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Budget

Clary & Associates, Trial Lawyers

by: ViolaLSchram

Sat Jun 28, 2014 at 06:20:49 AM PDT

Clary & Associates, Trial Lawyers
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Budget Goes to Governor's Desk: Republicans Freak Out About HSR

by: Brian Leubitz

Mon Jun 16, 2014 at 08:59:57 AM PDT

Budget Based on Compromises Leaves Questions

by Brian Leubitz

First, let's get this out of the way: the budget ($156bn for those counting at home) has now been passed and just awaits a few formalities. It is a budget of compromises, but a solid foundation for California's priorities.  And there are no big public fights, no big accusations, and no sleepovers in Sacramento. This is all good, and says a lot about the improved process under the majority vote budget system. (And Prop 30, which gives the revenue breathing room that we need.)

All that being said, the Governor wanted to maintain a hard line on spending. It's nice and prudent and all that, but there are a lot of gaping holes in the budget that should have been addressed. George Skelton's review of the completed product outlines some of those holes:

But the governor refused to reverse a 10% cut in pay rates for doctors who treat patients in the Medi-Cal program that is greatly expanding under Obamacare. Because of the measly rates - lowest in the nation - more and more doctors are refusing to accept Medi-Cal patients.

And, shamefully, no one even tried to restore previously cut funding for the most vulnerable: the aged, blind and disabled poor living entirely off federal and state subsistence programs (SSI/SSP) - $880 (sic, it is actually $877.40 - BL) monthly for singles and $1,480 for couples. There are roughly 1.5 million Californians receiving SSI/SSP, which was reduced to the federal minimum during the recession. The state is still stiffing them. They're not unionized and can't make campaign contributions. Meanwhile, legislators keep raising the minimum wage, bumping up inflation and squeezing these impoverished folks even more.

So the governor and Democrats shouldn't be patting themselves on the backs all that much for their budget compromise. ([George Skelton / LATimes)

There have been a few good editorials about the Medi-Cal question, including this one in the SF Chronicle. Boiling it down, our reimbursement rates are among the lowest in the nation. And while there is a sharp need to control medical costs. As you can see from the graph in this tweet, our costs are still out of control. But the problem here is that if the tightest controls are isolated to Medi-Cal, doctors simply won't take Medi-Cal patients. And that is exactly what is happening. As you can see from the ad up top, this was a big deal for the state. But under the current budget, reimbursement rates are still far too low.

In addition to the heartbreaking failure to restore SSI/SSP funding for some of the state's most vulnerable, the state's contributions to CalSTRS are taking a big chunk out of the restoration of funding to K12 education. And even with the $250+ million for both early child education and vocational education, there are still big funding problems at all levels of California education.

The other big issue: yeah, that would be Republican Majority Whip Kevin McCarthy's non-stop tirade over the high speed rail project. (Seen here looking hilarious in flick user donkeyhotey's cartoon.) The budget allocates $250m from cap and trade revenue, but long-term funding issues are still out there. At this point, HSR leaders can point to several billion of funding that is out there for the project, but are still a ways off from the full price tag. And if McCarthy becomes Majority Leader as expected, comments like these could mean it becomes a lot more challenging to get federal assistance for the project:

"Governor Brown's persistence shows he is more interested in protecting his legacy than communities that will be uprooted by its intrusion," he added. "As long as I am in Congress, I will do whatever I can to ensure that not one dollar of federal funds is directed to this project." (Melanie Mason / LAT)

But those decisions are for another day. Today, we have a budget that will keep the lights on throughout the state, and that's good thing.

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Budget Negotiations Continue

by: Brian Leubitz

Wed Jun 11, 2014 at 10:17:24 AM PDT

Process looks set for this weekend

by Brian Leubitz

The budget deadline is this weekend, and without the need to pull a few Republican votes, harmony seems to reign. Well, not so much real harmony, but something that passes for harmony in Sacramento when you look at the past budget fights before the majority vote budget and Prop 30 votes.

