17-Cent Gas Tax Hike on the Horizon

August 26, 2016 By Chris Reed 22 Comments

gas prices 2The Democratic member who has led the push in the Assembly for a gas tax hike to pay for transportation improvements is teaming with the Democratic senator who has played the same role in his chamber. And the pair want to be far bolder that Gov. Jerry Brown was in his 2015 proposal.

Assemblyman Jim Frazier, D-Oakley, and Sen. Jim Beall, D-San Jose, propose a 17 cent per gallon tax increase to fund a $7.4 billion transportation program, with likely additional annual hikes after adoption because the rate is indexed to inflation. They also want to increase the tax on diesel fuels by 30 cents a gallon, with the same indexing provision, and to make it easier to get approvals for transportation infrastructure improvements.

Brown’s proposal — which went nowhere in a special session — was built on a 6 cent per gallon tax increase and other provisions that would have funded a $3.6 billion transportation plan.

Bitterness over 2010 gas tax swap hangs over debate

The huge problem facing any proposal to raise taxes of this sort is the need for two-thirds approval, which means Republican votes in both the Assembly and Senate are necessary. And Democrats lobbying for GOP support don’t just have to overcome traditional Republican opposition to higher taxes. There continues to be deep bitterness over the gas tax swap that GOP Gov. Arnold Schwarzenegger and Democratic lawmakers pulled off in 2010 to plug a $1.8 billion hole in the 2010-11 budget. Republicans aware of this history would struggle to believe that the tax hikes that Frazier and Beall seek for road repairs might not at some future date be used to pay for state salaries, pensions or other needs unrelated to potholes and aging bridges.

The background: Irate over previous diversions of gasoline sales taxes from road repairs to other uses, California voters twice this century passed ballot measures — Proposition 42 in 2002 and Proposition 1A in 2006 — that banned such use of gas sales tax revenue.

But gasoline excise taxes can be spent on general fund obligations. So in 2010, gas excise taxes were sharply raised and gas sales taxes sharply reduced. Because the move was revenue-neutral, Schwarzenegger and Democrats successfully argued that the maneuver only needed to pass on a simple majority vote — not the two-thirds vote needed for tax hikes.

As a result, each year, the state Board of Equalization announces whether it is raising or cutting state excise taxes on gasoline to honor the deal’s requirement that the 2010 gas tax swap be roughly revenue-neutral.

Recent coverage of the Frazier-Beall initiative has not detailed whether the 17 cent per gallon tax hike would be entirely in the gas sales tax or entirely in the gas excise tax or a combination of increases in each.  If it were in the gas sales tax, that would nominally mean the money could only be spent on road repairs and infrastructure improvement because of Propositions 42 and 1A. But another gas tax swap could enable the money to be diverted to the general fund by a simple majority of the Legislature in the future, at least if the governor was amenable.

Republican lawmakers are also likely to be wary of another part of the Democratic lawmakers’ proposal: a $165 yearly fee for owners of zero-emission vehicles to help pay for road improvements. While that’s higher than what most states with such fees charge, it’s only half of what the average U.S. car owner pays in gas taxes a year, according to data from 2013.

The argument that zero-emission vehicles should pay more toward road maintenance is dismissed by greens who cite the environmental benefits of the vehicles. But as such vehicles become more common — and as states push gas taxes higher — owners of regular vehicles and free-market advocates are likely to cry foul.

Originally published by CalWatchdog.com

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Legislature clings to “gut and amend” powers

August 11, 2016 By Matt Fleming 9 Comments

TransparencyEven as a measure to end the most egregious offenses waits for voters in November, even as the procedure is discouraged by leadership and even as the move is prohibited by the Legislature’s rules, Assembly Speaker Anthony Rendon will continue to allow bills to be gutted and amended, his staff confirmed.

Gut and amend is a catchall phrase thrown around Sacramento. In general, it means removing all or a substantial part of a bill and replacing it with new provisions that have little or nothing to do with the bill’s original intent, especially after the bill’s shell has passed through a part of the process, like a committee hearing or a vote in one chamber.

Proponents say there are instances when it’s necessary, but detractors say it leads to bad legislation and limits the power of those with an opposing view. The times that irk opponents the most are when a bill is gutted and amended sometimes just hours before a vote.

Members of Rendon’s staff said the Paramount Democrat, who has taken a more soft-handed approach to leadership than some of his predecessors, does not encourage the practice, but leaves legislators to decide how to best handle their legislation.

