Huge $13 Billion California Deficit Forecasted: Legislative Analyst

Once again the Legislative Analyst has pulled back the curtain on California’s budgeting practices, announcing last week that the state is likely to have a $3 billion deficit at the end of this fiscal year. This means we can expect significant mid-year cuts to education and social services programs under the budget “trigger” mechanism. That trigger automatically cuts various programs if revenue targets are not met.

The next fiscal year that begins on July 1, 2012 looks no better. The LAO forecast shows a gap between revenues and expenditures of about $10 billion, which brings the total imbalance for this year and next to $13 billion.

One of the benefits of the Legislative Analyst’s forecast is that it focuses our attention on program requirements and revenues over the next five years.  Even though our current budgeting process looks only at one fiscal year at a time, it is important to extend our horizon and view the state’s fiscal condition from the prospective of our current budget priorities and the tax system that supports those priorities.

This is the tenth year of forecasted operating deficits. An operating deficit reflects our inability to match tax revenue with spending priorities. Every budget passed during this time has failed to significantly reduce the operating deficit. Instead, lawmakers have made a habit of spending more than the tax dollars available, and opted to close the expenditure-revenue gap by borrowing money or using one-time changes and accounting gimmicks.

Sadly, little progress has been made in the last 10 years to heed the warning of the Legislative Analyst and take sufficient steps to actually close the gap.

The most recent forecast does show moderate revenue growth through 2016-17 and assumes a slow but steady growing economy. But, the structural deficit remains six-to-eight-percent of state spending.

In 2001, fiscal pundits declared the situation of operating deficits unsustainable. Ten years later we’re saying the same thing. But, no action has been taken to address this continuing declaration.

Maybe it is time to set up a budgeting process that requires policy makers to face the inevitable: require the development and adoption of multi-year budgeting system, require expenditures and revenues to meet, and focus on improving state programs and setting goals, so they can achieve results.

Happy Anniversary.

(Fred Silva is a Senior Fiscal Policy Advisor with California Forward. This article was first posted on Fox & Hounds.)

Why Wall Street Secretly Loves Occupy Wall Street

Wall Street will never admit it.  But the bankers of lower Manhattan loved, loved, loved Occupy Wall Street.

That’s because OWS got the whole financial mess completely wrong, failing to understand the real cause of our economic woes.

OWS swung and missed, and Wall Street rejoiced.

Here’s why:

The target of OWS was corporate greed, a vague catchall embraceable by everyone on the left and everyone feeling left out of the modern economy.

Occupy-ers may have done a great job of organizing drum circles, yoga classes, and general assemblies, but they failed in two important areas.

The first was understanding what went wrong in the American economy and who was really to blame for it.

The second was to provide media training for its spokespeople, who sounded, well, flaky.  Wacky.  Well-meaning, but nuts.

Here’s what the Occupy-ers misunderstood:  corporations didn’t tank the economy.  Investment bankers were the guilty parties, but not one was punished or even confronted with the evidence of wrongdoing.  Not one went to jail.  Not one even went to trial.

The OWS’ers were within shouting distance of the people who vaporized billions of dollars of wealth and tens of millions of jobs.  But they never got their facts straight.  They huffed and they puffed, but they blew Econ 101.

Here’s what they missed:  the purpose of investment banks is to allocate capital. To decide which enterprises should get funded and which should not.  And instead of doing their job properly, they instead loaned money to all kinds of people who could never, or would never, pay it back, from the working poor of Santa Ana to the filthy rich of Italy and Greece.

The bankers basically gave credit cards to people who could never repay what they charged, and earned fat fees for doing so.  As a result, families were foreclosed upon when they couldn’t pay, and the economies of Italy, Greece, Ireland, Spain, Portugal, possibly even France, and even the United States of America were saddled with debt that would take lifetimes to pay off.

The bankers drowned the world in debt.  And their actions were lucrative, shortsighted, selfish, and, for the most part, utterly legal.

The corporations aren’t the culprits; in many ways, they’re victims of the bankers every bit as much as the Occupy-ers.  It’s tough to sell a house, or a cellphone, or even a bag of groceries, to someone whose job, or entire industry, has vanished.

The borrowers were just as guilty as the lenders — whether they were running European nations or running a lathe in Temecula.  But somebody had to dangle dollars at all those risky borrowers.  And those somebodies were the very Wall Street bankers who quietly walked by the Occupy’ers, eyes downcast, on their way to work.

