Leg Analyst Liz Hill on CA Budget Problems

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

California Forward, the non-profit group seeking to create a more responsive, representative and cost effective government held a session on the California budget in Sacramento Friday entitled, “Just How Bad Is It?”

One of the panelists was outgoing Legislative Analyst Elizabeth Hill who has been in the thick of the budget battles for over twenty years. Here is some of the thoughts and wisdom dispensed by Hill as she leaves her post:

  • California needs to unlock the budget process. 1) Reconsider the budget formulas based on today’s needs, not when they were put in place. Consider what services are required and who should pay for them? 2) Re-examine the initiative process and consider that initiatives that pass need to be altered for changing circumstances. 3) What is the collective vision of California’s future and what investment is needed to achieve that vision?
  • While a strategic plan for the budget is advisable, it will not work if an accountability plan does not accompany it. Performance measures won’t work without accountability procedures in place.
  • California’s tax system was created decades ago and no longer mirrors California’s economy.
  • Proposition 13 is not the cause of California’s budget problems, although the way the state responded to Prop 13 by sending funds to local governments has made it more difficult to establish a state reserve fund.
  • While a major part of the budget is controlled by formulas, those formulas can be modified by the Legislature each year (including the school funding mandates of Proposition 98) so it is not correct to say that the state budget is on autopilot.
  • The Legislature and Governor deserve credit for adopting a plan for a rainy day budget fund and allowing for mid-year budget cuts in emergencies.

Hill finds herself torn on the issue of requiring a two-thirds vote to pass the budget and raise taxes. For a long time, she said, she believed the two-thirds vote insured a bi-partisan commitment for California’s values and goals. But, given the recent polarization in the legislature, she admitted she was now considering a majority vote may be better, but she had not made up her mind. Hill emphasized this was a personal opinion and not a reflection of the Legislative Analyst’s Office.

Soon, she will have time to give many more personal opinions. Can’t wait for the book.

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Odds & Ends – October 20, 2008

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

Here are some odds and ends from the past week:

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Proposition 8 – It’s about YOUR rights

President of L&J Restaurants, Inc.

Under California law, “domestic partners shall have the same rights, protections and benefits” as married spouses (Family Code §297.5.). Prop8 doesn’t take rights from same-sex couples but its failure will take them from YOU:

Courts have an important role in government but NOT in defining American values. That right belongs with the people.

To overrule the voters, the court must find unequivocally that voters have done something they cannot legally do. That was not the case here. This case divided the court resulting in a narrow decision to overturn state law – not because voters were legally wrong, but because four judges decided to change the law to suit their views. Presumably, 4 million Californians were stupid to think that traditional marriage was critical to the common good.

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Joe the Plumber and Jerry Brown

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

If you listen at about the two-minute mark of the video embedded in the N.Y. Post article
of Senator Barack Obama discussing taxes with Joe Wurzelbacher, probably now known forever as Joe the Plumber, you’ll hear Joe suggest a flat tax to the candidate.

Senator Obama replies that he is open to the flat tax idea but thought it would take too high of a tax rate to get the needed revenue.

A decade and a half ago, another Democratic presidential candidate rode the flat tax idea a long way in the nominating process, much further than most pundits thought he would go. That candidate was Jerry Brown, California’s current attorney general.

And, perhaps the once and future governor?

Is the flat tax still an idea Brown would promote in a gubernatorial campaign?

Brown’s flat tax plan of 1992, shaped by supply-side economist Arthur Laffer, called for a 13-percent income tax rate and a 13-percent value added tax while doing away with most tax loopholes. The New York Times called Brown’s proposal the “…one truly creative and important idea to emerge from this Presidential campaign.” The Times did criticize Brown for the way he was delivering the message but pointed out that his plan to encourage savings and simplify the tax code was “exactly right.” The plan also found support with the New Republic and Forbes magazines.

In Obama’s off-the-cuff objection to Joe the Plumber’s flat tax idea, the senator talked about a high sales tax, but it was unclear whether he was talking about a pure flat sales tax to gather all needed federal revenues or a sales tax in addition to the flat income tax, perhaps as an alternative to the value added tax in Brown’s plan.

A Governor Brown (redo) might look positively on a flat tax plan for California. Laffer is a strong proponent of a flat tax to drive growth in a languishing economy. The Golden State desperately needs growth as an economic boost. Laffer proposed his flat tax/value added tax plan to Governor Schwarzenegger who did not adopt it.

But Jerry Brown already made a flat tax proposal his own in a presidential race and saw it take him a long way in that political campaign. It is not so hard to imagine he will seek a repeat performance.

If successful, maybe a future Governor Brown can convince Joe the Plumber to move his newly acquired business to California.

