State Budget

Department of Self Promotion

Joe Mathews — Fri, 10 Jul 2009 22:36:00 -0400

Here a report and video on the Zocalo Public Square panel I moderated last night in Los Angeles. The subject was the human cost of state budget cuts. We were joined by Mike Herald of the Western Center on Law & Poverty, journalist and activist Marta Russell, parent and advocate Michelle Wolf, Community Clinic Assn. of LA County chief Gloria Rodriguez, and state Sen. Gilbert Cedillo.

And here's a link to my story in Saturday's Wall Street Journal on the possibility of major tax changes in California.

Baseball Arbitration Budgets?

Joe Mathews — Mon, 01 Jun 2009 14:08:00 -0400

Richie Ross, the Sacramento power broker, lays out his plan for fixing California's budget system -- the baseball arbitration system is his model -- in George Skelton's column in today's Los Angeles Times.

The gist: just as players and teams submit salary proposals to an arbitrator when they can't agree on a contract, Democrats and Republicans would submit their own budgets to voters. Whichever drew more votes would become the budget.

Problems with this idea? Several. But given the fondness California voters have shown for spending far more than they're taxed, it's a good bet that voters would choose -- over and over -- the more fiscally irresponsible of the two budgets they were presented.

Obama's California Headache

Joe Mathews — Fri, 22 May 2009 14:38:00 -0400

Writing at the very progressive Calitics blog, Robert Cruickshank calls the Obama administration "clueless" when it comes to California and makes the case for federal loan guarantees for the state. Expect to hear more anger from the left if Obama leaves California to twist in the wind.

I believe that the state should get those guarantees. They come at very low risk (and no cost) to the Treasury. In fact, the state is likely to pay a substantial fee for the guarantees. But as I argue in today's New York Times, the Obama folks should -- for political and policy reasons -- attach serious strings to the guarantees, which would help the state with cash flow problems this summer and fall. Essentially, the administration (and Congress for that matter) should only help California with its cash flow if the state puts forward a real plan to fix its long-term structural budget problems. Such a deal would be good for the state and for the country.

Bay Area Event Thursday: What's Next in California?

Joe Mathews — Mon, 18 May 2009 16:36:00 -0400

Those of you in the Bay Area may want to check out a lunchtime event this Thursday at the San Francisco State downtown campus. My New America colleague Mark Paul and Noel Perry, founder of Next 10, will offer a detailed budget briefing of the state's options. The event is free, but be sure to reserve a seat (and find out more details) here.

What Mr. Mayor Doesn't Know

Mark Paul — Wed, 01 Apr 2009 00:34:00 -0400

Former LA Mayor and state education secretary Richard Riordan is getting a lot of attention, here and elsewhere, for his screed against Gov. Schwarzenegger and the budget measures on the May 19 special election ballot. What no one seems to have noted, however, is that Riordan doesn’t seem to have a clue about California fiscal realities.

In just 777 words Riordan manages to leave no California budget canard behind.

More taxes on the rich “will be economically disastrous for California,” Riordan (“and I am one of them”) writes. It is perhaps a sign of how little taxes matter to the rich that Riordan seems not to have noticed that California has spent the last three decades lowering his taxes.

Since 1978 California has slashed property taxes. It eliminated the inheritance tax and lowered the top income tax rates on high incomes. It has lowered both the nominal and effective corporate income tax rate, and in 2011 will let multinational and multistate companies reduce their payments even more. Economists may quarrel about who bears the burden of the corporate income tax, but to the extent it falls on wealthy shareholders and owners –– and they always insist it does –– the rich now pay less.

As a result, even with the temporary .25 percentage point income tax hike in the recent budget (which hit the middle class proportionally harder than the rich), the wealthy pay lower tax rates today on their income and property than when Ronald Reagan was governor. This trend hardly seems likely to set off the “exodus” of the rich that Riordan suggests.

That’s not the only exodus Riordan imagines. “Anti-business rules and laws…are scaring companies out of California,” he writes. Except that they aren’t, as Jed Kolko and his colleagues at the Public Policy Institute of California have comprehensively demonstrated in a series of studies: “Policymakers’ (and the media’s) concerns about jobs leaving California are for the most part unwarranted.”

Riordan is equally unhinged from the facts on the spending side of the budget. He throws around all the usual buzzwords: “duplicative,” “bureaucrats,” “unions,” “special-interest groups.” But Riordan seems not to have noticed that California has been the nation’s leader in restraining costs in public health programs; it spends less per MediCal beneficiary than any other large state. Or that it is near the bottom in per-pupil spending in schools, with the largest secondary school classes in the nation.

Yes, California needs to reform health care and education (an effort that notably ground to a halt during Riordan’s tenure in Sacramento as education secretary). But “save billions of dollars” without significantly reducing the quality of health and education? Only in your dreams.

If Riordan’s uninformed shriek, written by the former mayor of the state’s largest city and published in the state’s most important newspaper, represents the level of seriousness at which the May election issues will be discussed, California is in even bigger trouble than I imagined.

