Saturday, December 26, 2009

SCHWARZENEGGER: "Dear Santa:" …with a cc: to Uncle Sam

from various newsfeeds

Schwarzenegger Seeks Obama's Help for Deficit Relief

BusinessWeek - Michael B. Marois, William Selway - ‎Dec 24, 2009‎

Dec. 24 (Bloomberg) -- California Governor Arnold Schwarzenegger, anticipating a $21 billion state budget deficit, ...

Schwarzenegger Presses US for More Aid for Needy California

New York Times - Randal C. Archibold - ‎Dec 23, 2009‎

LOS ANGELES — Gov. Arnold Schwarzenegger has taken advantage of the holiday lull before the next state budget storm to serve notice ...

Schwarzenegger to seek federal help for California budget

‎Dec 23, 2009‎ - Los Angeles Times

Two Ways to Play: California May Ask for Bailout

Minyanville.com - Terry Woo - ‎Dec 24, 2009‎

Specific details aren't out yet but California Governor Arnold Schwarzenegger may ask President Barack Obama for a bailout ...

No happy new year for California budget

‎Dec 22, 2009‎ - Reuters

Health care plan may cost too much for California

‎Dec 21, 2009‎ - abc7news.com

Broke, Schwarzenegger begs President Obama for $8 billion. Is a California ...

LA Weekly (blog) - Jill Stewart - ‎Dec 23, 2009‎

Wow, Governor Arnold Schwarzenegger just continues to flounder and flub and flim-flam his way through one of the worst ...

Tuesday, December 15, 2009

Healthy Families/SCHIP: U.S. QUESTIONS CA’s HEATHCARE PLAN FOR CHILDREN OF WORKING POOR

http://bit.ly/6bwjJ0

Program passed by the Legislature in September to keep 700,000 children from losing healthcare coverage may not meet regulatory guidelines, federal health officials say. Eric Bailey in the Los Angeles Times -- 12/15/09

“U.S. health officials say the plan adopted by the state during the final days of the legislative session in September and signed into law by Gov. Arnold Schwarzenegger may not meet regulatory muster.

“As a result, children's health advocates are warning that by the end of next year, hundreds of thousands of poor youngsters could lose their coverage -- even as the Obama administration continues its push for universal healthcare.”

Monday, December 14, 2009

CALIFORNIA DEBT SERVICE TO SURPASS $10 BILLION, SCHWARZENEGGER NAMES ANA MATOSANTOS FINANCE CHIEF

links from Rough & Tumble

California debt costs to surpass $10 bln-Treasurer

-- California, the largest borrower among U.S. states, may see its debt interest costs nearly double to over $10 billion in 2020, the state treasurer reported on Monday. Lisa Lambert Reuters -- 12/14/09

Schwarzenegger names new finance director

-- Matosantos, currently chief deputy, will take over the Department of Finance helm days before Schwarzenegger delivers his final budget proposal in January, expected to be a cuts-heavy plan to deal with another severe deficit. Kevin Yamamura in the Sacramento Bee Shane Goldmacher in the Los Angeles Times -- 12/14/09

Thursday, December 10, 2009

LAUSD BUDGET SHORTFALL NEEDS SOLUTIONS NOT BATTLES

EASTERN GROUP PUBLICATIONS Editorial | Eastside Sun / Northeast Sun / Mexican American Sun / Bell Gardens Sun / City Terrace Comet / Commerce Comet / Montebello Comet / Monterey Park Comet / ELA Brookyln Belvedere Comet / Wyvernwood Chronicle / Vernon Sun

December 10, 2009 -- The first signs of what promises to be a war of words, shouts and picketing has taken place this week in the Los Angeles Unified School District.

The LAUSD school board has adopted a budget the District hopes will help it close a projected $1.2 billion deficit through 2012.

This budget calls for the furloughing of at least 5,000 district personnel. It appears that this time around the threats of layoffs will actually come to fruition. Last spring, LAUSD threatened to layoff as many as 8,000 teachers, but through a combination of cuts in other areas and the use of stimulus dollars, that threat never came remotely close to being acted on.

It doesn’t seem that will be the case this time around, however.

But if it is, and the District really has no plans to layoff workers, then they should not be causing so much uncertainty among District employees and even greater mistrust by the public in the school board’s budget proposals.

Clearly, however, if the budget is anywhere near the dismal financial reality being painted by the District, tough compromises will have to be worked out between the District’s unions and District negotiators. Hopefully it won’t come down to a standoff that will just disrupt our schools and not solve anything.

There comes a time when we all have to accept the inevitable and start working together to come to the least disruptive solutions. Any less, is a disservice to the teachers, students, and the District.

Wednesday, November 25, 2009

CITY OF L.A.’s CREDIT DOWNGRADED: L.A. credit rating takes a hit in light of grim budget outlook + L.A. Council will get briefing on finances, a day after city's credit rating is downgraded

L.A. credit rating takes a hit in light of grim budget outlook

by Phil Willon at L.A. City Hall | LA Times/LA Now!

November 24, 2009 |  6:15 pm

Los Angeles is about to pay a price for its financial woes.

The city’s credit was downgraded today by Fitch Ratings on $2.94 billion in debt, meaning that borrowing money will become more expensive for Los Angeles as it grapples with a $98-million current-year budget shortfall and faces the prospect of graver fiscal woes in the years ahead.

The financial ratings service credited Mayor Antonio Villaraigosa and the City Council for taking aggressive action to whittle down the budget gap, but added it wasn’t enough and that the ratings outlook for the city remains negative. Fitch Ratings, in a statement released today, said the “city’s economic decline, as evidenced by high unemployment, sales tax weakness, assessed value losses and high home foreclosure ... will impede financial recovery."

“It signals that we have some very difficult choices to make in the future," said Administrative Officer Miguel Santana, the city’s top budget official. “We simply cannot be spending at the rate that we have in the past."

Tomorrow, Santana is scheduled to brief the council on the downgrade, as well as the city’s financial status.

Council President Eric Garcetti said the rating downgrade shows that the city still needs to make sweeping structural changes to its $7.05-billion budget. Even after winning concessions from city unions, including pay cuts and an early retirement program, the city still faces a $98-million shortfall in the current budget year and a $408-million budget gap next year.

 

L.A. Council will get briefing on finances, a day after city's credit rating is downgraded

by Phil Willon at L.A. City Hall | LA Times/LA Now!

November 25, 2009 |  7:29 am

Mayor The Los Angeles City Council today will get what is expected to be a sober briefing on the city's financial condition, a day after L.A.'s credit rating was downgraded.

The city’s credit was downgraded  by Fitch Ratings on $2.94 billion in debt, meaning that borrowing money will become more expensive for Los Angeles as it grapples with a $98-million current-year budget shortfall and faces the prospect of graver fiscal woes in the years ahead.

The financial ratings service credited Mayor Antonio Villaraigosa and the City Council for taking aggressive action to whittle down the budget gap but added it wasn’t enough and that the ratings outlook for the city remained negative. Fitch Ratings, in a statement released today, said the “city’s economic decline, as evidenced by high unemployment, sales tax weakness, assessed value losses and high home foreclosure ... will impede financial recovery."

“It signals that we have some very difficult choices to make in the future," said Administrative Officer Miguel Santana, the city’s top budget official. “We simply cannot be spending at the rate that we have in the past."
Council President Eric Garcetti said the rating downgrade showed that the city still needed to make sweeping structural changes to its $7.05-billion budget. Even after winning concessions from city unions, including pay cuts and an early-retirement program, the city still faces a $98-million shortfall in the current budget year and a $408-million budget gap next year.

 

Photo: Mayor Antonio Villaraigosa. Credit: Los Angeles Times

Friday, November 20, 2009

RED INK IN THE GOLDEN STATE

Letters to the LA Times 11/20


Re “State facing $21-billion budget gap,” Nov. 18
While California drowns in nearly $21 billion of red ink, its educational system goes to hell and its tax base keeps shrinking as businesses flee, the morons who run this state busy themselves by regulating big-screen TVs.
As for Los Angeles County, its imbecile district attorney bathes himself in self-aggrandizement and political posturing over Roman Polanski -- a case that even the victim wants no part of -- and medical marijuana clinics while real crime festers.
Is it any wonder that the citizens have given up on the once-Golden State?
Michael Seawell
Santa Monica


::
The eighth-largest economy in the world, the once great state-nation -- California -- is being run like a banana republic.
In the words of Cicero: "O tempora! O mores!"

