Author: Joel Fox

The Legislative Analyst’s announcement that the state budget may be $8 billion out of balance despite the recent budget deal has focused attention on the May 19 ballot measures designed to fix the budget problems. Critics and commentators argue that this announcement puts the budget reform package in danger of being defeated. The Los Angeles Times carried a sub-headline that said the shortfall “could make May ballot items a tougher sell.”

How’s that? Defeating the ballot measures won’t close the budget hole. In fact, it will do the opposite; it will make the budget hole larger in the out years as predicted by the LAO.

But, the announcement is both a warning and an opportunity for the legislature to start working on long term solutions to California’s budget and government structural problems.

The first thing the legislators should recognize is that, with the economy down, the expected revenue boost from the new taxes will not be as high as projected. For one thing, this means that if Proposition 1A on the May ballot passes, the new spending cap based on revenues will be that much tighter.

The most astonishing thing about the introduction this week of a new cigarette tax proposal offered by Los Angeles state Senator Alex Padilla was that Senate President Pro Tem Darrell Steinberg joined Padilla at his news conference to cheer him on.

Steinberg forced a few sleepless nights trying to squeeze a budget deal, which included controversial taxes, out of the Senate. He finally succeeded, but the package he worked so hard to achieve must be ratified by the voters in the May 19 Special Election. As anyone who listens to talk radio or reads a blog knows the tax part of the budget package has been generating heated opposition.

One of the charges against the budget deal is that the tax floodgates will open up, especially with projections of dropping revenue and new deficits on the horizon. While supporters of the budget package claim that the taxes passed are temporary to bridge a gap and that we are not seeing the birth of Taxifornia, there’s Steinberg giving ammunition to his political opponents by hailing a new tax proposal.

The Commission on the 21st Century Economy stepped out of the way of an on-coming political train and sought an extension to finish its work. Originally scheduled to bring recommendations on tax structure reform to the governor and legislature by April 15, commission members acknowledged that the May 19 special election will directly affect their mission.

Proposition 1A on the ballot will establish a spending limit but at the same time extend for up to two years some of the taxes recently passed by the legislature in the budget deal. As I suggested in a previous Fox and Hounds Daily commentary, the commission’s report of possible changes to the tax system might be used in the campaign for Proposition 1A. Alternatively, the voters’ decision on Proposition 1A would alter the debate on what tax changes the commission might recommend.

Commission Chairman Gerald Parsky said in light of the Special Election he would request that the governor and legislative leaders extend the commission until after the May election if the other commissioners agreed. Parsky’s recommendation received unanimous support.

The Commission on the 21st Century Economy, set up to give recommendations to the governor and legislature on reforming California’s tax structure, was due to issue its report on April 15th. At the Commission meeting held at UC Berkeley today, Commission Chairman Gerald Parsky recommended that in light of the special election on May 19 which will deal with budget and tax issues, the commission should seek an extension for its report until sometime during the summer. The commission members unanimously agreed. Parksky noted that new commission meetings will be added to the schedule if the commission’s life is extended. Only one more meeting was scheduled to be held April 9 at UC Davis. The Commission will need a revised executive order from the governor to change the due date of its report. More on the commission hearing at Fox and Hounds later.

So now the call for punishing legislators who raised taxes has spread to those legislators who did not vote to raise taxes. Calls for recalls have gone beyond the targets of the governor and Republicans who voted for the taxes to include Republicans who voted to put Proposition 1A, the spending limit/two-year tax extension measure on the ballot. Supposedly, there was a deep conspiracy to make the taxes happen and all, or nearly all, Republican legislators are guilty.

Am I the only one that sees echoes of the Salem witch trials and Arthur Miller’s award winning play about the witch trials, The Crucible, in all this?

In the play, presiding Judge Danforth says: “You must understand, sir, that a person is either with this court or he must be counted against it, there be no road between.”
In Salem, all is black and white, you are either with God or with the Devil, and anyone who opposes the court cannot be an honest opponent.

Proposition 1A on the May 19 special election ballot will create a spending limit and a rainy day fund to even out the ups and downs of the budget and restrain spending. But, it is important to note, if the measure passes, the temporary tax increases approved by the legislature and signed by the governor will remain in effect for four years instead of two years.

A difficult choice is presented to the electorate. Is establishing a long term spending limit worth accepting the temporary taxes for an additional two years? I believe the answer is yes.

I do not reach this conclusion casually. The decision is the product of both analysis and history.

First, the history.

Prognosticators will be out in force combing over the results of the Los Angeles City election held yesterday. Most of the chatter, of course, will be about the mayor’s race looking toward the Antonio Villaraigosa’s potential run for governor.

With another low municipal turnout of 15% of registered voters, city voters returned Mayor Villaraigosa to office for a second term.  The mayor faced little opposition and captured 55% of the vote. That’s enough to avoid a run-off election but not enough to put a scare into potential rivals for the Democratic nomination for governor should Villaraigosa choose to run. If the mayor is interested in statewide office, his base in Los Angeles must be strong. With weak and barely funded opposition, a 55% vote will not impress the pundits.

The Commission on the 21st Century Economy, which is studying a potential restructuring of California’s tax system, is required to report its recommendations to the governor and legislature on April 15th. Beginning work in January, many observers questioned the ability of the committee to get anything done in such a short timeframe considering the complexity of the mandate  — studying the current tax system and a slew of possible changes— and making recommendations for change in less than four months time.

The commission intended to keep to its schedule but politics may intervene.

Since the commission began its work in January, the big story out of Sacramento has been the budget resolution. The voters in a May 19 special election must approve portions of the budget deal, more than a month after the tax commission report is due. Given that the major issue on the special election ballot has to do with continuing taxes for two more years if the spending limit measure is passed, the commission’s report would reverberate through the special election one month later.

Urban scholar Joel Kotkin of Chapman University takes turns laying into what he describes as a dysfunctional California in a Newsweek article; then goes after a dysfunctional Los Angeles in a Forbes magazine article.

While Kotkin offers some hope that California can rebound from its paralysis as it has in the past from down periods, this time through the efforts of individual entrepreneurs, he says Los Angeles’s hope rides in getting rid of Mayor Antonio Villaraigosa, whom he gives low marks.

Read the Newsweek piece on California, “Death of the Dream,” by clicking here.

Read the Forbes piece, “The Decline of Los Angeles,” by clicking here.