If OWS had only understood that their real beef was with the greed of the bankers, not the corporations, and had they found even a single spokesperson with the slightest ability to complete an English sentence, they might have been more than what they became:  a Wikipedia entry; a Woodstock-like experience for under-employed young people; a sideshow.

Incidentally, exactly which corporations were they so angry at?

Apple, Google, and Nokia, which made their communications flawlessly dependable?

Land’s End, L.L. Bean, and REI, which made their tents, sleeping bags, and warm clothes?

Whole Foods, Walmart, and Target, where they bought the wide variety of wholesome and delicious food they ate?

The news media that so vigorously covered OWS, hanging on their every pronouncement, seeking to turn every Erica from Brooklyn and Tony from Hoboken into reincarnations of Gandhi and Martin Luther King?

How ludicrous to stand before a TV news camera wearing Nikes, Levis, and Gap sweatshirts and condemning the very corporations that made those garments.

No, OWS completely missed the point.  They deserve credit for intuiting, in a broad, amorphous sense, that the economic disaster befalling the West had a Ground Zero in Lower Manhattan.  But they didn’t take a moment or two to figure out exactly who the bad guys were.

And today, post-OWS, those bad guys, the investment bankers who pocketed millions for lending out unrecoverable billions, are laughing at OWS…laughing all the way to the bank.

(Michael Levin is a New York Times bestselling author and runs, America’s leading provider of ghostwritten business books.)

Clashing Tax Proposals

California’s taxpayers look on in bewilderment as more and more tax increase proposals are created for next year’s ballot. A whole lot of organizations and people think they have the solution to California’s problems with an increase in taxes. And they all want to bring them to the ballot.

Over the weekend, the Sacramento Bee revealed the proposals from the Think Long Committee funded by billionaire Nicolas Berggruen. As noted in one of my previous posts, the centerpiece of this proposal is a tax on services. The proposal also carries plans to cut income and corporation tax rates, drop the sales tax on goods a half-cent and raise business taxes on out-of-state firms, among other proposals.

The sales tax cut goes against the plan being tested by the California Teachers Association, which would raise the sales tax along with income taxes on certain high-end taxpayers.

Then there are other tax plans in the works primarily aimed at funding education. As I reported last week, civil rights attorney and investor, Molly Munger, has a proposal to increase income taxes. A coalition of some business and education groups including the Bay Area Council, Children Now and the California School Administrators Association are reportedly behind a strategy that would include broad-based tax increases along with plans to make it easier to raise parcel property taxes on the local level.

Already filed with the Attorney General’s office is an initiative to create an oil severance tax to fund both K-12 and higher education.

It doesn’t take a degree in political science to realize that if all these tax measures appear on the ballot, they would be self-defeating, scaring the taxpayers to pull the NO lever and be done with it.

The Big Kahuna in bringing these disparate plans together is the governor. We know he, too, wants a tax plan on the ballot. Word is he still wants to entice business interests to play along by staying away from business-specific taxes and advocating for broad based taxes like the sales tax and an income tax increase on upper income earners. Unlike the education interests who would be satisfied with directing all new revenue to schools, Governor Brown wants money to fund his government realignment plans.

One definition for Kahuna is “priest, sorcerer, magician, wizard, minister.” The governor, a former seminary student, would have to be all these things to get the different tax plan opponents to pull together.

While all these tax measures, and perhaps others, will be filed for a title and summary that gives the governor and other interests until sometime in January to try and reach consensus on a tax strategy that won’t send the taxpayers running for the hills.

(Joel Fox is the President of the Small Business Action Committee and Editor of Fox & Hounds, where this article was first published.)

UC Davis Pepper Spraying Officer: A Clear Case Of Brutality

If you want to know which of your friends or neighbors believe in a free and humane society and which ones believe in a police state, show them the now gone viral video of a riot-gear-clad University of California-Davis police officer dousing a peaceful group of Occupy protesters with pepper spray as they sat, arms linked, in the campus quad. Most of us react in horror at what we saw, and at the absurdly dishonest explanations from the campus police chief. But some people think the protesters got what they deserved and even called for heavier-handed tactics.

Police officials – and these days, campus security guards have gained the power of full-fledged police officers, complete with those massive pensions and all the usual protections from accountability – claimed that the officer felt that his life was in danger when he methodically walked down the line of protesters and assaulted them with the spray. “If you look at the video you are going to see that there were 200 people in that quad,” said Chief Annette Spicuzza, who was placed on leave (i.e., additional paid vacation) Monday after backlash against the brutality. “Hindsight is 20-20 and based on the situation we were sitting in, ultimately that was the decision that was made.”