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Bake Sale Boogie Man

Michele Steel
Orange County Supervisor (2nd District) and Former California State Board of Equalization Member

Sometimes government can’t help itself. We pay some of the highest taxes in the nation and receive some of the worst in government service. So it should come as no surprise when government works overtime to prevent you from helping yourself.

At Davis Senior High School in Davis, California, the students have been doing what students throughout our country have done to raise money. They hold fundraisers. Many of these fundraisers are in the form of bake sales, pizza sales etc…The proceeds go to sponsor the myriad of students clubs and activities on campus. But no more.

The Sacramento Bee reports that the school district has prohibited food sales that weren’t prepared by a commercial enterprise. Commercially prepared food also has to be paid for with a check. As one student points out, “Who pays for a slice of pizza with a check?” She’s right. How many students are running around with checkbooks?

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Don’t Get Depressed By All The Gloomy Predictions–The ‘Experts’ are Not Always Right!

David S. White
Principal of the Law Firm of David S. White & Associates, West Los Angeles, specializing in litigation, arbitration and mediation of real-estate-related disputes and litigation since 1977; www.dswlawyers.com

It is very hard to get away from the media message of the moment that the world’s economy truly is going to Hell in a Handbasket. It screams from the TV, the Internet, newspapers (if you still read those!), magazines, and anywhere else you look- like those TV monitors in high-rise office building elevators and ads whizzing by on the sides of buses . . .

It is easy, so easy to get carried away by ‘experts’ ability to predict things that will happen in the future. So easy, in fact, that it is a pleasant, if not, often hilarious, diversion to occasionally look back on some predictions, taken quite seriously in their time, that history has proven to be absolutely, flat, dead-in-the-water, wrong. It may also help distract you from those unopened envelopes showing that your 401k has now shrunk down to a 101k!

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Arrogance Breeds Contempt

John R. McLaurin
President of the Pacific Merchant Shipping Association

Public officials at all levels of government like to go oversees to promote international trade in California. Cynic’s call them “junkets”. Policy makers call them “trade missions.” Economists have found that the logistics industry fostered by international trade has replaced California’s long lost manufacturing base in terms of providing good paying jobs.

Unfortunately, because of regulatory infighting and competing political agendas, California is unable to develop port projects or the supporting inland infrastructure needed to meet the future growth trends of international trade and the modernization that will improve efficiency and environmental protection.

The international trade community is finding willing partners and moving ahead with development projects in states like Virginia, the Carolina’s, Georgia, Florida, Alabama and Texas. We have seen the development of projects and expansion of facilities in Canada and Mexico – all in an effort to provide alternative gateways to California. The investments in these other locations are being made now.

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Endorsement Grid Updates

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

The Fox&Hounds Ballot Endorsement Grid was updated this morning to include ballot positions sent in by the California Libertarian Party and the Howard Jarvis Taxpayers Association. Ballot positions published by several major California newspapers have also been added.

UPDATE: We were informed yesterday evening that some positions we had listed as being taken by Lt. Governor Garamendi were in error. The Endorsement Grid has been updated to reflect the correct positions with our apologies to the Lt. Governor.

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Bond Sales Give CA Time, but Action is Needed

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Wall Street’s loss appears to be California’s gain. At least temporarily.

With stocks taking another nose-dive yesterday, investors gobbled up California bonds at a faster rate than anticipated. With their set interest rate, even California bonds backed by our shaky economy seemed preferable to the stock market rollercoaster.

These instruments are known as revenue anticipation notes. Given all that is going on with the state economy, can the state be sure it will receive the anticipated revenue? Yesterday, the Department of Finance revealed the state’s unemployment rate increased to 7.7% for August and the General Fund fell $923 million below expected revenue forecast in the 2008-2009 budget act. Investors are betting on the odds that governments rarely go belly up and are relying on the fact that government has the power to tax.

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Good News & Bad News Projected for CA Home Sales in 2009

David S. White
Principal of the Law Firm of David S. White & Associates, West Los Angeles, specializing in litigation, arbitration and mediation of real-estate-related disputes and litigation since 1977; www.dswlawyers.com

Which would you like first? The good news or the bad? How about the bad and the even worse?

According to the LA Times’ October 15 edition, the California Association of Realtors’ 2009 forecast will include both. Maybe.

Sales will go up- that’s the good news; prices will go down- that’s the bad news. Of course, if you read closely, it’s all pretty grim news because the projected increase in sales is really due to all those foreclosures. This is particularly so in the Inland Empire where the CAR Report found, according to the LA Times article, that sales increased by 143%– mainly due to increased foreclosures there. The other part of the news is the ‘fun with statistics’ part: in 2007 sales dropped statewide some 26%. So, if we project a 12.5% increase for 2009, as CAR does, then we are really talking about re-gaining a little less than half the ground lost last year.

"We’re not in a ‘happy days are here again’ scenario," Leslie Appleton-Young, CAR’s chief economist, is quoted as saying. I’ll say. Not by half!

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