●●smf's Hollywood High School Latin pays off!: "Alas for the times and the manners!"


M.T.Gyepes
Pacific Palisades

::
The news doesn't get any better for education with the announcement that California is looking at a budget shortfall of more than $20 billion next year. The Los Angeles Unified School District has already cut teachers and support staff, increased class sizes and eliminated many vital programs. Now there is talk that employees are facing a pay cut as high as 12%. Still, educators will be required to increase test scores and improve student learning.
When will we realize you get what you pay for in life? If we continue to shortchange education, we will continue to shortchange our future.
Tom Iannucci
Los Angeles
The writer is assistant principal, Paul Revere Charter Middle School.

Thursday, November 19, 2009

CALIFORNIA FACES A PROJECTED DEFICIT OF $21 BILLION: "Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento" …and so it continues

The legislative budget analyst's projection, to be released Wednesday, threatens to send Sacramento back into gridlock and force more broad cuts to state programs.

California faces deficit

Gov. Arnold Schwarzenegger will present his next proposed budget in January. Republicans vow to block new taxes; Democrats say they are through with cuts. (Eric Paul Zamora / Associated Press)

 Chart: Projected deficit of $21 billion Chart: Projected deficit of $21 billion

image

LAO REPORT

2010-11 Budget

California's FISCAL OUTLOOK

By Shane Goldmacher reporting from Sacramento  | LA Times

November 18, 2009 -  Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento, according to a report to be released today by the chief budget analyst.

The new figure -- the nonpartisan analyst's first projection for the coming budget -- threatens to send Sacramento back into budgetary gridlock and force more across-the-board cuts in state programs.

The grim forecast, described by people who were briefed on the report by Legislative Analyst Mac Taylor, comes courtesy of California's recession-wracked economy, unrealistic budgeting assumptions, spending cuts tied up in the courts and disappearing federal stimulus funds.

"Economic recovery will not take away the very severe budget problems for this year, next year and the year after," said Steve Levy, director of the Center for Continuing Study of the California Economy.

In fact, after two years of precipitous revenue declines, the new report projects relatively stable tax collections for the state, said those who were briefed. But that won't stop the deficit from climbing to nearly $21 billion.

Gov. Arnold Schwarzenegger, who will present his next proposed budget to Californians in January as he begins his last year in office, started sounding the alarm last week.

"I think that there will be across-the-board cuts again," he said at a San Jose news conference.

The task in 2010 could be even harder than it was this year, when record deficits and cash shortfalls drove California to issue IOUs for only the second time since the Great Depression. Lawmakers have already cut billions from education, healthcare and social services while temporarily hiking income, sales and vehicle taxes.

"I can't think of any good solutions," said Assemblywoman Noreen Evans (D-Santa Rosa), who chairs the lower house budget committee.

The current budget year accounts for $6.3 billion of the deficit, the nonpartisan analyst projects. Prisons spending will outstrip what has been budgeted by more than $1 billion, and K-12 schools were underpaid by $1 billion under the complex formula that governs education funding, the report says.

Another $14.4 billion of the deficit is for the fiscal year that begins next summer, say those briefed on the report. The governor's next budget will have to account for both years.

The state Department of Finance in August predicted a shortfall of at least $7.4 billion for fiscal 2010-11. But California's financial picture has darkened considerably since then, largely because the shaky summer budget pact relied heavily on borrowing, fiscal tricks and overly optimistic projections.

It assumed receipts of nearly $1 billion from the federal government for Medi-Cal that the analyst questions. Another $1 billion was assumed from the sale of a quasi-public workers' compensation agency that has stalled.

Next year's budget fight is expected to be as contentious as this year's. Republicans vow to block new taxes; Democrats say they are through with program cuts.

Powerful interest groups are already girding for battle.

"There is no more to cut from our schools," California Teachers Assn. President David Sanchez said Tuesday. "There is no more meat on this bone. . . . The next step is amputation."

In higher education, Chancellor Charles Reed of the Cal State University system said this month that he will plead for $884 million in funds from Sacramento next year. The University of California will ask for $913 million more for its 10-campus system, President Mark Yudof has said.

"If ever there was a time to fight for and invest in the institution best positioned to power this state from recession, now is that time," Yudof said in a statement. UC students, meanwhile, are coping with a staggering 32% fee hike.

California's finances have been so bad that the governor's finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy -- or revert to some kind of territorial status. (Neither was realistic, he determined.)

The state's financial problems predate the current recession and the gimmicks used to paper over the deficit, experts say. Year in and year out, state government spends roughly $10 billion more than it collects in tax revenue.

Political divisions in Sacramento, where support from both parties is necessary to pass a budget, have repeatedly stymied efforts to plug that hole. The task probably won't be easier next year as various interests try to muscle one another to the sidelines.

Some have even drafted potential ballot measures to aid themselves in the budget fight and are preparing to collect signatures in an effort to place the initiatives before voters.

Among the ideas: raising tobacco taxes, curbing public pensions, repealing corporate tax breaks passed thisyear and last, splitting the tax rules for commercial and residential property, reducing the legislative votes needed to pass a budget and strengthening the firewall around local government and transportation money.

"There's a lot of people putting chess pieces on the board right now," said Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Assn. "The question is which of those chess pieces will be moving."

___________________________

 

California's budget woes will continue for years, report says

Tax receipts have leveled off, but revenue won't bounce back until the 2014-15 budget year, according to the chief budget analyst. Near term, the state faces a nearly $21-billion deficit.

    By Shane GoldmacherReporting from Sacramento | LA Times

    November 19, 2009 - Despite an economy on the mend, California's budget woes will drag deep into the next decade, according to a report released Wednesday by the state's chief budget analyst.

    Tax collections have leveled off after one of the most precipitous drops since the Great Depression. But revenue is not expected to fully bounce back until the 2014-15 budget year.

    State government faces a nearly $21-billion deficit over the next year and half, according to the report by nonpartisan Legislative Analyst Mac Taylor. Sacramento will be forced to muddle along, he says, unable to reverse the deep cuts that officials have made to K-12, universities, healthcare and social services.

    A major reason the recovery will take so long, say many experts, is California's place at the epicenter of the real estate slide and the resulting foreclosure wave. Moreover, "the mess in Sacramento is going to affect the California economy," said Jerry Nickelsburg, senior economist at UCLA Anderson Forecast, "and not in a good way."

    Californians must get used to a state that offers fewer services -- and has higher taxes -- than before the real estate boom, Taylor's report suggests. But it remains to be seen how much residents will accept.

    On Wednesday, at least 14 people were arrested in a raucous protest as a University of California regents panel approved a 32% student fee hike. A day earlier, the president of the California Teachers Assn. had likened further K-12 cuts to "amputation."

    "We cannot afford now what we're spending," said Taylor, whom both Democrats and Republicans look to for fiscal advice. More cuts and more taxes will be necessary to balance the books, he said, calling all the options "painful choices."

    Budget shortfalls have reemerged less than four months after lawmakers and Gov. Arnold Schwarzenegger struck a summer deal, which contained accounting gimmicks and rosy assumptions that have failed to pan out.

    "The thing about smoke and mirrors is they are usually short-term solutions, and they come back to bite you the next year," said John Ellwood, a professor of public policy at UC Berkeley.

    Schwarzenegger, who last week predicted more across-the-board budget cuts, must unveil his plan to address the projected $20.7-billion deficit in January. Taylor urged that officials begin tackling the red ink "as soon as possible."

    The deficit is expected to be worse in the years beyond 2011, as temporary taxes expire and raids on local government funds must be repaid by Sacramento. Taylor projected a $21.3-billion deficit in fiscal 2011-12 and a $23-billion shortfall in fiscal 2012-13.

    Even those numbers could be conservative. They assume no raises for state workers and no cost-of-living adjustments for government programs. They also assume that California will win all pending court cases in which billions of dollars in service cuts are being challenged.

    Republican lawmakers have vowed to block new taxes, which many Democrats advocate to balance California's books. Assembly GOP leader Sam Blakeslee (R-San Luis Obispo) issued a statement Wednesday calling on the Democratic-dominated Legislature to instead change the state's "punitive regulatory and tax climate that is driving jobs away."

