Category Archive: California Budget

Nov 27 2012

Michael Ramirez on Jerry Brown and California Leadership

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Michael Ramirez has it RIGHT again!

All of that effort by California Governor Jerry Brown for a lousy quarter per cent sales tax increase, plus some state income tax upper income tax bracket increase.

And….the California State Budget remains structurally unbalanced.

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Aug 14 2012

Flap’s California Morning Collection: August 14, 2012

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Mission San Francisco de Asís

Good Tuesday 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:

Judge orders changes to Prop. 32 language

A Sacramento County Superior Court judge on Monday ordered the secretary of state to change language on the November ballot describing Proposition 32, the initiative that promises to eliminate special-interest money in politics.

According to the new ballot label, the measure “prohibits” unions and corporations from contributing directly to candidates, as well as using payroll deduction to raise political cash. The label initially used the word “restricts.” The backers of Proposition 32 had argued that the original language, as determined by the attorney general’s office, was misleading.

“Voters deserve to be informed that Prop. 32 doesn’t just reduce direct contributions from corporations and unions to politicians, it eliminates them entirely,” said spokesman Jake Suski.

Judge Michael P. Kenny, however, denied another request by Proposition 32’s supporters to strike key language from the measure’s title and summary in state-printed voter materials. Backers had targeted a phrase that notes: “Other political expenditures remain unrestricted, including corporate expenditures from available resources not limited by payroll deduction prohibition.”

That’s the argument at the heart of the union-backed opposition campaign, which has been running statewide radio ads denouncing the initiative as “a deceptive proposition stuffed with special exemptions” for businesses.

Unions lost a separate challenge to ballot language that they said could mislead voters into thinking payroll deductions can be used with workers’ written permission. All payroll deduction is barred under the measure

ONLINE POKER: Legislation faces tough odds before deadline

Divisions among tribes with successful casinos have stacked the odds against legislation to legalize and license online poker in California, with less than three weeks left in the two-year session.

Some tribes support the proposal co-authored by the Senate’s top Democrat. Others support the concept but want changes to the legislation. And some tribes oppose the idea, saying it risks eating into the business of bricks-and-mortar casinos legalized by voters in 1998 and 2000.

Bill to close corporate tax loophole moves forward

Middle class Californians will get relief from soaring college costs if a bill passed by the Assembly Monday becomes law.

AB1500 would eliminate a $1 billion tax break for out-of-state corporations and use the expected windfall to reduce tuition.

It is the second component of Assembly Speaker John Perez’s “Middle Class Scholarship Act.” The Assembly previously approved the other part, which would reduce tuition by more than half for families whose annual household income exceeds the cap for getting a free ride at California’s public universities ($70,000 a year for the California State University system and $80,000 for University of California system) but is less than $150,000.

The Legislature approved the tax loophole in 2009 as a way to get a handful of Republican lawmakers to vote for the state budget.

On Monday, Republican Assembly members objected to what they described as an attempt by Democrats to undo the previous budget deal.

“This wasn’t a loophole, it was a product of careful, extensive negotiations and promises,” said Assemblyman Don Wagner, R-Irvine. “Promises made by one side of the aisle to secure the votes that they needed from the other side of the aisle. Promises that have now been completely undone.”

But Perez, D-Los Angeles, said there was no use preserving a two year-old status quo where “you are getting kicked in the head by other states.”

“This will help California businesses remain competitive while ensuring that California’s middle-class families have the same opportunities to succeed as our generation had,” he said.

The 2009 tax loophole deal allowed companies operating in multiple states to choose the cheaper of two formulas for calculating their tax liability in California. They can use an option that considers sales, property and payroll, or a formula that considers only sales.

Perez’s bill would force corporations to use only the sales factor. At least 11 other states, including Texas and New York, require that corporations calculate their tax obligations this way.

Last year, Gov. Jerry Brown, a Democrat, passed a single-sales requirement through the Assembly, but his measure failed to get GOP support in the Senate. Republicans say the change could drive job creating corporations out of California.

AB1500 passed the Assembly 54-25, barley meeting the two-thirds threshold. Assemblyman Brian Nestande, of Palm Desert, was the lone Republican supporter.

“I’m putting forth my vote to say we need to come together and work on some of these issues to bring businesses back to California,” he said.

Assemblyman Nathan Fletcher, an independent, also voted yes.

California scrambles to pay its bills with more borrowing

Embedded in a Monday report from the California controller is a statistic showing just how much the state is straining to pay its bills before November’s vote on higher taxes.

Controller John Chiang, who manages the state’s cash flow, finished July with more than $18 billion in outstanding loans after using high-speed accounting to cover day-to-day expenses. That means he would borrow some money from the state’s 500-plus “special” funds, used it to pay a bill and promised to repay it later when more tax revenue rolls in.

