The State of the State of Despair

casosGovernor Brown had something to say to Crazifornia this morning as he kicked off his State of the State speech:

Against those who take pleasure, singing of our demise, California did the impossible.

That would be me – about 300 pages worth of singing of our demise, or at least the increasing probability of our demise.

The impossible, as Brown defined it, is that “We have wrought in just two years a solid and enduring budget.” I agree it’s two years since he took office. I’m not at all ready to call the budget solid and enduring, as it is based on a lot of assumptions that still could go sideways.

Brown was quick to give credit to those who had a part in “doing the impossible.”

You, the California legislature, did it. You cast difficult votes to cut billions from the state budget. You curbed prison spending through an historic realignment and you reformed and reduced the state’s long term pension liabilities.

That’s a pretty impossible characterization of what the state did. Pushing prison expenses off to counties instead of addressing the root causes isn’t fixing anything, and it’s certainly not heroic. It just transfer to pain to counties that can’t fight back.

The touted reform and reduction of the state’s long term pension liabilities, while welcomed, was akin to the rate of speed of a great Roman galley when only one oarsman is rowing. Trimming around the edges is not a haircut. Reducing benefits for new hires still saddles us with 30 years of unaffordable liability from the previously hired. (More on this in a minute.)

Then, the citizens of California, using their inherent political power under the Constitution, finished the task. They embraced the new taxes of Proposition 30 by a healthy margin of 55% to 44%.

Yes they did, and now we get to watch the Legislature burn through that money instead of approaching it, to use a favorite word of the Sacramento majority, with sustainability as a goal. And watch tax revenues drop off in the latter years of Prop 30′s seven year life as business owners peel out to other states, taking their taxability with them.

Members of the legislature, I salute you for your courage, for wholeheartedly throwing yourself into the cause.

What else is he going to say to his Democrat super-majorities? Now came the most telling 22 words of the speech:

I salute the unions–their members and their leaders. You showed what ordinary people can do when they are united and organized.

And there you have Jerry Brown. A union guy through and through. A guy who knows who’s buttering his bread. A guy who knows that big, fat public employee unions equal big, fat Democrat election margins.

Things are looking better in California since I wrote the last word of Crazifornia. Unemployment is down. That’s good; we’re all for less human suffering. And tax revenues are up. That’s certainly one way to close a deficit – not my favorite way, but certainly a way.

Still, sorry Jerry! I’m still singing of our demise. I’ll change my tune when taxes go down and California starts treating businesses like assets instead of asses; when the union grip on Sacramento is loosened and we seriously address the $250-$500 billion shortfall in public employee benefit funding by rewriting contracts and reducing benefits for existing employees; and when we have a governor who kills High Speed Rail and stops trying to single-handedly save the world from climate change.

It’s not too much to ask. But in California it is, to use Brown’s words from earlier today, doing the impossible.

The First Day of the 12 Days of Crazifornia

“On the First Day of Crazifornia, Moonbeam gave to me a tax on millionaires.”

In November, California voters listened to Gov. Brown’s continuous shilling of the tax-hiking Proposition 30 and voted in a new tax on millionaires (and many others) and a new sales tax.

Even before the November election, California had nearly the highest income tax burden in the nation. The old income tax rate of 10.55% for high earners squeaked in just behind Hawaii to be America’s second highest.

Our sales tax rate, 7.25%, was the highest.

And don’t forget our other exorbitant taxes, from what you pay at the pump (the highest gas tax in the nation) to what your employer pays in workers’ comp. One thing California is certainly good at is squeezing every available “revenue” from its residents.

So it came as no surprise that when faced with the carefully engineered choice between laying off teachers and firemen or raising taxes yet again, Californians chose to raise taxes. After all, most voters weren’t raising their income tax rates, only rich peoples’ taxes, to a highest-in-the-nation 13.3% for people making more than a million a year! Prop 30 will also raise taxes on everyone who makes more than $250,000 a year (or what we call middle class in the Tarnished State).

The Prop. 30 increase to the state’s sales tax protects our leadership in that sad stat – pity residents of Los Angeles, San Francisco, Oakland and a handful of other cities that now will suffer a combined state and local sales tax rate of over 9%.

Of course, Prop. 30 called both the income and sale tax hikes “temporary” – we’ll see about that!