With closed-door negotiations bearing fruit, the joint budget committee is expected to meet Wednesday afternoon to nail down more details on state spending.

"We'll get through most of it," Assemblywoman Nancy Skinner (D-Berkeley), who is chairing the committee, said in an interview.(LA Times)

Everybody seems to be all happy-go-lucky on getting a deal done. But to be clear, there are a lot of tough choices to be made. K-12 funding is still too low. Court funding is getting a boost, but is probably still too low. Skinner and Steinberg are still fighting Brown's intention to end overtime pay for homecare workers.

The bigger issue overhanging much of this is whether to include an additional $2.5 billion in projected capital gains revenue, with some sort of compromise likely.

Yes, the negotiations are more civil than in the past, but the issues are very real. Gov. Brown seems to be a bit hesitant to restore funding levels anytime soon, but there is a lot of gap to fill between how much the state needs in services and how much we are providing. The higher end of our economy has clearly recovered, but that is far from universally true across the income spectrum.

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May Revise Offers More Education Funding

by: Brian Leubitz

Tue May 20, 2014 at 14:34:12 PM PDT

Additional Revenue will be steered to education under Prop 98

by Brian Leubitz

The Proposition 30 funds will sunset in a few years, but the surplus revenue is nice while it lasts. With the economy picking up speed, and an additional few billion in unexpected revenue, Gov. Brown has some flexibility that wasn't there a few years ago. So, he's gone through his laundry list:

For the budget year (2014-15), the May Revision sets aside $1.6 billion to make the final payment on the Economic Recovery Bonds and another $1.6 billion for the Rainy Day Fund.

The May Revision reflects more than $2 billion in added costs over and above the January budget. This includes higher spending to provide health care coverage under Medi-Cal for a million more people, emergency drought assistance, added funding to meet the Proposition 98 guarantee for K-14 schools, caseload increases in the In-Home Supportive Services (IHSS) program, additional contributions to the California Public Employees' Retirement System (CalPERS) and added staffing to administer California's unemployment insurance program.

When Governor Brown took office, the state faced a massive $26.6 billion budget deficit and estimated annual shortfalls of roughly $20 billion. These deficits, built up over a decade, have now been eliminated by a combination of budget cuts, temporary taxes and the recovering economy.

Could he have done more to restore some of the massive cuts of the 2007-2012 era? Probably, but Gov. Brown was never going to wipe all that away in one cycle. That has just not been his style since his Oakland mayoral days. But the May revise moves the state forward and is a solid foundational document for the future.

Parts of this will clearly change as the Speaker and Senate leader get a hold of it, and there are certainly improvements to be made. However, with the rainy day deal already done, half the battle is behind us and the politicians are looking to the upcoming elections.

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Next10 Updates Budget Challenge

by: Brian Leubitz

Fri Mar 14, 2014 at 11:04:06 AM PDT

Interactive website lets you choose budget priorities

by Brian Leubitz

We've had a link to the Next10 Budget Challenge on the right sidebar for a while now, and mentioned it once or twice. And while it has a few flaws, after all it is hard to pack a $100B budget into a easily understood little game, it does offer an interesting way to look at the budget. It helps even those who haven't really had a chance to take more than the briefest of looks into the system. Check out the intro text:

While California is no longer experiencing an immediate budget crisis, important decisions will be made balancing this year's budget that will impact our shared future.  How quickly should the state pay off $28 billion in budget debt?  What should California do to plan for long-term pension and retiree health care costs?  How much should be invested in programs cut during the recession?  How much should the state have in reserve, and where should those funds come from?

The budget is a months long process, and you aren't going to get answers in 10 minutes. But, if you know a few folks who would be interested in learning more about the budget, send them over to the Next10 Budget Challenge. Also, give them a chocolate bar to help ease the depression that knowledge of the budget may bring on.

