Author: Joel Fox

If you are trying to defeat an initiative measure destined
for the ballot, lesson one in the initiative game playbook is to cause
confusion and uncertainty with the voters. One of the chief weapons to
accomplish this goal is to file a rival measure of your own on the same
subject. If both measures qualify for the ballot, the voters will have the extra
task of not only trying to decide if a reform is needed, but also which reform is the
best one to solve the problem the measures are intended to address.

Once the campaign attacks start flying on the supposed
hidden agendas or flaws in the rival measures, the voters often throw up their
hands in disgust and vote NO on both entries. That is often an acceptable
result for the supporters of the second measure. They don’t want Measure A to
pass. If Measure B, their own initiative, goes down in the process, they will
accept that collateral damage because their first priority is to defeat Measure
A. 

Businesses will be forced to pay an annual fee based on greenhouse gases each emits after the Bay Area Air Quality Management District voted to levee the fee yesterday (see article here). The fee will hit every size business-big and small-at a rate of 4.4 cents per metric ton of carbon dioxide.

According to the Bay Area AQMD, which regulates smog in nine San Francisco Bay area counties, the proposal will rake in over one million dollars to pay for collecting and tracking data on greenhouse gases.

Let’s call this fee what it really is….a carbon tax.

Could a surprise flood of money appear in the California treasury due to the presidential campaign? It’s possible…although probably too late for this year’s budget even if the budget scrum rolls on through the summer.

An investment advisor in the Wall Street Journal looks into his crystal ball to determine what investors should do as they watch the battle for the White House. One key tax rate he suggests investors watch is the capital-gains tax rate.

Capital gains taxes have led to bulging California budgets in the past. The boom of 2000 was in great part due to high tech entrepreneurs cashing in on their capital gains.

California will suffer a more severe recession than the rest of the U.S. economy according to a report issued by the Milken Institute. The report, The Economic Outlook for the United States and California, Slow Growth or Recession?, by Ross DeVol, director of regional economics at the Milken Institute with assistance from Armen Bedroussian, summed up its analysis this way: "If the U.S economy has the sniffles, California’s economy has a full-blown cold-with all the associated aches and pains."

However, DeVol points out the recession will be mild by historical standards.

The report says California’s economy will be hit harder by the housing market correction, depressed consumer spending, and slowing imports. Also, California’s economy, especially in the L.A. area still feels the effects of the Hollywood writers’ strike. The report claims that California will face a net job loss in 2008 with the unemployment rating hitting 6.6 percent in the fourth quarter.

Los Angeles
Mayor Antonio Villaraigosa spoke at a meeting of the Valley Vote organization last
night in the San Fernando Valley. He’s not the
governor and I didn’t ask him if he was running for the job, but as we walked
out of the meeting I did ask him how he would handle the current state budget mess.

Villaraigosa responded: "I’ve said
for some time the state budget deficit is a spending problem but it’s also a
revenue problem. There are very real structural elements to it. The only way to
resolve this budget deficit is to cut some spending and also to raise revenues
and that’s what we’re doing here with the city budget. We’re saying for every $1.50
in cuts we are going to raise a dollar in revenue."

My thoughts: Using that formula on a
$20 billion state budget deficit problem would mean a combination of $12
billion in cuts and $8 billion in tax increases. Scary numbers. Yes, I know
that is a static calculation and that’s not what the final numbers would be, but
a one-and-a-half to one ratio still means a large tax increase in a tough
economy. I don’t think the voters buy it and we know the Republicans in the
legislature won’t. The economic ripples from a large tax increase would not be
good for the state economy.

I also asked the mayor about Los Angeles’ reputation
for being bad for business.