That’s what police always say no matter the situation. But in this age of video, we can see for ourselves that the officers were in no danger. Multiple officers effortlessly moved in and around the protesters. The burly officer who sprayed the kids strutted slowly in front of them in a way that belies any sort of danger, real or perceived. He, too, was put on administrative leave after the video went viral, along with another officer. Without the video, you know what would have happened – nothing. The lies would have become the official record. This is why police officers have become zealous in their confiscation of video cameras and arrest of people who record them doing their jobs.

Such brutality is par for the course for today’s militarized police and campus security departments. What’s really disgusting is the natural instinct of so many conservatives to stick up for the police. They don’t like the Occupy protesters, so they willingly back brutality against them, without considering the possibility that conservatives at some point might be on the receiving end of this aggression. Then again, this common, vulgar form of modern conservatism almost always sides with the state, even as it champions the empty words of limited government.

A blog called Extreme Conservatives wrote the following, “Sorry libs… You can quit your squawking and take your leftie-indoctrinated butts back to class. The UC Davis pepper spray incident was standard police procedure. On Friday a group of UC Davis students blocked the campus walkway with arms linked and started chanting, ‘From Davis to Greece, F*ck the police!’ Moments later the little darlings were doused with pepper spray. This was only after several attempts by campus police to get them to move. Of course, the liberal media only played the part where the students were sprayed down.  But after two days of leftist outrage we find out that this was standard police procedure.”

The idea that this is “standard police procedure” is exactly what makes the video so horrifying. It doesn’t make it acceptable behavior. That’s why so many viewers were offended by it. The cop struts in front of the students and sprays them with massive amounts of pepper spray. He’s not in any danger. This is just standard procedure, ma’am. We treat everyone that way!

According to Rick Hahn from Accuracy in Media, the problem here was, of course, the liberal media, which failed to provide proper context. Hahn, who is identified as having worked for the FBI for 32 years, made the usual law-enforcement case that the cops were really in danger: “Many of the protesters were seated with arms interlocked. This means police would have had to physically engage them. The fact that the protesters were seated leaves police trying to disengage them from one another at a balance disadvantage. The cops have to bend over or crouch down to try to physically disengage any one individual, bring him or her to their feet and affect the arrest. The fact that the protesters had interlocked their arms was surely an effort to avoid any one individual being removed for arrest. There’s no way of knowing how strongly the protesters would have fought disengagement, but the fact is, they were inducing, baiting if you will, physical confrontation from the police.”

Scott Spiegel, writing in Conservative Outpost, joined a growing chorus of conservatives who seemed to want the police to behave even more brutally toward these “animals” and who have a rather authoritarian view of the world: “When cops say move, you move – even if you’re curled in a fetal position on the ground with flowers in your hair listening to Cat Stevens and nursing orphaned kittens. The UC Davis police could have acted a lot more brutally, including prodding or beating protesters with batons.  The occupiers should consider themselves warned: Trust fund brat refuses to move, trust fund brat gets spray tanned. Protesters in the UC Davis videos can be heard chanting ‘Shame on you!’ at police after the incident.  Actually, shame on patsy mayors like Michael Bloomberg and Jean Quan for not empowering police to clear out these animals ages ago.”

For insight into the modern conservative rabble, one ought to read FreeRepublic. It’s beyond irony. One commenter expressed disbelief at the sight of police backing away rather than engaging the protesters: “Do you get a chill up your spine like I do when you see the police slowly back away as if they are backing down from an impending violent stand-off?” Others seemed eager to see violence: “A billy-club to the ribs would have been just as effective at removing the bums and we would be hearing all this crying about pepper-spray!” Granted, these are anonymous commenters, but they reflect widespread sentiment.

I disagree with most of what the Occupy protesters are saying, quite obviously, but when I see lines of riot-gear-clad officials standing in front of these unbathed wretches, my heart goes out to the wretches. They need a lesson in economics and politics. The policies they advocate – to the degree that many of them have any well-defined grievances – range from the silly to the disastrous. They are inconsistent, foolish and hypocritical. Many of them are lazy freeloaders. Such is life. They do create filth and chaos in public parks, but if one cannot protest in a public park, there are not many places to have a protest. It’s in everyone’s best interest for the authorities to provide as much latitude as possible for protesters of any political persuasion. We still do pretend to live in a free society, right?

