March 2010: PG&E’s Prop. 16 Turns 100-Year Old Initiative Process on Its Head

March 9th, 2010

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.”

KC Fiscal Focus Guide to Searching for Federal Stimulus Funding in Your Community

March 9th, 2010

KC Fiscal Focus has produced a brief guide that is intended to help policy makers and community members search for how American Recovery and Reinvestment Act (ARRA) funding has been used in their community. 

Specifically, this guide provides instruction on how to search the internet for ARRA funds and projects by county, search for the largest fund recipients, and search by zip codes.

To search ARRA funded projects by county click here.  To search ARRA funding by zip code, Congressional district, top recipients, and job creation statistics click here.  

The federal government has created a user-friendly website that has a variety of state and national statistics.  To visit the federal ARRA website click here

The State of California has also created a website that allows users to track stimulus spending by issue area, among other things.  To visit, the state recovery website click here. 

 To learn more about how ARRA provides tax relief for business, infrastructure, and individuals click here.   

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February 2010: KC Fiscal Focus “Breakdown on CA Cash Crunch.”

February 17th, 2010

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

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

February 17th, 2010

A budget forum hosted by the Public Policy Institute of California in late January illustrated that the partisan divide over the California State budget is likely getting worse, as opposed to better, and that this year’s budget standoff promises to be at least as contentious as previous years if not more so. 

The event, titled “2010 Budget Debate,” held at the downtown Sheraton Hotel on January 28th included a panel discussion of Republican and Democratic Legislative budget leaders, including Sen. Robert Dutton (R), vice chair of the Senate Budget Committee and future Republican minority leader, Assemblymember Jim Nielsen (R), vice chair of the Assembly Budget Committee, Sen. Denise Moreno Ducheny (D), chair of the Senate Budget Committee, and Assemblymember Noreen Evans (D), chair of the Assembly Budget Committee.  To view a tape of the event click here.    

But Democrat and Republican budget leaders appeared to reach a consensus on one issue—the deep partisan divide over the state’s structural budget gap would continue long into the future.  Towards the end of the debate when the partisan divide became more apparent, the panel was asked if the state’s structural budget gap would continue into the future–the entire panel agreed that it would but did not elaborate much. 

Republicans Advocate for Spending Cuts to Close Budget Gap, Criticize Governor for Not Making Enough Spending Cuts

“Some way, somehow, we have to get this thing to zero by cuts,” Sen. Dutton said.  Asm. Nielsen agreed adding that the Legislature should “rein in the excesses of government.”

Both Dutton and Nielsen called on the Governor to do more to help the economy by easing environmental regulations to hasten construction projects and promote growth in the private sector.

Republican leaders, Sen. Dutton and Asm. Nielsen, criticized the Governor for not going far enough in making cuts to close the budget gap.  They also criticized the Governor for supporting climate change and said it was preventing economic growth in the private sector. 

In early January the Governor released his 2010-11 budget proposal which proposes $8.5 billion in budget cuts, $4.5 billion in alternative funding and fund shifts, and $6.9 billion from the federal government to close the $20 billion budget gap projected for 2010-11.  The Governor described the cuts as “painful” and “difficult” but said he “would not raise taxes” to help close this year’s budget gap. 

Last year the budget approved by Legislature included both cuts and a series of temporary tax increases to close the budget gap, but Republicans have stepped up their anti-tax rhetoric this year, saying that additional tax increases are out of the question.

Democrats’ Oppose “All Cuts Budget”

Democratic lawmakers on the panel, Sen. Ducheny and Asm. Evans, described the Governor’s January budget proposal as an “all cuts budget” that serves to protect Republican tax cuts. 

Asm. Evans advocated for “a mixture of solutions” and that the Legislature should look at cuts, fees and tax increases as possible solutions because “recessions are temporary, but the elimination of programs is permanent,” alluding to the Governor’s proposed elimination of the CalWORKs, healthy families and In-Home Supportive Services programs.

Sen. Ducheny also questioned the Governor’s decision to unilaterally decrease state workers’ compensation by 5% by Executive Order S-01-10.  “We’ve taken down 25 restaurants here in Sacramento because of those furloughs,” Ducheny said, noting that she thought the furloughs could actually be costing the state money in lost revenues as opposed to saving money.  

Evans declared that her support for education was “the highest priority, next to jobs”, while Sen. Ducheny insisted that jobs and the economy were important but stressed that investing in education was the way to improve California’s economy.

Rocky Road Ahead

The Legislature is currently in an emergency special session on the budget and has until late February to come up with a proposal for making $6.6 billion in reductions in the current budget year to help close the $20 billion budget gap projected for 2010-11. 

The Legislative budget battle will then resume in May 2010 with the release of the Governor’s May revise.    

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

February 17th, 2010

A recent public opinion poll by the Public Policy Institute of California found that the vast majority of the public lacks a very basic understanding of how the State of California raises and spends its money, however, 72% of Californians believe that they—not their political leaders—should make reform decisions at the ballot box.

To illustrate, only 16% of California residents correctly identified K-12 education as representing the area of the most state spending and 49% of all residents said the most money goes to prisons and corrections—despite the fact that prisons and corrections represents a mere 10% of the state budget, while K-12 education composes just over 40%. 

