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.
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.
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?
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:
After two and a half years of struggle and difficult times, California's budget is balanced and sustainable into the future.
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.
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.
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.
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.
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.
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.
May 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.
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...
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.
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.
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.
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.
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."
January PPIC poll shows majorities support current financial path
by Brian Leubitz
For years, we were told that the people wanted divided government. That we couldn't mess with the 2/3 requirements because they were somehow sacrosanct. But that little chart on the right tells us otherwise.
To be honest, I've always felt that PPIC was a little soft on the Legislature. I mean, could you really find one in four people that really approved of the legislature a few years ago? But since we ditched the 2/3 budget requirement, and Democrats were forced to deal with the disaster themeselves, we've moved on. The finger pointing had to stop, and for the most part it has. The Republicans, having lost on Prop 30, and lost even their marginal relevance by failing to garner a third of the legislative seats, are simply trying to get attention any way they can.
With everything that happened last year, Prop 30, and the grassroots field campaign around Prop 32, Brown is now in a better position than most thought he would be after inheriting Arnold Schwarzenegger's mess. Yet on the most toxic of issues, the budget, somehow he has built the consensus that many doubted he could create:
When read a brief description of the governor's overall plan, 69 percent of adults say they favor it and 22 percent are opposed. Across parties, 79 percent of Democrats, 72 percent of independents, and a slim majority of Republicans-51 percent-are in favor. Brown's 2013-14 budget, which projects a small surplus for the first time in many years, proposes increasing spending on K-12 schools, higher education, and health and human services, as well as paying down the state's debt and creating a reserve. Support was far lower for Brown's budget plan in January 2012 (50%).
Of course, with the budget, the devil is always in the details. And summaries, by definition, skimp on those. Yet, the fact remains that Jerry Brown, and his allies, have somehow charted a middle path that eluded Gov. Schwarzenegger.
On other issues, California support for gun control grew substantially after the tragedy in Newtown, CT. From March 2012 to this poll, the number of Californians supporting additional restrictions grew from 53% to 65%. There is a lot more data on gun control at the PPIC site, especially if you care to dig down into the cross-tabs.
While you're there, you can also see that the President also maintained his popularity here, with a 65% approval rating overall, and a broad other swath of data. Go check it out.
The structural revenue shortfall ends because Republicans have been thrown out of government
This week's big news is the announcement from Governor Jerry Brown that the state budget is out of perennial deficit and looking at several years of surpluses. Over the weekend we'll talk more about what those surpluses mean and how they ought to be used. But today it's worth taking a moment to remember how we got here.
Since 2001 or so, California's budget seems to have been in perpetual deficit, with less money coming in than was needed to fund existing public services. While the deficit pressure eased in 2005-06, that didn't last, and by the summer of 2007 the deficits had returned as the housing bubble popped and the country slid into the worst recession in 60 years.
Republicans and many of their media enablers claimed this was due to Democrats "overspending" and that the only solution was massive austerity. Thanks to the rule requiring a 2/3 vote of the legislature to pass a budget, Republicans were able to force Democrats and the state to accept this argument, and from 2007 onward state budgets included brutal cuts to health care, education, transportation, local governments, the courts, and other things that are necessary to keep California functioning as a 21st century society.
But those right-wing claims were never true. In fact, they were little more than deflections from the truth - that the deficits were caused by Republicans themselves and their anti-tax ideologies.
The story began in 1978 with the passage of Prop 13, but this particular chapter's true beginning came in 1996. During the 1980s state government had cobbled together an unwieldy but workable fix to the devastation to revenues and public services that Prop 13 had wrought, aided by that decade's economic boom. The '80s economic expansion was unsustainable, rooted in weapons, finance, and housing. By 1991 it had all come apart. Once again, the state government cobbled together solutions, as moderate Republicans and Governor Pete Wilson joined Democrats to pass a mixture of spending cuts and tax increases. By the middle of the 1990s the state budget had stabilized, and surpluses were projected for the first time in years.
But California was also undergoing historic political change. In 1992 the state flipped from red to blue in the presidential election for the first time in many decades. Republicans in 1994 won a tenuous majority in the Assembly by stoking white resentment at the rising Latino population, but this was only a temporary win. They needed something else that could stem the rising Democratic tide.
