As the California Legislature reconvenes, Californians will hear two decidedly different messages from both politicians and political pundits about the “state of the state.” Governor Brown will surely tout the “California comeback” and argue that the state is in much better fiscal health than just a couple of years ago. On the other hand, more conservative voices will argue that California remains in fiscal crisis, that our system of governance is still fundamentally flawed and that those who believe the state is on the right track are simply fooling themselves. So who is right, the “declinists” – as Governor Brown has labeled some of us in the latter group – or the “delusional” in the former?
First, in the “comeback” camp, there is no denying that California is enjoying the benefits of the national economic recovery. This rebound has resulted in much more than anticipated tax revenue for state coffers. In fact, for fiscal 2014-15 the Legislative Analyst is projecting an additional $2 billion.
Second, Brown will contend that we have already made substantial progress in dealing with the vast amount of accrued government debt racked up in the last decade. To his credit, Brown has at least laid out a game plan for some – but not all – of the pension obligations by requiring that public school teachers pay more into their pension fund known as CalSTRS. Moreover, the red hot stock market has – at least temporarily – made a significant dent in the unfunded liability of the state’s pension funds
Third, while not the hard spending cap based on inflation and population that fiscal conservatives would prefer, the passage of Proposition 2 in November enhanced the efficacy of the state’s “rainy day” fund. California’s most significant fiscal problem is the over-reliance on a fraction of California’s population – the wealthy – to pay the lion’s share of tax revenue. This results in wild swings in revenue depending on how the wealthy are doing. Proposition 2 was designed to smooth out the peaks and valleys of revenue so that we might be better prepared when the next inevitable recession occurs.
The opposite of this optimistic view is the “declinists/naysayers” camp whose adherents believe that California remains in fiscal crisis. Sure, the economic recovery is making things look better temporarily, but this is no more than putting a coat of paint on a decrepit house with a crumbling foundation.
The list of metrics supporting the naysayers is impressive. California ranks number one in poverty out of all 50 states. Nearly a quarter of the state’s 38 million residents (8.9 million) live in poverty. Business flight out of California to more business friendly states like Texas, Arizona, Nevada and Utah is accelerating. The tax hikes approved by voters via Proposition 30 slammed California’s wealthy with a huge retroactive income tax hike. Their response has been to vote with their feet and move to more favorable climes such as Texas & Nevada which have no income tax at all.
There remains a broad consensus that California’s tax structure is irrational. Rather than lowering taxes which would make California more competitive, the response from the political left is to propose a new tax on services. Given that California already has the highest income tax rate in America as well as the highest state sales tax rate, any tax “reform” that seeks to generate billions in new revenue will sink California even further.
Recent reports from the Los Angeles Times, no bastion of conservatism, note that millennials – the youth we need for economic survival – can’t afford housing in California and are moving out of state to escape anti-growth regulations which unnecessarily double the cost of a home or apartment. The Times also reported that the same out migration is occurring for the poor and middle class. And speaking of the middle class, they are about to be hit with a one-of-a-kind gas tax – imposed only by California – that will make fuel costs even higher.
A comprehensive list of California’s governance problems would fill volumes and can’t be recounted here. Suffice it to say, however, that those of us who have been labeled as “declinists” have a firmer grip on reality that those who believe that California’s natural beauty and weather will overcome all problems.
To be clear, those of us who possess a realistic grasp of the magnitude of challenges facing the Golden State do not believe that California is a bad place. To the contrary – it is a great state with a great deal of potential. The only question is whether our elected leadership will allow the citizens of California to pursue happiness as they see fit unshackled by foolish and counterproductive government policies.
Government Waste Cost California Billions in 2014
The Howard Jarvis Taxpayers Foundation has released a new report titled, “Follow the Money,” detailing government waste, fraud and abuse uncovered in 2014.
The report offers examples of irresponsible spending including $194 million in uncollected bills at the state toxics agency, $848 million in overpayments by the CalWORKs program and $80 million in illegal money transfers.
The Foundation even found California State University administrators spent hundreds of thousands in donated money on parties and alcohol.
“Even though California taxpayers already pay some of the nation’s highest taxes, Sacramento is considering even more, including new taxes on services and higher gas taxes,” said Howard Jarvis Taxpayers Foundation Chairman Jon Coupal.
“When you read the report, you’ll see billions of taxpayer dollars are going down the drain because of waste, fraud and abuse. The report is a clear message for politicians to do more with what they already receive, instead of raising taxes.”
While the amount of waste exposed in the report is massive, the Foundation emphasizes only waste publicly exposed and documented in 2014 is included.
“Californians can’t help but wonder how much more waste and abuse of taxpayer dollars remains hidden,” said Coupal. “It’s time to demand greater accountability from elected officials.”
If an award were given for political chutzpah, members of the California Legislature would win hands down.
