Kersten Communications

Kersten Communications (KC) has completed a brief report, titled “PG&E’s Prop. 16 Turns the 100-Year Old Initiative Process on Its Head,” which examines what is wrong with Prop. 16 and how PG&E is using the initiative process to do exactly the opposite of what it was designed to do.  To view the report click here.

Other KC Fiscal Focus Reports: 

“Ballot Measures Qualified for June and November 2010.”

“Federal Stimulus Funding Slow to be Spent in California, Other States.” 

“KC Fiscual Focus Guide to Searching for Federal Stimulus Funding in Your Community.”

Kersten Communications (KC) has completed a brief report, titled “State to Experience Mild Cash Crunch By End of March, But the Real Cash Crisis Begins in July,” which takes a look at the state’s impending cash crunch.  To view the report click here.

Other KC Fiscal Focus Reports: 

Lawmakers Budget Forum Illustrates Deep Partisan Divide, Foreshadows Budget Stalemate for 2010 and Beyond

Poll Highlights Need for Better Public Education on State Budget and Tax Issues

Want more frequent updates from KC, we now have a more frequent publication than KC Fiscal Focus–this monthly E-Newsletter.

Earlier this month, KC debuted KC Blog Blast, which provides email subscribers with up to date email blasts when significant new KC reports or blogs are released.  To subscribe, click here.  Here are some recent archives of recent updates. 

–DOF Proposes Controversial Budget Trailer Bill Language to Defer State Payments    

–Senate Democrats Introduce Jobs Bill Package

–CTA Kicks In $500,000 For Signature Drive To Repeal Corporate Tax Loopholes

KC Fiscal Focus is an electronic newsletter that focuses on California State public policy issues from a fiscal perspective.  Kersten Communications is a Sacramento-based consulting firm which specializes in public policy research and analysis.  To sign-up for KC Fiscal Focus click here. 

Finally, we welcome your feedback on this newsletter and our other publications.  To submit your comments, click here. 

Sincerely,  

Kersten Communications

Kersten Communications has completed a brief report, titled “Legislative Analyst Projects $20.7 Billion Budget Deficit for 2010-11 Budget and Beyond,” which summarizes the findings of a report released yesterday by the LAO.   

Another KC publication, titled “Flurry of Fiscal Initiatives Filed With California Attorney General’s Office for Possible Consideration on November 2010 Ballot,” summarizes a series of fiscal inititatives, and their proponents, that have been filed for the November 2010 ballot.  

Initiatives include measures that would enact a “split-roll” property tax, reform state and local finance, increase the cigarette tax, tax marijuana, call a constitutional convention, and more.  Links to the initiative texts are provided in the KC report.    

KC Fiscal Focus is an electronic newsletter that focuses on California State public policy issues from a fiscal perspective.  It is also the primary means for announcing the public release of publications by Kersten Communications–a Sacramento-based consulting firm which specializes in public policy research and analysis.  To sign-up for this newsletter click here. 

Finally, we welcome your feedback on this newsletter and our other publications.  To submit your comments, click here.

After more than 18-months of preparation, the non-partisan reform group California Forward is preparing to qualify a package of reforms for the November 2010 ballot that would overhaul the state’s budget process, enact state/local government reform, and reform term limits.

The reform package would include lowering the vote requirement from 2/3 to a majority vote for passage of a state budget, two-year budgeting for the state, and narrowing the definition of fees that can be enacted on a majority vote, among other things.

KC Fiscal Focus sat down with California Forward executive director James P. Mayer this week to discuss the reform package.

“We built a model tailored to California—no state is doing all of the pieces,” Mayer said, noting that the California Forward effort has examined countless policy options and pulled together the best practices from California communities and states across the country.

“We tried to create the entire spaceship by pulling together pieces of what other states do well,” noting that California currently lacks many of the tools that other states are using to better manage themselves.

The reform package includes three major components: 1) budget reform, 2) state/local government reform, and 3) political reform (see below for a summary). He said all three pieces were developed and vetted through a long conversation and series of meetings with local communities, business leaders, legislators, legislative staff, national groups, and other major stakeholders.

