Misleading Budget Reporting from the Los Angeles Times

The LA Times had a ‘news analysis’ piece today on the impact of the budget deal on the middle class. While it got the gist right – Californians are getting screwed – it repeats a great many of the myths about state finances. I was going to discuss it in detail, but instead I’ll point to Robert at Calitics.

I do want to mention three things. On the question of the tax burden in California as opposed to other states. According to this CNN Money graph from 2005, California ranks 20th on taxes as a percent of income. In a February 2009, the Public Policy Institute of California [PDF] showed that on the same metric, California ranked 18th. We are firmly in the middle of the pack. For some reason, the mindset in California is that our tax burden is still well over the national average. This hasn’t been true since the last 1970s, but reporting like this helps to perpetuate the belief.

The second issue pertains to paying for our freeways. I’ve discussed a mileage tax before, and how it should replace the gas tax as the means for paying for transportation infrastructure, with the gas tax being retained for climate change mitigation until a carbon tax is instituted. The article hints at a mileage tax around the edges, but mostly suggests that new construction will take the form of toll roads rather than freeways. This need not and shouldn’t be the case. The debacle of the TCA in Orange County should be evidence enough. There is a good coverage of this issue over at OC Progressive.

Finally, there is the question of the article’s focus on the middle class.

But at a time when taxes are about to rise substantially, the services that have long set this state apart are deteriorating. The latest budget cuts hit public programs prized by California’s middle class particularly hard — in some cases at the expense of preserving a tattered safety net for the poor — following years of what analysts characterize as under-investment.

The entire tenor of the article paints the picture that the middle class is being targeted specifically for both tax increases and budget cuts, in favor of the “tattered safety net”. However, this is misleading in three ways. First, public programs are prized by and benefit all residents of California, not just in the specific (everyone wants afforable higher education for their kids), but also in the abstract (quality education benefits businesses in the state and helps combat crime). Second, see this post at Calitics on the intensely regressive nature of the tax hikes in this budget – it is the poor who are being unfairly targeted, while corporations get a tax cut. Finally, the Democratic proposal for this budget always involved restoring high income tax brackets abolished in the 1990s. It is the governor, and ultimately the Republican obstructionists, who deserve the credit for shifting the burden to the middle and lower classes, both in the form of the income tax increase and in the sales tax increases, which are inherently regressive. Of course, this is seen as a bonus by the Yacht Party. Shame on the Los Angeles Times for getting the isolated facts right, but missing the larger story.

Abel Maldonado: Not A Hero

As mentioned over at Calitics, the California media seems to be fawning over Abel Maldonado for successfully forcing an open primary amendment through the legislature. Without getting into a discussion of whether open primaries are good policy or good for the parties, I instead want to ask whether the process by which the proposal was adopted. First, George Skelton’s laudatory language:

Normally, it might take years for a citizens reform group to place an open primary proposal on a statewide ballot. Sen. Abel Maldonado did it in less than a week.

Actually, the heavy work was done in less than 24 hours.

The brashness, the audacity, the tenacity of this Republican lawmaker from Santa Maria in ramming such a landmark measure through a Legislature that ordinarily wouldn’t have touched it in a blue moon made him the single biggest winner of the budget-tax brawl that finally ended in the Capitol at dawn Thursday.

The state, broke, has been withholding income tax returns because it doesn’t have the money on hand. Infrastructure projects had been halted, and those that had previously been exempted on the grounds of public safety were also about to be shut down. State employees were being ordered to take mandatory furloughs, and tens of thousands were about to be laid off. California has the lowest municipal bond rating in the country. Months of Republican obstructionism had blocked any reasonable budget, and a dubiously legal work-around had been vetoed by the governor. Finally, a budget compromise had been worked out, in secret, with no hearings and few publicly released details, and only one vote in the Senate remained to get it passed. And Abel Maldonado saw an opportunity.

Actually, the heavy work was done in less than 24 hours.

No. The heavy work was on the budget, and had been going on for months while Maldonado complained about the costs associated with relocating the State Controller’s offices. There was no heavy work on the open primary. There were no hearings, no public comment, no testimony by expert lawyers or political scientists, and certainly no discussion of whether this kind of open primary will benefit the populace. Open primaries are an article of faith among some ‘centrists’ and ‘reformers’, so there was no need to have a debate on whether open primaries would drive up the costs of or lead to voter confusion. Washington state has this kind of open primary, but there was no discussion of the results there. Instead, the proposal was rammed through the legislature with nary a debate. Whatever ‘winners’ there may be in this entire debacle, good governance certainly isn’t one of them.

