Budget/Fiscal

While redevelopment agencies may be facing annihilation, Senator Lois Wolk (D-Davis) is taking steps to ensure that municipalities still retain some tools to continue their economic development mission. Senator Wolk has introduced legislation to give locals another financing option similar to redevelopment agencies.

Wolk’s legislation, Senate Bill 214, is a compromise between the entrenched camps of the Redevelopment debate. For proponents of eliminating redevelopment, claiming that they are wasteful and operate to the detriment of schools and other core services, it will protect source of revenues to these services from being usurped by redevelopment. For the proponents of redevelopment, SB 214 would allow Infrastructure Financing Districts (IFDs) to absorb many of the functions of the current redevelopment agencies.

The Legislative Analyst Office released a report on the possible list of cuts needed to close the state’s multi-billion dollar budget deficit, should the state not extend taxes as Governor Jerry Brown proposed.

Republicans are already calling it a ploy to convince legislators to place the tax measure on the ballot, that would cut the needed budget cuts in half.

The problem of soaring prison costs is nothing new in California government, even as the state faces largely unprecedented problems with its budget.

The recent polling by the Public Policy Institute of California (PPIC) shows that 70% of the voters singled out prisons as a major area where the budget should be cut.  This exists, in fact, across party lines and geography.

Governor Jerry Brown delivered the first State of the State Address of his new tenure as California’s Governor, and he called on both Democrats and Republicans to do things that they do not want to do.

“This is not a time for politics as usual,” he said in a line that is usually reserved more for rhetoric than substance.  However, this time it is different.

The conventional wisdom rising out of the first month of Governor Jerry Brown’s tenure is that he does not have the votes to get his tax measure on the ballot and that if he does, the majority would oppose extending taxes another five years to help alleviate the state’s fiscal problems.

However, earlier this week, the Public Policy Institute of California (PPIC) released their findings showing that a strong majority say that a special election on Governor Jerry Brown’s tax and fee proposal is a good idea, and a majority are generally satisfied with his budget plan.

In July, candidate Jerry Brown laid out a series of common sense proposals to deal with pension reform on the state level.  While we have generally focused on pension reform at the local level, clearly, state-level changes could be made to help communities trapped into past promises of unsustainable wages.

However, as critics are quick to charge, Governor Brown’s budget proposal has promised cuts to about every sector except one, pension reform. Orange County Columnist Steven Greenhut, a leading proponent of pension reform, accused Jerry Brown of dodging the issue.

This morning’s Sacramento Bee points out that those who own the land and buildings in downtown Sacramento pay an estimated 31 million dollars in property taxes every year.  Contrary to popular belief, most of that money does not go to fund schools or the local government.

Rather, 26 of the 31 million dollars goes directly to the city’s redevelopment agency (RDA) which ostensibly uses money to  “subsidize development projects, build affordable housing, fix up rundown buildings and beautify streets.”

One thing Jerry Brown cannot be accused of doing is playing things safe.  His plan is bold, it spreads pain, and it has the potential to  both please and irritate everyone at the same time.

Time will tell whether he will be successful in convincing a few Republicans to allow the tax plan to go before the voters, where he will get to make his case.  Many will quibble at the margins, but frankly I cannot think of a bolder first week in any recent administration.

Governor Jerry Brown unveiled his budget plan Monday, but critics have already scoffed that it looks remarkably like that of former Governor Arnold Schwarzenegger, and GOP leaders have already said that the tax plan will get none of their votes.

In a statement, Governor Brown said that his proposed budget will be comprised half of budget cuts and half tax increases in order to attack a deficit that is estimated at $25.4 billion.

In an Op-ed in the LA Times yesterday, Joe Mathews asked if the failures of Arnold Schwarzenegger will save the state.  He argued, “Nothing worked for Schwarzenegger because the system itself doesn’t work.”

He went on to argue, “On fiscal and budgetary matters, Schwarzenegger suffered defeat after defeat. The state’s fiscal record after his seven years — California has the same budget deficit now as in 2003, with a much larger debt — has led commentators across the political spectrum to write him off as a failed governor. That conclusion has a factual basis — and is deeply wrong. And it obscures the most interesting and important lesson of his governorship. Put simply: The sheer number and surpassing scale of Schwarzenegger’s failures to fix the state budget constitute a grand and peculiar success, especially if Californians heed the lessons they provide.”