“There are many situations where a gut and amend may be actually be needed,” said Rendon spokesman John Casey. “Regarding the Speaker’s involvement on the issue, he does not tell members to do anything. They are the masters of their own legislation and are entitled to amend their bills in any way they see fit.”

Senate President Pro Tem Kevin de Leon’s office did not respond to requests for comment, but the Los Angeles Democrat has not opposed gut and amends in the past.

Examples

Proponents of a bill generally care little for how it gets passed as long as it becomes, and remains, law. So the murky gut and amend process is a means to an end for advocates.

For example, last year, the Legislature officially amended a shell with 104 pages of language changes that dissolved 400 redevelopment agencies statewide, which subsidized local development, which advocates of the move said eliminated wasteful and corrupt agencies.

However, right or wrong, the gut and amend circumvented the normal vetting process, critics said.

“SB 107, redevelopment rewrite, may (or not) be a great bill but springing it on final day of session as a budget trailer bill is shabby,” Sacramento Bee columnist Dan Walters tweeted at the time.

A year prior, the Legislature pushed through a 112-page bill limiting school districts’ ability to fund reserves, without even a committee hearing, which Walters called one of the “most pointlessly cynical legislative act(s) of this still-young century.”

And years before that, the Legislature jammed through a bill streamlining the strict environmental review process for local development to pave way for a proposed football stadium in Los Angeles — the shell of the bill required recycling and compost bins in schools — only to have a court later rule part of the measure “unconstitutional.”

And so on.

Rules

Legislative rules in both chambers already prohibit “non-germane” amendments, meaning those amendments that have nothing or little to do with the shell. A prime example waiting in the wings is Democratic Assemblywoman Lorena Gonzalez’s bill to even out when farmworkers are given overtime pay — a measure that died earlier this year but has since been added to a bill originally focused on teachers.

However, the rules can be, and are routinely, waived. Leaders generally like having as many legislative tools as possible at their disposal, and anything that speeds up the process or lacks scrutiny limits the power of the minority to impact in the debate.

Proposition 54, which is to be decided by the voters this November, would, among other things, require the final version of a bill to be in print and made available online for 72 hours prior to a vote.

“The only way to actually fix this problem is by changing the California Constitution,” said Sam Blakeslee, a former Republican legislative leader and proponent of Prop. 54.

But do some deals need to be passed in the eleventh hour?

Prop. 54 would prevent the last-minute gut and amends, but it would also thwart other quickly-passed and negotiated bills that may not qualify as gut and amends, like the 2008 budget deal advocates say staved off bankruptcy.

Democratic political consultant Steven Maviglio argues that Prop. 54 is just another “tool” for special interests to unravel legislative deals at the last second, pointing to the 2008 budget agreement, the 1959 Fair Housing Act, the 2006 climate change bill (AB32) and the 2014 water bond — all voted on without 72 hours notice.

“Let’s not give special interests any more tools to prevent lawmakers from doing the right thing, whether it be unnecessary delays in enacting legislation or ways to demonize the Legislature,” wrote in The Sacramento Bee.

This piece was originally published by CalWatchdog.com

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Why Teachers Union is Desperate to Pass Prop. 55

July 28, 2016 By Chris Reed 3 Comments

K-12-spending-1California voters face a daunting challenge in November in that they’ll be asked to become familiar with a stunning 17 ballot measures. Some consultants fear that this will overwhelm many voters, who will choose either to vote no on everything or not vote on many initiatives.

But when it comes to Proposition 55, ignorance of its contents is not likely to be a problem for voters. The California Teachers Association and its allies are likely to spend $100 million or more on saturation TV and social media ads depicting the measure as crucial to the future of California public education.

Prop. 55 would extend for 12 years the temporary tax hikes on single people earning more than $263,000 and couples earning more than $526,000 that voters approved in 2012 (then at slightly lower income thresholds) as part of Proposition 30. Instead of sunsetting at the end of 2018, the income tax increase would continue through 2030. The $7 billion or more this is expected to generate annually would be earmarked for education. The temporary sales tax hike that voters also approved in 2012 will lapse at the end of this year.

Revenue recession took toll on teachers

prop 55 websiteThis month, the CTA wrote a $10 million check to the Yes on 55 campaign, which now has a $28 million warchest. The CTA and the smaller but still powerful California Federation of Teachers are likely to write several more checks that size to try to avoid the headaches that public school teachers faced from 2008 to 2012 during California’s long revenue recession.