Whatever the bigger picture, this was a clear case of abusive and heavy handed behavior by the campus police. The president of the university was right to call for an investigation and the officer and the chief need to be removed from their positions, not just given meaningless and indefinite paid leave. And now it’s time for Californians to take a closer look at issues of police conduct and secrecy. In recent years, Democrats and Republicans have made those issues off limits thanks to their close association with the police unions.

Maybe the Occupiers can become productive and lead a real movement for civil libertarian reform. I know it won’t happen, but who can live in California without embracing a little wishful thinking?

(Steven Greenhut is the Editor-in-Chief for CalWatchdog, where this article was first posted. Greenhut was deputy editor and columnist for The Orange County Register for 11 years.)

They Can Dissemble But Their Votes Don’t Lie

The 2011 Howard Jarvis Taxpayers Association Legislative Report Card is out and, from the perspective of citizen taxpayers and homeowners, the grades of the majority of legislators are so poor that, if they were school children, they’d be grounded.

The 2011 legislative year was not without its victories. The largest tax increase in U.S. history, approved in 2009, was not extended, saving California families about $1200 a year. Also, billions of dollars in energy ratepayer charges were not renewed.

But the California Legislature remains a hostile institution for taxpayers. New taxes, masquerading as fees, were pushed on everything from homeowners to carpet. And our elected representatives are still are unable to bring government spending under control. After just four months into the new fiscal year, the budget already reflects an $8-10 billion deficit.

Taxpayers demand legislators be held accountable on the issues they care about: reasonable taxes, protection of Proposition 13’s two-thirds vote and limits on property taxes, and their ability to use the initiative process. That is the purpose of the HJTA Report Card.

Because HJTA is a non-partisan organization -– over 30 percent of members are registered Democrats -– we ignore party affiliation entirely when handing out grades. With two million unemployed Californians and one of the nation’s heaviest tax burden, favoritism or other gimmickry is the last thing voters need. Only the politicians’ votes matter, not their party affiliation, their campaign promises or their excuses.

For this evaluation to be as fair and non-partisan as possible, we have taken a number of steps to ensure that the scorecard is balanced. Although we are not fans of grade inflation, we did adjust our grade levels downward to ensure a legislator gets a “C” grade if they agree with taxpayers positions at least half the time. (We are fully cognizant of the fact that, by giving a legislator a passing grade with 50% correct votes, we risk being called too soft -– an adjective not normally associated with HJTA).

Despite our leniency, 76 legislators still received grades of “D” or “F.” As has been our practice, we have given half-credit for all vote abstentions on bills. We recognize that legislators are constantly buffeted by special interests and their own leadership, and we want to ensure that those who don’t vote for bills that increase the burden on taxpayers are rewarded accordingly.

The 2011 scores are based on 22 bills. This year we double-weighted two bills: ABx40 and Assembly Constitutional Amendment 6 as they represented a tax increase and a threat to the initiative process, respectively. Also, for the first time, we have failed to give a score to a legislator. Since March, State Assemblyman Jeff Gorell (R-Ventura) has been serving our country faithfully overseas in Afghanistan and was unable to vote on many legislative bills.

While scores declined for legislators overall, there were some bright spots. For the second year in a row, State Senator Lou Correa scored the highest among Legislative Democrats with a “C” grade. For Republicans, 26 received “A” grades this year compared to just 18 from a year ago. Five Republicans also received perfect scores. All of these came from the Assembly, and HJTA is pleased to report that four were freshman legislators participating in their first report card. (The five are Assembly Republican Leader Connie Conway, Assemblyman Tim Donnelly, Assemblywoman Shannon Grove, Assemblywoman Linda Halderman and Assemblyman Mike Morrell).

2012 is an election year that will see a lot of changes in the political process. Last year, voters passed reforms establishing an open primary election system and new legislative and congressional districts. With new rules and district boundaries, it may be even more difficult for taxpayers to sort out who best represents their interests. The HJTA report card is designed to help Californians gauge how their state representatives are performing on taxpayer-related issues so they can make good decisions on who they will support.

To see the grade your representatives earned, click here.

(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

$1 Million Remodel For Sacramento County Supervisors

Sacramento County Supervisors believe that they need a new Taj Mahal in which to hold their meetings. And no ugly old government building will do.

The Sacramento County Board of Supervisors is planning on spending $1 million to renovate supervisors’ chambers despite a $181 million budget deficit. What’s another $1 million when the hole is already so deep?

