Budget

Just as major league ballplayers were taking the field for the first spring training exhibitions on Feb. 28, Arnold Schwarzenegger was putting taxes in play in California's budget debate.

"I am a big believer that when we have a financial crisis like this, we all should chip in," California's governor said about his state's two-year, $16 billion budget shortfall. "This why I totally agree with the Legislative Analyst’s Office when she says we should look at tax loopholes.... We should go after those tax loopholes."

It won't be hard to find them. California is a big-league loophole-creating machine. It takes only a simple majority of California's Legislature to carve out a tax loophole, but it takes a two-thirds vote to close a loophole or pass a budget. That imbalance has created a ratchet effect in California's tax code.

This is the title for a 2/27/08 New America Foundation and UC Center Sacramento workshop in Sacramento. It will look at a variety of California tax and budget issues and possible remedies that also bring California's depression-era, industrial-based tax system into the 21st century. This blog post serves as place for further discussion on the topic and the workshop presentations.

Here is a link to my presentation topic on broadening the California sales & use tax base and lowering the rate. If other workshop materials are posted on the web, I'll add a link to them at this blog entry.

I look forward to your comments and online discussion.

In his 2/13/08 State-of-the-State address, Minnesota Governor Tim Pawlenty announced that he would create a 21st Century Tax Reform Commission to recommend tax reforms for the 21st century economy. Related to this, he also noted:

• the state has a serious deficit
• tax policies, job climate and large government have harmed economic growth
• there is a need to reduce taxes
• Minnesota should join other states and cap property taxes
• there is a need to move the tax system from the 1960s to the 21st century
• tax reforms should "encourage job growth, income generation, investment, entrepreneurial activity, research and exports"

Well, as the title of this blog would suggest, I think this is a good move for Minnesota. But, it won't be easy -- change rarely is.

The presidential candidates have mostly "tweaking" ideas for our tax system; they don't seem to be focused on the incredible budget and tax issues that will face the new president during the first term. Or, perhaps they just aren't being asked the right questions.

Pending fiscal challenges include:

Lobbyists who represent Sallie Mae, Nelnet, and the rest of the student loan industry are anxiously awaiting the arrival of President Bush's Fiscal Year 2009 Budget on Monday morning. Last year, Congress cut taxpayer subsidies to banks that make government-guaranteed student loans and put those savings into lower-cost loans and bigger Pell Grants for students. Industry lobbyists will pore over the budget the moment it comes out Monday to find numbers that make their case that it is now cheaper to subsidize their retail loans rather than continue the wholesale approach known as direct lending.

[slideshow] The difficulty for the media and Members of Congress is that industry representatives will decide which budget numbers to use and how to portray those numbers in assessing the relative costs of the two programs. Unfortunately, their paychecks require them to reach a pro-industry conclusion no matter what story the numbers actually tell.

In October and again in November, we warned that Congress might try to cut the Pell Grant program for low-income college students. We argued that after passing a new law in September that rightly whacked excess student loan bank subsidies to increase Pell Grant funding, Congress might later…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

In my 11/22/07 post on ideas for addressing California's $10 billion budget shortfall, I included reinstating the vehicle license fee (VLF). Apparently I'm not alone on that suggestion. But as Dan Walters recently reported, when the VLF was cut a few years ago, it was done in a way that prevents it from being restored. See his 12/11/07 article in the Sacramento Bee.

Lots of restrictions on budget options is a poor way to run a government. California has too many restrictions that tie the legislators' and governor's hands. These restrictions include Prop 98 that mandates that a certain percentage of the budget go to K-14. Of course, funding education is an extremely important role of government (and should include beyond grade 14!), but the restriction ignores that every year is different and ignores the role of lawmakers. Other restrictions include Prop 13 and 218 among others.

I was once on a panel that included a former California legislator. When I noted that these laws are too restrictive and prevent legislators from doing their job, this person noted something along the lines of "but we have to do that because you can't trust legislators to do the right thing." I about fell off of my seat that such a comment would be made publicly or even believed by someone who had served in the legislature. Apparently, we need to have better civics education.

When Congress returns from its recess next week, unfinished fiscal year 2008 education funding legislation will be high on the agenda. Fiscal year 2008 began on October 1 and funding subject to appropriations for the fiscal year has…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

House Education Committee Unanimously Passes Bill to Reauthorize the Higher Education Act

The House Education Committee unanimously approved legislation on Thursday that would reauthorize the Higher Education Act for five years. The College Opportunity and Affordability Act (H.R.…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

With Congress providing a significant increase in Pell Grant aid, federal lawmakers have some pressing questions to ask colleges about how they spend their institutional aid dollars. Will colleges use the influx of Pell Grant dollars to supplement their aid and insure that low-income students don't have

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.