While the “step” increases in pay that teachers typically receive in 15 of their first 20 years on the job were largely protected, strapped school districts didn’t grant additional across-the-board pay hikes that many provided during recent tech bubbles that pumped up capital gains revenue for the state. They also pushed for teachers to pay more toward their benefits and in some cases accept layoffs that extended beyond the newly hired to those with several years of experience.

As the Legislative Analyst’s Office graphic above shows, education spending has strongly rebounded since 2012, helped by a new boom in Silicon Valley and Proposition 30’s adoption that year. But the CTA and the CFT share Gov. Jerry Brown’sskepticism that the current good times can last. After first insisting that the temporary tax hikes must be allowed to expire because that’s what voters were promised, Brown has been far less vocal on the topic in the wake of new forecasts from his Department of Finance that state deficits are likely in coming years without retention of the income-tax hike.

Since state coffers are the main source of K-12 funding, Prop. 55’s approval is crucial to maintaining teachers’ pay and benefits. In most school districts, compensation eats up more than 80 percent of general fund budgets.

But Prop. 55’s route to passage may be rougher than Prop. 30’s in 2012. The Sacramento Bee editorial page has already saidthat support for extending the tax hikes should be explicitly linked to reforms in teacher tenure and to teacher unions’ support for state-subsidized childcare for poor families.

Some state lawmakers may also try to leverage their support for Prop. 55. Led by Assemblywoman Shirley Weber, D-San Diego, they are unhappy with how 2013’s Local Control Funding Formula has been implemented. The measure was supposed to pump billions of dollars in extra funding to districts with large numbers of English-language learners and foster children so they could provide help specifically for such students.

But three years in, education reform groups say that’s not happening, citing the absence of evidence of additional help for either category of student. Last year, Superintendent of Public Instruction Tom Torlakson said the local control dollars could be used broadly for general pay raises, overruling a lower-ranking official.

This article was originally published by CalWatchdog.com

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Legislative Democrats Gift Awards to Family, Friends

July 23, 2016 By Matt Fleming 2 Comments
Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

At a time when voters are increasingly believing that the system is rigged, some state legislators are making that perception worse by giving district-wide awards to their family members, critics say.

While it’s not uncommon for legislators to participate in award ceremonies recognizing constituents for their accomplishments, it’s becoming more common for those constituents to be friends and family members of the legislators.

In March, members of the Legislature honored women from their districts to be Woman of the Year: Assemblyman Luis Alejo picked his mother. In May, Assemblywoman Nora Campos selected as Small Business of the Year a brand new political strategy firm both her brother and her longtime political consultant work for, which had also held fundraisers for her. And just a few weeks ago, Assemblywoman Lorena Gonzalez picked her boyfriend, Nathan Fletcher, a former state legislator, to be Veteran of the Year.

“These ‘awards’ are a generally cost-free technique for buying some goodwill in the community,” said John J. Pitney, Jr., a Roy P. Crocker professor of politics at Claremont McKenna College. “Generally, they are harmless, but when lawmakers give them to their relatives, friends and squeezes, they just contribute to the sense that the political system is rigged.”

“We already have a surplus of cynicism, and this nonsense makes it worse,” Pitney said.

Hurts the association

This was the first year Campos, a San Jose Democrat, chose to participate in the Small Business of the Year award, selecting Voler Strategic Advisors, which had been in business less than one year and does not have a working website.

The same month the award was given, Voler held a fundraiser for Campos’ Senate campaign — Campos is challenging Sen. Jim Beall, a fellow San Jose Democrat.

“This is absolutely not the spirit of the award,” said Samantha Toccoli, legislative coordinator for the California Small Business Association, one of the groups in charge of the program.

California Small Business Day was created by an Assembly resolution in 2000. Toccoli said she was unaware of any familial relationship between Campos and Voler and added that the organization is run by volunteers who have no way of efficiently vetting every honoree.

“I would hope that this reflects on the legislator and not the integrity or intention of our organization and the 25 other organizations that host the event,” Toccoli said.

A Campos spokesperson countered that the award was technically given to Voler’s owner, not Campos’ brother, Xavier, who is a senior vice president, or her longtime political consultant and former communications director, Rolando Bonilla, who is Voler’s chief strategy officer.

Look no further

For Alejo, a Watsonville Democrat, it’s his last year in the Legislature, having been termed out and elected to the Monterey County Board of Supervisors — he said he “could not think of anyone better” for the award than his mother, Maria Luisa Alejo Covarrubias.