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Students and Community in California Take on Big Oil to ReFund Education

by: ReFundCalifornia

Fri Mar 07, 2014 at 12:52:58 PM PST

California - With student debt reaching over $1 trillion nationally and college tuition continuing to skyrocket, dozens of major national organizations representing students, youth, labor, veterans and policy organizations have come together to unite their efforts to tackle what has become a student debt crisis in America. Higher Ed Not Debt, a new, multi-year campaign to address the twin issues of education debt and college affordability launched on Thursday, March 6, with dozens of events across the country.  
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California's 7 Tea Party Die-hards

by: Brian Leubitz

Thu Oct 17, 2013 at 17:05:21 PM PDT

Seven Republican House members vote no on budget/debt limit compromise

by Brian Leubitz

The Tea Party has many Republicans running scared across the country, with nearly 2/3 of the Republican House caucus voting no on the Senate driven compromise plan. But here in California, the lack of a primary in a Top-2 system insulates much of that right-wing pressure.

But seven Republicans voted no on the compromise anyway.

California Republicans voting "no" were: John Campbell, R-Irvine, Jeff Denham, R-Turlock (Stanislaus County), Duncan Hunter, R-Alpine (San Diego County), Doug LaMalfa, R-Richvale (Butte County), Tom McClintock, R-Elk Grove (Sacramento County), Dana Rohrabacher, R-Costa Mesa (Orange County), and Ed Royce, R-Fullterton (Orange County).(SF Gate and full roll call vote here)

Perhaps you could argue that if the vote was unsure, that some of them may have switched. But the fact is that they voted to gamble with the national and global economies in a fit of picque. It was a gamble that seven other California Republicans weren't willing to take. Heck, even Darrell Issa voted for the deal.

And some of those Republicans who voted no were just never going to vote yes, like McClintock. But the biggest name that jumps out on me on that list is Jeff Denham who is still in a district with a Democratic registration advantage, and who won by a fairly slim margin in 2012. If Denham draws a well funded challenger, he'll need to answer for this vote.

But, really, shouldn't all of these legislators answer for this vote?  

Discuss :: (3 Comments)

Not Just the Budget: Legislature Spends Some Time on MediCal

by: Brian Leubitz

Mon Jun 17, 2013 at 10:29:38 AM PDT

A busy few days for the Legislature as they move forward on important priorities

by Brian Leubitz

The Legislative leaders and the Governor agreed to a framework for the budget at the beginning of last week, but on Friday, the plan was sealed and sent to the Governor. He promptly signed it and tweeted the accomplishment:


The total budget is at $96.3bln, a spending total that should give the state some breathing room. If the revenue totals are higher, as the LAO predicts, Governor Brown intends to put much of it into reserve. There was a trailer bill for some welfare restoration and the partial restoration of some dental services within MediCal.  The dental restoration wasn't everything, but it was a good start:

"The elimination of adult dental in 2009 was one of the most visible examples of the harm caused by the recession, the 42 billion dollar California budget deficit," says Steinberg.

Lawmakers were pressured by many groups to restore public services. A broad coalition wanted to stop doctor payment cuts in Medi-Cal. That didn't happen.

"We can't restore everything, or nearly everything that has been lost," Steinberg says. " But we can pick a few targeted areas where people have suffered the most. And for me, dental care was at the top of the list."

So Denti-Cal will be restored - to most of what it was before. Patients will be able to have their cavities filled, get crowns on broken teeth, and bridge work. They won't be getting partial dentures or implants, and Steinberg says they won't be getting any care right away.  

"It's going to take some time to rebuild the program since it's been gone now for over four years," adds Steinberg.(CapRadio)

Indeed, the Legislature would still like to restore additional funding that was not included in this round. But, for the time being that will wait until additional revenue comes in and an argument that will sway Gov. Brown.

On MediCal, the Legislature also took some time to authorize the build out of that System along the lines envisioned in the Affordable Care Act (aka ObamaCare). The new system will make a million more Californians elibile and streamline the application process.