Last week we reported that Genentech, one of the chief backers of Prop 24’s efforts to prevent the closing of tax loopholes opened up in the 2008 and 2009 budget deals, had pumped 1.6 million dollars into the efforts to defeat Prop 24, only to turn around and eliminate over 800 California jobs.

Now Dan Morain, Senior editor of the Sacramento Bee, is reporting that Comcast is the latest to play “take our tax breaks and run.”

Davis has often lamented the fact that Dixon, rather than Davis, got Genetech’s expansion.  In 2008, Genentech, a company based in South Francisco, decided to put a 140,000 square foot research facility in close proximity to UC Davis.  But instead of building it in Davis, they built it in Dixon.

At the time, the facility was expected to house 120 employees starting in 2010 and expand to 160 employees in 2016.  This was before the collapse of the economy in September 2008, and the plans have since been dropped (perhaps demonstrating the problematic nature of any investment by a large company).

Apparently Governor Arnold Schwarzenegger did not get the memo – he is a lame duck, he is no longer in charge, and even when he was in charge he did a poor job of getting budgets passed anyway.  It is time to step aside and let Governor-Elect Jerry Brown have a shot at it.

In case you missed it, last week Governor Schwarzenegger, who is still refusing to be called a lame duck, called a special session of the legislature for December 6 when the new legislature is sworn in.  The purpose?

We already knew it was going to be a problem because the last budget passed was largely smoke and mirrors covering up a deficit as high as ten billion dollars.  But now we know it is much worse than that.

According to the Legislative Analyst’s Office, a non-partisan agency that scrutinizes the state budget, “Our forecast of California’s General Fund revenues and expenditures shows that the state must address a budget problem of $25.4 billion between now and the time the Legislature enacts a 2011-12 state budget plan.”

Governor Arnold Schwarzenneger used his weekly radio address on Saturday to call out Republican legislators, who he says tried to block his pension reform bill this month as selling out to the prison guard union for campaign contributions.

The reform was designed to roll back major state worker pension increases that were implemented in 1999 that set in motion a round of local government pension increases that critics have claimed are unsustainable and will increasingly eat up funds needed for general operating expenses.

They would not share the details on Friday night, but the Governor and legislative leaders from both parties apparently believe that they have reached an agreement that would end the state’s record-setting budget stalemate.

Last night, Senate President Pro Tem Darrell Steinberg announced that they had reached a “comprehensive agreement.”

There are a couple of noteworthy editorials in this morning’s Sacramento Bee pertaining to the issue of pensions and state workers.  I have long supported both unions and public employees.  However, we have allowed, particularly at the local level, the pension system to run out of control.  Local entities simply cannot support the rate and length of pension benefits, particularly to non-unionized upper management and those otherwise rank-and-file making over $100,000 per year.

My fear has been from the start that if we do not fix this problem, the voters, as they have in the past, will pass the first and most draconian “reform” package that they get their hands on.  The typical state worker and public employee is not the problem here.  The typical state worker makes less than $40,000 per year and gets 2% at 60.  Do the math and, even working for 35 years, such a worker would get no more than $28,000 per year in pensions.  That is a healthy retirement, but not the type of pension we are fearing.

Last week, the OC Weekly’s R. Scott Moxley wrote about the roaring debate over public employee pensions in “Death and Taxes.”

While I appreciate his highlighting the contributions of Dan Chmielewski and myself to the debate with Steven Greenhut and Supervisor John Moorlach, I do have to take issue with the way he presented some of my comments, including the attribution of some statements out of context.

For those who do not believe that pension reform is quickly becoming inevitable, the proposal by Democratic Governor Candidate Jerry Brown probably makes it exactly that.  And while his opponent Meg Whitman was quick to attack the proposal, it has always been my hope that more moderate forces would get out in front on this issue.

From my perspective, the fiscal problems that cities face with pensions have little to do with the average worker’s pension and far more to do with the 3% at 50 safety enhancement, early retirement ages, pension spiking, and the large pensions earned by those in top managerial positions.  The average state worker will earn roughly $27,000 upon retirement.  My hope is to protect that average state worker while reforming the excess at the top.