Republicans figured the answer was to fan the flames of the tax revolt. The first step came in 1996 when Proposition 218 was placed on the November ballot. This measure required a 2/3 vote of the people to raise most local taxes, setting up widespread municipal financial woes in the coming years.
But their main thrust came in 1998. As the dot-com boom gathered pace, the state had huge budget surpluses. Rather than use the surplus to fund new programs or new capital investments, Republicans, worried about their fortunes in the 1998 statewide races, decided it was time for a huge tax cut. Democrats, eager to appease the tax revolt, went along.
The result was the creation of a structural revenue shortfall. Rather than a one-time tax rebate, tax rates were permanently lowered. The consequences became clear in 2001 when the country entered recession. As tax revenues declined, it became clear that the 1998 cuts had gone way too far, and Governor Gray Davis found himself short nearly $30 billion in revenue.
Republicans had engineered a crisis. Now they took advantage of it to reclaim power, pushing through the recall of Governor Davis in 2003 and replacing him with Arnold Schwarzenegger. There were many issues driving the 2003 recall, but in many ways this was the final triumph of the tax revolt. Schwarzenegger ran against the restoration of the vehicle license fee to the levels it had been at from the 1940s to 1998, and blamed the state's budget woes on overspending.
Once in office, he refused to consider new tax increases even though economists suggested he do so, and instead borrowed money to cover the shortfall. He also pushed through, with Democratic support, a new cut of the VLF, creating a $6 billion hole in the state budget that was only filled last November by the passage of Prop 30.
The underlying structural revenue shortfall never went away. When the housing bubble burst and the nation slid into recession in 2007 (California got there a few months earlier) the revenue shortfall problem was again revealed. And again, Republicans demanded and won not just more spending cuts, but also more tax cuts. Even as billions were being cut from schools, Republicans leveraged the 2/3 rule for passing budgets to win new corporate tax loopholes. California became a laughingstock, a national poster child for supposed liberal fiscal excess.
By 2009 Democrats finally agreed with what we progressives had been saying for years: that the only way to fix the state's financial woes was not to cut spending, but to take power away from Republicans. On New Year's Day 2013 I described how this was done. In 2010 Prop 25 passed, ending the 2/3 rule and eliminating Republican power over state budgets (though not yet over tax increases). That same year, Democrats swept all statewide offices, including retaking the governor's mansion. In 2012, Democrats went further, winning a 2/3 supermajority while also ending the structural revenue shortfall with Prop 30. They even managed to close the corporate tax loopholes created in 2008, with Prop 39 passing by a healthy margin.
Yesterday we saw that elections have consequences, as Governor Brown announced the end of deficits and the return of surplus. It is not a coincidence that this happened after Republicans were kicked out of state government and after the tax revolt was ended. California's fiscal woes were a direct result of Republican policies, and now that the Republicans are gone, so too are the structural deficits.
That's not to say all is rosy. California still has widespread unemployment. The safety net and public schools have been shredded by 30 years of low taxes, and in particular by the Republican-driven austerity of the late '00s. California has a lot of spending needs in the coming decades in order to build a sustainable society and to address global warming, as well as to finally overcome a century and a half of inequality.
But it is possible to begin solving those problems now that the Republican Party has been destroyed and the state budget crisis has ended. California has a future again - if the supermajority decides to start building one.
If you read Calitics at any time between 2007 and 2010, you'd have seen a site focused on the same problem now facing the country as a whole: how to keep a government, an economy, and a society functioning in the face of Republican obstruction. The latest nonsense surrounding the so-called "fiscal cliff" shows that the House Republicans have learned well from their Sacramento counterparts. The method is the same: make Democrats do what they otherwise would not do by threatening to block passage of crucial legislation, then up the ante by rejecting initial deals and demanding even more once Democrats have shown they will make concessions to avoid the predicted disaster that comes with legislative inaction. The resulting deals were destructive to the state's economy and safety net, worsening the already bad financial and social crisis.