Just in case there is a politician alive not sure why most voters despise them, the out-of-touch Sacramento politicians will make the case for you.

According to a Sacramento Bee story, the money comes from cable fees. “As it turns out, the county has found a funding source that can be spent only on government access projects and not for other services,” the Bee reported.” The Sacramento Metropolitan Cable Television Commission awarded the county about $1 million of its Public, Education and Governmental funding, which comes from fees paid by cable companies, said Bob Davison, the commission’s executive director.”

But here is the kicker – the commission is made up entirely of local politicians, including the county supervisors who will benefit from the new chambers.

The commissioners, who unanimously approved the renovations in June, “considered it a worthwhile project because 40 percent of the programming from Metro Cable, which broadcasts local government proceedings, comes from the board chambers.”

The county has terminated more than 800 employees, and made severe cuts to county programs. Even if the money is not directly from the county budget, who would vote to approve a $1 million redecorating program for government facilities?

There are plenty of large high school auditoriums with adequate sound systems to accommodate the public at the meetings. Bring out the metal folding chairs and wooden podium – that’s the meeting environment they should have.

Remember the names of the Sacramento County Supervisors:

District 1 is represented by Phil Serna. District 2 is represented by Jimmie Yee, who previously served on the Sacramento City Council and as Mayor. District 3 is represented by Susan Peters. District 4 is represented by Roberta MacGlashan. And District 5 is represented by Don Nottoli

The website of The Sacramento Metropolitan Cable Television Commission lists all of the officials: “The Commission is a joint powers agency representing seven member jurisdictions: the County of Sacramento, the cities of Sacramento, Citrus Heights, Elk Grove, Rancho Cordova, Folsom, and Galt. The power and authority of the Commission is vested with a Board of Directors which currently consists of eleven Board members:

Five members of the Commission Board are members of the County Board of Supervisors:

  • Supervisor Phil Serna (District 1)
  • Supervisor Jimmie Yee (District 2)
  • Supervisor Susan Peters (District 3)
  • Supervisor Roberta MacGlashan (District 4)
  • Supervisor Don Nottoli (District 5)

Three members of the Commission Board are members of the Sacramento City Council:

  • Council Member Sandy Sheedy (District 2)
  • Council Member Kevin McCarty (District 6)
  • Council Member Darrell Fong (District 7)

One member of the Commission Board is an appointed representative for the Citrus Heights City Council:

  • Council Member Mel Turner

One member of the Commission Board is an appointed representative for the Elk Grove City Council:

  • Council Member Steven Detrick

One member of the Commission Board is an appointed representative for the Rancho Cordova, Folsom and Galt City Councils:

  • Folsom City Council Member Andy Morin
  • (Ex-Officio Member, Rancho Cordova City Council Member Robert McGarvey)

Since last January 2011, the Commission has cancelled eight of its regular monthly meetings, and held only three meetings. Is there any accountability anymore?

The comments on the Bee’s story say it all.

(Katy Grimes is CalWatchdog’s news reporter. Grimes is a longtime political analyst, writer and journalist. This article was first posted on CalWatchdog.)

The Fallacy of the Untaxed Pot of Gold

With increasing frequency, offering new taxing mechanisms to fund ever-growing governments is becoming in vogue. Whether it’s tinkering with California’s Prop 13, marijuana taxes, or the newly proposed 5% “service” tax in California, such proposals labor under the false premise that there are untaxed pots of gold and that if only we would tap them our budget problems would go away.  Rather than solve our problems, however, new taxes would weigh down our economy even more and result in less revenue over time –not more.

Keep in mind, as we consider government funding, that there is not one government today that is smaller than it was 10 years ago or 40.  The sphere of governments – federal, state and local – and their corresponding budgets have grown at alarming rates and run up huge unfunded liabilities.  The prospect that any of them will be smaller tomorrow or 10 years from now is literally zero.

Despite that, discussions over funding government growth, however unsustainable, dominate over whether we should be growing government at all.  Those who would accept government growth rather than curtail it, constantly look for new ways to tax. It is a predilection that is sinking our cities, states and country.

Keep in mind that throughout history, in any given economy, there is only so much that a government can extract from the economy overall before the weight of taxes drags the economy down.  Whether that is extracted by 1 tax at 50% or 50 different taxes at 1% – the economic effect is nearly the same. I would argue, however, that 50 small taxes are worse because people don’t realize the aggregate effect as much as they would one, large, blunt tax.  Since we live under many different and hidden taxes, it’s easier to offer new, however small, taxes.