It’s a standard maneuver, especially at the beginning of the fiscal year, when expenses outpace revenues. But the controller leaned more heavily than usual on this tactic last month, tapping 81% of the money available for short-term borrowing, up from 48.4% in July 2011.

A spokesman for the controller, Jacob Roper, had a matter-of-fact explanation for the borrowing: “That’s the amount of special fund borrowing necessary to carry out the state’s budget.”

The $18 billion in outstanding loans includes $9.6 billion left over from June, as well as $8.5 billion in new borrowing in July.

Cities refuse to hand over redevelopment money

Twenty-seven cities have not forked over all of the redevelopment money the state says they owe, according to Gov. Jerry Brown’s administration.

The state says the cities owe $129 million total, but they’ve only returned $6.7 million.

The dispute involves an accounting shuffle that helps close the state’s $15.7-billion budget deficit. Because redevelopment agencies are being dissolved this year, Brown wants to shift $3.1 billion to schools, helping offset the state’s obligation to fund education.

Right now the state is trying to secure the first wave of money -– local tax revenue that officials say was mistakenly paid to redevelopment agencies in the first six months of 2012.

The Brown administration set a target of $685 million and has threatened financial penalties if cities don’t pay up, but they may not meet their goal.

“It may be half of that amount. It may be a third of that amount,” said Marianne O’Malley of the Legislative Analyst’s Office, which has repeatedly warned that there may not be as much redevelopment money available as expected.

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Jul 31 2012

Mad Max 2: The Road Warrior Meets California

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Sadly, Professor Victor Davis Hanson makes the case for California.

George Miller’s 1981 post-apocalyptic film The Road Warrior envisioned an impoverished world of the future. Tribal groups fought over what remained of a destroyed Western world of law, technology, and mass production. Survival went to the fittest — or at least those who could best scrounge together the artifacts of a long gone society somewhat resembling the present West.

In the case of the Australian film, the culprit for the detribalization of the Outback was some sort of global war or perhaps nuclear holocaust that had destroyed the social fabric. Survivors were left with a memory of modern appetites but without the ability to reproduce the means to satisfy them:  in short, a sort of Procopius’s description of Gothic Italy circa AD 540.

Sometimes, and in some places, in California I think we have nearly descended into Miller’s dark vision — especially the juxtaposition of occasional high technology with premodern notions of law and security. The state deficit is at $16 billion. Stockton went bankrupt; Fresno is rumored to be next. Unemployment stays over 10% and in the Central Valley is more like 15%. Seven out of the last eleven new Californians went on Medicaid, which is about broke. A third of the nation’s welfare recipients are in California. In many areas, 40% of Central Valley high school students do not graduate — and do not work, if the latest crisis in finding $10 an hour agricultural workers is any indication. And so on.

Our culprit out here was not the Bomb (and remember, Hiroshima looks a lot better today than does Detroit, despite the inverse in 1945). The condition is instead brought on by a perfect storm of events that have shred the veneer of sophisticated civilization. Add up the causes. One was the destruction of the California rural middle class. Manufacturing jobs, small family farms, and new businesses disappeared due to globalization, high taxes, and new regulations. A pyramidal society followed of a few absentee land barons and corporate grandees, and a mass of those on entitlements or working for government or employed at low-skilled service jobs. The guy with a viable 60 acres of almonds ceased to exist.

California has many problems.

But, first and foremost is the housing crisis which many decades in the making, has deluded California homeowners that government spending largess is acceptable.

As housing prices skyrocketed, Californians income rose proportionately and as long as more and more folks flocked to California, bidding up the prices, all was right with the world. You see California housing prices since World War II had ALWAYS risen.

Accordingly, the State of California and local governments (city, county, special park districts, etc.) were happy to spend the ever increasing revenues.

And, as government grew and regulations sprouted anew, some businesses left, but who cared?

But, the housing bubble burst.

Who could REALLY afford a Santa Monica home which was built for $20K in the 1950’s and which was now $1.5 million, with a $1.2 million mortgage?

Businesses and jobs left. Productive people retired – others moved to Colorado or Arizona pre-retirement.

State of California budgets ran structural deficits for years, but California borrowed and used accounting gimmicks to push the debt further into the future. Local governments used 1940’s base redevelopment law to “steal” from the state and the schools for their own pet projects, like Civic Auditoriums and Sports Facilities.

The State soon discovered the redevelopment law exploits and Governor Jerry Brown ended the charade.

Now, many California cities are struggling to pay their bills and many either have or are contemplating bankruptcy. No more shuffling of redevelopment money to balance the city budgets.

But, the cities also struggle from more than redevelopment largess. Sweetheart deals with their public employee unions, including the Firefighters and Police have driven their budgets upside down. City managers and other city leaders lined their own pockets while police and firefighter unions helped elect City Councils and County Board of Supervisors who hired their bosses.