Brown optimistically thinks the higher taxes will bring in $9 billion in revenue to the state – or about what it spends annually paying down its debt. But that’s assuming that those Californians faced with a new tax burden – most of whom are job-generators, and none of whom are on the state’s dole – won’t look to move to cheaper states. Like Texas or Nevada, which have no income tax at all. Or maybe Arizona, which set up a program to help California CEOs relocate to the Grand Canyon State just days after Prop 30 passed. As a Christmas present, Brown might as well send a nice new suitcase to California’s wealthy – along with a bill for the tax on it.

Come back tomorrow for the Second Day of Crazifornia!

Brown Wants California to Lead U.S. to New Taxes

Are Californians shooting themselves in the head with Prop. 30?

Despite a continuing economic malaise that keeps his state behind most others in recovering from the recession, California governor Jerry Brown thinks the state is ready to lead the nation again. No, not in being the the envy of the national economy, but into a new era of hefty taxes on the wealthy.

He wants to take his successful ballot measure, Proposition 30, national.

It imposes a series of progressively higher tax increases on individuals in higher income brackets, starting at a jump from 9.3 to 10.3 percent for those making between $250,000 and $299,999 and stepping up to an increase from 10.3 to 13.3 percent for those making over $1 million a year. (If you are one of the “lucky” ones with a $10 million annual income, your state tax bill will go up $300,000 to $1,330,000.) The measure also pumped up the state’s sales tax from 7.25 to 7.75 percent.

Following Prop. 30′s passage by 54/46 margin, backed by $80 million in public employee union contributions, Brown said on CNN’s “State of the Union” program Sunday morning he hoped the vote marked the start of a sweeping national change toward tax increases.

“Revenue means taxes, and certainly those who have been blessed the most, who have disproportionately extracted, by whatever skill, more and more from the national wealth, they’re going to have to share more of that,” Brown told Candy Crowley. (Read more on the comments at the Sacramento Bee.)

A National Model?

Can President Obama and governors in other states look to California’s vote and see an endorsement for hiking taxes on the rich? Perhaps Obama can because he, like Brown, has sequestration to use as a threat. For other states, the election’s tea leaves don’t give much hope to tax hawks.

Everyone but the most honest Progressive commentators agrees with Brown’s statement that deficits are out of control. There’s less agreement, though, on whether “the cutting, the cutting” is out of control. Proposition 30 passed largely because Brown set it up as a counter-measure to what most voters would see as out of control cuts: a $6 billion sequestration-like deficit reduction Brown carefully structured to impact only popular segments of government like education and public safety.

Obama is in a similar catbird seat as the $120 billion looming federal sequestration includes a devastating $60 billion in defense cuts, which most would consider to be out of control cuts – except, again, those Progressive commentators honest enough to say they’re all for stripping America of its military might.

Had Proposition 30 been set up as a counter-measure to $6 billion in cuts to the budgets of anti-business, job-killing regulatory agencies, or $6 billion in cuts to the ever-expanding state payroll and retirement benefits obligations, most would not have thought the cuts to be out of control. The same might be said of hefty cuts to the state’s social welfare spending, which is three times greater per capita than the national average.

Tea Leaves

Without similar sequestration threats, other states are unlikely to succeed in becoming a part of Brown’s vision of California leading the nation towards big tax hikes on the wealthy. After all, other states didn’t share California’s embrace of tax increases this November.

According to a Forbes analysis, only two votes outside California can be seen as an endorsement of giving politicians more money. In Oregon, a phase-out of death taxes was rejected, and in Michigan, a two-thirds vote requirement for tax increases died. But measures reducing states’ tax income overwhelmingly prevailed, with votes on eleven measures going against the tax and spend crowd as proposed new taxes failed and proposed caps on property taxes passed. New Hampshire’s action was the most definitive, with voters approving a constitutional amendment that forbids the state’s Legislature from imposing any new income tax on personal income.

With these results, it seems the odds are with New Hampshire, not California, on which state will be leading the national view on taxes. Californians can only hope that’s true, and that their state will see the light and be a late joiner.

The Crazifornia Propositions Voter Guide

Uglies, Goodies and Don’t Bother Me’s make the Crazifornia Proposition Voter Guide a Must!

When I was interviewed by The Weekly Standard for an upcoming article about this November’s flock of Crazifornia ballot initiatives, that’s how I categorized them: “Five uglies, four goodies and two don’t bother me’s.” (I’m still not sure how to spell that last one!) Coming up with that summary took hours of research, which you can save yourself with The Crazifornia Propositions Voter Guide.

Here are my recommendations, in ballot order, with those in red being the most critical:

Prop 30 – Ugly

It’s hard to even get by the name of this one – Temporary  Taxes to Fund Education, Guaranteed Local Public Safety Funding – without uttering that most common of election season bromides, “How stupid do they think we are?”