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Gov. Brown Outlines Plan for Good Jobs

by: California Labor Federation

Thu Jun 13, 2013 at 14:15:10 PM PDT

by Steve Smith

To some politicians, economic development means giving hundreds of millions of taxpayer dollars to strip clubs, fast food joints and retail giants like Walmart. Gov. Brown, thankfully, has a better idea. Today, the Governor announced a broad coalition of labor, business and others in support of his good jobs plan that will flip the broken enterprise zone program into real incentives for creating quality, middle-class jobs.

Gov. Brown:

California's 30-year-old Enterprise Zone program is not enterprising, it's wasteful. It's inefficient and not giving taxpayers the biggest bang for their buck. There's a better way and it will help encourage manufacturing in California.

Study after study has shown that the enterprise zone program is a waste of taxpayer dollars. The California Labor Federation has been sounding the alarm on this broken program for several years, and now there's strong momentum for reform.

California Labor Federation leader Art Pulaski:

The Governor's plan wisely targets our tax dollars to good jobs that build the middle class and strengthen communities. California workers stand with the Governor in his efforts to create good jobs that will spur our state's economic growth.

The Governor's plan directs tax credits to businesses that are actually creating new, quality jobs -- something the broken enterprise zone program has failed miserably in achieving. The Governor outlined his program today in a release to media:

 The Governor's plan, proposed in the May Revision, builds on the framework of existing, targeted programs by redirecting approximately $750 million annually from the current flawed Enterprise Zone program to three new economic development programs:

   Sales tax exemption: A statewide sales tax exemption on manufacturing equipment or research and development equipment purchases by firms engaged in manufacturing or biotechnology research and development. The proposal is estimated to provide sales tax exemptions worth over $400 million annually.

   Hiring credit: A hiring credit targeted to businesses located in areas with the highest unemployment rate and poverty. This credit will be available for the hiring of long-term unemployed workers, unemployed veterans and people receiving the federal earned income tax credit. The credit will only be allowed to taxpayers who have a net increase in jobs. The proposal is expected to provide approximately $100 million annually in hiring credits.

   Investment incentive: The California Competes Credit based on specified criteria including the number of jobs to be created or retained and a set job retention period. This component of the proposal is expected to provide between $100 million and $200 million per year in tax credits.

It's time to end the enterprise zone abuse of taxpayer dollars. Send a message to your legislators in support of the Governor's good jobs plan today!

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The Power of Majority Vote: Budget Set to Be Enacted On Time. Again

by: Brian Leubitz

Tue Jun 11, 2013 at 08:19:02 AM PDT

Legislature Agrees to Deal with Governor, Set to Pass Soon

by Brian Leubitz

It turns out representative democracy works. It really works! When you let the majority party do its job, they tend to get it done. It doesn't hurt that the Governor is of the same party as well, of course. However, in the end, the Governor got most of what he wanted, this is primarily a budget with limited restorations of persistent funding. And he mostly got his way on school funding as well. From John Myers:

The proposal, which still must be put into actual bill form by week's end, gives legislative Democrats from both houses a smattering of their priorities, from money for mental health programs to new dollars for career technical education and a new scholarship program aimed at college students from middle-class families.

For the governor, the budget includes most of what he wanted in a major education funding plan to earmark money for disadvantaged students.  The proposal tinkers with, but retains the structure, of the formulas first demanded by Brown in January -- including extra cash for school districts with higher concentrations of poor and English learner students. (John Myers / News10)

There are still plenty of smaller details to work out, but the budget is looking like it will be passed on time for a third straight year. It is no coincidence that it has been three years since the majority vote ballot measure was passed.

On the other hand, this budget is far from all that could be desired from a progressive standpoint. There are big holes that should be filled sooner rather than later. We are still leaving some of our most vulnerable Californians without the services that they desperately need. We are still underfunding the supposedly co-equal judicial branch. We are still underfuning health care services.

The budget uses Brown's more conservative estimates of revenue over the LAO's estimates of $3B extra, but perhaps that caution could lead to a more sustainable future for state services.