Read the rest of Professor Hanson’s post.

How will this Mad Max California resolve?

It may not be an easy ride.

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Jun 29 2012

Flap’s California Morning Collection: June 29, 2012

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Fallbrook, California

Good Friday morning!

The California Legislature is in session. But, both houses have adjourned until noon on Monday, July 2, 2012.  Today’s schedule is here.

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

On to today’s Californa headlines:

Molly Munger sues state over initiative treatment

The proponents of a tax measure on November’s ballot – a rival measure to Gov. Jerry Brown’s tax initiative – have sued the secretary of state over what they say is a change in law that could “imminently threaten to alter the results” of the fall election.

Molly Munger, who is sponsoring the Our Children Our Future measure to raise taxes for education, filed suit in Sacramento County Superior Court Thursday alleging that elections officials in Los Angeles and Alameda counties did not follow proper procedures and allowed Brown’s initiative to qualify before her initiative. Munger had submitted petitions for her initiative before Brown did.

Because Brown’s initiative qualified first, it will receive higher placement on the ballot than Munger’s. The suit also challenges the validity of a bill passed as part of the budget this week that would place all constitutional amendments at the top of a ballot, behind only bond measures. Brown’s measure is a constitutional amendment; Munger’s is not.

Jerry Brown cuts $195.7 million from budget

Gov. Jerry Brown sliced $195.7 million from the budget that lawmakers sent him, disappointing fellow Democrats by taking money from child care, college scholarships and state parks and adding more to a rainy-day fund.

In a series of line-item vetoes detailed Thursday, Brown brought general fund spending to $91.3 billion and the overall state budget, including dedicated funds and bond money, to $142.4 billion.

The governor did not explain his vetoes publicly. His finance director, Ana Matosantos, said he wanted a larger reserve to cushion the state against any financial turbulence in the coming fiscal year, which begins Sunday.

Although Brown reduced some park funds, officials said state operations would cease as of Sunday at only five of the 70 properties originally proposed for closure. Agreements with private donors, nonprofits and other government agencies will keep 40 of the natural and historic sites open; 25 others will continue operating as more funding agreements are negotiated.

Dan Walters: California’s budget vote change is biting back

I told you so. Or, more accurately, I was one of several commentators who warned voters two years ago that a ballot measure to reduce the legislative vote margin on the state budget from two-thirds to a simple majority could backfire.

Gov. Jerry Brown, who rode advocacy of political reform into his first governorship, is a more-than-willing participant in this subversion of legislative process. He’s implying to voters that he’s solely focused on achieving his political aims, such as raising their taxes, and doesn’t really care what it takes to get there.

Earlier, he had signed a measure requiring all initiative ballot measures to go on the November ballot, aimed specifically at making it easier for unions to defeat a pending “paycheck protection” measure that would restrict collection of campaign funds via paycheck deductions, reversing a policy he followed himself as secretary of state before becoming governor in 1975.

So why are Democrats wielding their newly minted budgetary power so ruthlessly? Because they can, one supposes, and perhaps because with the Legislature’s public approval ratings already at rock bottom, they have nothing to lose.

Lowering the budget vote threshold to a simple majority in 2010, may have, as its advocates said, enhanced democracy. But the way it’s been used is an anti-democratic regression to insular, arrogant and self-dealing governance.

Russell Takasugi sentenced for stealing from clients

A judge Thursday sentenced Russell Takasugi, the son of Nao Takasugi — a late assemblyman and Oxnard mayor — to six years and eight months in prison for stealing hundreds of thousands of dollars from two elderly clients.

Ventura County Superior Court Judge Colleen Toy White listened to 14 people, including friends, relatives and clients of Takasugi, address the court before sentencing. She also said she read more than 90 letters from supporters along with a letter from Takasugi.

She added that prosecutor Marc Leventhal submitted a document with details of the crime, giving a voice to the deceased victims.

White said she took into consideration that the Simi Valley lawyer had no criminal record, had paid more than $1 million as restitution and had been disbarred from practicing law for life.

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Jun 27 2012

Flap’s California Morning Collection: June 27, 2012

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Hearst Castle, San Simeone, California

Good Wednesday 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.

Tonight at midnight California Governor Brown must sign the California budget.

Gov. Jerry Brown has until midnight tonight to sign the budget, and both the Senate and the Assembly have scheduled sessions at 9 a.m. to vote on legislation needed to finalize it.

Click here to see the list released Tuesday of 21 updated measures they’re expected to consider. Brown may be sharpening his blue pencil already.

On to today’s California headlines:

Stockton council votes to go into bankruptcy protection

Years after betting on a sustained housing boom to bankroll a waterfront redevelopment and dole out salary and benefit perks to city employees and retirees, Stockton cashed in its chips Tuesday in a plan that will lead it into bankruptcy.