“I wanted to honor my mother during my last year in the state Assembly,” Alejo said in a statement at the time. “Our mothers are our first teachers and made us who we are today. My mother has done so much for my family and for our local communities, and I could not think of anyone better for this year’s Woman of the Year for Assembly District 30.”

Alejo did not respond to requests for comment.

Cronyism?

Because Gonzalez’s boyfriend is a former legislator, her awarding Fletcher was more conspicuous than the two prior examples. On Instagram, Fletcher said: “Honored to be chosen as Veteran of the Year by my Assemblywoman:)”

San Diego Republicans blasted Gonzalez, a San Diego Democrat, for choosing her boyfriend, which she defended on Facebook by highlighting Fletcher’s work with veterans, by denouncing the attacks as partisan and by blaming the media. She pointed out that others, including Republicans, had done the same.

“It is well known that Nathan and I are in a committed relationship, but there is a long line of assemblymembers who have picked husbands, wives, fathers, mothers and other relatives for recognition,” Gonzalez wrote. “Never once has it been questioned.”

Not who it is but how it looks

But the question isn’t so much whether Fletcher or any of the others are deserving of the awards, it’s a question of what message these actions send to the public, which is already weary from the perception of widespread double standards and cronyism.

“These examples reflect poorly on the Legislature,” said David Wolfe, legislative director for the right-leaning Howard Jarvis Taxpayers Association. “We need to ask if the awards program as a whole is in the best interest of California taxpayers.”

“If the Legislature truly desires to honor [taxpayers] it should rededicate the hours that they currently spend on pomp and circumstance shows like these and instead focus on fixing real problems, like our state’s $500 billion unfunded pension liability,” Wolfe said.

Lax leadership?

So far, the three incidents are isolated to Assembly Democrats and it’s unclear if Speaker Anthony Rendon, D-Lakewood — who waited more than two months to take action against a committee chairman accused of domestic violence and under a temporary and then three-year restraining order — will ask fellow legislators to abstain from taking actions that give the appearance of cronyism.

Rendon did not respond to requests for comment.

This piece was originally published by CalWatchdog.com

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Court Will Stop Suspending Driver’s Licenses Over Unpaid Fines

May 26, 2016 By Matt Fleming 5 Comments

parking ticketUnder pressure from civil liberties groups, Contra Costa County Superior Court announced last week a moratorium on the practice of suspending driver’s licenses over unpaid fines.

In March, the ACLU of Northern California and other groups urged the California Judicial Council — the policy-making board of the California court system — for action, arguing that suspending licenses for unpaid fines disproportionately affects lower-income drivers.

The ACLU and others have been targeting individual courts as well in Bay Area counties. Contra Costa County Superior Court responded last week saying the Failure to Pay policy was under review.

“The court will suspend all FTP referrals until further notice,” Steven K. Austin, presiding judge of the Superior Court, wrote last week to the ACLU of Northern California and Bay Area Legal Aid. Austin added the moratorium had already begun.

In many instances, drivers receive an initial fine for some violation, with lots of additional fees tacked on. What was a $100 fine could be several hundred dollars and only swelling from there, sometimes escalating to thousands as payment is not made.

This often leads to a suspension, which limits the driver’s ability to get to work and perpetuates the problem, the coalition of civil liberties groups argued. And many of these citations are for minor infractions like not wearing a seat belt or not signaling on a turn.

By the end of 2015, more than 1.9 million Californians, many of who whom are unemployed, disabled or homeless, had suspended licenses for failure to appear or failure to pay on citations, according to data provided by civil liberties groups.

Data shows a strong correlation between high poverty rates and high suspension rates in the bay area.

“What we’re looking for is a system that doesn’t punish people for being poor,” Micaela Davis, staff attorney with the ACLU of Northern California, previously told CalWatchdog. “What we see is that the fines and fees are so exorbitant on simple traffic citations that people simply can’t afford to pay.”

Detractors may argue that it’s the driver’s actions that incurred the fine in the first place, but Davis dismissed that notion, saying there are more effective ways of handling the issue.

“We can hold people accountable without also ruining their lives,” Davis said.

This piece was originally published by CalWatchdog.com

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50% of California’s Income Tax Revenue Comes From 1% of Residents

May 11, 2016 By Matt Fleming 5 Comments

California-budget-crisis-bear-flagIt’s politically popular to rail on the One Percent and demand top earners pay their “fair share.” But they actually already pay a large share, fair or not, which analysts predict could be disastrous to California in the event of an economic downturn.

Actually, nearly half of the state’s personal income tax revenue comes from the top 1 percent of earners — 150,000 individual tax returns. And personal income tax revenue is 65 percent of total revenue, which means the One Percent provides 33 percent of the state’s total revenue.