An example of chutzpah — a word whose synonyms include “insolence”, “cheek” and “gall” — would be an expensive restaurant adding a 25 percent tip to the bill after providing poor and insulting service.
Don’t blame California’s beleaguered taxpayers if they feel like diners at the restaurant in the above example. Our state’s high tax rates in almost every category have resulted in Californians laboring under the second highest tax burden in all 50 states.
In return for these high taxes, roads are crumbling, schools are underperforming and services in general are well below par. Money that could go to improving government services is syphoned off to support the highest paid state and local government employees in the nation and to provide them pensions in retirement that are as much as five times higher than what similar private sector workers can expect from Social Security.
Even though revenue to state government is surpassing expectations — State Controller Betty Yee has announced that February receipts were $6.6 billion, exceeding estimates by $1 billion, or 18.3 percent — Sacramento lawmakers are demanding more — much more.
State Sen. Robert Hertzberg is promoting an extension of the sales tax, already highest in all 50 states, to services. The goal would be to squeeze another $10 billion annually from taxpayers.
Then there is Speaker of the Assembly Toni Atkins who proposes a brand new tax on drivers to pay for highway and road repairs in California. This new “fee” would take $1.8 billion dollars out of the pockets of hard working California citizens over the next five years. This is especially ironic in that California already has the highest gas tax in the nation.
Not to be outdone, Assemblyman Jim Frazier has introduced a constitutional amendment (ACA 4) that lowers the Proposition 13 mandated two-thirds vote for special taxes to 55 percent, to fund local transportation projects.
Just what is a local transportation project, you might ask? From the bill, “’local transportation project’ means the planning, design, development, financing, construction, reconstruction, rehabilitation, improvement, acquisition, lease, operation, or maintenance of local streets, roads, and highways, state highways and freeways, and public transit systems.” In short, the potential for billions of dollars of higher taxes.
Government bureaucrats and the special interests that contract to provide transportation infrastructure related construction and services, are, no doubt, doing the happy dance at the thought of being handed billions of additional taxpayer dollars.
California taxes already rank at or near the top in almost every category. With state government taking in money hand over fist, can there be any doubt that those California lawmakers promoting new taxes deserve an award for chutzpah?
Look for the Union Label
Because of Proposition 13, the unions representing California’s government employees – employees that are the highest paid in all 50 states according to the Bureau of Labor Statistics – have a huge stake in who is elected to the state Legislature.
While most Californians are aware that Proposition 13 limits increases in property taxes- they can be increased by two percent annually, they are less familiar with the requirement that new or increased state taxes receive a two-thirds vote of each house of the Legislature. Proposition 13 authors Howard Jarvis and Paul Gann included this provision because they feared that if they were successful in saving taxpayers money, lawmakers, no doubt with union support, would turn around and attempt to increase the tax burden in other areas.
So the government employee unions are constantly working hard to increase their support in the legislature, with the goal of achieving a super-majority of compliant lawmakers to increase taxes and make even more money available for payroll. This explains why the government unions have been making all-out efforts in special elections that are often overlooked by the general public.
For example, government union leaders have ramped up their efforts to influence the outcome in the upcoming May 17th special election for a vacant senate seat in the Bay Area. Although the race is between two Democrats, they fear the election of Orinda Mayor Steve Glazer, a self-described fiscal conservative and social progressive. His experience in city government has taught him the importance of responsible budgeting, and this, to the unions, is intolerable. To assure his defeat and the election of union compliant Assemblywoman Susan Bonilla, they are spending hundreds of thousands of dollars of union dues to finance a mailing from a group calling itself “Working families Opposing Glazer for Senate.”
The problem is that the unions apparently do not want those who receive the mailing to know who is paying for it. State law requires that the top two contributors of more than $50,000 be listed on the mailer, but the names of the State Council of Service Employees, which gave $185,000, and the California School Employees Association, which gave $75,000 are nowhere to be found. Glazer has filed a complaint with the Fair Political Practices Commission, but more voters will see the misleading mailers than are likely to hear of a FPPC decision, and the damage is done.
Government employee unions being shy about public exposure is not unusual. Unions back a number of organizations that at first glance appear to be looking after taxpayers’ interests. In San Diego, they have set up the Middle Class Taxpayers Association that has opposed pension reform.
And, of course, there is the California Tax Reform Association, whose president, a former ’60s Berkeley radical, is dedicated to the overturning of Proposition 13’s taxpayer protections. The group’s funding and board of directors come primarily from the government employee unions.
So when a group whose name makes it sound like a pro-taxpayer organization, or that it is representing average working folks, pushes policies that would raise taxes and the cost of government, it would be wise to look carefully for the union label.
For more information on the Howard Jarvis Taxpayers Foundation and to read, “Follow the Money,” visit HJTA.org. A copy of the report can be downloaded on the homepage under “Hot Topics. Jon Coupal is President of the Howard Jarvis Taxpayers Association – California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.