The City Council voted to approve an austerity plan, including stopping bond payments and making deep cuts in retiree health care, as part of a plan to file Chapter 9 bankruptcy.

The insolvent city of nearly 300,000 residents, home to America’s second-highest rate of foreclosure, is now certain of the additional ignominy of becoming the largest city in America to declare bankruptcy.

Only six years ago, Stockton had appeared to be a boomtown as median home prices shot up from $110,000 to $400,000.

Bursting with new tax revenue and anticipating 10 percent annual increases in its budget resources, Stockton cashed in by selling bonds for an urban renewal including a $68 million arena and invested $125 million in a pension fund that resulted in fiscal disaster.

On Tuesday night, in preparation for the bankruptcy filing, the City Council voted 6-1 to enact a plan to slash retiree health coverage starting this year and possibly eliminate it next year.

Stockton also will use bankruptcy protection to suspend contracts with its public employee unions to cut city employee pay and benefits. It will also stop bond payments as it seeks protection from creditors and renegotiates its debts.

Stockton to file for bankruptcy, will be largest U.S. city to fail

This Gold Rush-era port city, an epicenter of California’s agricultural exports, will become the nation’s largest city to seek protection under the U.S. bankruptcy code after its City Council on Tuesday stopped bond payments, slashed employee health and retirement benefits and adopted a day-to-day survival budget.

City Manager Bob Deis likened the process to cutting off an arm to save the body. He is expected to file bankruptcy papers immediately.

A Delta wind had scrubbed the Central Valley sky blue as residents gathered hours early for the 5:30 p.m. meeting.

Most knew what the night held; bankruptcy has been a long time coming. Stockton has been in negotiations with its creditors since late March under AB 506, a new California law requiring mediation before a municipality can file for reorganization of debt. It was the first use of the law, and policy analysts who watched its torturous and tedious progress have titled their report on it “Death by a Thousand Meetings.” Mediations ended Monday at midnight.

Recent council meetings have been boisterous and contentious. Tuesday night’s meeting was quieter, with an evident sadness on faces in the packed audience. Many residents said they were there mostly to hear for themselves that the day so long expected had finally come.

The Three Words That Made Pensions Untouchable

As it stands in California law, on the day municipal workers start their jobs, their pension benefits can only go up, not down.

This legal principle has been a bedrock behind the city of San Diego’s decade-long pension drama. Despite a growing pension debt that has dominated the city’s political discourse, reforms have focused on new employees, not the retirees or current workers who are owed the bill.

It’s one reason why the June pension initiative, Proposition B, stuck new workers with 401(k)s, yet did nothing to guarantee San Diego’s existing pension debt would be cut.

This legal principle is important, foundational even, to how California governments do business. And, according to a fascinating new article in the Iowa Law Review, it all goes back to three words in a 1917 California Supreme Court decision about benefits for a police widow.

At issue in that 1917 decision was the legal status of pensions. Are they bonuses granted to employees after their service to the government? Workers’ property akin to their houses or other possessions? Or part of their employment contracts?

The 1917 decision didn’t make a definitive call. Instead it used the three words, “in a sense,” to link pensions to unbreakable contracts for the first time. In the 95 years since that initial decision, courts in California and other states have expanded on that three-word phrase to the point where we are now with pensions. The article calls the legal principle the “California Rule.”

Shenanigans abound as final budget vote nears

 More legislative shenanigans appear to be in the works as state lawmakers prepare to vote on the final pieces of the state budget Wednesday.

One newly introduced budget trailer bill would create a statewide authority to negotiate union agreements for In-Home Supportive Services workers. The IHSS program is managed at the county level, where collective bargaining agreements are currently negotiated.

This new proposal, pushed by the Service Employees International Union and American Federation of State, County and Municipal Employees, would take collective bargaining power away from the individual jurisdictions that actually run IHSS and give it to officials in  Sacramento, the seat of union power.

Watch for this bill to be controversial with some moderate Democrats.

Another trailer bill raising eyebrows deals with Californians who qualify for both Medi-Cal and Medicare, which we wrote about earlier on the OC Watchdog blog. This bill would enroll so called “dual eligible” Californians in Orange and seven other counties into managed care plans, to save the state money on their health care.

Some California doctors have been concerned that this proposal would force them to accept low fees for their services, but the initial, proposed language of the bill tempered some fears. Initially, the bill said that doctors would be paid “according to the prevailing Medicare fee schedule” and would receive “the full Medi-Cal rates for Medi-Cal benefits.” From the doctors’ perspective that’s not so bad.

Recently, however, the language was changed to say that the state would “pay providers reimbursement rates sufficient to maintain an adequate provider network and ensure access to care for beneficiaries.” This new language has doctors very worried that they’re going to be forced to take peanuts for their services.

Enjoy your morning and Dan Walter’s Daily video: ‘We told you so’ on majority-vote budget

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