    The bleak numbers have also spurred calls to Washington, D.C., for help, as much of the federal stimulus package that somewhat blunted this year's state cuts is set to expire. Jean Ross, executive director of the California Budget Project, which advocates for low-income residents, said the state "needs a second round of federal aid as we face record unemployment and continuing economic weakness."

    That may be a hard sell in the nation's capital, where conservatives have questioned the success of the first package.

    "California clearly has mismanaged its fiscal house," Nickelsburg said. "It seems to me it would be very difficult to convince states that have not mismanaged their own fiscal house to come to the aid of California."

    Thursday, November 12, 2009

    Lead line in Tucson TV story about the Arizona state budget” "At least we're not as bad as California".

     

    At least California's budget problems are worse

    KGUN TV9

    12 NOV -- How doses his grab you as a new state motto: "At least we're not as bad as California."

    Don't like it?

    Brace yourself: when it comes to state budget deficits, the motto fits.

    A new pew center report labels our state's budget mess as second worst in the nation.

    Arizona's budget is about two billion dollars in the red.

    Homes are still being foreclosed, people still can't find work and the state is gasping for breath trying to find money.

    Republican state representative frank antenori told us these problems were handed down by the former democratic governor.

    "We had a governor who failed to realize the revenue was dropping. She continued to spend," Antenori said.

    democratic state senator Linda Lopez agrees with antenori in one sense but disagrees on who's to blame.

    There was no debate from either side on the pew study. Lopez and Antenori agreed that Arizona is in big trouble.

    That means, more cuts are coming.

    You can probably expect a tax increase too.

    Antenori's plan would create a flat fee property tax.

    Instead of determining the fee by a home's value.

    "Some property taxpayers will see an increase in property tax. Some may see a decrease," Antenori said.

    Lopez wants to help pass a one cent sales tax increase and also create a whole new tax.

    So what does the governor think about all of this?

    We called Jan Brewer and left a message. Our call was returned but we were told she wouldn't be available to talk to us today (Thursday)

    That would still leave about $1.5 billion unaccounted for they would have to deal with when the regular session starts in January.

    The Arizona legislature is expected to cut the budget deficit down by $500-million during a special session this month.

    Wednesday, November 11, 2009

    SCHWARZENEGGER WARNS OF MORE ACROSS-THE-BOARD BUDGET CUTS

    Michael Rothfeld in Sacramento for the LA Times

    November 10, 2009 |  2:29 pm -- Gov. Arnold Schwarzenegger today predicted a new round of budget cuts, as the state’s finances remain shaky despite large spending reductions made by the governor and lawmakers in July.

    Schwarzenegger, at a news conference today and at the Fresno Bee’s editorial board Monday, estimated that the current fiscal year’s budget is $5 billion to $7 billion in the red, on top of the $7.4-billion deficit projected by his aides for the fiscal year that begins in July.

    The governor said he would reveal his specific plans to deal with the problems in January. But he said that, as in the past, no program would be immune to the budget knife. A wide spectrum of programs were cut as state leaders closed a deficit exceeding $20 billion over the summer.

    “I think there will be across-the-board cuts again,” Schwarzenegger told reporters today in San Jose, after signing legislation that is part of the water deal he reached last week with lawmakers. “We are not going to go and pick and choose" between programs. "I think that we always have to go and cut across the board."

    Schwarzenegger downplayed the impact on state finances from the water deal’s proposed $11-billion bond issue, which will go before voters next year. He said the state would not borrow much of the money for several years, after it has paid down some of its current debt.

    The governor said that though there are signs of a recovery in the housing market and strength in the green technology sector, “the economy is not coming back yet the way we want it.”

    In a bit of positive news, California Controller John Chiang announced today that tax revenue for October was $285 million above projections, although for the current fiscal year it is still short by $854 million.

    Tuesday, November 10, 2009

    CALIFORNIA DEBT BINGE SHAKES UP MUNI BOND MARKET: Interest on state bonds up from 2.48% to 4% in two weeks. Rising market yields also devalue older fixed-rate muni bonds.

    by Tom Petruno | Money & Co. | LA Times

    November 10, 2009 |  8:48 pm -- The municipal bond market’s message to California: Enough with the borrowing already!

    BearflagOver the last seven weeks the state has sold more than $21 billion of short- and long-term debt for budget-related reasons and to finance voter-approved infrastructure projects.

    That flood -- in a period when muni bond yields nationwide already were rebounding after diving in summer -- has helped to boost yields more than they might otherwise have risen, some analysts assert.

    "Yields are higher because California has so much paper in the market," said Matt Fabian, who tracks muni bond trends at Municipal Market Advisors in Westport, Conn.

    The state has been its own worst enemy: Its borrowing costs have risen with each bond deal, which means taxpayers will bear a bigger hit to service the debt over time.

    Rising market yields also have the effect of devaluing older fixed-rate muni bonds. If you own a California muni-bond mutual fund, chances are its share price has been sliding since the end of September as the  market has suffered indigestion from the supply of new bonds.

    In California’s latest offering -- a sale Tuesday of nearly $1.9 billion of bonds maturing in June 2013 -- the state had to pony up for a 4% annualized tax-free yield to lure investors to the deal.

    Less than two weeks ago the state paid a yield of 2.48% on a bond with a similar maturity.

    Investors’ ability to squeeze 4% out of the state in this week’s deal "is an expression of saturation of the market" by California, said George Strickland, a muni bond fund manager at Thornburg Investment Management in Santa Fe, N.M.

    Demand for the bonds sold Tuesday also may have suffered because the deal stemmed from one of the gimmicks concocted by the Legislature and Gov. Arnold Schwarzenegger in July to close the state’s huge budget deficit: The proceeds will repay local governments for the $2 billion in property tax revenue that the state is borrowing from them to plug the budget gap.

    The bonds become part of the state’s overall debt burden, but they’re a step below so-called general obligation issues, which have an iron-clad repayment guarantee in the state Constitution.

    Treasurer Bill Lockyer obviously knows that he has dumped a lot of debt on the market this autumn. He didn’t have much choice, given the budget fixes ordered by the Legislature, and given the backlog of infrastructure bonds California has to sell.

    The state’s borrowing plans had been put on hold for much of this year because of the deepening budget crisis. "We had a lot of work to do to get our financing program back on track" this fall, said Tom Dresslar, Lockyer’s spokesman.

    Of course, for investors with money to put to work, rising muni yields are welcome.

    Ken Naehu, who manages bond investments at Bel Air Investment Advisors in L.A., believes the state’s budget woes are far from over, which Schwarzenegger acknowledged Tuesday. Still, a 4% tax-free yield on a bond maturing in less than four years was too good an opportunity to pass up, he said.

    "We gave them a large order," Naehu said.

    -- Tom Petruno

    Wednesday, October 14, 2009

    Field Poll: VOTERS SUPPORT REFORM …BUT WHICH ONES?

    By Lisa Vorderbrueggen from POLITICAL BLOTTER: Politics in the Bay Area and Beyond


    Wednesday, October 14th, 2009 at 10:32 am in constitutional reform.

    New Field Poll figures released this morning at a constitutional change conference in Sacramento show voters like the idea of reforming the way they govern themselves.

    But they are reluctant to make the kinds of reforms that have been discussed such as reducing the two-thirds voting threshold to pass a state budget or raise taxes, modifying or eliminating term limits and altering the California tax system.

    “The rub is, what are we going to reform?” said Field Poll director Mark DiCamillo. “It’s going to be a tall order to put a package before voters that they will support.”

    Kimberly Nalder with Cal-State University compared it to the person who hires a trainer but says he will not exercise or east less.  Then six months later, he complains about his trainer.

    “That’s California voters,” she said. “They are confused.”

    The poll was commissioned for today’s “Getting to Reform: Avenues to Constitutional Change in California,” sponsored by UC-Berkeley’s Institute of Governmental Studies, Stanford’s Bill Lane Center for the American West and California Stat’s Center for California Studies. Pollsters surveyed 1,005 registered voters between Sept. 18-Oct. 5. The margin of error was plus or minus 3.5 percent for the full sample and plus or minus 4.5 percent for subsets.

