If Republican legislators thought they were ignored last year in the annual budget dance, Gov. Jerry Brown has made it clear they ain’t seen nothing yet.

In a remarkably candid news conference Tuesday, the governor told reporters that it just doesn’t make political sense to work with GOP leaders next year, especially when he’s going to the voters in an effort to pass a $6.8 billion tax hike.

“As far as I can ascertain, the Republicans – to a person – are committed to not vote to let people vote on a tax,” Brown said after announcing that the state will have to make $1 billion in mid-year budget cuts. “There’s always people who say, ‘Well, if you abolish in 10 years collective bargaining and do a few other things, I’ll give you a vote.’ But the amount – the ask – to get the tax is so high you’ll lose on the other (Democratic) side.”

Earlier this year, Brown spent months working with Republicans in the Legislature, trying to fashion a budget deal that would give him the handful of GOP votes needed to put a $12 billion tax and revenue increase on last June’s ballot. Like Wily Coyote in a Roadrunner cartoon, Brown tried ploy after ploy to corral those elusive votes, always confident that his next maneuver would be the one that worked.

And the Republicans kept dropping the anvil on his head.

Not this year, though. When asked if was going to “aggressively court Republicans to put a tax measure on the ballot,” Brown dismissed the suggestion as a joke.

“Well, I’m not going to serve my good wine in the way I did earlier in the year,” the governor said. “What’s to negotiate? … This courting process doesn’t work unless the (GOP) leaders want to participate.”

State Sen. Bob Huff of Diamond Bar, the GOP spokesman on budget matters, chided Democrats for refusing to seek Republican input on the current budget, which he said included “rosy revenue assumptions and onerous trigger cuts to education.”

“Senate Republicans were ready to roll up our sleeves and hammer out a budget solution then and we are still ready now,” he said in a statement.

But with only a simple majority now needed to pass the budget, Brown only wanted GOP votes to put his tax measure on the ballot. And since he’s going the initiative route with this new tax plan, he has even less need – and desire — to deal Republicans into the game.

“We’re pretty polarized in this country … I think the cleavage is very sharp,” Brown said. “And that’s just the way it is.”

No one can accuse Brown of painting an overly rosy picture of his tax plan’s chances. If other Democratic-friendly groups insist on putting competing tax measures on the November ballot, it “will be difficult” to pass his measure, he said.

“The people of California are saying they don’t want cuts. They’re also expressing reservations about taxes,” Brown said. “We ought to resolve it by a vote,” with no guarantee of how it will turn out.

And since he’ll need the strong backing of the Democratic base of labor, environmentalists, progressives and teacher groups for his tax plan to even have a chance, making nice with the enemy isn’t an option.

Brown drew a few laughs when he said he’s willing to talk to Republicans and “if they’re willing to buy, I’ll have a drink with them.”

But the governor bristled at GOP suggestions that California’s budget problems are simply the result of the state just spending too much money.

“I think any honest observer will say that the California budget is more constrained than it has been historically,” Brown snapped. “And if any of these Republicans has some ideas other than just poor people they’d like to take away child care from, I’ll be glad to listen.”

That’s the kind of talk you hear from a governor who’s decided to burn his bridges to the GOP side of the aisle.

(John Wildermuth is a Journalist and Political Commentator. This article was originally posted on Fox & Hounds.)

California’s periodic crises have often yielded opportunities for innovation in public policy. From progressive reforms at the turn of the twentieth century to “sunshine” laws in the 1950s, Californians have been quick to act when they perceive that government won’t—or can’t—do what needs to be done. So far in the twenty-first century, however, an ongoing economic crisis may require a different sort of response, one that fundamentally rethinks interaction between residents and governments.

At a time when the California government is synonymous in the popular mind with polarization and mistrust, such a task may seem daunting. But in cash-strapped localities across the state, residents and government officials are working together not only to determine spending priorities, but also to fill in service gaps left by funding cuts. The effort is receiving bipartisan support even in the gridlocked California legislature. Marin County Democrat Jared Huffman’s Assembly Bill 42 allows community groups and nonprofits to help save 70 state parks slated for closure earlier this year. The legislation passed 75–1 in the Assembly and 35–2 in the state senate; Governor Jerry Brown signed it into law in October. Elizabeth Goldstein, president of the California State Parks Foundation, explained that two state parks are already run by nonprofits. But, she added, “both of these required a long and arduous legislative process to get their statute.” With the new law, nonprofits should be able to enter into operating agreements with parks more easily.