Besides volatility of the revenue stream — the One Percent’s personal income comes largely from capital gains, which are generally tied to the stock market — what happens if a Mark Zuckerberg or a Larry Ellison — #6 and #7 on Forbes’ list of wealthiest people in the world — leaves the state?

In New Jersey, another top-heavy state, one billionaire relocated to Florida, leaving as much a $140 million hole in the budget.

Few in California dispute the over-reliance on top earners is an issue. It’s in Gov. Jerry Brown’s budget summary and even the credit rating agencies Moody’s and Standard & Poor’s have warned against it. However, there is conflicting opinions of what needs to be done.

There could be tax reform, but is that a flattening of the tax code? Or a shift to sales tax on services? Higher property taxes? Would the solution be revenue neutral, meaning tax increases in one area are offset with decreases elsewhere? And what are the new consequences that might come with new tax dependencies?

What requires a frank discussion has so far drawn only whispers. Many on the left feel that while this is a problem, the state is on a good path, with reduced debt, a growing reserve fund, increased education spending and moves to address the state’s unfunded liabilities.

Republicans, on the other hand, lose sleep over the more than $400 billion in debt (including unfunded liabilities), the warnings from credit agencies and outside groups saying the state will falter in an economic downturn and a proposed 12-year extension of a “temporary” tax imposed on the wealthiest of residents that they see as only perpetuating the problem.

“I’m very concerned about where we’re at today,” said Assembly Republican Leader Chad Mayes of Yucca Valley. “You’ve got a very few people paying a vast majority of the revenue collected by the state. That doesn’t put us in a very good spot.”

A downturn is coming likely sooner than later

It’s a question of when, not if, an economic downturn will occur. In Gov. Jerry Brown’s budget introduction released earlier this year, it warned that California is in “its seventh year of expansion, already two years longer than the average recovery.”

“While the timing is uncertain, the next recession is getting closer, and the state must begin to plan for it,” the introduction continued. “If new ongoing commitments are made now, then the severity of cuts will be far greater — even devastating — when the recession begins.”

Tax reform

As a starting point, both sides agree some kind of tax-code overhaul is necessary. However, that’s about where the agreement ends.

Senate Budget Chairman Mark Leno told CalWatchdog the state is “to a certain degree overly dependent on the highest wage earners,” and suggested increasing the vehicle licensing fee (the “car tax”) because it’s more stable, although he conceded the toxicity of the issue makes it difficult. For example, Congressman Ted Lieu, when he was in the state Senate in 2012, pitched the idea of increasing the car tax, but relented only five days later after backlash from hundreds of constituents, including his wife.

Another idea Leno, the San Francisco Democrat, pitched was extending sales tax to services, to reflect a shift in the state’s economy away from manufacturing, which he again agreed was “a difficult conversation to have.” He lauded the efforts of Sen. Robert Hertzberg, D-Van Nuys, who is sponsoring legislation to do just that.

David Wolfe, legislative director for the right-leaning Howard Jarvis Taxpayers Association, suggested a simplified tax code — not quite a flat tax rate, but close. Wolfe said with the proper analysis sales tax on services is an idea “worth considering,” but it would require cuts elsewhere for their support.

“Of course, the overall sales tax rate would need to be lowered in order to make it revenue neutral because the base is being broadened,” Wolfe said.

Additional burdens

There are a few programs that limit the state’s flexibility, even though the individual programs may be beneficial:

  • Prop. 13 capped the rate property taxes could increase annually at two percent.
  • Prop. 98 requires that a large percentage of the state’s general fund be spent on education.
  • Prop. 2, also known as the Rainy Day Fund, sets aside a certain amount of money annually to buffer the budgetary effects of an economic downturn. However, even if fully funded it would only reserve 10 percent of the general fund tax revenues.

“While a full Rainy Day Fund might not eliminate the need for some spending reductions in case of a recession, saving now would allow the state to spend from its Rainy Day Fund later to soften the magnitude and length of any necessary cuts,” according to Brown’s budget explanation.

Prop. 30 extension

It’s likely that voters will consider a 12-year extension to Prop. 30, which is a “temporary” tax on top earners and a quarter-cent sales tax increase.

It was approved during the last downturn primarily to avoid deep cuts in education. It is set to expire in two years, but proponents saw this campaign cycle as more favorable.

The Prop. 30 extension only perpetuates the state’s over-reliance on personal income tax, said Carson Bruno, a research fellow at Stanford University’s Hoover Institution.