As an economy weakens, there are fewer business transactions and fewer sales.  Recessions brought on by high tax rates, like all recessions, produce less tax revenues not more.  That is why John Maynard Keynes said that “high tax rates defeat their own object,” i.e. to collect tax revenue.

Today we face double-digit, structural unemployment.  Since 2007, the Nation has lost nearly $7 trillion in homeowner equity and California homeowners have lost nearly $2 trillion of that – more than the size of its economy for a year. With those losses, dramatic decreases in net worth and dramatic losses in consumer purchasing power have followed. Simply stated, the great lot of Americans and Californians do not have the money or wealth they once did.

Those weakened homeowners, unemployed and consumers in general are not hiding pots of money going unused and waiting to be taxed.   People are buying fewer things overall because they have less money overall – and less consumer purchasing results in less jobs which means less consumer purchases by the unemployed, and the downward spiral continues.  Those pushing the proposed new service tax in California fail to grasp those basic concepts and Keynes’ warning.

The new tax would tax nearly everyone that provides services including business consultants, most independent contractors, financial advisors, insurance brokers, real estate brokers, travel agents, housekeepers, gardeners, piano teachers, hair dressers, pool servicemen and the accountants and lawyers that service them.

Because the economy and consumer purchasing is so weak, people are already cutting back on the use of those services – which means less tax revenues from a reduced number of transactions whether they be a home sale or a new will.  In response to such weak demand, businesses are forced to lower prices to attract consumers and in periods of weak demand, like today, manufactures and sellers cannot easily pass on price increases.  For instance, despite rising costs for commodities and parts, today’s businesses have not been able to raise prices at the same rate as those rising costs.

All combined, those dynamics are why Keynes wrote in full:
‘Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the budget.
For to take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more–and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss.”

California and the Nation are already making a loss.

Keynes well understood that business owners of today will not simply be able pass on the 5% service tax increase which, if they tried, would amount to a 5% price increase.  Instead, by in large, the new 5% tax increase will be an added 5% cost of doing business on those providers. Thus, despite the modest tax decreases offered elsewhere in their proposal, an overall tax increase would await a huge portion of California businesses – not mention future increases to that 5% rate which would inevitably be pushed.

We should also know that just because a portion of the transactions that Californians undertake is not being taxed or is taxed lower than in some other states, i.e. property taxes or services, does not mean that a higher or new tax will net more money from people – just as higher prices do not create more sales.

At the end of the day, consumers and businesses have only have so much money – the number and variance of taxes leaves them with only so much in their pockets.  Attempting to pick another of their pockets will not produce long-term, newfound gold.  It will only leave them weaker than before and so to our economy – all of which leads to prolonged budget deficits.

I am literally saddened to hear some think a massive new category of taxation is the answer to California’s economic or budget problems.   At some point, those who want to raise tax rates or create new taxes will come to understand that California is already uncompetitive because it is over taxed and over regulated – while they may not get that during an economy where California homeowners have lost nearly $2 trillion in homeowner equity, the over 10,000 people that leave this state every week and those facing foreclosure and under-water mortgages certainly do.

(Tom Del Beccaro is the Chairman of the California Republican Party.  This article was first posted on Fox & Hounds.)

Are “Automatic” Budget Cuts Really Automatic?

Is anyone else starting to wonder just how automatic California’s planned “automatic” budget cuts are going to be?

Especially when Gov. Jerry Brown, the Legislature and state finance officials, channeling their inner Bill Clinton, seem to be suggesting that a cut-triggering budget shortfall depends on what your definition of what — and when — “shortfall” is.

It seemed so straightforward last June, when Brown and the Legislature finally agreed on an $86 billion budget that was balanced with $4 billion of magic money — a late-arriving guesstimate of the additional funds the state’s purportedly improving economy would pump into California’s coffers over the next year.

But just in case that fortuitous budget estimate turned out to be a bit optimistic, the budget mavens agreed to a trigger mechanism that called for deep, automatic midyear program cuts if the state finance officials found the budget was running more than $1 billion below estimates.

Fast forward to last Thursday, when state Controller John Chiang announced that California’s revenues were $1.5 billion below budget estimates for the first four months of the fiscal year.

Under the budget agreement, a shortfall of that size would trigger $601 million in cuts on Jan. 1, including $100 million each to the University of California and state college systems, $30 million to community colleges, and millions more to social service programs.