This proposition’s position at the top of the ballot is the result of Gov. Jerry Brown’s strong-arming of the system to gain advantage, and that pretty much sums up this initiative. Its advertising campaign is basically strong-arming, too; picture an image of a sweet classroom teacher with a gun to her head and the slogan, “Pay up or the teacher dies!” Brown could have linked passage of his tax  hike to the jobs of bureaucrats, regulators and tax-collectors instead of teachers, but we know how that would turn out.

If Proposition 30 passes, California will have the highest income taxes of all 50 states, and its already secure ranking as the state with the highest sales tax will become more secure.  California spends three times more per capita on social welfare programs than it should, based on national per capita averages. It doesn’t need more revenue, it needs more disciplined spending. Vote NO.

Current Around the Capital Polling Average: Closing steadily at 50.8 yes, 39.9 no. We might still defeat this one!

Prop 31 -  Goodie

If the LA Times is against it, we must be for it. This latest effort from California Forward would create a two-year budget cycle for the state in order to reduce end-of-the-session craziness (I doubt the craziness would disappear, but still like the idea of taking more time with budgeting), require the legislature to find off-setting cuts for any new expenditure of $25 million or more, require performance reviews of all state programs, plus a few other good ideas.

The LA Times doesn’t like it because “it could only be revised by another vote of the people.” Exactly! Leave it to the legislature and they’ll be back to their old tricks in no time.  Vote YES, but note that OC Supervisor John Moorlach, a leader in the fight for fiscal responsibility let me know he’s voting no because it “forecloses on the Laffer curve” by limiting the legislature’s ability to enact tax decreases. Like all things from California Forward, 31 is a mixed bag.

Current Around the Capital Polling Average: About one-third are still undecided so this one could still flip. Yes: 30.7, no 37.8

Prop 32: Goodie

Here’s another run at “paycheck protection” or curtailing the power of unions (and corporations) to mandate paycheck deductions used for campaigning and lobbying. Of course, corporations don’t do mandatory payroll deductions for lobbying, so clarity demands saying that this is an effort to curtail union power.

And it needs to be curtailed if California is every going to gain the fiscal sensibility it must gain to become healthy once again. Public employee unions own Sacramento now, as just the two biggest public union funders of lobbying in Sacramento spend more than the pharmaceutical industry, PG&E, Chevron and ATT&T combined.

The unions are spending really big to stop Prop 32, contributing nearly $60 million thus far. Until Charles Munger responded with a $23 million contribution in support, opponents had outraised supporters five to one. They’re still up by about $13 million.Vote YES

Current Around the Capital Polling Average: A long-running dead heat, with 44.4% yes and 43.8% no.  The 11.5% undecided are going to be barraged with ads from both sides.

Prop 33: Don’t bother me

This is Mercury Insurance CEO George Joseph’s second run at insurance regulation tweaking via the ballot box. Last time around (Prop. 17, 2010), Mercury spent about what they’ve spent this time – $17 million – trying to accomplish the same thing, which is to blah, blah, blah, zzzzz.  I figure they figure they’ll make more than $17 million off higher premiums if it passes.

One reason to vote for it is that Harvey Rosenfield is against it. This is a guy who has milked propositions for millions in personal gain, so I lean toward supporting what he opposes. But this kind of junk shouldn’t be clogging our ballots, so Don’t Vote.

Current Around the Capital Polling Average: Holding at 54.8% yes, 33.6% no.

Prop 34: Ugly

Propositions, as you’ll learn in Chapter 1 of Crazifornia, were the Progressive’s wet dream of the early 1900s. Prop 34 shows why, as it would take capital punishment off the table in California, thereby moving the state closer to Europe.

Arguments fly on both sides of this longstanding and controversial issue, but here’s one that works for me: If the death penalty is no longer in a prosecutor’s bag of tricks, the number of plea bargains and confessions will drop dramatically. Even with delays that are far too long before sentencing and execution, the chance of taking up residence on death row remains the penultimate bargaining chip. I don’t want it taken away, and neither should anyone else who puts victims and justice ahead of criminals and legal technicalities. Vote No.

Current Around the Capital Polling Average: Steady and unbelievably tight at 43.9 yes, 44.9 no.

Prop. 35: Don’t bother me

Don’t bother me, but don’t get me wrong. I’m no fan of human trafficking, a subject I wrote passionately about quite frequently in my Cheat-Seeking Missiles days. It’s the sinful side of the human nature played large and its perpetrators will need Christ’s forgiveness; they’re certainly not getting mine.

