Author: Loren Kaye

Modernizing the State Lottery and allowing the state to “securitize” (get an advance on) future revenues are well-known elements of the budget deal hammered out in September. A constitutional amendment and related changes to the lottery initiative will be proposed to voters at the next statewide election. The Governor estimates that these changes will result in a $5 billion bump in revenues in 2009-10, which will be used “to pay down debt and fill the rainy-day fund in the out-years.”

But one of the lesser-known features of this deal will be to disconnect the Lottery from its original purpose to supplement public school and college budgets. Instead, any surplus revenues beyond prizes, administration, and loan repayment will be deposited in the state General Fund. In return, the amount of lottery spending for public education this year will be added to the Proposition 98 guarantee, and increased as the constitutional minimum floor is raised. This is not a trivial change: for the eight years through 2006-07 (most recent data), lottery revenues increased by 34 percent while the Prop 98 guarantee increased by 54 percent.

Much of the debate over controlling greenhouse gases is a variation of “pay now or pay later.” Pay a higher price (for a light bulb, refrigerator, or automobile) and save on more efficient operation later.

Since autos and light trucks account for more than a quarter of all GHG emissions in California, regulators are focusing their attention on more efficient automobiles. New technology to produce highly efficient cars will cost more, but the Air Resources Board, claims that “because these technology improvements will also reduce the operating cost of vehicles … the average consumer will ultimately save $30 a month.”

But are regulators considering all the operating costs of smaller or more efficient vehicles when determining a net benefit in purchasing and operating these vehicles? Perhaps not.

The sun rose this morning, the Cubs are not in the World Series, and California’s budget is in crisis. All may not be well with the world, but we can count on some things remaining constant.

Also predictable: renewed positioning for new taxes to solve the budget deficit.

But if the Governor calls the Legislature into special session next month to address the deficit, they should be mindful that this year’s budget was predicated on nearly $6 billion in new or accelerated taxes on California businesses and investors. When it comes to taxing California’s employers, they gave at the office.

What are the tax changes?

Amid the dismal news of financial markets, a new report on the housing sector provides no relief. The closely-watched Case-Shiller index reports that homes in Californian metro areas are still rapidly losing value. Year-over-year changes in the index for Los Angeles, San Diego and San Francisco were -26.2%, -25% and -24.8%, respectively, with index declines from June to July at -1.6%, -1.8% and -1.8%, respectively.

California did not suffer the worst performance nationally; that anti-distinction went to Las Vegas, Phoenix and Miami. Seeking signs of good news – but finding few – the chairman of the S&P index committee, David M. Blitzer, said, "There are signs of a slow down in the rate of decline across metro areas, but no evidence of a bottom."

Legislative Democrats and their allied interest groups are pressing the case to reduce the budget vote to a simple majority to avoid future standoffs. But be careful what you wish for.

In Washington, House Democrats are giving their majority vote authority the cold shoulder. As of Thursday night, the financial rescue deal is reported off track because House Republicans are insisting on a very different approach. Democrats could have approved the deal, reportedly signed off by the Senate and the White House, with a simple majority of the House, including about 50 Republicans. But instead of voting for it along mostly party lines, Democrats are insisting on a broader consensus that includes a majority of Republicans.

Would that circumstance never arise in a California budget debate?

Here is the conclusion from the just-released economic analysis by the California Air Resources Board’s of AB32, the Global Warming Solutions Act of 2006:

The analysis we have conducted indicates that if California implements the comprehensive greenhouse gas strategy, as recommended in the draft Scoping Plan, not only will the economy grow by a similar amount as we move toward 2020, but it will grow at a slightly higher rate. Increased economic growth is anticipated primarily because the investments motivated by several measures, such as the expansion and strengthening of existing energy efficiency programs and implementation of new and existing policies to reduce emissions from the transportation sector, result in substantial energy savings that more than pay back the cost of the investments at expected future energy prices.

“Trailer bills” are legislation passed to ease implementation of the budget, such as bills to suspend cost-of-living increases or raise taxes or other revenues. But because they are numerous and voluminous, trailer bills are also convenient vehicles to slip in language that might not otherwise survive the legislative process.

So it comes to pass that buried within one of the dozen or so trailer bills, on page 57 of the 133-page AB 1389, is a provision that repeals the designation of the Business, Transportation and Housing Agency to be “the primary state agency responsible for facilitating economic development in the state.”

This bureaucratic face-slap may be of little consequence, except to note that the Legislature has been singularly unsupportive of state economic development leadership, having abolished the Trade and Commerce Agency earlier this decade after less than ten years in existence. (Disclosure: I was an official in the original Trade and Commerce Agency.) California has been struggling ever since to create a unified, effective voice on economic development. Removing that leadership designation from a member of the Governor’s cabinet certainly sends a discouraging signal, and may indicate even more dysfunction below the surface.

The Education Establishment has announced their intent to sue the State Board of Education for adopting an 8th grade Algebra 1 requirement.

I say bring it on! It’s about time that the state’s school leaders – school board members and administrators – go on the record in sworn testimony as to why they cannot and should not teach algebra to 8th graders.

In 2007, California’s eighth graders ranked 44th in the nation in mathematics achievement. Internationally, eighth graders in the United States are outperformed in mathematics by their counterparts in Singapore, South Korea, Hong Kong, Taiwan and Japan, as well as Belgium, the Netherlands, Estonia and Hungary.

California environmental regulators have proposed a multitude of new rules that aim to reduce greenhouse gas emissions below their 1990 levels. Virtually every measure would cost a lot of money, either through mandated new investments in alternative energy or energy efficiency technologies, or in foregone economic opportunities to expand industries in California.

However, there is at least one strategy for reducing greenhouse gas emissions that costs absolutely nothing, could save workers and businesses time and money, and even make people happy — the use of four-day/ten-hour work weeks.

Imagine: by shortening the work week by one day, a worker would not only free up that day for personal use, she would spend less money on gasoline and automobile expenses, reduce congestion on the roads, and reduce smog-forming pollution and greenhouse gas emissions.