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Business Roundtable Poll Shows Support for the Governor's Agenda

by: Brian Leubitz

Wed May 29, 2013 at 18:09:03 PM PDT

Business funded poll has some otherwise predictable results

by Brian Leubitz

The business roundtable is pretty much exactly what you would think it is: a business, right-leaning group that wants lower taxes and job growth.  So, it is no surprise that in their recent poll, almost 79% of Californians think taxes are too high. Now, there are a lot of ways to ask that question, and the results are somewhat confusing considering a strong majority voted for Prop 30 to raise taxes.

But some of the other data is more useful, including some evidence of support for the Governor's education agenda:

* 54.5%, including 68.3% of Latinos support the governor's proposed education funding plan to allocate additional money to school districts with higher populations of high-needs students;

* 56.4% support the Governor's current budget proposal to send an additional $2.9 billion to California schools, including $1 billion in one-time funding to help schools implement recently adopted academic standards. (CBRT)

Now, I think this poll is best viewed in a larger context of other data, and that will come soon enough. However, for now, the Governor appears to be on the right track.

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LAO Says More Money Is Coming

by: Brian Leubitz

Fri May 17, 2013 at 14:49:37 PM PDT

LAO thinks more cash is coming than  Gov. Brown

by Brian Leubitz

In his negotiations with the Legislature, perhaps Gov. Brown would prefer to bargain over less money and pocket any extra revenues that fall into the general fund over the course of the fiscal year. But alas, the LAO thinks that the bigger sum should be in discussion:

Legislative Analyst Mac Taylor projected state revenues Friday that are $3.2 billion higher than those projected by Gov. Jerry Brown this week in his revised budget proposal.

The difference translates into $400 million for the current fiscal year and $2.8 billion for the year that begins in July. The projection sets up a potential battle between Brown and fellow Democrats in the Legislature. who want to spend more than he proposes.

Both Brown and Taylor urge fiscal restraint, however, because revenue projections are largely dependent upon economic factors ranging from employment to housing prices. Both also agree that the bulk of the money will go to schools under state law.(SacBee)

Taylor is generally in favor of taking the cautious approach, so that's no surprise. But acknowledging the extra cash will surely mean that the fight is more intense from legislators that are looking to restore funding for some of the state's programs. Social services, the judiciary, higher education and other interests are competing with the Prop 98 K-14 funding guarantee, and the fight will be typically intense. This LAO report will only add intensity.

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Brown: Surplus Not So Big After All And It's Already Spoken For

by: Brian Leubitz

Tue May 14, 2013 at 11:54:26 AM PDT

Jerry Brown 0742May revised budget assumes smaller surplus this FY, lowers estimates for next year

by Brian Leubitz

Well, the CalChannel stream is leaving something to be desired, but seems to have rebounded to some sense of consistency at the end after Gov. Brown was replaced by Ana Matosantos at the dais.

But, here is the big, headline takeaway: The administration doesn't think the surplus is really $4.5 billion, and it thinks it is money that was pushed forward for tax purposes. And that money is going to education.

The budget Brown proposes will assume revenue in the current fiscal year only $2.8 billion ahead of expectations, with revenue next fiscal year down $1.8 billion from Brown's January estimate, the sources said.

The proposed budget will include a $1.1 billion reserve. It would increase funding for Brown's effort to overhaul California's educational finance system by $240 million. In his education proposal, Brown will also propose $1 billion to implement English, math and other subject guidelines known as the Common Core Standards.(SacBee)

According to Matosantos, the additional funds dedicated for education are 103% of the surplus. Because previous budgets "borrowed" from previous Prop 98 requirements, the administration had very little choice as to where the money would end up. However, that he continues to plan to focus it on English learners and socioeconomic status is quite the source of controversy.

Brown's revised budget still includes his plan from January to revamp education funding, directing more money to low-income schools and giving districts more control over how to spend the state's money. The plan he released Tuesday would boost the money under local control by $240 million, to a total of $1.9 billion.