But why is it on the ballot? Even the inept California legislature has done enough law-passing to discourage the practice and incarcerate the perpetrators. Since it won’t make any difference in the results, Don’t Vote.

Current Around the Capital Polling Average: Yes 79.7%, no 12.3%.

Prop. 36: Goodie

I was all for the first three-strikes proposition, but it turns out that it had unintended consequences, as so many propositions do. Prop 36 corrects this while keeping the intent of the original proposition intact.

Basically, it separates truly heinous offenders from run of the mill bad guys, with the former still subject to life in prison without parole on their third strike and the others not. California spends way too much on prisons for a lot of reasons, one of which is that we simply have too many prisoners. Let’s save some money by letting some bad but not too bad guys do their crime and serve their time. Vote Yes.

Current Around the Capital Polling Average: Yes 71.5%, no 17.3%. It looks like even Californians can agree on this one.

Prop. 37: Ugly

If California’s recent voting trend holds, Prop. 37 will pass because it has a lot of corporate money against it. Yes, a big majority of Californians are anti-business and it shows on proposition votes (and when rich Republicans run for state office, right Meg?). And this one has a lot of corporate money flooding the opposition.

But the current Around the Capital Polling Average indicates that might not happen this time. The yes vote is strong at 56.2%, but the no vote is climbing at 32.7%, and a lot of money will be spent on NO ads in the next two weeks.

It made my ugly list because Prop. 37 is the new Prop. 65.  In other words, it was written by trial lawyers for trial lawyers. Like 1986′s Prop. 65, it has a seed of a good idea. Then it was that people shouldn’t be exposed to carcinogenic chemicals without knowing it; now it’s that they shouldn’t be exposed to genetically engineered foods without knowing it. But like 65 was an elaborate ploy to funnel millions of dollars to trial lawyers (almost $500 million to date, in fact), so is Prop 37.

Don’t be fooled. Prop 37 is not about informative labels for you. It’s about label regulations that are so complex that farmers, processors, manufacturers and retailers are bound to make mistakes. And when they do, they’ll be sued by a pack of legal mutants. Vote NO.

Prop. 38: Ugly

Prop. 38 is another tax increase, but with this one the money is earmarked for schools. Why, if 1988′s Prop. 98 guarantees they’ll get over 40% of the general fund anyway? And why, since all that money has done nothing to lift our schools out of the cellar?

Well, it turns out the state legislature routinely steals Prop. 98 money from schools and rarely pays it back. In Crazifornia, I put the current IOU at $3.6 billion. Surprised?

But what good would even $3.6 billion do? At a luncheon yesterday, political mastermind Dan  Schnur quoted a Harvard study that found it would take $1 trillion a year to raise California schools to mere mediocrity if nothing is done beyond money to improve the system.

So let’s force the schools and the legislature to fix education by not giving the schools more money. Let’s force Sacramento to drop regulations that cost school districts $400 million a year to keep up with. Let’s let classrooms get bigger again because we’ve learned that all we’ve gotten from small classrooms is more mediocre teachers. Vote NO.

Current Around the Capital Polling Average: Yes 42.1%, No 47.0%

Prop. 39: Ugly

This one will pass for sure because it taxes the other guy, and Californians don’t mind taxing the other guy, as they do regularly with smokers, drinkers and millionaires. (Hm, strange company there!)

Be that as it may, there are two things wrong with Prop. 39 that definitely make it ugly. First, it taxes business. Yes, they’re out of state businesses, but Californians are more addicted to taxing business than smokers are to cigarettes, drinkers are to booze and millionaires are to … success. They’ve hit bottom. It’s time for an intervention, not another hit.

Second, about half the money raised – a stunning $500 million a year – will go to “create energy efficiency and green energy jobs” in California. Haven’t we had enough Solyndras and A123′s? Vote NO.

Current Around the Capital Polling Average: No surprise at 54.2% yes and 30.7% no.

Prop. 40: Goodie

Here’s something more rare than a California gnatcatcher eating an elderberry beetle: A GOP-sponsored proposition that’s polling very favorably. But that may be because it’s just the precursor to the really big vote that will follow.

Prop. 40 would subject the California senate district lines drawn by the California Citizens Redistricting Commission to a vote of the people, with interim boundaries for the next state-wide election set by court-appointed officials. California Democrats smartly and unethically took over the Citizens Redistricting Commission so the boundaries need to be redrawn. This proposition will make that vote possible. Vote YES.

Current Around the Capital Polling Average: 44.2% yes and 25.8% no. It should win, but with 30% undecided, it could still go south.