    The daylong conference is being held at the Sacramento Convention Center, and I’m here all day.

    The poll’s key findings:

    • 51 percent believe the state needs to make fundamental changes to its constitution.
    • 48 percent prefer to see a single package of reforms on the ballot rather than a piecemeal manner like the initiative process. 40 percent like the individual measure process.
    • 51 percent support a reform process that uses a constitutional convention rather than a commission appointed by legislators and the governor.
    • 63 percent support the appointment of a broad range of people to rewrite the constitution, including average voters, elected officials and experts.
    • 60 percent would be willing to consider serving on a constitutional reform delegation.
    • If California is going to reform its constitution, 59 percent prefer limiting its scope to issues of governance and exclude social issues.
    • 52 percent oppose a recent state tax commission proposal to flatten the personal income tax.
    • 65 percent oppose a replacement of the corporate income and sales taxes for a broader tax.
    • 52 percent oppose the elimination of the two-thirds voting threshold in the Legislature to adopt a budget.  That figure goes even higher among Republicans — 69 percent.
    • 69 percent reject the elimination of the Prop. 13 mandate that new taxes require a two-thirds vote. Among Republicans, that figure is 86 percent.
    • 52 percent oppose splitting the tax roll, which would allow the state to increase taxes on commercial properties at a rate higher than that imposed on residential properties.
    • 66 percent support the imposition of a requirement that ballot initiatives identify the source of funds for new programs.
    • 56 percent would support requiring a two-thirds vote on all ballot initiatives that change the state constitution.
    • 57 percent believe the state could continue to provide current levels of service without new taxes if it would strip waste, fraud and abuse from government.
    • 49 percent disapprove of the idea of merging the Assembly and Senate into a single legislative body. 35 percent like the idea.

    Tuesday, October 13, 2009

    FIELD POLL: Schwarzenegger+Legislature hit new lows

    from SacBee CapitolAlert

    13 October -- Approval ratings of Gov. Arnold Schwarzenegger and the Legislature have hit new lows, according to the results of a Field Poll released today.

    The governor's approval rating among voters dipped to 27 percent, according to a telephone survey of 1,005 registered voters conducted Sept. 18 to Oct. 5.

    That marks Schwarzenegger's lowest approval ratings since he took office in 2003 (and puts him second only to Democratic Gov. Gray Davis when it comes to low job performance reviews for governors who served over the last 50 years).

    Results were even more dour for the Legislature.

    Just 13 percent of voters approve of the job lawmakers are doing. Job performance for both houses has been on a downward trajectory since it fell below 20 percent approval ratings for the first time last September.

    The rate of voters who disapprove of the Legislature's performance -- 78 percent --is the highest recorded by The Field Poll in results dating back to 1983.

    Well, they must be doing something right in the eyes of the electorate... right?

    Voters surveyed by The Field Poll were keen on one thing: the governor calling the Legislature into special sessions for two front-burner issues: water and taxes.

    The poll found that 73 percent of respondents favored a special session on water supply issues and 62 percent were behind bringing the Legislature back to face tax reform issues.

    Here are the statistical tabulations for the Field Poll, prepared exclusively for Capitol Alert, on California voters' opinions of the governor and the State Legislature. The publicly released results of today's poll can be found here.

    Monday, October 12, 2009

    CALIFORNIA DEBT UNNERVES INVESTORS AS TAXES PLUNGE $2 BILLION

    By William Selway and Michael B. Marois | Bloomberg.com

    Oct. 12 (Bloomberg) -- A $2.1 billion drop in California tax collection is opening a hole in Governor Arnold Schwarzenegger’s budget only three months after lawmakers in the most-populous state slashed spending for the second time in a year.

    General fund revenue in the state accounting for 13 percent of the U.S. gross domestic product dropped to $19.4 billion during the fiscal year’s first three months, according to figures Democratic Controller John Chiang released Oct. 9. The total for the period ended Sept. 30 trailed by $1.1 billion, or 5.3 percent, forecasts in the annual budget the Republican governor signed July 28.

    “This reinforces that state’s budget problems aren’t over, and as the year goes on, we’re likely to see growing budget deficit projections,” said David Blair, an analyst with Pacific Investment Management Co. in Newport Beach, California, which invests $20 billion in municipal bonds. “This clearly is going to continue to put pressure on the Legislature and the governor.”

    The latest report underscores how states including California, the largest municipal bond issuer in the U.S., are still dealing with fallout from the recession even as the economy begins its recovery. The state last week was forced to raise yields to attract buyers to a $4.1 billion debt sale, after cutting the issue from $4.5 billion.

    California’s decision helped push up borrowing costs in the municipal market by the most in almost four months even as states prepare new issues of taxable Build America Bonds, whose sales already total $40.2 billion. The Treasury pays 35 percent of interest costs for the debt, part of the federal economic stimulus plan approved in February.

    Losing Jobs

    State governments are particularly hard hit by a continuing loss of jobs, which dampens the income- and sales-tax collections upon which they depend. From April through June, states and localities recorded a 12 percent tax revenue decline from a year earlier, the third consecutive quarterly drop, according to the U.S. Census. The national unemployment rate in September was 9.8 percent, the highest since 1983, according to the U.S. Labor Department.

    In New York, Governor David Paterson on Oct. 6 ordered state agencies to cut spending amid predictions that the deficit for the year ending March 31 may grow to $3 billion, $900 million more than budget officials estimated in July. Pennsylvania, acting 101 days into the fiscal year, enacted a $27.8 billion budget on Oct. 9 that raises cigarette taxes and expands gambling to boost revenue. Ohio confronts an $844 billion gap, while Connecticut will borrow $2.25 billion over the next two years, beginning with a $1 billion debt sale in November, to balance its budget.

    ‘Somewhat Unique’

    “California’s problems, while somewhat unique and self- inflicted, are really America’s problems,” said Bill Gross, co-chief investment officer of the world’s biggest bond fund wrote on Oct. 1. State and federal lawmakers, unable to comprehend the extent of consumer borrowing, “reflect a lack of vision to perceive that the strong growth in revenues was driven by the same excess leverage and the same delusionary asset appreciation that was bound to approach cliff’s edge.”

    The state has been among the hardest hit and its Legislature, requiring a two-thirds vote to raise taxes or pass a budget, has struggled to respond swiftly as the state’s fiscal strains worsened this year. Since February, Schwarzenegger and lawmakers have slashed $32 billion from spending, cutting into funding for schools, universities and welfare programs. They also raised taxes by $12.5 billion to balance the $85 billion budget.

    ’ Court Decision

    Chiang, the controller, said the state’s latest figures show that Schwarzenegger and the Legislature must prepare for “more difficult decisions ahead.” California was also handed a defeat on Oct. 2 by the state’s Supreme Court, which let stand a ruling that the governor and lawmakers illegally used $3.6 billion of money meant for local transportation agencies to balance the budget since 2007.

    “Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” Chiang said in a statement Oct. 9. “While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag state revenues down.”

    California isn’t at immediate risk for running out of cash as it did in July, when it resorted to issuing IOUs to pay some vendors and tax refunds as lawmakers fought over how to shore up finances. Last month, it borrowed $8.8 billion by selling notes, an advance on the tax it will collect later in the budget year.

    Plugging Gaps

    Schwarzenegger’s administration said it’s too soon to tell whether the slide in tax receipts through September foretells a worsening trend. Should revenue continue slipping, California lawmakers may find it difficult to make up for the gaps, given how deeply they have already cut and resistance among Republicans to further tax increases.

    Schwarzenegger, 62, who can’t seek re-election because of term limits, doesn’t have to present his budget for the next 12- month fiscal period until January, and he has given no indication that he is planning to call an emergency session beforehand, as he did last year.

    “Clearly, the numbers are cause for concern but the issue now for us is to determine if this is a one-time event or whether it has one more long-term implications,” said H.D. Palmer, a spokesman for Schwarzenegger’s finance department.

    The tax collection figures were released after the conclusion of a $4.1 billion bond sale, which was trimmed by about $400 million after investors demanded higher yields than the state was willing to pay on some of the securities. The sale came after a rally in demand for municipal bonds pushed state- and local-government borrowing costs to a 42-year low.

    Watching for Deterioration

    David Blair, the Pimco analyst, said the pullback was caused by the low yields California offered amid lingering investor concern that the state’s fiscal condition may deteriorate further.