Only 28% of Californians correctly identified the personal income tax as the area representing the most revenue in the state budget, while 30% named the sales tax.  In the 2009-10 budget, the state’s personal income tax accounted for 55% of the state’s general fund revenues, followed by the sales tax at 31% and corporate tax at 10%. 

Perhaps the most shocking finding of the poll is that 72% of the public, despite their lack of a basic understanding of budget and tax issues, the public believes that they should make reform decisions at the ballot box, not the Governor and Legislature. 

The poll asked:  “And when it comes to long-term issues of reforming the state budget process, both in terms of changing the way the state taxes and spends money, which approach do you most prefer:  the Governor and Legislature should pass new laws; or the California voters should decide at the ballot box?”  Some 72% of all adults said California voters should decide at the ballot box, while only 22% said the Governor and Legislature should pass laws. 

Public’s Misunderstanding of Budget and Tax Issues Leads to Flawed Perception of Political Discourse on These Issues

The public’s lack of an understanding of these issues inevitably leads to a flawed perception of the political discourse on these issues in the media and in other public forums.  One can only speculate about the depth of the public’s lack of knowledge on other more complicated budget issues such as the causes of Legislative gridlock and impact of the 2/3 vote requirement in the Legislature to pass a budget and close even the most egregious tax loopholes.

Furthermore, when asked “how would you prefer to deal with the state’s budget gap—mostly through spending cuts, mostly through tax increases, through a mix of spending cuts and tax increases, or do you think that it is okay for the state to borrow money and run a budget deficit?”  Some 41% of adults said through a mix of spending cuts and tax increases, while 37% said mostly spending cuts, 9% said mostly tax increases and only 6% said that it was okay to borrow money and run a deficit. 

However, in two separate questions asked later 66% of adults said they would pay higher taxes for K-12 education and 82% of adults said they opposed cutting K-12 education.  If more California voters knew education composed nearly half of all state spending, as opposed to prisons, they would likely be more adverse to severe spending cuts as an option, and likely prefer for the Legislature to examine tax loophole closures or other tax increases to fund education. 

If voters knew more about the budget process it is likely that more than 51% of voters polled by PPIC would believe replacing the 2/3 vote requirement with a 55% majority vote is a good idea.  Increased education on tax issues could also increase the 13% of adults who believe the state and local tax system is fine the way it is. 

Political Leaders Need to Step Up to the Challenge  

California voters will not be likely to make responsible, informed decisions on future budget and tax-related proposals, and the leaders who advocate for them, until they acquire a basic understanding of state tax and budget issues. 

Reform advocates, including the California Teachers’ Association and Repair California, have filed a series of budget and tax ballot measures–of which at least a handful are likely to appear on the November 2010 ballot—but any successful public education campaign will take years as opposed to months to achieve significant results.      

Political leaders and advocates for reform must improve the public’s education of these issues to have any real chance of achieving meaningful reform at the ballot box—the most likely place for reform to occur given the gridlock in the Legislature.

Governor Sets Bad Example for Political Leaders

Governor Arnold Schwarzenegger has continued to obscure the magnitude of the state’s budget crisis proposing a misleading and flawed budget trigger in his January budget proposal, while calling on the federal government to help close the state’s $20 billion budget gap by providing $7 billion in additional federal spending for California.     

The Governor sets a bad example for the state’s political leaders by saying it is OK to distort the state’s budget crisis by shifting the focus to what the federal government can do, as opposed to accepting responsibility for the need to balance the state budget through realistic means.  The Governor’s actions do not honestly represent the state’s budget situation and the tough choices needed to close the $20 billion budget gap for 2010-11. 

Political leaders need to stop playing political games with the budget and instead begin a true and honest education of the public on budget issues.  Only then will voters truly understand the need for budget and tax reform and be able to make informed decisions among potential reform options.  

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DOF Proposes Controversial Budget Trailer Bill Language to Defer State Payments

February 10th, 2010

To help cope with the state’s impending cash crunch, the California Department of Finance (DOF) has proposed controversial trailer bill language that would give the DOF complete discretion to defer payments to state programs, vendors and taxpayers including payments to California taxpayers for tax refunds, the University of California, Medi-Cal payments to providers, SSI/SSP welfare payments, CalWORKs welfare payments, K-12 education and more. 

The trailer bill language was submitted to Legislative Counsel last week and presented to lawmakers in an Assembly Budget Committee hearing on February 3, 2010.  DOF representatives said they needed the authority to act quickly to realize cost savings. 

“We think it’s way too broad,” said Legislative Analyst Mac Taylor, who encouraged the Legislature to narrow the authority granted to the DOF and make it more discrete. 

Taylor said giving the DOF such authority would create a problem for K-12 schools and other state programs that depend on state funding by not allowing them to plan ahead.  “What are the schools supposed to do if they know the Dept. of Finance can take money at any time?” Taylor said.    

Taylor said he thought the Legislature should make choices about intra-year payment deferals to meet cash obligations and grant specific authority under certain windows of time. 

Assembly Budget Committee chair Noreen Evans (D) was also skeptical.  She asked if the DOF had ever been given this type of authority and DOF representatives said no.  Evans described it as a “historic request” and said she was “skeptical” because it was essentially a “blank check.”  Evans was not comfortable with the DOF having the authority to decide which programs to not fund. 

KC has requested the trailer bill language but it is not clear if it has been made public yet or not.