Laffer: California’s High-Tax, Big-Government Comedown

Arthur Laffer, creator of the now famous “Laffer Curve” understands California. He spent many years here, trying to let folks understand the bigger the government, the higher the taxes, the less stability for the economy. Years ago he decided he did not want to give Sacramento 10% of his income. So he moved his home and business to Tennessee—low taxes, no income taxes. When he speaks, business people listen.

“The California Teachers Association union is the state’s largest political contributor, having spent $212 million in state races over the past decade on both candidates and propositions. This is more than twice the next-largest political contributor, also a state government employee union.

Public employee unions have had state politics locked down for so long that almost every public employee, past or present, judge or contractor, has benefited directly or indirectly from their actions. And to state the obvious, every opponent of theirs has been punished.”

California has a $10 billion cash deficit, a $340 billion debt. Our confused Guv believes with these numbers he has a balanced budget and a surplus. That is why legislative Democrats beg for more taxes and more government—they do not trust families or businesses. Any wonder productive people and firms are rushing out of the former Golden State?

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California’s High-Tax, Big-Government Comedown

By ARTHUR B. LAFFER, Investors Business Daily, 5/8/14

Anyone who has ever watched Animal Planet should be familiar with migrations. Geese do it, wildebeests and whales do it, turtles do it and, yes, people do it too. To migrate is a natural phenomenon.

What’s interesting about most migrations is their purposes are generally positive: sex, food, sun and other such motivations. “The grass is always greener” is what they say.

For humans and, to a lesser extent, animals, a number of migrations also occur for negative reasons: famine, war, pestilence and, yes, taxes without corresponding benefits.

Population outmigration can be a key marker for a disturbed society with deeply rooted policy flaws. It’s a far better sign of a state’s health to have people lined up on its borders trying to get in than it is to have people lined up on its borders trying to get out.

Over the past 165 years, California has grown at an average annual compound rate of 3.8%. But in recent times it has morphed from being America’s (if not the world’s) greatest people attractor to being a massive population and jobs repellent (see actual population in blue on the chart above).

And there really is no end or solution in sight. If it weren’t for net immigration (people who move from another country to California), California would be a mere shadow of its present size (the population from 1960 on without net immigration is shown in red).

Post-War Boom

To set the stage for the story of today’s California, you should be aware that after World War II, Gov. Earl Warren cut California’s highest marginal income tax rate from an astronomical 15% to 6%, where it remained for well over a decade. He also cut the state’s sales tax rate.

In the chart on Page A15, I have plotted California’s population growth relative to the U.S. from 1959 to the present. I have also plotted California’s net domestic in-migration (people who move from state to state) as well.

My choice of 1959 is far from arbitrary. That was the year when Edmund G. (Pat) Brown became governor of California. It was also a year of enormous tax increases in California — no mere coincidence.

As governor in 1965, Brown even proposed raising California’s highest personal income tax rate back up to 15%. But he withdrew that proposal when tax revenues exceeded projections.

After eight years of calamitous government, Ronald Reagan took the helm in 1967 and showed that he too could raise taxes with the best of them, culminating in his 1972 increases on corporate income and sales.

Think of it: From 1958 through 1974, the highest personal income-tax rate in California went from 6% to 11% and the highest corporate tax rate from 5.5% to 9%. Even the sales tax rate went from 4% to 6%.

And these increases were merely the tip of the tax-increase iceberg. California’s population growth went from a 2% premium over U.S. growth to zero in a decade and a half.

‘Son Of Brown’

In 1974, California opted for the sequel to Gov. Brown-the-elder: “Son of Brown,” starring Edmund G. (Jerry) Brown. But the storyline was radically different for the son than it was for the father.

From 1975 through 1982, taxes were lowered. California and Gov. Brown-the-younger were on a roll. Property tax rates were cut and constitutionally limited (June 1978), government spending limits were set (November 1979), the death tax was removed (June 1982) and income taxes were indexed for inflation (1978-79 legislation).

And California boomed as never before. After the passage of Proposition 13 and other tax cuts, the population during the 1980s grew by more than 6.1 million people. Put another way, California imported, net, almost a full San Francisco each and every year and a little more than a Massachusetts over the decade. Not too shabby.

But the years that followed weren’t very attractive.

The California Constitution was amended by Proposition 98 (November 1988) to lock in ultra-high government spending on public education.