“Prop. 30 doubles down on this problem by making the income taxes even more reliant on the highest earners,” Bruno said.

Bruno agreed Prop. 30 expiring would leave a hole in the budget, but said legislators should have been preparing for this, as it was “temporary.”

“If they haven’t been doing that then that’s kind of irresponsible,” Bruno said.

This piece was originally published by CalWatchdog.com

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Quick and Dramatic Consequences of Minimum Wage Hike

April 22, 2016 By James Poulos 6 Comments

Minimum wage fight for 15Confronted with an impending hike to $15 in the California minimum wage, businesses, labor advocates and political analysts have all begun to shift strategies and tactics. Given current trends, the combined impact could be a smaller, more unionized workforce — that doesn’t always see the benefits wage activists have promised.

The consequences will be quick and could be dramatic. “Most state raises over the past decade, when there have been any, ranged from 1 percent to 3 percent annually. The law Gov. Jerry Brown signed will increase bottom-rung pay roughly 10 percent per year starting in January,” as the Sacramento Bee reported.

Manufacturing flight

One immediate result of the hikes has already appeared in Southern California, where the garment industry faces an especially rough road. Sung Won Sohn, former director of apparel company Forever 21 and economist at Cal State Channel Islands, told the Los Angeles Times a veritable “exodus has begun,” with manufacturers already tempted to shift garment production overseas to retreat from the Golden State still further. “The garment industry is gradually shrinking and that trend will likely continue.”

“In the 1990s, as borders opened up, foreign competitors began snatching up business from Southland garment factories. Eventually, many big brands opted to leave the region in favor of cheaper locales. Guess Jeans, which epitomized a sexy California look, moved production to Mexico and South America. Just a few years ago, premium denim maker Hudson Jeans began shifting manufacturing to Mexico. Jeff Mirvis, owner of MGT Industries in Los Angeles, said outsourcing was necessary to keep up with low-cost rivals.”

The problem, particularly acute for business owners who can’t automate jobs as readily as, say, fast food restauranteurs, was encapsulated by Gov. Jerry Brown himself, who signed the $15 wage into law despite clear reservations about its economic wisdom. “Economically, minimum wages may not make sense,” he said, defending the law on moral and sociopolitical grounds. A high minimum wage, Brown claimed, “binds the community together and makes sure that parents can take care of their kids in a much more satisfactory way.”

Incentives in tension

According to critics of the change, the tension involved in using poor economic choices to encourage good moral ones has driven labor unions themselves toward a predictable, if hypocritical, shift in their own policy objectives. Many of the same unions that agitated for a higher wage “have been quietly — and often successfully — lobbying cities to let employers who hire union workers pay them less than the mandated minimum,” as Quartz observed. “Unions say it gives them the flexibility to negotiate packages for their workers that supplant wages with health insurance and other benefits.

“Critics say that it’s a shrewd move by unions to drive up membership dues and ensure that their workers are the cheapest in town. The exemption gives cost-conscious employers little choice but to hire union, and workers who want jobs little choice but to join their local.”

At the same time, however, workers who have been rallied to the $15 cause have been swiftly pressed into service for pro-unionization demonstrations. “The demand from the original strikes in 2012 was $15 and a union,” said Mary Kay Henry, international president of the SEIU, according to the Times. “Underpaid workers in California are now on a path to $15, but we think the way we can make these jobs good jobs […] is through a union.”

In an added twist, some economists defending the wage hikes have raised the question of whether subsequent job losses are a price worth paying. Gov. Brown, in fact, has referred favorably to that view. “We understand that this can be difficult,” he said, as the Washington Post recalled. “But the fact is that there’s a principle called the living family wage, which is a doctrine that has been around for a long time, since probably before the 1900s, which is that you can’t expect someone to work if the wages for that work can’t support a family.”

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Should State Provide Retirement Fund for All Californians?

April 3, 2016 By Matt Fleming 12 Comments

retirement_road_signState policy makers on Monday inched closer to a state-run retirement system for workers who don’t have access to employer-run accounts.

Secure Choice, if implemented, would require employers of five or more people to automatically enroll employees into portable retirement accounts, with an opt-out clause for the individual.

While everyone has the ability to go check-in-hand to invest in a retirement account at any time, proponents of the measure point to the fact that many are not. The theory behind the bill is that the approximately 7 million people in the state who don’t have employer-based retirement accounts need to be nudged into planning for the future.