For a long time, Sacramento Democrats argued they had no other choice. We heard from Speakers of the Assembly and Presidents of the Senate that unless concessions were made to obtain Republican votes, budgets would not be passed and people would suffer. Republicans made good on their threats and delayed budgets - the 2008-09 budget was three months late. Now we're watching a similar script play out in Congress.
Here in 2013, California is in a very different place - precisely because of the lessons learned from the era of Republican obstruction. Voters approved a tax increase to help schools. The state budget is headed toward surplus. Budgets are passed on time and without hostage tactics. State government is starting to become functional again.
That did not happen by accident. It happened because Democrats and progressives decided they had enough of Republican obstructionism and developed a plan to stop it for good. The plan included smarter legislative tactics, but the real keys were changes to the political process as well as an unprecedented organizing effort, all aimed at the same core goal: restoring political power to the people, not allowing it to remain concentrated in an extremist fringe.
The first step requires being honest about how politics now works. Another veteran of those California political wars, David Atkins, observed that expecting Republicans to act rationally is to misunderstand how the party operates:
The Republican electoral chips are stashed safely in gerrymandered hands, and any losses over fiscal cliffs or debt ceilings only hurt the President and the nation's perception of government. There's no downside for the GOP in bluffing every time in the hopes that the President will fold. Why not? When you're playing with house money, it makes sense to go all in on every hand.
This realization led California Democrats and progressives away from focusing on the specifics of a deal and toward the kind of process and political changes that would end the obstructionism for good. Once it was realized the problems were deeper, people started working on the lasting solutions.
In 2009, after yet another bad budget deal, progressive organizations began meeting to plan the way out. Everyone agreed that the rule requiring a 2/3 vote of the legislature to pass a budget was a key part of the problem, as it gave Republicans leverage. Getting rid of that rule became a top priority for the 2010 ballot - with majority rule, Democrats would never again have to make deals with Republicans to pass a budget.
But it was also agreed that the electorate had to be expanded. Nobody knew what kind of electorate would show up in 2010, and Meg Whitman was already making it clear she would spent as much as it took to try and win the governor's race. Public confidence in the Legislature was at an all-time low, creating conditions that Republicans could potentially have exploited to win more seats, particularly if the 2010 electorate was more conservative than the historic 2008 electorate.
So work began on mobilizing hundreds of thousands of new and infrequent voters among the progressive base. Many of these voters were people of color, and many were low income. Their values were progressive, but since Democrats and progressive organizations had generally failed to reach out to them, they were not a regular part of the electorate. The Democratic Party under its new chair John Burton and its new executive director Shawnda Westly pursued this on one track while the progressive coalition led by labor unions pursued the same goal on their own track - to be clear, this wasn't coordinated, and no laws were violated in the process.
Progressive organizations, websites like Calitics, and an increasing number of Democratic elected officials also began adopting similar messaging. They pointed out that Republicans did not share California's values, that they were willing to destroy the state to impose their extremist values on a population that did not want them, and that the only answer was to take away their power to do that. It was made clear to people that problem wasn't bad legislators unwilling to "come together" but that a group of extremists had used loopholes to block good things from happening and to cause people harm.
The result was that in 2010 California bucked the red tide that hit nationally. Democrats won huge victories, sweeping all statewide offices and taking back the governor's office by a 13-point margin. Prop 25 passed by an even larger margin, ending the annual Republican hostage tactics on the budget. This was the result of the voter mobilization efforts that had begun in 2009.
The coalition for change did not stop there. In 2012 the progressive groups continued their voter mobilization work, this time to beat back the anti-union Prop 32 and to pass the Prop 30 tax increase. That mobilization in turn helped elect a Democratic supermajority, leaving Republicans with no more political power of any kind in state government.
They were helped in their work by a late but pivotal voter registration innovation. In September 2012 the Secretary of State's office announced online voter registration was available. Over 1 million people registered online, and many of them were the younger and diverse voters that are key to a progressive future.
The supermajority victory was also enabled by a change that the Democratic and progressive groups had originally opposed. Redistricting reform passed at the 2008 election in the form of Prop 11, and was upheld by voters in 2010 when a repeal effort reached the ballot. I was one of many progressives who opposed this reform. But the work of the Citizens Redistricting Commission proved me wrong. It ended a 20-year Republican-friendly gerrymander, creating fair districts that reflected modern demographic realities. Republicans now had to defend turf that had previously been artificially safe, and as a result they lost four Congressional seats to Democrats, along with the Democratic supermajority in Sacramento.