Proposition 111 (June 1990) raised gasoline, truck and other taxes. But even more importantly, it eliminated the effectiveness of a limit on state and local spending authored by Prop 13 co-author Paul Gann in 1979.

Then, 1991 brought huge, albeit temporary, increases in income and sales taxes.

Even with the expiration of these temporary tax increases in 1996, the state had been dealt a near-fatal wound, and recovery was shallow and slow. Public employee unions were firmly in control.

In 2003 there was an infamous car tax increase that came on the heels of a subsidized electricity scandal. Gov. Gray Davis was recalled, there was a 1% add-on millionaire’s tax and Arnold Schwarzenegger professed his pro-growth vision of “Kahlifornia.”

But the Terminator himself was shamefully terminated after failing to pass even one of four propositions he put on the ballot in 2005, and he switched sides faster than you can say Jack Robinson.

And so far, the second coming of Gov. Jerry Brown has been the polar opposite of his first eight years.

The links between taxes and population growth, however, aren’t the only public-policy “cause and effect” relationships in a state. Public spending also matters — a lot.

People seem to like good schools, safe neighborhoods, good roads and all the other amenities of life provided by state and local governments. And to receive these public services, it’s pretty obvious you’ve also got to have some taxes.

In California, however, high tax rates don’t correspond to better public services. No matter how much they’re taxed, Californians are the recipients of the short end of the public-service stick. It’s a double whammy: They pay more and get less.

About half (54%) of all state and local public employees in the nation are employed in education. In California there are about 228 full-time equivalent education employees per 10,000 of population. The national average of all states is 281. In fact, California has fewer education employees for its size than all but two states (Nevada and Washington state).

According to the Department of Education’s National Assessment of Educational Progress (NAEP) test scores, California’s schools are the fourth-worst in the nation. And fourth- worst is California’s best performance in more than two decades.

If you think California’s poor educational performance has something to do with inadequate funding levels and underpaid educational employees, you’re wrong: Educational employees are paid more in California than educational employees in any state save New Jersey and Minnesota.

California doesn’t fare much better with other essential services. Its highway employees have the highest pay in the nation, 58% more than the national average.

Government Pays

According to the Reason Foundation’s most recent annual ranking of “Overall Highway Performance,” California has the fourth-worst state highway system, which might have something to do with California employing the fourth-fewest highway personnel per 10,000 population of any state.

Police protection? Here too, California police protection employees are payroll winners and California citizens the losers.

The state pays its police protection employees more than any state — 38% more than the national average — and has 11% fewer police protection employees than the national average.

The average California fire protection employee is paid more than $115,000 a year (64% higher than the national average), while the state has the 15th-fewest fire protection employees per 10,000 of population (20% fewer than the national average).

Topping off these “achievements,” California has the nation’s highest poverty rate.

In the eyes of the Law and the Lord, all people are supposed to be equal. But not in the eyes of California’s tax collectors. High-taxable-income Californians are audited and pursued far more than other residents — especially if they attempt to move out of state. They’re the prey, and California’s government is the predator.

Using IRS data for the tax years 1992 to 2009, we are able to track adjusted-gross-income (AGI) migration from state to state by year for the five mega states: Florida, Texas, Illinois, California and New York.

In the table below I’ve listed by state the total number of tax returns moving into that state (a), out of that state (b), and the number of net in returns (in minus out) (c), the average AGI per in return (d), the average AGI per out return (e), the in-return premium over out-return (f), and the state’s net inflow of total AGI (g).

With high taxes and poor public services, is it any wonder why people and money are leaving California? If it weren’t for the heavy-handed tactics of California’s state IRS, a lot more people and money would have been gone.

But government threats and bureaucratic intimidation only harden people’s resolve to leave. And leave they will. While the state’s economy may wax and wane, California is in a death spiral.

Why am I so pessimistic? Can’t the same democracy that voted these people into office take them right out again? I wish the answer were yes, but it’s not.

Union Control

The California Teachers Association union is the state’s largest political contributor, having spent $212 million in state races over the past decade on both candidates and propositions. This is more than twice the next-largest political contributor, also a state government employee union.

Public employee unions have had state politics locked down for so long that almost every public employee, past or present, judge or contractor, has benefited directly or indirectly from their actions. And to state the obvious, every opponent of theirs has been punished.

Finally, it’s these very same people who also draw the political redistricting boundaries for federal, state and local political races.

