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Mar 15 2012

Flap’s California Morning Collection: March 15, 2012

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Los Angeles Marathon Map at Race Expo

Good morning!

The California Legislature is in session. Today’s schedule is here.

The California Assembly’s Daily File is here and the California State Senate’s here.

On to today’s California headlines:

Dan Walters Daily: Jerry Brown paddles on the left

Brown’s revised plan would hike income tax rate on $500,000 earners

In a hairpin turnabout, Gov. Jerry Brown is seeking a last-minute change to his tax proposal, a move to capture the energy of the populist ire toward the wealthy while trying to clear the November field of competing measures.

Brown said he wants to revise his initiative to incorporate elements of the chief rival proposal, a move rife with risks that include a fast-approaching deadline and potential new opposition. In return, backers of the so-called millionaire’s tax are withdrawing their ballot initiative and putting their weight behind the governor’s new plan to boost the hit on the wealthy while easing Brown’s previously proposed sales tax hike that all voters would pay.

“This united effort makes victory more likely and will go a long way toward balancing our budget and protecting our schools, universities and public safety,” Brown said in a joint statement with the California Federation of Teachers, President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Perez, D-Los Angeles.

A deal came together over the weekend, when Brown promised to make his tax hike more progressive.

“Our values and principles are clearly reflected in this new initiative,” said Josh Pechthalt, the president of the teachers union.

Brown’s revised plan would put a larger burden on individuals who earn $500,000 or more a year, raising their income tax rate by 3 percentage points instead of his earlier plan for a 2 percentage point increase, while reducing his sales tax hike proposal from a half-cent to a quarter-cent. Those earning $300,000 to $500,000 would also see more of a tax hike: a 2 percentage point increase, rather than a 1.5 percentage point hike.

The new proposal also is expected to extend the period of the income tax hike from five years to seven.


Higher community college fee plan in Santa Monica would be a first in California

Depending on your perspective, Santa Monica College’s plan to charge students four to five times the normal fee to add sections to oversubscribed classes  is either a brilliant idea to cope with its shrinking revenues, or a misguided strategy making it more difficult for low-income students to reach their academic goals.

Given the depth of the community colleges’  financial woes, and the fact that there are 112 of them around the state, it is surprising that more of these revenue generating ideas have not surfaced.  But the Santa Monica plan is now being discussed across the system, as every college struggles to reconcile increasing demand with shrinking resources.

“To some, it offers increased access,” said Paul Feist, a spokesman for the California Community College’s Chancellor’s Office, referring to the Santa Monica plan.  ”Others will argue that this is a move to privatizing public colleges.  We recognize that this debate is going on.”

The interest that the plan has triggered is reminiscent of San Francisco City College Chancellor Don Griffin’s idea in 2009 to sell naming rights of college courses for $6,000 a course.

When the City College’s  Board of Trustees heard of the plan, they nixed it.

Santa Monica officials say they have no choice but to come up with a creative plan to meet student needs and stay solvent.  Since the 2008-09 school year, the college has had to cut the number of courses its offers from 7,434 to 6,288 this year,  a drop of 15 percent.  If voters fail to approve a tax initiative this November, that figure will jump to 23 percent.  Currently the college is serving 500 full time equivalent students without receiving any support from the state to do so, officials say.

CalPERS ‘smoothing’ eases employer rate shock

CalPERS is planning a two-year phase in of a rate increase resulting from a lower earnings forecast adopted yesterday, continuing a “smoothing” policy that softens the impact of rising pension costs on deficit-ridden state and local government budgets.

Lowering the investment earnings forecast from 7.75 to 7.5 percent is expected to increase the annual state payment to CalPERS by $303 million, pushing the total to $3.8 billion.

Critics contend CalPERS and other public pension funds use overly optimistic earnings forecasts to “discount” or reduce future pension debt, concealing a massive “unfunded liability” and the urgent need for cost-cutting reforms.

But CalPERS says its earnings averaged more than the 7.75 percent target over the last two decades. The new forecast stays the course and does not change the basic average investments are expected to earn, 4.75 percent.

What the board lowered is the forecast for 3 percent price inflation, which when added to the basic 4.75 percent return totaled 7.75 percent. The new inflation forecast of 2.75 percent drops the total earnings forecast to 7.5 percent.

“Your proposal is driven by an inflation assumption that I just don’t buy,” board member J.J. Jelincic told chief actuary Alan Milligan at a committee hearing. “I do admire your courage for bringing it forward.”

Jelincic, the apparent lone “no” in a board voice vote, argued that the U.S. Federal Reserve and central banks in other countries have “flooded” their economies with money, a stimulus likely to lead to inflation.

Enjoy your morning!

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