If the projected shortfall rose above $2 billion, an additional $1.8 billion in budget reductions would take place Feb. 1, including $1.5 billion in K-12 school funding.

Those are some ugly numbers that are going to slash deeply into all levels of education and threaten the safety net for California’s most vulnerable residents. But if the money’s not there, what other choice is there, which is why the cuts were put on autopilot.

Still, there’s no way a Democratic governor or legislator wants to see those kinds of cuts on their watch, regardless of how necessary — or automatic — they may be.

So now there’s a growing murmur about how it’s not the actual, cash money budget shortfall that exists that will trigger the cuts, but the projected health of the budget in June 2012. And, boy oh boy, are those second half numbers going to be good. Trust us.

Stop me if you’ve heard this before.

“The bulk of the $4 billion, to the extent that it’s going to be realized, will be coming in between December and June,” H.D. Palmer, spokesman for the state Department of Finance, said last month. “We are still in the early innings.”

According to a memo obtained by the Sacramento Bee,  the Assembly’s Democratic budget team is convinced that the state and national economy is beginning to roll, which will be good news for the state’s future budget numbers.

“Whether the trigger is pulled,” the memo said, “will have much more to do with thesubjective forecast for the second half of the year than the objective data that we have in hand now.” (Emphasis contained in memo).

So, to paraphrase, while the magic money used to balance the budget last June hasn’t arrived in the state treasury so far, the check is in the mail. We hope.

It’s the no-real-money-needed budget plan. If the state is, say, $2 billion in the hole on Dec. 15, when state finance Director Ana Matosantos is required to release her budget estimate for the rest of the fiscal year, just project that $1 billion and one additional dollars will arrive by June 30 and, voila, no midyear “trigger” cuts needed.

And when the money isn’t there come budget time? As Texas Gov. Rick Perry would say, “Oops.”

But of course by then it’s time to put together the 2012-13 budget, so the deficit can has been kicked down the road for yet another year, once again avoiding the hard choices the governor has repeatedly said must be made.

In September, Brown struck a blow for honesty in budgeting by vetoing a bill that would have let Democratic legislators fiddle with the budget trigger in the name of fairness, not to mention political expediency.

It’s two months later, though, and those automatic cuts no one wants are looming larger every day. It would be easy enough to fudge that December estimate, arguing that any current shortfall is just a technical issue that will disappear in the months to come.

Yet Brown was elected on an “eat your vegetables” platform that promised he would be the bringer of hard truths, doing whatever was needed to get the state back on a firm economic footing.

It won’t get much harder than letting those devastating cuts take place. But if Brown wants to have any credibility when he starts the next round of budget negotiations in January, he can only grimace and let them happen.

(John Wildermuth is a journalist and noted political commentator. This article was first posted in Fox & Hounds.)

Orange County Lincoln Club’s “New Conversation” on Illegal Immigration

Last month, the joint Lincoln Clubs of Orange County, San Diego, and Northern California went on their annual trip to Washington, D.C. to visit with Members of Congress, U.S. Senators and think tank leaders.  We talked mostly about the economy, jobs, and pension reform.  The issue of immigration was addressed in a session with James Carafano, Director of the Douglas & Sarah Allison Center for Foreign Policy Studies at The Heritage Foundation.

Carafano was one of our most engaging speakers.  He said that everyone on all sides of the immigration issue was angry at the current Presidential Administration for the handling of immigration policy and enforcement.  No one “Inside the Beltway” could see a pathway towards meaningful policies to address border security, a guest worker program, or effective enforcement policies aimed at those who come here illegally and those businesses that knowingly break the law by hiring them.

This week, the Lincoln Club of Orange County unveiled “a three-point, common-sense approach” on Immigration Reform.  Their blueprint may be the beginning of a renewed new discussion, focused on economic empowerment rather than welfare-state dependence.

Immigration policy is a political landmine for lawmakers, even though more and more businesses are acknowledging that border security is only one facet of the discussion that must be addressed when talking about employers’ and workers’ responsibilities under the law.

The Orange County plan supports an approach to immigration reform that includes (1) additional border security measures, (2) creation of a guest worker program that allows illegal immigrants to get temporary work permits if they meet certain criteria such as proof of employment, passing a criminal background check, paying fees and taxes and (3) calls for a streamlined high-tech system for employers and government to enforce the program.