In the recent past, such a plan would likely have been seen as a step on the road to privatization—typically a dirty word in the Golden State—and met with strong opposition. But crises have a way of focusing the mind, and Governor Brown’s designation of 70 state parks for termination had exactly that effect. Drawing more than 85 million visitors annually, California’s state-park system is one of the largest in the nation. California residents have taken for granted easy access to state beaches, mountain parks, and historic sites, but now the parks’ future is in their hands.

AB 42 is opening opportunities to creative solutions from civic and business leaders like Tony Magee, founder of the Lagunitas Brewing Company. When Magee, a former resident of Lagunitas, heard that the local Samuel P. Taylor State Park was on Brown’s closure list, he put together a plan to take over economic responsibility for the park from the state. Lagunitas Brewing would set up a nonprofit with a $1 million annual budget to run the park, creating a community project with local employees as well as volunteers.

The potential for such partnerships extends well beyond parks. In collaboration with the National Conference on Citizenship, the Davenport Institute at Pepperdine University (where I’m a research coordinator) recently released a report, “Golden Governance: Building Effective Public Engagement in California.” In addition to providing a guide for communities interested in developing working relationships with residents, the paper highlights several successful collaborative projects.

One such success can be seen in the small city of Auburn, in the foothills of the Sierra Nevada Mountains, where residents have demonstrated that civic engagement can mean much more than voting, showing up at a town hall meeting, or clicking through an online survey. It can also mean getting your hands dirty. Residents decided that they couldn’t wait for an economic recovery to start protecting their homes and businesses from wildfires. The city backs onto the American River Canyon, much of which is owned by the Federal Bureau of Reclamation. But due to federal budget cuts, the Bureau has been unable to maintain an 11-mile-long firebreak along the canyon. City residents negotiated permission from the local BOR manager to construct the firebreak. Hired professionals, local firefighters, and members of the California Conservation Corps cut brush and dead trees, while volunteers handled removal. The first such city-sponsored “Project Canyon Safe” day event was held in May 2010; since then, the community has continued with 18 neighborhood projects and a second annual citywide project on July 11, which cleared 4.21 acres of brush in one day.

Observing the young American republic in the early 1830s, Alexis de Tocqueville noted the vital roles that civic associations played in public life: “Americans of all ages, all conditions, all minds constantlyunite. . . . I often admired the infinite art with which the inhabitants of the United States managed to fix a common goal to the efforts of many men and to get them to advance to it freely.” For much of the twentieth century, this American way of accomplishing things seemed in decline as a more bureaucratic, administrative state became the norm. But in the face of harsh economic realities, the policymaking landscape is changing. The twenty-first century may prove to be a new era of associative democracy in California, and perhaps nationwide.

(Ashley Trim is research coordinator for the Davenport Institute for Public Engagement and Civic Leadership at Pepperdine University. This article was first posted on City Journal.)

As we head toward decision time for the budget trigger to be pulled and to what degree, fiscal information is starting to come in from the keepers of the ledgers. State Controller John Chiang revealed last week that while November tax receipts were a half-billion dollars ahead of projections, California was spending almost two-billion dollars more than projected.

The state budget will never be brought into balance until we control spending.

Where California is overspending is a bit of a mystery. The Controller’s Statement of General Fund Cash Receipts and Disbursements shows that practically all the overspending is in the category of Local Assistance. In fact, State Operations is doing quite nicely in the spending department, currently running almost one-quarter of a billion dollars under budget spending projections. However, that savings is easily wiped out by the Local Assistance spending.

While the Controller’s report indicates some of the areas in which overspending is occurring under Local Assistance, the biggest chunk of overspending is an unidentified category labeled “Other Local Assistance.”

The report is clear, for example, that Mental Health programs are overspending by 185% or about $166-million and that the Community Colleges are overspending by 26% or around $527-million. But, the Other Local Assistance category accounts for $1.44 billion of overspending.

Could it have anything to do with the governor’s realignment program sending state prisoners to local jails?

What is clear is that spending continues to be California budget’s Achilles heel. The fix for the state’s spending problem is a solid spending limit. As I wrote last week, voters will likely get a chance to support such a fix when a proposed spending limit appears on next November’s ballot. (Disclosure: I am involved in supporting the proposal.)