The program would be administered by a nine-member California Secure Choice Retirement Savings Investment Board, which is chaired by the state treasurer.

On Monday, the board accepted recommendations based on a market analysis and feasibility study prepared by an outside vendor. The study was paid for with $1 million in private funds raised by Senate pro Tem Kevin de León of Los Angeles, the bill’s sponsor.

The study’s recommendations will be added to an amended version of the 2012 bill, which is to be heard in the Senate Public Employment and Retirement Committee by April 22.

Details

The plan is for the state to provide the opportunity for saving. There is no state contribution to the fund, so proponents say there is little to no risk to the state.

The state would incur administrative costs, but those would be covered by participant fees, according to Grant Boykin, deputy treasurer for retirement security and health care.

Businesses will not be required to offer financial advice about the plans, said Boykin. Instead, they will pass on information determined by the board and then set up payroll deductions.

“Education will be hugely important, but that will fall on the board,” Boykin said.

Behavioral economists contacted by de León advised that people are 15 times more likely to save once the account has been opened than if left to open an account on their own, according to Boykin.

De León conceded that there was an element of risk to the employees when investing in retirement funds, but he said that the types of investments would be relatively low-risk.

Opposition

When the initial measure passed in 2012, it was over the opposition of groups like Howard Jarvis Taxpayers Association, which opposed on the grounds that the private sector was already performing this service, and business groups, like the California Chamber of Commerce, which opposed largely on concerns of the impact on employers.

Key findings of the study

  • “About 6.8 million workers are potentially eligible for the California Secure Choice Retirement Savings Program.”
  • “Likely participation rates (70-90 percent) are sufficiently high to enable the program to achieve broad coverage well above the minimum threshold for financial sustainability.”
  • “Eligible participants in California are equally comfortable with a 3 percent or 5 percent contribution rate. The vast majority of likely participants are also comfortable with auto-escalation in 1 percent increments up to 10 percent.”
  • “To start, the program should offer a default investment option consisting of a diversified portfolio with long-term growth potential and the choice to opt into a low-risk investment.”

Originally published by CalWatchdog.com

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SCOTUS declines to review CA asset seizure practice

March 7, 2016 By James Poulos Leave a Comment
Photo courtesy Envios, flickr

Photo courtesy Envios, flickr

The U.S. Supreme Court declined to take on a 15-year-old case challenging California’s asset seizure practices.

The justices decided “they would not hear a long-running lawsuit that contends the state does not do enough to notify the rightful owners before seizing their assets,” the San Francisco Chronicle reported. “Under the state’s law, accounts can be seized if a bank or retirement fund has lost track of the owner for three years. But lawyers who sued called the state’s system a ‘recipe for abuse’ because many people are unaware that their assets or those of a relative are being held by the state.”

The suit put the court’s interpretation of fundamental constitutional rights at stake. “Lead plaintiff Chris Taylor filed the class action at issue back in 2001, taking aim at California’s Unclaimed Property Law, which provides for the conditional transfer to the state of unclaimed property such as savings accounts or shares of stock,” Courthouse News reported. “Taylor accused state controller Betty Yee of violating due-process rights by transferring property to the state without providing the potential owners adequate notice.”

“During the intervening years, the challenge brought several amendments to the law’s notice procedures. Chief among them, California now notifies potential owners before the state transfers the unclaimed property, not after.”

Room for abuse

But the state has not changed its passive stance on money “which they freely admit they owe to someone (or that person’s heirs if they are deceased) but are unable to deliver because they can’t find them,” as HotAir noted. Other states, the site observed, had reason to watch the case closely. As CNN Money has calculated, “States, federal agencies and other organizations collectively hold more than $58 billion in unclaimed cash and benefits. That’s roughly $186 for every U.S. resident. The unclaimed property comes from a variety of sources, including abandoned bank accounts and stock holdings, unclaimed life insurance payouts and forgotten pension benefits.”

Critics have charged that governments take advantage of the perverse incentive to keep people in the dark about what they’re owed. California alone has amassed some $8 billion in unclaimed assets, according to the Los Angeles Times; “from this fund, it takes about $450 million a year to add to the state budget,” the paper reported.

Future hopes

Two justices did offer Taylor and his supporters a small consolation prize. In a concurring opinion, Justices Samuel Alito and Clarence Thomas recommended that the court consider “in a future case” how proactive states should be in similar situations.