    “They just got a little aggressive in where they wanted to price it,” Blair said. “Most people still recognize that there’s budget deficits the state is trying to deal with this year and going forward.”

    The difference between a 10-year California bond and a top- rated municipal security reached as much as 1.71 percentage points on July 1, when the California debt yielded 5.21 percent, according to Bloomberg data. The difference slipped to 1.06 percent on Sept. 11 before ending at 1.21 percent on Oct. 9.

    Future Debt Sales

    California plans to sell as much as $15 billion more in bonds this year and its deficits, while not projected to reach the $60 billion it dealt with in the two years that end in July, are persistent. The state will face a $7.4 billion gap in the fiscal year beginning on June 30 and about $15 billion in each of the following two fiscal periods, California Treasurer Bill Lockyer said in his annual report on the state’s debt, released ahead of the bond sale.

    Tom Dresslar, a spokesman for the treasurer, said his office has alerted investors that the fiscal troubles are far from over and the latest tax data did little to alter the outlook.

    “The state has been very clear that our budget problems aren’t behind us,” Dresslar said. “This shouldn’t be a big surprise to anybody.”

    To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

    Last Updated: October 12, 2009 00:01 EDT

    Sunday, October 11, 2009

    CALIFORNIA BUDGET IS AREADY IN THE RED 10 WEEKS AFTER PASSAGE

    By William Selway and Michael B. Marois | Bloomberg.com

    Oct. 10 (Bloomberg) -- California Governor Arnold Schwarzenegger will know within a month whether a $1.1 billion drop in revenue collections is part of a growing budget shortfall or an isolated event, his budget spokesman said.

    Revenue in the three months ended Sept. 30 was 5.3 percent less than assumed in the $85 billion annual budget, state controller John Chiang reported yesterday. Income tax receipts led the gap, as unemployment reached 12.2 percent in August.

    “The culprit here appears to be estimated quarterly personal income tax statements,” H.D. Palmer, the governor’s budget spokesman, said yesterday. “The numbers are cause for concern, but the issue now for us is to determine if this is a one-time event or whether it has more long-term implications.”

    The latest figures show that California is facing resurgent fiscal strains brought on by the U.S. recession. Since February, Schwarzenegger and lawmakers have cut $32 billion from spending, raised taxes by $12.5 billion and covered $6 billion more with accounting gimmicks and borrowing. Even with those actions, state budget officials predict an additional $38 billion in deficits in the next three fiscal years combined, including $7.4 billion in the year starting July 1.

    Schwarzenegger must present a budget for the coming fiscal year in January. The state’s Franchise Tax Board will deliver new data to the governor in November.

    Debt Sales

    The budget news comes as the most populous U.S. state prepares to sell as much as $15 billion of bonds in the next nine months to refinance debt and fund public-works projects, and as a surge in fixed-rate municipal issuance sent benchmark rates up by the most in almost four months.

    California, already the largest borrower in the municipal market, may offer $4 billion of debt during the week of Oct. 26 to refinance the bonds used by Schwarzenegger to cover previous budget deficits. The budget enacted in July would allow the sale of as much as $11 billion more of general obligation bonds through the June 30 end of the fiscal year if financial markets allow, state Treasurer Bill Lockyer said. The exact sale amount hasn’t been decided.

    “If the market is inhospitable, we won’t go,” Lockyer said in an interview yesterday. “We’ll just have to wait and see how the feelings are when we get ready to think about it again.”

    Additional bond sales by California would follow an offering of $4.1 billion of general obligation bonds this week.

    Scaled-Back Offering

    The state was forced to scale back the size of the deal by almost $400 million as benchmark yields surged. The yields climbed after gains in the tax-exempt market last week pushed them to a 42-year low.

    California’s sale follows a two-month rally in municipal bond prices, fueled by a record flow of money into mutual funds that outweighed lingering fiscal strains on localities, said Craig Elder at Milwaukee-based Robert W. Baird & Co.

    U.S. Treasuries also fell, sending two-year notes toward their first weekly loss since the period ended Sept. 18. Federal Reserve Chairman Ben S. Bernanke said the central bank is ready to tighten monetary policy once the outlook for the economy improves.

    California, a state that’s been among the hardest hit by the recession, had already issued $22 billion of debt since March, including $8.8 billion of notes that provided the state with an advance on taxes collected next year.

    Even after increasing what it would pay, California still borrowed more cheaply than during previous offerings. A taxable California bond maturing in 2039 yielded 7.23 percent this week, down from a yield of 7.43 percent during a sale in April.

    “Everybody thinks there’s still an appetite for California bonds,” Lockyer said. “There’s certainly a continuing need for long-term investments in schools, high-speed rail, stem-cell research centers and so on.”

    To contact the reporter on this story: William Selway in San Francisco at wselway@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

    Thursday, September 24, 2009

    FUNDING THE CALIFORNIA BUDGET CRISIS


    By Daniel Johnson in New University on Oct. 13, 2008
    September 24, 2009 | Volume 43

    Following a record setting 85-day stalemate over the state budget, the financial situation for California looks nearly as downtrodden as it did two weeks ago when state officials were seemingly still in a deadlock deciding the budget. Because the budget was planned too optimistically and state revenue has been unable to meet original estimates, the deficit, which Gov. Arnold Schwarzenegger has been aiming to close, looks like it will get a lot worse before it gets better.


    In fact, Schwarzenegger has been working with his brain trust to analyze the budget deficit through an emergency meeting in which they may or may not plan to decide to ask for emergency funds from the federal government. However, rather than working with his team, planning, waiting and planning to wait, Schwarzenegger, along with friends and enemies alike, needs to appreciate the timeliness of the situation, suck up his pride and reach for those emergency funds.


    It could be argued that the abundance of bureaucratic red tape and the stalemate is just politics as usual. However, with the economic crisis confronting Californians on both a state and national level, it is tough to argue that California’s budget is anything but at its breaking point.
    According to data collected from “The Economist,” state revenue in the form of sales tax receipts and corporate taxes have been 9 and 16 percent lower than state estimates. Furthermore, income-tax receipts, which make up the majority of state revenue, have only done marginally better.


    Rather than arguing over how to allocate money, state officials should first consider whether or not they have the money at all, which can only positively be done through borrowing money from the federal government. This must be done as soon as possible for three primary reasons. First, as long as doubt drifts over the budget at the highest level, this will trickle down in budget matters concerning all levels of employment. Second, as the world’s eighth largest economy, California is positioned to be a trendsetter among the states, as far as balancing budgets is concerned. Thus, the longer the state is in the red, the longer the smaller economies that surround it will follow. Third, the national economy is in ruin and any financial assistance the federal government can offer will lessen over time.


    According to one report that appeared in the Contra Costa Times, the state budget crisis affects not only politicians, but unions as well. An example cited in the report showed that teaching unions could not negotiate with school distracts because a three-year revenue projection is required to come to an agreement. Because the state budget is not concrete, these projection numbers have no solid basis, which in turn casts doubt on agreements being reached between teacher unions and school districts.


    While California’s trendsetting status is impressive for a state that is currently in turmoil, it is also a responsibility. According to a recent Wall Street Journal article, the basic moneymaking system is the same in California as it is in other states, with one exception. It is on steroids. Through such factors as exporting businesses, manufacturing capabilities and professional services, California’s economy accounts for roughly 15 percent of the U.S. gross domestic product. So when waves are made on California’s financial coast, they resonate throughout the other 49 states.


    Finally, while the effects of the Emergency Economic Stabilization Act of 2008 (the bailout plan) have yet to completely settle, it is tough to argue that the national economy is anything but worrisome. As long as this turmoil exists, both federal and private sources offering funds will have no choice but to become more conservative in their lending habits. Thus, if California is in need of emergency funds, it is best to aim for them while this safety net is outstretched rather than tucked away.

    Daniel Johnson is a fourth-year literary journalism and film and media studies double-major. He can be reached at dcjohnso@uci.edu.

    Monday, September 21, 2009

    THE CALIFORNIA FIX: Tax commission report falls flat, but it's a start

    Proposals to eliminate the sales tax and levy an experimental business tax are said to have 'zero percent' chance of passing. But an overhaul is needed, and the ideas may provide a jumping-off point.