One other important note in the Controller’s report is that the budget is balanced on borrowing. The Controller states that both internal borrowing from special funds and external borrowing, which adds to the state’s debt, cover the current deficit. The spending limit initiative proposal aims to not only prevent future borrowing by controlling spending, but also proposes to pay down the state’s current debt when revenues exceed the spending limit.

It seems from the Controller’s latest numbers the spending limit proposal is important and timely.

(Joel Fox is the Editor of Fox & Hounds and President of the Small Business Action Committee. This article was first posted on Fox & Hounds.)

The rate hike next July for most of the 2,043 local public pension plans in the giant CalPERS system will be lower than expected — an increase of 1 percent of pay or less for four-fifths of them.

The rates reflect the second year of a radical “smoothing” plan that spreads rate increases from huge investment losses over a three-year period.

The CalPERS investment fund dropped 24 percent in fiscal 2008-09 when the stock market crashed. The fund peaked at $260 billion in the fall of 2007, hit bottom at $160 billion in March 2009 and was $222.5 billion early this week.

Actuaries told the CalPERS board yesterday that a 13 percent gain in investment earnings the fiscal year following the crash, 2009-10, was better than what CalPERS expects in an average year, 7.75 percent.

“Most of the plans are experiencing an increase in rate for the 2012-13 year, although the increases are less than we projected in our prior report,” said actuary Nancy Campbell.

“And I may say that overall 80 percent of the local government plans had an increase in employer rates of 1 percent or less, some zero, some less than that,” Campbell said.

The local plan rates are not expected to change much in July 2013, when they will reflect a 21.7 percent increase in earnings last fiscal year, the end of the three-year smoothing period.

The local rates are based on two-year-old investment returns because of the time needed to make actuarial calculations for the 2,043 plans. The new rates for state workers, expected in May, will have a one-year lag reflecting the big earnings last fiscal year.

The state rates are not expected to change much next July. The nonpartisan Legislative’s Analyst Office estimated last month that the state payment to CalPERS, $3.6 billion this year, will increase to $3.8 billion by fiscal 2016-17.

The new rates set by the actuaries for the local plans drew praise from several California Public Employees Retirement System board members.

“I’m pleasantly surprised,” said board member J.J. Jelincic. “All the great fear we have heard about how much rates are going up and how we are destroying Western civilization — 75 percent of all the plans the rate change is plus or minus 1 percent. It would suggest that maybe it’s not as forsaken out there as some people would like to project.”

Member Tony Oliveira, a former Kings County supervisor leaving the board this month, thanked the actuaries and the board for their “courage” in adopting the smoothing plan despite criticism.

He said jobs were saved. As the economic downturn forced cuts in local government budgets, particularly hitting counties who lost state aid for social services, spreading out pension rate hikes allowed time to plan and phase in reductions.

“Because you helped us gain a little more time no one lost a job,” Oliveira said when Kings County cut about 11 or 12 percent of its staff positions. “We did it through attrition.”

The average funded status of the local CalPERS plans is still low. It was 89.6 percent in June 30, 2008, dropping after the stock market crash to 61 percent in June, 2009, and then increasing to 65.8 percent in June 30, 2010.

Actuaries estimated that the big earnings gain last fiscal year adds 7 to 8 percent, which would push the funded status as of last June 30 to about 73 or 74 percent. But with the stock market in turmoil, the funding level has probably dropped since then.

The CalPERS board may revisit a controversy in March, when actuaries are scheduled to make a recommendation about the investment earnings forecast, now 7.75 percent, which critics say is too optimistic.

The actuaries recommended early this year that CalPERS lower the forecast to 7.5 percent, which would increase rates. The CalPERS board decided to leave the forecast unchanged.

Critics contend that the earnings forecast used to offset or “discount” future pension obligations is too optimistic and conceals massive long-term debt.

A leading critic, Joe Nation of the Stanford Institute for Economic Policy Research, issued a new report yesterday contending that the long-term debt or “unfunded liability” of the three state pension funds is $500 billion, far greater than reported.

The governor’s budget proposal last May estimated a total unfunded liability of $118 billion for the three state plans: CalPERS $48.6 billion, California State Teachers Retirement System $56 billion and UC Retirement $12.9 billion.

A CalPERS news release said earnings from the pension fund‘s “highly diversified” investments are historically higher than assumed in the Stanford report, which is based on low earnings that “artificially magnify unfunded liabilities.”

When viewed as an average, the rate increase next July tor the 2,043 local CalPERS plans is minimal.