“As advances in technology make it easier and easier to identify and locate property owners, many states appear to be doing less and less to meet their constitutional obligation to provide adequate notice” prior to seizure, Alito reasoned. “Cash-strapped states undoubtedly have a real interest in taking advantage of truly abandoned property to shore up state budgets. But they also have an obligation to return property when its owner can be located.” Alito said “the convoluted history” of Taylor’s suit “makes it a poor vehicle for reviewing the important question it presents[.]”

Legislative divisions

More broadly, asset forfeiture laws have become a target for reformers in both political parties, with bills attracting controversy in states across the country. Last year, a divided Legislature in Sacramento saw Senate Bill 443 sail through the Senate but sink in the Assembly. State Sen. Holly Mitchell, D-Los Angeles, and Assemblyman David Hadley, R-Torrance, “would have reformed the state’s asset forfeiture regulations to require that police and prosecutors actually convict citizens of crimes before seizing ownership of their assets to spend on themselves,” as Reason magazine noted. Between the Senate’s vote and the Assembly’s, state police and prosecutors mobilized effectively to prevent the bill from becoming law.

Originally published by CalWatchdog.com

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Middle Class Fleeing CA at Record Rates

February 25, 2016 By James Poulos 30 Comments

http://www.dreamstime.com/-image14115451New data has brought a new urgency to the souring fortunes of California’s middle class.

“Not only are Californians leaving the state in large numbers, but the people heading for the exits are disproportionately middle class working families — the demographic backbone of American society,” the American Interest recently noted.

Looking at labor force categories provides more evidence that California is losing working young professional families,” argued Hoover Institution research fellow Carson Bruno; “while there is a narrative that the rich are fleeing California, the real flight is among the middle-class.”

“Knowing that net out-migrants are more likely to be middle-class working young professional families provides some hints as to why people are leaving California for greener pastures. For one, California is an extraordinarily high cost-of-living state. Whether it is the state’s housing affordability crisis — California’s median home value per square foot is, on average, 2.1 times higher than Arizona, Texas, Nevada, Oregon and Washington’s — California’s very expensive energy costs — the state’s residential electric price is about 1.5 times higher than the competing states — or the Golden State’s oppressive tax burden — California ranks 6th, nationally, in state-local tax burdens — those living in California are hit with a variety of higher bills, which cuts into their bottom line.”

Real estate indicators

“In 2006, 38 percent of middle-class households in California used more than 30 percent of their income to cover rent. Today, that figure is over 53 percent,” according to Christopher Thornberg, director of the UC Riverside School of Business Administration Center for Economics Forecasting and Development. “The national figure, as a point of comparison, is 31 percent. It is even worse for those who have borrowed to buy a home — over two-thirds of middle-class households with a mortgage are cost-burdened in California — compared to 40 percent in the nation overall.”

Recent studies illustrated a continuing plunge in homeowning among traditional buyers in-state. “California’s middle class is being hammered,” wrote Joel Kotkin at the Orange County Register. “The state now ranks third from the bottom, ahead of only New York and the District of Columbia, for the lowest homeownership rate, some 54 percent, a number that since 2009 has declined 5 percent more than the national average.”

Low on houses

Some analysts looking to explain the trend have pointed to a so-called housing shortage statewide. “With supply falling far below demand, California needs to build at least 1 million more homes for low- and middle-income Californians in the next 10 years,” CAFWD suggested, adding that, although Gov. Jerry Brown “did not mention housing in the State of the State address,” he has “not explicitly ruled out addressing the issue in the next three years.”

Giving ammunition to the housing shortage thesis, meanwhile, was “a new report from the California Legislative Analyst’s Office that found that poorer neighborhoods that have added more market-rate housing in the Bay Area since 2000 have been less likely to experience displacement,” the Washington Post noted. But experts have differed significantly on how to read the tea leaves of the data, and analysts disagree on whether increasing density — or what kind of density — is the right answer.

A cloudy picture

The Golden State has been haunted in recent times by sharply mixed economic indicators. “While California has added 2.1 million jobs since 2010, employment in six industries is still below 2007 levels, before the Great Recession, according to the center’s analysis. Those sectors — including construction, finance and manufacturing — generally pay more than the service-type jobs that we’re adding in droves,” the Sacramento Bee noted late last year.

Economic growth concentrated in Silicon Valley has also not done much to relieve the income or jobs picture for middle-classers. “In a recent survey of states where ‘the middle class is dying,’ based on earning trajectories for middle-income cohorts, Business Insider ranked California first, with shrinking middle-class earnings and the third-highest proportion of wealth concentrated in the top 20 percent of residents,” Kotkin observed.

Originally published by CalWatchdog.com

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