Democratic Gov. Davis and the Democratic-controlled state Assembly and Senate redistricted California after the 2000 Census. Including the elections in 2000, there have been 560 regularly scheduled Assembly elections between 2000 and 2012.

After the election of 2000, the Democrats controlled the Assembly 50 to 30. In 2002 the Republicans picked up two out of 80 seats.

For the next six years there wasn’t a single seat that changed hands. In the Obama sweep of 2008, the Democrats picked up four seats and the Republicans picked up one, leaving the Democrats in charge 51 to 29.

In the election of 2010, the Democrats picked up one more seat, giving them a 52 to 28 majority. But after the redistricting of 2011, the Democrats extended their majority to 55-25 in the election of 2012.

It’s hard to imagine how the people of California can ever win when amoral politicians set the rules to perpetuate themselves, force state employees to pay dues that are then used for political purposes, appoint their own judges, pay off their supporters, punish their opponents and hire ringers to fight their fights. We need a miracle.

• Laffer is chairman of Laffer Associates, was an adviser to President Reagan and is co-author of “An Inquiry into the Nature and Causes of the Wealth of States.”
 

When Will Los Angeles Based DirecTV Move to AT&T Based Dallas?

Toyota left Los Angeles for a suburb of Dallas. Numerous other firms have already gone to the Lone Star State. The value of companies go up by leaving California for Texas, thanks to our high taxes rates and the Texas government refusal to tax incomes or corporations. That adds about 10% to a worker’s paycheck and a company’s bottom line.

In about a year DirecTV, headquartered in the Los Angeles, will have its’ company ownership bought by AT&T, headquartered in Dallas. AT&T will be able to add to the profitability of its acquisition by moving the headquarters and much of its work to Dallas. This will be another example of California policies killing off jobs and revenues—and hope.

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AT&T to acquire DirecTV in a deal valued at nearly $50 billion

Lance Murray, Dallas Business Journal, 5/19/14

Dallas-based AT&T Inc. announced Sunday afternoon that it intends to acquire DirecTV in deal estimated to be about $50 billion in value.

The boards of both companies met Sunday to approve the deal in which AT&T (NYSE: T) AT&T will buy DirecTV in a stock-and-cash transaction for $95 per share based on AT&T’s Friday closing price, AT&T said Sunday. DirecTV shareholders will receive $28.50 per share in cash and $66.50 per share in AT&T stock, AT&T said.

El Segundo, California-based DirecTV is the second leading satellite television providers in the United States and Latin America.

“This is a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes. At the same time, it creates immediate and long-term value for our shareholders,” Randall Stephenson, AT&T Chairman and CEO said in a release. “DIRECTV is the best option for us because they have the premier brand in pay TV, the best content relationships, and a fast-growing Latin American business. DIRECTV is a great fit with AT&T and together we’ll be able to enhance innovation and provide customers new competitive choices for what they want in mobile, video and broadband services. We look forward to welcoming DIRECTV’s talented people to the AT&T family.”

The deal will create a pay television giant with roughly 26 million subscribers, comparable in size to where Comcast will be once it completes its pending $45 billion acquisition of Time Warner Cable.

Once the deal closes, AT&T said it is committed to:

  • 15 million customer locations to get more high-speed broadband competition, mostly in rural locations where AT&T doesn’t provide high-speed broadband service.
  • It will offer stand-along broadband for customers who only want a broadband service and may choose to consume video through an over-the-top (OTT) services such as Netflix or Hulu. AT&T, the combined company will offer stand-alone wireline broadband service at speeds of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.
  • DirecTV’s TV service will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers, AT&T said, no matter where the customer lives, for at least three years after the deal closes.
  • The combined company will continued commitment for three years after closing to the FCC’s Open Internet protections — net neutrality — established in 2010, regardless of of whether the FCC re-establishes those protections for other industry participants following a court of appeals vacating those rules.
  • The deal will not change AT&T’s plans to participate in the FCC’s planned spectrum auctions later this year and in 2015.

Ventura Accused of Stifling Good Samaritans

Government loves monopolies. They prefer to control schools, roads, libraries—then tell the public what they are allowed to do. In this case, a church has created a welfare program for the homeless and the needy in the city of Ventura. Food, clothing and other essential were provided, by private people under the auspices of a church. That is true charity. Now the city of Ventura is showing that Scrooge exists year round, not just at Christmas.
Ventura is trying to stop the church from doing well. Bah humbug!
“The city asked the church to apply for a new permit in 2012, claiming that the previous permit covered worship but not Harbor’s social services for the homeless.
     Since the church had been running the ministry for four years, it claims it was “confused” by the request, but reapplied in early 2013 “in the spirit of cooperation,” and paid the $7,200 application fee.
     Months later, the city Planning Commission denied the permit. The City Council deadlocked after the church appealed, so the Planning Commission decision was allowed to stand.”