Conservatives and liberals in California need to abandon the sharp-tongue, wedge campaign rhetoric and engage in the dialogue from a realistic standpoint of how policy impacts our economy.  They need to work together and engage employers and workers from all sectors of the California economy.  Immigration reform impacts all Californians who care about our economic base.  This is especially true for Central Valley growers and workers in high tech Silicon Valley, major pillars of the California economy.

The dialogue that has taken place thus far has been limited to pricey attorneys, political consultants, special interest groups and individuals who wish to paint immigration as a wedge issue.  What good does that discussion do to restore California and American economy’s economic footing at a time when we must be innovative and create jobs?

When my grandparents came here from Lipari, Sicily and Castel Forte, Italy; they sought the American dream of making a better life for their family than the one they left behind.  They worked hard during the Great Depression and fought so that their children and grandchildren would have a better life.  Economic security and the “shining city on a hill” wasn’t something they thought was unattainable.  Their work ethic and values were passed along to all of their grandchildren.

If we don’t do something soon to effectively address illegal immigration through market based, sensible solutions, we’ll be stuck with an underground economy that will fill the labor force in our agriculture centers and big cities illegally.  That breeds more government-based, government-run solutions rather than economic vitality.

When I worked at the U.S. Labor Department in the previous Presidential Administration, we accomplished a great many things to reform outdated regulations and ease the regulatory environment so small businesses could create jobs.  What we failed to do was rally conservatives and liberals to common ground on immigration.  The current Administration had the same chance to make their mark when the President was elected with super majorities in both the U.S. Senate and U.S. House.  Now with a split Congress, attempts appear futile to enact meaningful, market based reform.

Some will say it’s too hard to enact an immigration policy that favors economic freedom and opportunity since our government seems intent on preserving a welfare state full of taxpayer funded entitlements.  But the key to the discussion is restoring economic freedom rather than stifling it.  Gravitation towards government-funded fixes must be replaced by gravitation towards market-based reforms that favor high growth jobs and a better way of life.  That is the American dream that brought my Grandparents to this country – not the promise of a government handout.

(Judy Lloyd is a senior manager and strategist specializing in government affairs, community outreach, development and public relations. She has served in notable leadership roles in government, the private sector and her community for more than 28 years.)

Supreme Court’s Decision a Victory for the People’s Initiative

Many news reports on the California Supreme Court’s decision to allow Proposition 8 initiative proponents to defend their initiative before the bench called the decision ‘a set back for gay rights.’ More accurately the decision was not for or against gay rights, it was a victory for the people’s right of initiative.

It makes both legal sense and common sense that initiative proponents are allowed to defend their law against legal and constitutional challenges. Leaving a law passed by the voters without a champion would be more than an insult to the proponents; it would be an aberration of justice to the majority of voters who passed the measure.

Simple fairness dictates that an important constitutional question gets a vigorous defense in front of an impartial panel.

In the case decided yesterday, the California high court was responding to a request from the 9th Circuit Federal Court, which asked if California law permits the proponents to defend initiatives if the state refuses to step up and defend a measure passed by the voters. Proposition 8, which prohibits gay marriage, was passed in the 2008 general election but both Governor Arnold Schwarzenegger and then-Attorney General Jerry Brown refused to argue for the law in court deciding on their own that the measure was unconstitutional.

The California Supreme Court found that when proper authorities refuse to carry out their duties to defend a challenge to a law, “the official proponents of a voter-approved initiative measure are authorized to assert the state’s interest in the initiative’s validity.”
The court’s decision has nothing to do with the issue of the case or ideology.

The will of the people is expressed through a successful ballot measure. Opponents have the right to challenge ballot measures if they believe basic rights have been stripped away by a majority vote. The courts have a right and a duty to make that determination and nullify the law if required by constitutional dictates.

But the people’s voice cannot be stilled by manipulation of the legal process when the measure at hand is refused a champion.

In a 1999 opinion piece titled, “Who Represents Voters at the Mediation Table,” published by the Los Angeles Times, I argued that the Gray Davis administration set up a mock adjudication of Proposition 187, the measure denying benefits to illegal aliens, by submitting portions of the measure for mediation. The problem was that on both sides of the mediation table would be non-supporters of the measure.

As I wrote in the piece, “As to any proposition’s constitutionality, that is for the courts to determine in an open hearing with both sides of the argument–true supporters and real opponents–making the case for and against it.”

The same is true today.

(Joel Fox is President of the Small Business Action Committee and Editor of Fox & Hounds, where this article was first published.)