    By Eric Bailey in the LA Times - Reporting from Sacramento

    September 21, 2009 -- It was to be the sort of big-game victory that California political leaders rarely pull off. Gov. Arnold Schwarzenegger and legislative chiefs set out to shake the roots of the state's tax system to spur the business climate and resuscitate the treasury.

    But as the commission they formed for that purpose prepares to release its final report this week, business leaders are grumbling, labor unions have turned wary and once-bullish lawmakers are backing away.

    The recommendations from the Commission on the 21st Century Economy, which include some revolutionary ideas such as scrapping the sales tax and imposing a broad and untested new business levy, have been met with shrugs and even a few snickers.

    "It's not cooked," said state Treasurer Bill Lockyer, who was a tax lawyer for decades. "It probably needs years of work."

    Republicans like some of what they see, such as the plan's call for a flatter income tax, but they don't expect to make much headway in a Capitol dominated by Democrats.

    "This is the most significant tax policy proposal in three decades," said Assemblyman Chuck Devore (R-Irvine). "But the chances of this getting approved, as is, are zero percent."

    Such conclusions have not completely derailed the prospects for change in a state that Forbes magazine ranks 50th out of 50 for its big tax bite and other high costs of doing business.

    Schwarzenegger is expected to call a special session of the Legislature to address the commission's findings.

    Assembly Speaker Karen Bass (D-Los Angeles), an early proponent of the commission, has backed away from a vow to hold a yes-or-no vote on the package. But she calls the commission's principal suggestions "intriguing."

    While that is not a warm embrace, she and other lawmakers see the package as a worthy starting point for debate on changes considered long overdue. They say the commission report should spark a full reappraisal of California's tax structure, and possibly a push toward a bipartisan compromise that might actually take flight in the fickle political winds of Sacramento.

    "The issue is not going to go away," said Senate President Pro Tem Darrell Steinberg (D-Sacramento). "But it's important to get it right."

    Sacramento has long been an epicenter of debate about taxation.

    The state's tax system was fashioned during the Great Depression, when small manufacturers churned out retail products subjected to a sales tax. As recently as 1950, the sales tax provided nearly 60% of the state's revenue.

    But in the years since, California's economy has shifted to one dominated by service industries -- lawyers, engineers and other professionals whose sales are not taxed. Although the state has the nation's highest sales tax, it now accounts for barely a quarter of revenue.

    The result has been an increasing dependence on income taxes, which grew from 11% of state revenue in 1950 to more than 53% in 2008. In recent years, the wealthiest 1% of the state's population has generated a big percentage of that.

    Liberals say the tax burden borne by the wealthy simply reflects the astronomical rise in incomes of the super-rich in Silicon Valley, Hollywood and other enclaves. But that revenue, too, has proven volatile, soaring or stumbling with the rise or fall of the economy and the stock market.

    As the economy slumped and tax proceeds plummeted late last year, Bass and Schwarzenegger got together to form the 14-person tax commission and sidestep the usual Capitol bickering.

    But the commission -- attempting to do in months the kind of wholesale reconstruction some states have taken years to accomplish -- slogged along. Partisan fissures cracked open, and the group's ideas fell well short of unanimous approval from participants.

    Still, Schwarzenegger believes the panel's proposed changes in the tax system are "the most significant action we can take in ending our perpetual budget crises," said Aaron McClear, the governor's spokesman.

    Under the plan, the state's current half-dozen income tax rates would be replaced by two -- 2.75% for those making up to $56,000 a year and 6.5% for those earning more. Sales and corporate taxes would be replaced by a single new business levy that would spread the burden -- at a tax rate of about 4% -- more broadly and would include service professions.

    The proposals have drawn heavy fire from all sides.

    Business leaders are worried it could make things worse for their bottom lines and the broader economy.

    "There is simply too much at stake to adopt this proposal before the implications for jobs and the economy have been fully assessed," said Allan Zaremberg, president and chief executive of the California Chamber of Commerce.

    With some tax experts saying the changes would favor the rich and could cost jobs, labor leaders don't like what they see.

    "This feels like a dangerous experiment," said Courtni Pugh, executive director of SEIU California, the state's largest union with more than 700,000 workers.

    Among the most pointed critics are nine tax experts from Stanford, UCLA, Rice and other universities. They rose up earlier this month to oppose the bid for a broad new business levy, saying in a Sept. 5 letter to Commission Chairman Gerald Parsky that there are "numerous reasons to believe that this is the wrong course for the state to take at this stage."

    They cited potential administrative difficulties, legal challenges and competitive disadvantages to California businesses compared to out-of-state firms not hit by the tax.

    "The problem with this is it's a poorly designed substitute for a sales tax," said Kirk Stark, a UCLA tax law expert who signed the letter.

    Lockyer and other Democrats, meanwhile, say the commission's mandate to ease the volatility of state revenue -- a boom-and-bust cycle that has sent the state spinning into deep deficits -- seems to have masked a hidden agenda.

    "What they really wanted to do, in my opinion, was lower taxes on rich people," Lockyer said.

    Republicans counter that their foes across the aisle had their own motivation -- to raise taxes.

    Still, lawmakers from both parties insist they will fully analyze the proposals and come up with alternatives.

    One strategy suggested by Democrats is to broaden the existing sales tax to include more service industries rather than impose a whole new business tax. They also want to look at tapping Internet commerce, hiking the gasoline tax to help fund the fight against global warming and adopting a levy on oil extracted from California, the only petroleum-producing state in the nation without one.

    Republicans will probably push for a bigger rainy day fund to help the state better survive slumps. But they draw the line at any proposal to boost taxes overall. Nearly every GOP lawmaker has signed a no-new-taxes pledge.

    In addition to ideological opposition, attempts to increase taxes would face a gantlet of special interests with something to lose.

    "Any revision of the tax code is a Herculean undertaking," conceded Assembly GOP Leader Sam Blakeslee (R-San Luis Obispo).

    But the commission's report -- along with the Legislature's abysmal legislative approval ratings and an election year sure to be dominated by the cry for California government to fix itself -- could still provide enough impetus for change.

    "The bottom line is we've got a tax system designed back in the 1930s, when we were building widgets," said Assemblyman Charles Calderon (D-Montebello), chairman of the lower house tax committee. "We need reform. We need a system for the information age."

    …Nothin' t' read while you're waiting for th' Commission on the 21st Century Economy report?

    Start here:

    Government Reports
    State of California Department of Finance (DOF)
    Legislative Analyst's Office (LAO)
    Other Governmental Organizations
    Reports by Non-Governmental Organizations
    California Budget Project
    California Tax Reform Association
    Council on State Taxation (COST)
    LECG LLP
    Public Policy Institute of California

    THE CALIFORNIA FIX :: Taming the California Beast: So many problems, so many competing interests -- only rewriting the Constitution will do.

    LA Times Editorial

    September 20, 2009 -- It's not always easy to identify the tentacles that are strangling California and keeping it from fulfilling its promise for 38 million residents.

    Who wrecked our public school system, which was once the envy of the world?

    Who ruined the nation's premier network of highways, …the most ambitious and reliable water delivery system, …the best state parks?

    Who killed the spirit of opportunity and innovation that once made California the headquarters for banks and oil companies, for makers of surfboards and electric guitars, for computers and communications?

    Even if we can't identify the culprit, people here intuitively know that some kind of monster has wrapped itself around the Golden State. Well over two-thirds of registered voters said recently that they would vote yes on two key ballot measures to pave the way for a constitutional convention to wrest back control of the state for Californians.

    The numbers were compiled by a pollster for Repair California, a coalition of organizations from across the political spectrum that believes a convention is the best way to make the state work again. The group has set Friday as its deadline for submitting ballot language to the attorney general. If current numbers remain strong, voters would call a convention in November 2010. The convention would take place the following year, and a constitution would go to voters for an up-or-down vote in November 2011.

    But once the convention is called, then what? It's easier to agree on a fix if there's agreement on who, or what, the monster is.

    Once, it was easy. Reformers and demagogues of the 1870s argued that California was being strangled by twin demons: Chinese immigrants and the Central Pacific Railroad. Anti-Chinese provisions were grafted onto California's second Constitution in 1879. But reformers believed things were still awry, and increasingly, they identified the enemy as the Central Pacific's successor, the Southern Pacific. As the state's biggest corporate presence, the railroad selected the candidates who ran for office and bought their votes to assure control over any attempt to regulate freight rates or impose taxes. As one of the state's largest landowners, it ruled agriculture and water.

