Wednesday, October 14, 2009


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


By William Selway and Michael B. Marois |

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; Michael B. Marois in Sacramento at

Last Updated: October 12, 2009 00:01 EDT

Sunday, October 11, 2009


By William Selway and Michael B. Marois |

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; Michael B. Marois in Sacramento at