Mayer said California Forward has conducted extensive polling and focus groups in developing the package of reforms and that most of the reforms are very popular with the public. Mayer said specific language for the proposals has been developed and will be available on the group’s website in a week or so.

Mayer said the goal is to get the Legislature to approve the package of constitutional and statutory reforms but the group is preparing to begin collecting signatures in the fall to ensure that the reform package will be placed on the November 2010 ballot.

“The public wants the lowering of the vote threshold for passage of a budget,” Mayer said, noting that most voters do not support lowering the vote requirement as a standalone measure but are willing to support the provision if it is part of a larger package of budget reforms.

Mayer said fundraising for the effort is being conducted by a separate entity, the California Forward Action Fund (which is 501(c)(4) political committee), and did not specify how much money he thought the effort would need to raise because it will depend on the amount of opposition. The California Secretary of State’s Office does not show any major fundraising activity for the action fund as of yet.

California Forward has also started working a package of reforms to the state’s tax system but is waiting to see what the Commission on the 21st Economy recommends before releasing its own recommendations. Mayer said he thought it would be too late to qualify the group’s recommendations on tax reform for the November 2010 ballot, but would push for tax reform in the Legislature and possibly qualify a tax reform measure for a future ballot.

Summary of Reforms (specific language to be available at www.caforward.org shortly):

Budget Reforms

► Lower Vote Requirement for Passage of a State Budget: Lower the legislative vote requirement for passage of a state budget from a 2/3 vote to a simple majority vote.

► Two-Year State Budget: Require the Governor and Legislature to craft two-year budgets with midyear correction authority, long-term revenue forecasts, and capital investment plans.

► Pay-As-You-Go Budgeting: Require that new programs identify a funding source for the new spending that they require.

► Result-Based Budgeting: Require the Governor and lawmakers to set clear goals for programs, measurements for effectiveness, monitor performance to improve efficiency, and consider eliminating outdated and duplicative programs.

► One-Time Use of One-Time Revenues: Reduce future budget shortfalls by prohibiting the use of unexpected spikes in revenues to increase spending on programs that continue year after year.

► Clarify Vote Requirement for Fees: Clarify the circumstances in which the Legislature and the Governor can impose fees without a two-thirds vote.

► Protect Local Revenue: Give communities more control over community-related services and prevent the state from siphoning off local revenue by giving local governments legal ownership of specific funds for community services.

► Remove Barriers to Local Government Coordination: Encourage community-level governments to coordinate and consolidate districts when this makes sense, give county governments the authority to redistribute local property taxes to improve efficiency, improve services, and deliver better results.

► Foster and Fund Long-Term Regional Collaboration: Allow cities, counties and school officials who craft long-term flexible plans to address community needs and seek majority vote approval to provide funds to pay for them while retaining the vote thresholds established under Proposition 218.

► Term Limit Reform: Reduce the total time newly-elected state legislators are allowed to serve from 14 years to 12 years, regardless of whether the time is spent in the Assembly or Senate.

► Constitutional Access and Accountability: Require legislators to spend part of every year in their district, in consultation with constituents and local leaders.

California Forward is registered as a nonprofit 501(c)(3) and started out a year and a half ago with $15.9 million in operating funds donated by the James Irvine Foundation, the William and Flora Hewlett Foundation, the David and Lucille Package Foundation, the California Endowment, and the Evelyn and Walter Haas Jr. Fund.

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The Legislature and Governor have managed to put together another “get out of town” budget agreement that fails to close the state’s structural budget gap and does nothing to collect the billions of dollars in tax revenues resulting from waste, fraud, and abuse in the state’s tax system.

Yesterday the Governor announced that he will immediately call the legislature into a special session when the 14-member Commission on the 21st Century Economy submits its recommendations for modernizing and stabilizing California’s tax system. The Governor also signed an executive order granting the Commission’s request to extend the submission of their report to September 20, 2009.