In short, the steps to stopping Republican obstruction in California involved changing the rules and changing the electorate:
• Ending a supermajority procedural rule (Prop 25)
• Growing the electorate through massive organizing
• Making it easier to vote (online voter registration, easy access to vote-by-mail)
• Ending gerrymandering (Prop 11 redistricting commission)
• Naming the problem (calling out Republican obstruction)
To stop the extremists in the House GOP from destroying what remains of America's safety net and obtaining their dream of drowning government in a bathtub, a similar path must be followed nationally. David Atkins, now chair of the Ventura County Democratic Party, laid out the rules that need to be changed to stop extremist obstruction. Notice the similarities to the list that worked in California:
The only thing that allows Republicans to take their hostages in the first place is a series of arcane rules that give the minority undue influence. Among those rules are:
• Gerrymandered Congressional districts
• Dysfunctional filibuster rules
• Disproportionate Senate representation
• Corrupt lobbying laws
• Campaign finance laws that give outsized political influence to a few billionaires
• Archaic electoral college rules
• Discriminatory workday elections
California's problems are not solved, not by a longshot. There's still a lot of work to do to repair the damage from 35 years of a right-wing tax revolt and the inequality it helped create. But the opportunity to fix those problems now exists. The nation as a whole will not be able to overcome extremist obstructionism and have a chance to solve deeper problems until these types of changes are pursued.
Progressives should continue to pay close attention to the details of any deal in Congress, and continue to organize around them. But it's time to pursue the bigger changes that are needed to put an end to the obstruction, to fix the broken parts of the American system of government that the extremists have been exploiting.
In a sign that progressive push-back against Los Angeles Mayor Villariagosa's membership in the right-wing "Fix The Debt" lobbying group isn't abating, activists from MoveOn.org and the Progressive Change Campaign Committee delivered over 21,000 signatures to LA City Hall this afternoon demanding Villariagosa resign from the group's steering committee.
"They call themselves bipartisan because they're able to buy members of both parties," said Richard Eskow, a blogger for the Campaign for America's Future.
"The primary agenda for these folks is to lower taxes for millionaires, billionaires and corporations," he said.
In a scathing Huffington Post article about the Campaign To Fix the Debt's agenda, Eskow was even more blunt, "Let's be clear: This crowd doesn't really care about deficits. It never has. It's an anti-tax group which pursues its goals by fighting to downsize government programs and "reform" the Internal Revenue code. Its natural allies are the Republican Party, the nation's mega-corporations, and billionaires."
"The so-called 'Campaign to Fix the Debt' is nothing more than a front group to protect tax cuts for the wealthy while balancing the budget on the backs of the poor and elderly," said founder Rick Jacobs. "The fact that Mayor Villaragosa, or any other Democrat that claims to want to protect Medicare, Social Security and Medicaid, would join this effort is nothing short of shameful....Mayor Villaragosa should resign immediately."
Last week, Villaraigosa defended his decision to join fix the debt. "I am a Democrat and a progressive, but you know what? The country is evenly divided. They won too," Villaraigosa told CNN, referring to Republican lawmakers.
Angela Garcia Combs, a native Angeleno and former volunteer for the Mayor who started the petition, said she decided to deliver the signatures today after staff from Villaraigosa's office told her it would take at least three months to schedule an appointment.
She promised today's action wouldn't be the end of it. "Any Politician that calls themselves a Democrat, Progressive, Centrist,Bipartisan, we are putting you on notice too. We are coming after you if you join this group," said Combs.
"Joining the Steering committee of Fix the Debt is like saying I'm joining the steering committee of the Titanic to help all those poor people in the water."
"Let me be very clear: I oppose the privatization of Social Security. I oppose turning Medicare into voucher care," said Villaraigosa. "I oppose dismantling Medicaid. I support letting the Bush tax cuts expire for the top 2%."
However, a spokesman for the Mayor's office told KPCC Villaraigosa was open to raising the retirement age for Social Security and other federal benefits.