    The Southern Pacific became known as the Octopus, to describe the numerous corporate tentacles that worked their way into the statehouse, the voting booths, the farms, the cities. An 1880 land dispute between the railroad and settlers that grew violent and resulted in several killings became the basis of the 1901 Frank Norris novel “The Octopus: A Story of California.” The Southern Pacific's nickname stuck.

    To break the railroad's iron grip on the Capitol, Progressive era reformers wrote, and in 1911 voters adopted, constitutional amendments to allow for the initiative, referendum and recall. The Southern Pacific might still have been able to bribe lawmakers into doing its bidding, but Californians now had a way to fight back. They could overturn bad laws, pass new ones and throw out politicians they believed were not serving their interests.

    By 1996, when the Southern Pacific was absorbed by its ancient rival, the Union Pacific, the railroad Octopus was long dead. But there is a new multi-armed monster, more pernicious than any outside corporation ever was.

    One tentacle belongs to public employee unions. Although Californians should reject the foolish notion that there is something intrinsically destructive about workers in public service, it is undeniable that their unions have gained enormous clout in Sacramento. They have the influence to select Democratic Party primary candidates in urban areas, and the money and foot soldiers to ensure their election. Then, at contract time, those unions sit across the table from officials they put in office -- officials who realize they are bargaining with people who have the power to end their careers. The greatest barrier to affordable and sensible prison reform has been the California Correctional Peace Officers Assn. -- the prison guards union. Ballot measures are made or broken by the California Teachers Assn.

    Another tentacle belongs to big business. Less powerful, perhaps, than when the Southern Pacific ruled the state, business interests nevertheless exercise a remarkable degree of clout through lobbyists. Disgraced ex-Assemblyman Michael Duvall (R-Yorba Linda) may have just been telling stories earlier this month when he described trysts with a business lobbyist, but it's hard to distinguish between his supposed antics and those of lawmakers all too anxious to get, well, close to big-moneyed business interests.

    Add two more arms: The state Democratic Party, in alliance with labor, and the Republicans, supported by business, seem locked in an eternal contest. But they are so invested in their game that they unite in resisting any attempt to change the rules. The parties and (more tentacles) their lawyers, political consultants, pollsters, signature gatherers, fundraisers -- effectively, a political/industrial complex -- are bent less on winning than on being able to continue playing the game.

    One more tentacle of today's monster is the very weapon used to slay the last one. The initiative process, which loosened the Southern Pacific's grip on California, has been co-opted by the forces it was meant to control -- the tendency of power to seek any means to perpetuate itself.

    The new Octopus is different from a single, all-encompassing railroad; this time the tentacles wrapped around California also are wrapped around one another in a knot so tight it can't be untied. It has to be cut.

    That's where a constitutional convention comes in. Instead of removing one arm with a ballot initiative or shackling another with a regulation, a convention has the potential to remove all the arms at once. It can fail, of course, but it also might create a governance system that again puts Californians in control of their state, at least for a while -- until a new Octopus presents itself and a new generation of Californians rises to the challenge.

    Friday, July 17, 2009

    CALIFORNIA’S BUDGET: AN EXPENSIVE NEEDLESS DELAY: Missing the deadline on a budget has cost California billions and undermined confidence in the state.

    Editorial From the Los Angeles Times

    July 17, 2009 -- Maybe you've seen the TV commercial. "Sacramento" is asking Gov. Arnold Schwarzenegger to sign a budget that "raises your taxes and spends money we do not have." Schwarzenegger is "standing firm." It's an act, and not a very good one.

    The governor and legislative leaders are in what Californians can only hope are the final days of negotiations to close a $26-billion budget gap. Democrats went through their empty gesture a month ago, seeking to fill the hole with taxes on oil extraction and tobacco sales. But they knew those wouldn't fly -- and they didn't -- and there is currently no tax proposal being discussed in budget talks, regardless of Schwarzenegger's claims to the contrary.

    What he's trying to do instead is to portray the three additional post-deadline weeks that the state budget has been out of balance as time well spent. That's debatable at best.

    If those three weeks really helped the state crack down on supposed waste, fraud and abuse, we'll gladly take it, but we have several serious qualms. First, the savings from many of these reforms may, with luck, just offset the $1.5 billion to $3 billion the state lost by blowing its June 30 deadline, stopping cash payments to vendors and issuing IOUs with interest. So what was gained? The governor might answer that savings kick into future years as well, and that's great -- if there really are such savings to be had. County welfare officials have rejected Schwarzenegger's blithe assertion, for example,that many people in the state's welfare-to-work program aren't really looking for work and, without reforms, never will. CalWorks clients in Los Angeles County are lining up to grab the temporary and part-time jobs made available through the state program.

    Are welfare programs chock-full of cheaters? We're left to rely on the word of the governor -- the same man who is raising special-interest money to run commercials pretending that he is in the midst of a fight over taxes.

    Meanwhile, reforms in other areas, such as In-Home Supportive Services, were making their way through the Legislature. It is there, in public, where law and policy should be crafted, not in closed post-deadline budget sessions.

    It would be merely annoying if the Kabuki, to use the governor's word for it, came during a typical budget disaster year. But this one isn't typical. This year, as its credibility erodes, California is nearing default, in which the state doesn't merely fail to pay its bills but shows no prospect of ever being able to do so. Then it would be too late for reform; no one would do business with California, and other states on the edge -- and finally all states -- could fall.

    Schwarzenegger and the Legislature were on the verge of closing the budget gap and backing away from default at the end of June. Delay, ostensibly in the name of reform, deepened the problem and swept away much of the remaining confidence in California's ability to meet its obligations. It's hard to see that as worth the wait.

    BUDGET MESS MAKES CALIFORNIA VULNERABLE TO CRIPPLING CREDIT DOWNGRADE, OFFICIAL WARNS: Treasurer Bill Lockyer says the state could find funding sources for crucial programs cut off if its credit rating is dropped to junk status. Lawmakers and the governor vow to keep negotiating.

    By Evan Halper and Eric Bailey | From the Los Angeles Times

    2:50 PM PDT, July 16, 2009 -- Reporting from Sacramento — State Treasurer Bill Lockyer warned today that state leaders' failure to reach a budget deal has put California at risk of a credit downgrade that would cut off access to funds needed for building schools, roads and other public works projects.

    "With every passing day, the state's credit rating moves closer and closer to the junk pile," Lockyer said in a prepared statement. "If our credit rating sinks to junk status, the state will find the door to the infrastructure bond market locked shut."

    The warning came as budget negotiations remained stuck amid simmering frustrations, although legislative leaders and Gov. Arnold Schwarzenegger vowed to forge ahead in hopes of settling on a package to close California's $26.3-billion deficit.

    Speaking at a midday news conference, Schwarzenegger characterized the state of negotiations, which halted Wednesday night.

    "It wasn't a breakdown," he said, "but I think a stall. . . because some new issues came up."

    No time has been set to resume talks, though Assembly Speaker Karen Bass (D-Los Angeles) said more bargaining sessions would take place. And the Legislature has postponed its summer recess, scheduled to begin Friday, pending a budget agreement.

    "The legislative leaders plan on working through the weekend, and we hope to get a deal soon," said Jim Evans, a spokesman for Senate leader Darrell Steinberg (D-Sacramento).

    The prime obstacles to an accord are in the areas of education and welfare. One major sticking point is how to tweak voter-approved school-funding guarantees so the state can cut billions of dollars it needs to balance its books -- while still guaranteeing that school funding will be restored when the economy rebounds.

    Aside from disagreements over education funding and welfare, Schwarzenegger spokesman Aaron McLear said, Democrats remained "unwilling" to make deeper cuts to create a healthy reserve so the state can weather an economy that could get worse before it gets better.

    Democrats are pushing for the budget package to include changes in state law that would assure repayment of roughly $11 billion diverted from education when the economy improves and create new guarantees that schools would not lose money in future downturns. The governor said he would support repayment of the $11 billion but will not allow permanent changes to the funding formulas.