We have a word for people who exploit the fears of others for political gain. Holding hostage the welfare of the poor, the disabled, the young, the elderly, and the ill to advance some dubious electoral change is as morally reprehensible as taking civilians hostage to free a ‘political prisoner’. For 72 hours, Senator Maldonado, you held this state hostage in an attempt to ease your path to reelection, and for that I name you extortionist. And George Skelton, for your praise of his tactics and results, I name you apologist. May both of you be punished as the people of this state see fit.

The Party of No Solutions

State Assembly Speaker Karen Bass was on the Rachel Maddow Show tonight. The video can be found here (I cannot figure out how to make the MSNBC embed code work on wordpress – advice would be welcome).

Key, Speaker Bass referred to the Republican Party as “The Party of No Votes. The Party of No Solutions.” This should become the Democratic motto in California for the next two years. Assuming that some sort of compromise is finally reached, the inclination will be to let the horror of this budget crisis pass into history. Progressives are going to need to keep Republican obstructionism front-and-center both for the fight against the 2/3rds rule and for the gubernatorial race.

(On the 2/3rds rule, see Robert in Monterrey at Calitics on the history of the rule, and the approach to changing it.)

Overall, I thought that Speaker Bass hit the key points, especially on the recent history of Democratic concessions to spending cuts. However, I found fault  with her on two issues. The first, she made a point that this crisis is a product of the Republican party – referring to recall threats and KFI’s John & Ken specifically. Okay, that is accurate. But in doing so, she appeared to give a kind of clemency to the individual legislators. This is dangerous, especially given Abel Maldonado’s narcissistic attempt to rewrite the constitution to protect his own seat.

Rachel also asked her about the liberal response to those threats, a question that Speaker Bass had to evade, because there has been relatively little liberal or progressive response. I think some of this is structural – liberal outrage is unlikely to sway recalcitrant Republicans, and threatening Democratic legislators for more tax increases and fewer spending cuts is counterproductive in the face of total disaster. However, I also suspect that the problem, among both Democrats and the populace at large, is familiarity. We’re used to budget crises in California. They aren’t news – they’re olds. As such, I believe that most of the state ignored the crisis in the summer of last year, even though in retrospect is was an obvious prelude to the current disaster. We’re so used to storms that we didn’t recognize the hurricane for what it was.

Speaking of progressive response, Calitics has been urging people to call Abel Maldonado for days.

If you haven’t called him, please call Maldo,916-651-4015, and tell him to end the hostage situation. If you have, call him again, or you can also call his local offices. And if you are in the district, why not call both offices and send him an email too?

This is especially important given this from the LA Times:

But for others, including Sen. Sam Aanestad (R-Grass Valley), it is a matter of listening to the “hard-working middle-class people” he represents.

“Just yesterday alone, we had 400 telephone calls,” he said. “Overwhelmingly, more than 40 to 1, they were saying, ‘Please do not raise our taxes.’ “

Take the time; make a call.

Leaving California

From Calitics (quoting the Wall Street Journal):

Several Western states are launching aggressive efforts to poach jobs, talent and industry from California, sensing an opportunity to capitalize on the Golden State’s current political and financial woes.

Colorado is the first out of the box with a Valentine-themed banner that will trail behind an airplane circling rush-hour traffic in Los Angeles on Friday morning, urging Californians to give Colorado a try. Ads in newspapers from San Diego to San Jose will feature a Cupid in ski boots over a bold-faced tease: “California, can you feel Colorado’s love?

To the California GOP: Please note that the banner doesn’t say “California, Colorado has lower taxes.”

I’ m at a point in my life where I’m considering a fairly significant move, one which may establish where I am likely to spend the next decade or two of my life. I find myself wondering why on earth I would consider staying in California. Why would I want to raise children in a state where there is no strong commitment, at the legislative level, to funding quality public education? Why would I want to work or play in a state where environmental regulations and labor protection laws are being sacrificed by a legislature held hostage? If the state is unable to solve even a relatively simple budget problem, why should I trust it to solve the near-term water shortage, let alone the long-term certainties of a catastrophic earthquake or climate change?

So, thank you, GOP, for making it easier to consider leaving my home state.

Published in: on February 15, 2009 at 1:52 pm  Comments (1)  
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George Skelton: Almost Right (Updated)

In the LA Times yesterday, George Skelton made three suggestions aimed at preventing future state budget crises. He almost got it right.