When fully implemented, it's projected that the new local-control funding formula will spend 80 cents of every dollar on base grants for every district; 16 cents in supplemental funding for every English learner, student from a low-income family, or foster child in a district; and four cents for those districts with a particularly high concentration of these students.

The concentration funds are only a small part of the total dollars, the governor's office says, but are vital to districts facing the biggest challenges. The May revision also strengthens the proposal's accountability measures to make sure the targeted, at-risk students benefit from the money. (Josh Richman / BANG)

There is still a sizable group within the Legislature who would prefer to simply dish out the additional funds to the schools. And school districts. And teachers. But, negotiations on the issue are still active, and given that the decision will be made entirely by Democrats, some sort of deal will be worked out with the Legislature and the Governor. It is hard to argue that some of our poorest schools don't need a bit of extra resources. But all schools will get at least some additional money under the May revised budget, and schools with additional needs will simply get a boost.

You can see the full May revised budget over the flip or at this link. Photo credit: Randy Bayne, 2010.

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The Governor's May Revised Budget: Tomorrow at 10

by: Brian Leubitz

Mon May 13, 2013 at 17:38:15 PM PDT

Budget "surplus" headed to education?

by Brian Leubitz

I'm a nerd, so this tweet was very exciting:


Now, I'll probably we watching this live online, but in case you can't, I'll make a few comments tomorrow. However, before we get the details of where the Governor is looking, a few points.

First, the so-called surplus is looking like it might end up in the $4.5 billion range. However, before we get any plans on how we can spend it, Prop 98's educational funding guarantees get precedence. We have already "borrowed" from Prop 98 guaranteed money, and much of that will have to be paid back to the schools. Not exactly the end of the world (in fact, more money for schools is a very, very good thing), but it leaves less flexibility than perhaps the Governor would prefer.

The Governor would like to leave much of that money as some sort of rainy day fund, but other interests are clamoring for the restoration of some of the worst cuts from the past few years. The judiciary has been especially hard hit, and social services budget are minuscule compared to the past. If the governor is going to be able to save some of that money, he'll have to negotiate some sort of compromise with the teachers and education advocates while also holding off on some of the critical spending priorities we are facing.

We'll get a lot more details when the May revised budget comes out tomorrow...

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Speaker Pérez Looks towards a Responsible Budget

by: Brian Leubitz

Sat May 11, 2013 at 18:52:22 PM PDT

Speaker Pérez outlined his budget goals at a speech to the Sacramento Press Club, here is the audio of the opening to that speech:

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Climate Change and the Budget

by: Brian Leubitz

Tue May 07, 2013 at 10:40:02 AM PDT

Brown looks long-term on impending climate crisis

by Brian Leubitz

Gov. Brown, in this go-round as governor, has hardly been spending willy-nilly. Now he says that he has another reason:

"It doesn't look like the people who are in charge are going to do what it takes to really slow down this climate change, so we're going to have to adapt, and adapting is going to be very, very expensive," Brown said. "That's another reason why we have to maintain some budget discipline."

Brown, who has urged lawmakers of his own party to resist spending despite the state's improving revenue outlook, said weather is "becoming more intense" as a result of climate change and will "cost a lot of money and a lot of lives."(SacBee)

Now, I actually find this pretty persuasive. Climate change will hit California particularly hard. Drought and fires will be increasingly common. Our fertile Central Valley will not be so fertile when we have no water for what is basically a semi-arid climate. Snowpacks will cease to become good water reserves as they melt too early in the season. In short, Gov. Brown was probably underselling the costs of adaptation to climate change.

That is not to say that we shouldn't be continuing to work to slow climate change. We need to rethink our fossil fuel usage, and how we are assisting in that dependence. (Ahem...for starters: fracking and LNG pipeline) And yes, planning for budgeting long-term to address the changes inherent in catastrophic climate change should be part of the overall adaptation process. That being said, it would be interesting to see how money is being specifically directed towards that planning.