Make That 7 Measures, Over 2 Elections

Joe Mathews — Fri, 20 Feb 2009 16:11:00 -0500

If anyone needs further proof that California is not quite a republic, look at the budget deal that appears to have saved the state from a fiscal disaster. (At least for now -- we could be at the brink again if the economy continues its downward march and state tax revenues slip even further below the current estimates).

The deal requires citizens to pass judgment on seven related ballot measures (At one point, a possible deal looked like there might be eight ballot measures, but in last-minute negotiations, it was decided that one measure--that would have involved docking the pay of lawmakers when they don't pass a budget on time -- was unconstitutional).

Five of the measures will be on a special election ballot May 19. These are 1. changes to the state's education funding guarantee or Prop 98. 2. Borrowing against future lottery revenues. 3. taking funds that voters approved through Prop 10 for early childhood programs. 4. taking funds that voters approved through Prop 63 for mental health programs. and 5. a new state spending limit, that would try to address California's volatile tax revenues by socking away money in a rainy day fund in years when revenues exceed the average of 10 years. Why are these measures on the ballot? Because the changes are constitutional -- as in the case of the spending limit or the education funding guarantee -- or they make changes to laws that were enacted by ballot initiative. California, alone among direct democracies, does not permit policymakers to change a statute enacted by voters. Only the voters can undo what they have done.

CORRECTED: A sixth measure -- a ban on legislative pay raises that was part of the price of State Senator Abel Maldonado's vote -- is also on the ballot. A seventh measure, a so-called "open primary" or non-partisan primary, will go on the June 2010 primary ballot, which should hurt the measure. The sort of partisan voters who cast ballots in primaries tend to oppose open primaries.

Today's LA Times offers more details on all of this here. The fight to pass these measures is uphill. They were drafted by an unpopular governor and an unpopular legislature.

Twittering Budget Night

Joe Mathews — Sun, 15 Feb 2009 02:10:00 -0500

John Myers is doing the play by play via Twitter here. And you can check out the Assembly and Senate debate via the web at calchannel.com

There Is No Budget Deal Until California Voters Say OK

Joe Mathews — Thu, 12 Feb 2009 15:18:00 -0500

Want more proof that the initiative process is too powerful in California? All the recent talk about lawmakers reaching a budget deal is bunk. The deal, even if it passes, requires the voters to sign off on multiple ballot measures later this year. That's right -- California simply can't handle a budget emergency without a vote of the people.

Details have not been released, but I count at least five separate ballot measures that would be needed to complete this deal: 1. a measure authorizing the modernizing of the lottery and borrowing against future funds. 2. the approval of some sort of new spending limit that Republicans insisted upon in negotiations. 3. Changes to the state's education funding formula. 4. A measure permitting the state to raid money that voters approved for early childhood programs and 5. A measure permitting the state to raid money that voters approved for mental health programs.

Given the extreme costs of delays by the legislature, and their inability to do much without the voters OK, the real question is: why bother having a legislature at all?

What Happens When the Cash Runs Out?

Joe Mathews — Wed, 11 Feb 2009 20:54:00 -0500

Last night in LA, I moderated a panel with State Controller John Chiang, Barclays Capital managing director Peter J. Taylor (a public finance expert), and New America senior scholar Mark Paul on California's cash crunch. A report on what was said is here. One message: even if the tentative deal that legislators and the governor appear to have reached in the last 24 hours won't end the cash crunch. The state still has serious cash flow problems, said Chiang, comparing a state with a budget deal to an unemployed person who has suddenly found a job and income -- but still has to deal with the debts and bills he delayed paying while he was unemployed.

The Winchester Mystery State Government

Joe Mathews — Mon, 02 Feb 2009 14:34:00 -0500

I'm in San Jose this morning, at a bakery across a boulevard from the Winchester Mystery House, and thinking about state government. The Winchester, for those who don't know the story, was built over 38 years by a Winchester Rifle heiress, over 38 years. Bit by bit, she and her builders created a maze, adding room after room, fireplace after fireplace (there are 47 in all). creating a mystery box that's so big and confounding that you can't help but get lost inside. Whatever the reasoning behind each addition, the whole thing is madness.

Yes, as a metaphor for California's state government, the house is perfect.

One might think that a budget and cash crisis of the size that now faces this state would present an opportunity for reform, for simplifying a governing structure that surpasses understanding by all but the most informed citizen. The state's Rubik's cube system of education funding might be unscrambled, with a simpler system that ensures equal funding for district and tries to match money with needs. Overlapping boards and commissions might be eliminated. The state's crazy quilt initiative system mighty be brought under control.

But from what I'm hearing about the mostly secret and decidedly slow budget negotiations is that any solution will preserve California's Winchester-like governing system -- and perhaps add a few more rooms of complexity while they're at it. Too bad. The state desperately needs to simplify its systems so that they can be more easily monitored by citizens. Most of the reporters who did this sort of monitoring are gone, going, or simply too busy to do the kind of monitoring they once did.

See you soon back inside the house.