles.

The governor issues two budget proposals today, one suggesting how he plans to fill the budget hole if the special election ballot measures pass, the other showing how he’ll fill the bigger hole if they fail.

Either way, whether the budget is 15 billion dollars out-of-whack or 21 billion, cuts will happen.

Arguing that many of the suggested cuts are scare tactics, some have referred to similar tactics employed in the past, especially during the famous California tax revolt of 1978. Few of the threatened cuts at that time came to pass. One big difference from then to now is that in 1978 the state was sitting on a 40% state budget surplus. Now there is a about a 40% state budget deficit.

So there will be cuts. The focus now is how they will be employed. Many cuts should be made and have been needed for a long time. Agency consolidation, unnecessary commissions and sale of excess property have been argued over for years and will be the first on the agenda. But that will not be enough, and cuts will come to local governments and schools and other mainline services.

Today marks the first anniversary of Fox and Hounds Daily.

Our goal in creating this site was to bring together varying voices to debate and illuminate the issues affecting business and politics in California.

Our best-read pieces didn’t hone to a specific political ideology or theme. Jon Coupal’s argument for shared sacrifice from the public sector and supporting furloughs for public employees proved extremely popular, as did Allan Hoffenblum’s view of the falling fortunes of the California Republican Party and Chandra Sharma’s business take on building a football stadium in Los Angeles.

Our readers clearly have multiple interests.

Governor Arnold Schwarzenegger has turned around a number of ballot measure campaigns, turning what looked like defeat into victory. However, he has his work cut out for him to do that again, according to Mark Baldassare, President of the Public Policy Institute of California that issued a new statewide poll on the ballot measures. Most of the measures are trailing, some by double digits.

In the March 2004 election, Schwarzenegger campaigned hard for budget reforms in Propositions 57 and 58, turning measures that were initially polling in the low 30-percent range to victory on Election Day. Similarly, the governor worked to turn around an attempt to ease California’s three-strikes law and helped take the redistricting Proposition 11 to victory.

However, Baldassare says the political climate is different in 2009 than it was in 2004 when Props 57 and 58 passed. For one thing, he noted the governor’s approval rating was around 60% in 2004 compared to 34% in the most recent poll. Similarly, the legislature was not being roasted with numbers in the low teens as they are today.

Selection of the new Republican Minority Leader boosted the movement for a constitutional convention. Sam Blakeslee has introduced two bills calling for a constitutional convention. ACR 1 outlines parameters for a convention and AB 4, which calls the convention, lays out a proposal for picking delegates.

Blakeslee’s bills would limit the convention to three areas: Election and campaign reform; budget reform, and tax reform. Among the reforms mentioned in the bills are lengthening term limits and requiring fees that exceed a certain standard to face the same two-thirds vote required of taxes.

Blakeslee will be taking on many of these issues as Republican leader. In his new role he has the opportunity to push reforms without the need of a constitutional convention. But, if reforms are not advanced, and trust in state government is not restored, the call for a constitutional convention will become louder.

Former Speaker of the House Newt Gingrich says the solution to fixing California’s governance problems starts with a part-time legislature. Gingrich, who was in Orange County last night speaking at the New Majority’s Tenth Anniversary celebration, argued that term limits did not work, simply ceding power to lobbyists and bureaucrats.

Now running a think tank called American Solutions, Gingrich said he studies Sacramento, along with the capitols of New York and New Jersey, to see what is wrong with governance in America.

California’s problems start and stop with the control special interests have over the legislature, he said. Calling the public employee unions the modern day version of the railroads from the early 20th century that caused Governor Hiram Johnson to champion the initiative process to get around the legislature, Gingrich said we are in similar times to that progressive era when the people took more control over government.

Governing by polls instead of by pols (as in politicians) apparently would not bring different results in California. Just look at recent polls.

The respondents to the latest Field Poll are clearly saying: Don’t raise taxes and don’t cut spending. Isn’t that the position politicians in Sacramento take most of the time?

When the voters were asked if they wanted to see their taxes raised to balance the budget, 58% said no way.

When they were asked if they wanted to cut law enforcement and police only 23% said Yes. Cut public schools: 25% Yes. How about health care for low-income people: 26% Yes. Higher education: 31% Yes. And so it went. Only state prisons and parks seemed to be on the chopping block to the poll respondents. But do you really think a majority of voters would actually pull the trigger to cut these programs if they were given the chance?