The Commission began its work late last year but does not appear to be close to reaching any kind of consensus on a tax package that would significantly address the waste, fraud, and abuse in the state’s tax system, largely because their initial charge was to focus on making the system less volatile, as opposed to more fair and equitable.

An open and honest examination of the state’s tax system reveals that there are billions of dollars worth of loopholes, inefficiencies, and enforcement gaps in the state’s tax system that should be corrected before making deep cuts to important state programs such as education, health care, and human services.

Attempting to close the state’s $26 billion budget gap without examining the revenue side of the equation is reminiscent of the story of a drunk who has lost his keys but spends all his time and energy looking under the street lamp to find them, where he can see, as opposed to all the other dark places where the keys may be.

To illustrate, as outlined in a recent Los Angeles Times article titled “It’s time to close a big tax loophole for businesses,” the state’s commercial property tax is riddled with loopholes: 100% of a company can change hands without triggering a market rate reassessment. The use of off-shore tax havens have gone unchecked, sales taxes on remote sales are not collected even though they could be, independent contractors can avoid paying the taxes they should, and new studies have shown that the state’s enterprise zone system fails to create jobs and is riddled with waste, fraud, and abuse.

These are just a few of the proposals which should be considered. Lenny Goldberg and the California Tax Reform Association have put together a series of proposals that is available by clicking here.

Democratic legislators are open and willing to address this waste, fraud, and abuse in the tax system but the Governor and Republican legislators have unilaterally declared that they are against any and all “tax increases” even if the money would come from individuals and businesses who should be paying their fair share of taxes, just like everyone else.

Republican legislators justify their untenable position by saying that state spending is the problem and not revenues. But Republican legislators rejection of any and all tax change which raise revenues has created a situation where the tax system has been neglected for so long that the Democrats would be justified in refusing to make any additional program cuts until the Governor and Republican lawmakers are willing to address the problems in the state’s tax system.

Republican legislators are always saying how opposed they are to waste, fraud and abuse in state government, but do not object to allowing the endless manipulation of the state’s tax system by corporations and tax accountants.

To make matters worse, to gain Republican votes for for the September 2008 and February 2009 budget agreements some $2.5 billion in additional permanent corporate tax loopholes were passed into law without any public scrutiny or review for effectiveness.

The California Tax Reform Association, the American Federation of State, County and Municipal Employees (AFSCME) and the California Federation of Teachers recently filed an initiative to reverse these loopholes. For the initiative findings and declarations and text click here.

The California Budget Project has produced an analysis which shows that the vast majority of the benefits go to less than 0.1 percent of California corporations with over $1 billion in gross income.

The Legislature should also consider rolling back some of the $11.7 billion in permanent tax reductions that have been enacted since 1993-94. The California Budget Project has produced a chart showing the cumulative annual cost of these tax cuts.

The itemized annual cost of the various tax cuts enacted since 1998 are itemized in an Excel chart that is available by clicking here.

The state’s structural budget gap could be solved tomorrow if the Governor and Republican legislators would be willing to own up to the waste, fraud, and abuse in the state’s tax system and agree to work with Democratic legislators to pass common sense tax proposals which collect tax revenues from the taxpayers that should be paying them.

Health care reform is currently at the top of the national agenda with Congress and the Obama Administration preparing to consider a national health care reform plan in the coming weeks. 

Kersten Communications has prepared an in-depth report  which examines California’s attempt to enact universal health care reform.

The report titled, “Lessons Learned from the Failure of AB 1X 1: The Health Care Security and Cost Reduction Act,” is available by clicking here.

The report provides an in-depth look at what led to the development and ultimate failure of one of the most important pieces of legislation ever considered by the California Legislature.

The piece provides valuable insight into barriers to reform, the politics of reform, and the complex policy challenges presented by sweeping health care reform.       

KC Fiscal Focus is an electronic newsletter that focuses on California State public policy issues from a fiscal perspective.  It is also the primary means for announcing the public release of publications by Kersten Communications–a Sacramento-based consulting firm which specializes in public policy research and analysis.  To sign-up for this newsletter click here. 

Finally, we welcome your feedback on this newsletter and our other publications.  To submit your comments, click here.