The average employer contribution for miscellaneous plans covering most workers increases from 14.6 percent of pay to 14.9 percent. For the public safety plans covering police and firefighters the increase is from 31.1 percent of pay to 31.2 percent.

Board member George Diehr asked about the “extremes,” 122 plans with a rate increase of more than 5 percent of pay and 41 plans with a rate decrease of more than 5 percent of pay.

Alan Milligan, the CalPERS chief actuary, said the plans where the rate increase is volatile, despite smoothing, tend to be plans with a small number of members. In a small plan, rates can change significantly with the gain or loss of just a few members.

In addition, he said, some of the plans make extra contributions to pay off their “side funds.” When smaller plans with varying assets were placed in a pool to spread risk and avoid rate shock, side funds were created to even out contributions to the pool.

“Incredibly, it seems like the bulk of the significant reductions are probably due to extra payments being made by employers,” Milligan said.

Board member Henry Jones said he agreed with Oliveira’s praise for the three-year smoothing. He also asked about another part of the smoothing plan that allowed the losses to go well beyond the usual “corridor” limiting the spreading of gains and losses.

Milligan said he expected that the rate increase for the last year of the three-year smoothing, beginning in July 2013, “will not be very difficult for employers at all.” But he said the “remaining unrecognized loss within the original corridor” must still be covered.

He said annual actuarial reports to the local plans will try to show the rates they can expect for the next four years, including examples of what might happen if investment earnings fall short of the 7.75 percent forecast.

“We are trying hard to give employers the information they need so they can manage their budgets,” Milligan said.

(Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. This article was first posted on Calpensions.)

 

Near the end of the classic 1978 movie “Animal House” we see Kevin Bacon, wearing his ROTC uniform, wildly flailing his arms and screeching, “Remain calm, all is well,” as panicking parade attendees run about in every direction and back again in total confusion.

Were the writers and director John Landis channeling Nostradamus? The scene certainly appears to presage California initiative politics in 2012.

Thanks to the August, dead-of-the-night, last minute passage of a bill that prohibits initiatives from appearing on primary ballots — usually in June — the Legislature guaranteed a free-for-all for possibly a dozen or more ballot measures for the upcoming November 2012 ballot.

When the governor signed this legislation, he reversed a position he had taken as attorney general back in the early 1970s when he pioneered the placing of initiative measures on the primary ballot as well as the general election ballot, which served to make it easier for voters to digest the issues by allowing them take on propositions in two bites instead of one.

The motive for the change was painfully transparent. In addition to ensuring that a specific initiative despised by government union bosses would not appear in June of 2012, campaign consultants advised the politicians that measures to increase taxes, which they favor, would fare better in November. This is because a presidential election is more likely to turn out a larger group of “low information voters,” those who are less well informed and are more easily influenced by slick advertising campaigns.

So let’s have a look at the pandemonium we could well face on one ballot.

• A handful of billionaires and two failed governors — Gray Davis and Arnold Schwarzenegger — want to extend sales taxes to services, a tax increase of $10 billion.
• Molly Munger — the daughter of Charles Munger, Warren Buffet’s chief business partner — wants a sliding scale increase in income taxes to raise $10 billion a year
• Hedge fund manager Tom Steyer would indirectly boost taxes on out-of-state corporations doing business in California, by changing the way their taxable incomes are calculated to the tune of about $1.1 billion a year.
• Gov. Brown and his union allies are backing a sales tax hike on everyone and income tax surcharge on the affluent to raise about $7 billion a year.
• The California Federation of Teachers is backing their own initiative to place a surcharge on millionaires
• An initiative to split the property tax roll and increase taxes on businesses has been filed
• A measure to impose $3 billion oil severance tax is already being circulated.
• Voters will be confronted with a $11.1 billion water bond.
• A spending limit initiative — that will not be liked by those backing the preceding tax increase measures — has just been filed and will likely qualify for November.
• Already qualified is a measure that would limit the influence of special interest money in politics.

There are a number of additional measures that could appear — 40 measures are pending with the Attorney General, while 31 are in circulation — from one that would totally reorganize the structure of the State Legislature to one requiring California officials to engage in cooperative enforcement of federal immigration law. There is even the potential for a ballot proposition that would essentially grant state amnesty to illegal immigrants.