Lower the vote requirement for a budget to 55%. That’s still a supermajority, but one that’s practical given California’s increasing diversity of people and interests represented in Sacramento. A budget then would need 44 votes in the Assembly and 22 in the Senate, rather than 54 and 27. Democrats normally could handle that by themselves.

Also drop the two-thirds vote requirement for taxes to 55%, with one caveat: All the new revenue must be used to help balance a status-quo budget — not a penny for spending increases above inflation and population growth.

If they still don’t pass a budget by the July 1 start of the new fiscal year, the lollygagging lawmakers forfeit their pay and per diem for every day the spending plan is late. For most, that would be a hard hit. Legislators make $116,208 a year; house leaders get $133,639. Per diem is $173 tax-free each day — even weekends — while the Legislature is in session.

To his credit, he recognizes the unfairness of the third rule to legislators who vote for a budget and aren’t rich. He misses, of course, the unfairness to legislators who don’t vote for a budget for some principled reason, and aren’t rich. I disagree with why Republicans refuse to vote for a tax increase, vehemently. I don’t, however, think that we should essentially extort legislators into passing a budget they disagree with.

I think, instead, that abolishing the 2/3rd rule should be enough to result in budgets passed in a timely manner. I don’t believe that a majority of legislators want the budget delayed every year.

The bigger problem is the spending cap he wants to impose as a condition of changing the 2/3rds rule for taxes. He rightly accounts for population growth in the spending cap – a vital necessity given the projections for the next few decades. However, he misses two other key sources of new spending: 1) popular initiative and 2) disaster relief.

A great deal of the spending in our state is in some way governed or mandated by initiative. Between program mandates and debt service on bonds, it is not practical to believe that binding the legislature’s hands on taxes while allowing the populace free-reign over spending will produce balanced budgets. The populace is not going to approve, by initiative, more money for prisons. However, they will approve toughening sentencing laws to send more people to prison. It is the role of the legislature to make sure that the necessary funds are raised to meet the expenditures mandated by the wishes of the populace. A system that denies the legislature the flexibility to meet those mandates is no more functional that the current system.

The second issue is disaster relief. Beyond the obvious expenditures that would follow a massive earthquake, there are other more prosaic expenditures. Climate change will require both large capital improvements in the form of, say, new water infrastructure. It will also involve smaller, annual expenditures in the form of, for example, wildfire fighting costs. There may be costs associated with global warming over the next 50 years that we cannot even predict. And that is the point. Placing any kind of hard cap on either taxes or expenditures fails to account for unexpected future costs.

In a representative democracy it is necessary to trust your representatives. If the populace doesn’t like the tax rate, or feels that the state is misspending money, then elections are the cure. Forcing the legislature to govern with one hand tied behind its back is asking for prolonged and unpopular budget crises. If the populace doesn’t like how Democrats prepare the budget, then they will stop electing them.

Update: See Robert in Monterey at Calitics reacting to an article in the Monterey Herald. He also makes the point that the rising health care costs of an aging population aren’t reflected in a spending cap based on population growth and inflation.

Economics and the California Republican Party: Never the Twain Shall Meet

This is a monumentally bad idea.

While many of the funds pegged for California would immediately help children, the poor and commuters, some Republican state lawmakers argue that the state should sock away some of the money for hard times in the future.


Villines agreed that avoiding costly borrowing would be prudent. But he had other ideas about using federal funds. Any federal money that “we might get should basically be put away into a … rainy-day fund for any potential future deficits if the economy continues to get worse,” he said, “as opposed to any budget factoring now.”

The purpose of the money is to stimulate economic recovery now, not to hoard it for the future. Apparently, statehouse Republicans don’t know the meaning of the word ‘stimulus’. The state Republican party should be disbanded, unless and until they can find people who know what they are talking about.

Finally, let’s look at this reporting:

One silver lining in the state’s deep fiscal crisis is that it has forced Republicans and Democrats to consider policies they had ardently opposed in the past, such as taxes and spending caps, experts say.

Which experts say that? Did you make that up, or are there really people who think that this kind of manic crisis budgeting is a good thing? Spending caps are a dangerously bad idea, as usually proposed. This is especially true if they are unable to account for population growth. New taxes are necessary, but Republicans have only willing to offer them in exchange for a spending cap.

The true silver lining of this crisis is that it may provoke the kind of massive structural reform the budget process needs: the abolition of the 2/3rd requirement for both the budget and taxes and the reconsideration of proposition 13; without both of which, we would not be in a crisis this severe. Unfortunately, it would be better to deal with this issues in the sober light of day, rather in the midst of a meltdown.