    "I think we are not going to do that," Schwarzenegger told reporters, "because Proposition 98 can only be changed by the people."

    Schwarzenegger says the changes he wants to state government operations would produce long-term savings by making various programs more efficient. Democrats have resisted, saying there is not enough evidence that they would be effective, and they have not been properly evaluated through normal legislative hearings.

    One contentious proposal, some participants said privately, would change the state welfare program to increase penalties for recipients who do not meet minimum federal work requirements. Currently, emergency cash is available for children of parents in that category; those grants could be eliminated under Schwarzenegger's plan.

    Thursday, July 16, 2009

    THE SALLY RAND OF LEGISLATURES: “The Democrats want some guarantees and protections for education funding, and the governor’s evidently saying nix to that”.

    By Patt Morrison - Patt Morrison Blog KPCC 89.3 FM

    Thursday July 16th 08:26 AM -- Oh, that legislature is such a tease, with the peekaboo budget – it’s off, it’s on, we have a deal, no we don’t.

    By ten pm, the deal that looked good eight hours earlier – as Assembly speaker Karen Bass told us – was stalled and everybody went home to think it over for the night.

    Whatever budget we wind up with, it won’t be any oil painting. Schools? Cut. Health services for poor kids and homebound elderly? Cut. Prison budget? Cut. The sad part is that even though this budget may straggle across the finish line, bleeding from $26 billion in cuts, it’s no triumph; as is so often the case, some cuts will wind up costing more than they save. The elderly whose adult day care is cut will wind up in bogglingly more expensive nursing homes. Poor kids who don’t get health care coverage will still get sick – and end up in bogglingly more expensive emergency rooms. Penny-wise, billion-foolish, maybe. In exotic-dancer terms, services could be stripped. But you can still read someone's lips, because they're saying ''no new taxes.'' You could still hope for a ten-spot in the g-string, though.

    And then there's burlesque-like tease. The state Board of Equalization goes and dangles the prospect of a billion plus dollar tax bonanza in front of the state. It’s calculated that taxing the marijuana trade could raise as much as $1.4 billion a year. It arrived at this figure in response to a proposal by a San Francisco assemblyman to handle dope the way we handle booze: regulate it and tax it.

    But don't count your buds before you pick 'em, bud.

    Yesterday we heard about two breakthroughs in Alzheimer’s disease: a Duke University finding that a certain genetic biomarker could flag a coming case of Alzheimer’s anywhere from five to seven years before symptoms actually show up – and a UC Irvine study found that a drug rather like one used to treat the inflammation from rheumatoid arthritis could likewise reduce brain-cell inflammation that exacerbates Alzheimer’s. Lab mice treated with the drug didn’t suffer the same memory loss that untreated mice showed.

    And how did Goldman Sachs manage to make a humongous $3.44 billion profit in the second quarter of this financially wretched year? We spent time with two guests on that topic – and one of them concluded pretty much what I would hear a few hours later, when one member of my book group said that as soon as he heard those numbers, he figured something or someone got finagled.

    Today – could California really stage another constitutional convention? And I mean, make some really serious changes? Like to the initiative process? Proposition 13? Hey, if the guys in powdered wigs and buckled shoes could do it, why can’t we? Okay, then – what power would YOU be willing to give up? And to whom?

    See? Harder than it looks.

    IN SACRAMENTO, THEY ALL DROPPED THE BALL

    The state could have had a budget weeks ago and avoided the embarrassment of IOUs, but various actors -- especially the top one -- wouldn't let it happen. Now, everyone loses.

    George Skelton

     

     

    George Skelton | LA Times Capitol Journal

    Darrell Steinberg, Karen Bass

    Rich Pedroncelli / Associated Press -- Senate leader Darrell Steinberg and Assembly Speaker Karen Bass talk with reporters as they head to a budget meeting Wednesday. Bass recently accused the governor of “moving the goal posts.”

    July 16, 2009 -- From Sacramento -- They whiffed a fat batting practice pitch. Blew a gimme putt. Inexplicably clanked a slam-dunk.

    Pardon the sports jargon, but it's a civil way to characterize incompetence and failure in Sacramento. It avoids invective language already too prevalent in California's Capitol.

    Three weeks ago, as I left town on vacation, the politicians seemed poised to close a $24-billion deficit hole, which would have saved the state from issuing costly IOUs and suffering national ridicule.

    Whatever budget deal ultimately is passed -- and in this economy it'll only be a temporary fix, at best -- virtually the same agreement could have been reached weeks ago.

    What happened? For one, Gov. Arnold Schwarzenegger swung for the fence -- not willing to settle for a run-scoring single -- and didn't seem to know where the fence was.

    But there were errors all around.

    Democrats wasted too much time fumbling with tax increases that they knew never were going to connect and that many voters had made clear they hated.

    The loudest message from the California electorate while rejecting the governor and Legislature's budget propositions in May was that it wanted Sacramento politicians to fix the state's fiscal mess themselves and not dither. Just do it!

    So much for that notion.

    But accompanying that overarching message was a strong chorus of: "Stop taxing us. Live within your means."

    Schwarzenegger and Republican legislators heard the "no tax" gospel, even if some public employee unions and liberal activists closed their ears.

    Democratic legislative leaders understood the political reality: They had few options. Deeper slashes had to be made in healthcare and welfare programs. Education would take a big hit, although there'd be some help from federal stimulus money. More cuts would be needed in virtually every state program, from prisons to parks.

    Moreover, voters had granted Democrats a license to whack away.

    The electorate's verdict had plunged the state $6 billion deeper into debt, cut off $16 billion in future tax hikes and denied schools $9 billion in eventual restoration of previous cuts. Before casting their ballots, voters had been warned about the dire consequences of rejecting the props.

    Additionally, the measures had been opposed by labor and social groups that despised the ballot package's key feature, a modest spending cap. So the Legislature's majority party owed these traditional allies practically nothing when they began yelping about the program cuts -- and trims to state employees' pay -- forced, in part, by the propositions' demise.

    Politically, signing off on the inevitable budget butchering should have been a slam-dunk. A gimme putt. A soft pitch.

    But philosophically, Democrats couldn't handle it. They did cut sharply, but also decided to play out the game fighting, by pushing tax increases on oil companies, smokers and motorists. That losing effort took up valuable time right before the July 1 deadline for avoiding IOUs.

    Democrats produced a stop-gap plan supported by Assembly Republicans that would have staved off IOUs. They proposed $3.3 billion in cuts to education and other programs that would have kept the cash flowing, at least for a few weeks. It would give them time to negotiate more cuts. Schwarzenegger rejected the idea and persuaded Senate Republicans to follow.

    That's where the governor began bobbling the ball, although his coaches figured he was playing to his fan base, what's left of it.

    Issuing IOUs will cost the state roughly $26 million in interest for July, the state controller's office estimates. The IOUs also prompted Wall Street bond rating agencies to lower California's credit to near junk status. That potentially could cost the state $7.5 billion over 30 years, according to the treasurer's office.

    Schwarzenegger, aides say, calculated that Democrats wouldn't negotiate seriously without facing a deadline, such as the latest: most banks refusing to accept IOUs. Negotiating piecemeal would get nowhere, the governor believed.

    But he might have dodged IOUs completely. Guess it doesn't rankle much that the state he has governed for nearly six years must now pay bills with scrip.

    Schwarzenegger rankled Democrats by producing a packet of "reform" demands just before the IOU deadline. Most made sense, but they entered the game late.

    "Moving the goal posts," Assembly Speaker Karen Bass (D-Los Angeles) called it.

    She also theorized that the governor was going down his "legacy list" -- striving for achievements he can point to after leaving office in 18 months. That's fine, Bass says, but more thought and deliberation are needed. "You shouldn't use the budget process to jam through public policy."

    Senate leader Darrell Steinberg (D-Sacramento) says Schwarzenegger returned to "the Terminator zone" after the May election and resumed bashing legislators, making negotiations more difficult.

    Typical rhetoric: "I don't want to kick that can down the alley anymore. I've given them enough chances and now I say, let's fix the problem. . . . It's easy for the politicians to keep promising things, but they can't deliver. They live way, way beyond their means."

    You'd think this guy hadn't been the head coach and superstar for all these years.

    Both sides should have called the game long ago. There'll be no winners -- just bigger losers the longer it lasts.