Although some of these measures are likely to fall by the wayside in the qualification process, there remains the very real possibility that voters will be run over by a hoard of complex issues. If they throw up their hands and vote no on everything, the Sacramento elite, who don’t like allowing citizens to make decisions anyway, will use the failure of their pet measures to attack the right of the people to use the initiative process, and urge that all powers be vested in their bought-and-paid-for legislators. Of course, if the people do reject everything the Sacramento schemers put on the ballot, the latter will have only themselves to blame. By insisting that all measures be crammed into one ballot, they make it more challenging for thoughtful voters to make informed decisions.

On the other hand, maybe when voters say no, especially on tax increases, they know exactly what they are doing. It is much more likely that it is the politicians, rather than the voters, who are out of control.

(Jon Coupal is president of the Howard Jarvis Taxpayers Association – California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights. This story was first posted on HJTA.org)

A year ago, I stopped at a filling station in Fountain Valley to get gas and a snack.  The station owner saw me pondering the Vitamin Water, stepped out from behind the counter, and approached.

“Are you a Jew?” he asked, studying me carefully.

“Yes,” I said, surprised.

And then I was even more surprised when he put his arms around me and hugged me.

“I am Moslem!” he declared.  “We are brothers!  We must be friends!”

This unexpected gas station embrace came to mind while reading the most hopeful and hardheaded book on modern Islam I’ve ever read, Rock The Casbah, by veteran foreign correspondent Robin Wright.  The book paints a portrait of what could be called the Islam nobody knows.

Wright writes of an Islamic revolution sweeping North Africa and the Middle East that rejects both the violence of jihad and the ways of the West.  Instead, this developing approach to Islam embraces the joy of finding God in both traditional and high tech ways.  Wright offers portraits of an emerging generation of educated Moslems who don’t embrace the West but don’t want to destroy it, either.

These young Moslems embrace the smartphone and the chador with equal vigor.  They want political freedom–and they’re attaining it in country after country.  They use rap songs and hard-hitting comedy, both Western imports, to express their contempt for violent interpretations of their religion.  Social media tools enable them to publicize government-sanctioned murders of the innocent in ways unimaginable in a pre-YouTube, pre-Facebook world, destroying the ability of despots to operate in the dark.

They want Islam on their own terms, turning to mellow Islamic televangelists and pop singers as their spiritual leaders and role models.  And they want jobs, which the kleptocratic dictators could never provide for them, but the free market can.

Despite their adapting of Western technology and cultural vehicles, they are not in love with the West.  They want to live by their own values, instead of taking cues from Hollywood or Washington about how to dress, how to vote, or how to think.  They want democracies infused with Moslem values just as the West incorporates Judeo-Christian ideals into its national narratives.  They want neither Obama or Osama; they want both freedom of religion and freedom from religion–that is, religious views imposed upon them by others.

Wright’s book is heartening because the War On Terror, ultimately, is doomed to the same failure as the War On Poverty (poverty won) or the latter day War On Drugs (drugs are way ahead).  We can’t stay angry and afraid of a group that counts more than a billion and a half people.  We have to find a partner for peace.  The good news is that Wright describes, in her meticulously reported work, a rising Moslem majority that wants to live in peace and practice their faith on their own terms.

These are the individuals putting their lives on the line in Syria, in Yemen, in Iran, and once again in Egypt, and in other nations throughout the region.  But they are also our Moslem neighbors here in California and throughout the U.S.

Wright is not naive enough to suggest that the next generation of Moslems can overlook the West’s support of Israel against the Palestinians.  Or that they can easily forgive America’s longterm tolerance of the very dictators, like Mubarak and Gadhafi, they have worked to remove.  These issues mean that the West may never enjoy much credibility or sway with the next generation of Moslems.  But the desire for self-governance, which led to the Arab Spring, means that these young people aren’t naively risking their lives simply to trade secular dictators for Islamist regimes.

Rock The Casbah ought to be required reading in Orange County, home to a growing — and deeply misunderstood — Moslem population.  They didn’t dance when the Twin Towers fell and they don’t send money overseas to support terrorists.  They are raising their children to be doctors and lawyers, not suicide bombers.  They want the same thing the rest of us want — the right to be left alone, the right to worship without suspicion, the ability to live in peace in Irvine or Huntington Beach or wherever they please.

I’m not naive.  I know that not every Moslem seeks the same embrace with the West, let alone with Jews, that the gas station owner wanted with me.  But Wright offers a valuable lesson:  that millions of Moslems are just as tired of jihad as is the West.  And in a world wracked with dissension, turmoil, and economic unrest, that counts as good news.

(New York Times bestselling author Michael Levin runs www.BusinessGhost.com, America’s leading provider of ghostwritten business books.)