Author: Joel Fox

If the Federal Government is going to kick in $700-billion to bail out the nation’s financial industry, do you think it could come up with another measly $15 billion to bail out the state of California and balance our books? That’s only an additional 2% on the latest bailout bill.

And, like the Fed takeover of AIG, the Feds can simply take a share of the business…er….state. Fifteen billion is a little less than 15% of the general fund. Under the deal, the feds will own 15% of the state’s assets and add that to their portfolio along with the 80% they own of AIG. Let’s give them the freeways…during rush hour…and see what they can do with them.

The budget deal agreed to by Governor Arnold Schwarzenegger and legislative leaders is better than the budget the legislature sent to the governor earlier in the week, but it does not come close to fixing California’s dysfunctional fiscal system.

The idea of borrowing from the taxpayers with a no-interest loan by increasing withholding was eliminated. That’s a good thing. And, the rainy day fund provision was strengthened while the size of that fund was reduced. That works, too.

But, whether other aspects of the deal—collecting larger penalties from corporations that underpay their taxes, and voters approving a plan on loans from an expanded lottery – will secure the needed revenue to balance the budget are iffy at best.

On top of that, the main budget problem remains: once again the state is projected to spend more in the next budget year than it brings in. While some think they can take a breather from state budget thoughts now that this budget is put to bed, others are plotting otherwise.

Governor Arnold Schwarzenegger formally answered the recall petition put forward by CCPOA yesterday calling it an intimidation tactic by the prison guards union. He added, “It’s offensive that one special interest is using a recall to get more money.”

In the end, will there be just one public employee union that sees this as an opportunity to set their agenda in Sacramento or will others join in? If a number of public unions sign up, then Schwarzenegger might have a different response: bring back a paycheck protection initiative.

Schwarzenegger supported Proposition 75 on the 2005 special election ballot which, if passed, would have required public employee union members to approve in advance taking dues from their paychecks for union political activity. The measure lost 46.5% to 53.5%, but it came the closest to passing of any other Schwarzenegger backed initiative on the ballot that day.

It may not be quite “blowing up the boxes,” but "blowing up the budget” will send a similar message. Governor Arnold Schwarzenegger was elected to corral the budget beast. His announcement yesterday that he plans to veto the Rube Goldberg-style budget plan sent to him by the legislature is a righteous stand against California’s out-of-control budget process.

In December 2003, buoyed by the power of the recall election, the newly minted governor had the power to fix the problem he was elected to address—California’s unbalanced and spending-addicted budget. However, as a new governor, he chose not to use his mandate to force the necessary budget changes upon the legislature.

When word of a budget deal first came out, we were told the budget would be balanced with no borrowing. What we were not told was that meant no borrowing from the usual sources–transportation funds or local governments. But I guess borrowing from the taxpayers is different.

By increasing withholding by 10% and requiring quarterly filers to increase payments and paying back any overage later, the state is essentially borrowing from taxpayers. And, it’s an interest free loan at that. When provisions were put in to protect local government from the state vultures, laws required that borrowed money would have to be returned with interest.

Then there are the items in the budget deal which stipulate that millionaires who see an income windfall will be required to make more of their tax payments sooner and businesses will be restricted from writing off losses for two years while recouping those revenue losses in future years.

All this on a day the stock market fell 500 points and Wall Street is in turmoil. I don’t think there will be too many windfall profits to hit up very soon. And, businesses probably will be suffering big losses and still have to come up with the money for taxes.

Legislature leaders came together on a budget deal over the weekend, but reportedly few major reforms in the budget process will be part of the deal.

Get ready for the coming initiative wars over budget reform. I believe frustrated political interests as well as members of the legislature will ask the people to reform the way the system works on the 2010 ballot.

Even if a 2009 special election is called to put forth some constitutional changes created by the legislature and included in the budget deal, big changes on the budget front will probably find their way onto the 2010 ballot by initiative.

Senate President Pro Tem to be Darrell Steinberg has already said he will not go through this type of stalled budget mess again, indicating an initiative is on the horizon to lower the two-thirds vote to pass the budget. Whether there will be included in a budget reform measure, or in a separate measure, a proposal to lower the two-thirds vote requirement to raise taxes is also a possibility.

George Putnam, the legendary pioneering newsman and radio talk show host who helped energize the electorate to pass property tax cutting Proposition 13, passed away in Chino on Friday at the age of 94. Putnam was a fixture on Los Angeles television and radio for 50 years in a career that spanned 70 years. He was still working at the mic on his syndicated “Talk Back” radio program up until a few months ago.

Putnam advocated for property tax reform for many years. He offered an open microphone to Prop 13 co-author Howard Jarvis on his program day after day. Putnam once said Jarvis appeared about 50 days in a row at one stretch. In turn, Jarvis credited Putnam, along with fellow talk radio hosts Ray Briem and Hilly Rose with getting the message out on Proposition 13.

The issue of property tax reform was one Putnam adopted well before any modern day property tax measure appeared on the ballot. In 1957 he helped conduct a rally at the Los Angeles Coliseum against high property taxes, although he once told me the organizers could have picked a better venue. Six thousand protestors looked lost in the cavernous arena. “If you’re going to impress people, for God’s sake, put it in a small area so that it overwhelms the room,” Putnam said.

I attended an interesting panel discussion at the Los Angeles Central Library last night moderated by journalist and Fox and Hounds Daily contributor Joe Mathews on the topic: Do Teachers Unions Have Too Much Power Or Not Enough?

The question never was answered directly, but one thing that stood out was the idea from Joshua Pechthalt, vice president of United Teachers Los Angeles, for a teachers’ army. Pechthalt noted that teachers have a “footprint in every community in the country” and suggested they could serve as a catalyst for social change.

The way he expressed his idea, it sounded eerily like a plan consisting of hidden cells planted around the country that would rise up at the same time and march forward to pursue a liberal agenda that he listed in his remarks. Not that a social or political movement spurred on by ideas is unprecedented in this country. But what struck me was the underlying idea that all teachers think the same way and will carry out this program. I don’t believe that’s true.

Steve Barr, head of Greendot Charter Schools, also sat on the panel and had some compelling ideas on how to improve schools by bringing more money to the classroom and giving more control to teachers. Perhaps more on that at another time.

The prison guard union’s announcement that it will file recall papers against Governor Arnold Schwarzenegger may not work out as union officials expect. This action will put a spotlight on the union and add evidence to the charge that public employee unions want to wrap up control of state government. Two weeks ago on this site, Patrick Dorinson drew a comparison between the public employee unions’ efforts to dominate state government and the railroad barons’ control of state government at the beginning of the 20th century. This recall effort is another piece of evidence to endorse that argument.

The California Correctional Peace Officer Association’s charge that this recall effort is not about money and the two-year old contract dispute with the governor is laughable. Everyone will see it for what it is.