Discuss :: (1 Comments)

Gov. Brown Is Really Done with Prison Receiver

by: Brian Leubitz

Tue Mar 12, 2013 at 09:22:02 AM PDT

Cites high costs and skewed priorities

by Brian Leubitz

Gov. Jerry Brown didn't like the prison receivership when he was Attorney General and tried to get it closed up. And he sure doesn't like it any more from the Horseshoe. And he let the world know about said dislike ahead of a hearing to consider the future of the prison receivership.

"During the life of these lawsuits, the prison health care budget has gone from $700 million to $2 billion. ... That money is coming out of the university, it's coming out of child care. It's a situation you wouldn't dream anyone would want."

The governor's comments came as lawyers prepare for a battle in Sacramento federal court later this month over whether the state is providing a constitutional level of mental health and medical care for inmates. Oral arguments are scheduled for March 27 on California's motion to terminate oversight of mental health care by U.S. District Judge Lawrence K. Karlton.(SacBee)

The costs of prison health care is never going to return to that $700 million figure, but realignment may have helped somewhat with the high costs. And of course, working to rehabilitate additional low-level offenders and get them out of the system would be the most efficient way to reduce costs. Some of the programs associated with the prison realignment will also help there as we clear out some of the worst of the overcrowding.  

But don't expect any easy solutions when it comes to our prisons.

Discuss :: (0 Comments)

Next10 Launches Updated Budget Challenge

by: Brian Leubitz

Tue Feb 12, 2013 at 09:00:00 AM PST

Group aims to show tough decisions that make up budget process

by Brian Leubitz

Next10, a nonpartisan group that has spent a lot of time working on California budget issues, has just released their updated budget challenge.  Long story short, you get to act as a kind of super planner that gets to make a bunch of decisions on the California budget. One caveat, you have to make the make the numbers work.

Users will have dozens of choices, including options for restoring services and programs and paying off billions of recession-era debt.

Check out the Budget Challenge here.

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Final January Revenue Figures Exceed Expectations

by: Brian Leubitz

Fri Feb 08, 2013 at 17:03:29 PM PST

Controller's report shows big gains

by Brian Leubitz

A while back, I mentioned the (mostly) good news on the revenue front. Today, the controller's office released the full numbers, and again they are (mostly) good.

Personal income taxes in the month of January came in $4.8 billion above (54.7 percent) monthly estimates contained in the Governor's latest budget proposal. Corporate taxes came in $11.4 million above (45.5 percent) those monthly estimates, and sales tax receipts came in $582.7 million below (27%) projections.

The State ended the last fiscal year with a cash deficit of $9.6 billion. As of January 31, that cash deficit totaled $15.7 billion and was covered with $5.7 billion of internal borrowing (temporary loans from special funds), and $10 billion of external borrowing.

Of course, the big caveat here is that the sales tax numbers were below projections pretty substantially. Also, because of the fiscal cliff, many companies changed pay schedules, resulting in some of these bigger numbers. Of the numbers, Controller Chiang had this to say:

"Last month's revenues were by far the highest that California has seen in any January for the past decade. Along with increased auto sales, rising home values, and more construction, it signals that California may be entering an era where we can govern outside of crisis. However, given our state's troubled history with boom-or-bust revenue cycles, this good news must be tempered with increased fiscal discipline in how we interpret and budget January's collections."

This seems to be the path that the Legislature and the Governor are content to pursue. A steady budget with no big increases planned.

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Corporate Subsidies: Wherein I sort of agree with a FlashReport article

by: Brian Leubitz

Fri Feb 01, 2013 at 10:29:00 AM PST

NYT: Per Capita Subsidies photo PerCapitaSubsidies_zps70a56d6b.jpgCorporate subsidies ignite a race to the bottom

by Brian Leubitz

It is not often that I read something on the FlashReport that I can agree with in the general substance. But, while the article was intended to be a slap at Jerry Brown, the Reason Foundation's (a right-wing libertarian group) Adrian Moore, PhD, takes on corporate subsidies.

Proponents argue that while cases such as Solyndra are unfortunate, they are a necessary evil that must be tolerated since the benefits of governmental "investing" in certain technologies or industries will, in their view, someday outweigh the costs. I'd point out that the government rarely knows what is both certainly beneficial and inadequately funded by the market, but even worse is a lousy investor, giving to well connected companies, not those with the best business plan, and not caring if the investments pay off or not, only the newsbite when the check is written.

The Reason/Howard Jarvis study looks at specific corporation tax and sales and use tax credits, deductions and exemptions in order to evaluate whether they serve their purpose. The argument offered in support of such tax breaks is that they will improve the lives or livelihoods of certain classes of individuals, businesses or industries. But their costs are frequently ignored. While they may encourage business activity in a certain sector of the economy, this comes at an unseen cost, which is the business activity that would otherwise have taken place in other sectors of the economy. (FR)

These all fairly reasonable points here. Perhaps California does spend too much on corporate subsidies to lure jobs. Perhaps we should be asking ourselves whether the government should be subsidizing corporations at all.

But this should be part of a larger conversation that we should be having at every level of government. The most visible examples of these subsidies come in the context of sports, where teams are lured with free land, tax credits, and sometimes a brand new stadium with a pretty bow on top. But it isn't just sports where we see this. In a great series in the New York Times, Louise Story investigates the troubling growth in tax subsidies that are going to specific corporations, and how an entire cottage industry has grown up to game the system. (She also gave a very interesting interview to Terry Gross on NPR's Fresh Air.)

The fact of the matter is that yes, California does spend a fair chunk of change on corporate subsidies. The Times quotes a figure of $4.17 billion, or $112 per Californian. But if you look to the right, you'll see that our $112 per capita pails in comparison to other states. Especially some very heavily Republican states. Alaska spends nearly a thousand dollars per person! And Rick Perry has spurred the people of Texas to spend over $750 per person. This turns out to be real money:

The math on the new deal angers former Amazon workers, especially those who are still unemployed. For Texas to give up more than $250 million in tax revenues in exchange for 2,500 jobs amounts to about $100,000 per job. Most distribution workers are paid $20,000 to $30,000 a year. The rest benefits the company's bottom line, which generally increases executive bonuses and shareholder returns.(NYT)

This is the new math of corporate subsidies and job creation. And, unfortunately, California carries a special burden in this area. Film subsidies have been some of the hottest growth areas, garnering a full story in the Times. States and cities find it attractive to get a movie shot in their area, and so spread the cash around. Michigan, Louisiana, and pretty much every other state have tried to lure Hollywood away from, well, Hollywood. (Canada has also been aggressive in this area as well.)

The article is on FlashReport, so of course, it is rather unnecessarily partisan. It calls out Gov. Brown, and name checks Solyndra, and the film tax credit. Solyndra, of course, being the big cause celebre of conservatives for collapsing under the weight of cheap solar panels being dumped on US shores after having received federal loan guarantees. And this being California, conservatives like Dr. Moore get to blame the evil liberals in the legislature for all these ills.

But Dr. Moore is probably right that we shouldn't be spending so heavily providing cash to corporations. He and I clearly disagree about what should come of that money, lowering the corporate tax rate would fall significantly behind investing in education and other priorities, but that's a topic for another time. Unfortunately, we live in a competitive world, and our governments are competitive as well. In many ways, it is something of a mutual self-injury pact. Local governments compete against one another, and the individual citizen gets lost in the shuffle.

Clearly, we, as a nation, need to do a better job of monitoring this process. And we need to have a conversation about whether it is in our best interest for states and municipalities to compete in this manner. Dr. Moore (and the NYT's Louise Story) do us a favor by raising this issue. It deserves serious consideration, perhaps with a touch less of the absurdly misplaced partisan rancor, about how we government goes about the task of "job creation."  

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