250px-Poor_mother_and_children,_California_1936_by_Dorothea_Lange

Ventura Accused of Stifling Good Samaritans

By MATT REYNOLDS, Court House News, 5/19/14

         

 
Forcing the church to close its doors on the homeless violates its religious freedom, the church says.
Some people who live near the church don’t like the outreach program, viewing it as a nuisance in an area that includes a local school and park.
“For me, it’s a matter of safety,” Tracy Strong told the Ventura County Star last year. “My point of view is, safety trumps religion.”
The city asked the church to apply for a new permit in 2012, claiming that the previous permit covered worship but not Harbor’s social services for the homeless.
Since the church had been running the ministry for four years, it claims it was “confused” by the request, but reapplied in early 2013 “in the spirit of cooperation,” and paid the $7,200 application fee.
Months later, the city Planning Commission denied the permit. The City Council deadlocked after the church appealed, so the Planning Commission decision was allowed to stand.
The church was told that it would have to end the program or move, according to the complaint.
“Ministering to the poor, both spiritually and physically, has been and continues to be a central tenet of the church’s doctrine, faith, and practice,” the complaint states. “By forcing Harbor to discontinue its ministry to the poor, the city has substantially burdened the church’s religious exercise without a legally justifiable reason, in violation of RLUIPA [Religious Land Use and Institutionalized Persons Act] and the First Amendment.”
Harbor claims that Ventura “never reached the question of whether the denial was the least restrictive means of furthering a compelling governmental interest.”
The church says it does not have enough money to move. And even if it did, and it decided to move, it could take months to find a new home, secure new permits, and complete renovations or construction work, the lawsuit states.
“In the meantime, Harbor’s congregants need a church. If the church simply shuts its doors, its congregants will have nowhere to go,” the complaint states.
The church seeks declaratory judgment that the permit it has is sufficient for it to run the outreach program.
It is represented by James Sonne of the Stanford Law School Religious Liberty Clinic.
Ventura’s estimated median household income in 2011 was $62,971, according to city-data.com, 10 percent above the statewide median of $57,287.
Its median house or condo value that year was $401,100, about 13 percent higher than the statewide median of $355,600.
It is 52 percent white, 34 percent and Latino and 2 percent African American, according to city-data.

 

Why school choice is a civil rights issue

Being able to eat at any restaurant is a civil rights issue. Being able to travel and sit anywhere, is a civil rights issue. Getting a job, enrolling in a school, getting a job—regardless of color—are all civil rights issues. What is even more important as a civil rights issue is giving children, of any color, the right to a quality education.

I would say those that oppose school choice are like the Southern governors in the 1960’s and 1950’s that stood in the school entrance not allowing black children into a classroom. Bigots come in all sizes and in all era’s. Now we have bigots closing the doors to quality education—mostly led by unions. Children should be first. Allow quality education for all. Stop the special interests control of our government schools.

According to a 2011 study, more than 40% of black students were assigned to schools that are underperforming, and they are much less likely to graduate high school. Among high school graduates in 2010, just 52% of black males and 58% of Hispanic males completed high school in four years, compared to 78% of white males.

That’s why education remains a civil rights issue — the civil rights issue of our time, and it demands action from all of us.”

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Why school choice is a civil rights issue

By Reince Priebus, Op-Ed for CNN, 5/19/14

  This weekend marks the 60th anniversary of the Supreme Court’s decision in Brown v. Board of Education, a unanimous ruling that declared school segregation unconstitutional and affirmed the principle that in America, all children, regardless of their race, should have equal access to a quality education.

Integration, long overdue, did not happen overnight. President Dwight D. Eisenhower had to deploy the 101st Airborne and federalize the Arkansas National Guard to enforce the integration of Little Rock’s Central High School. Nine years after Brown, Alabama’s governor, George Wallace, was still promising “segregation forever” as he blocked the entrance to the University of Alabama.

Thankfully, the days of police physically blocking the school doorway to keep out minority students are behind us. But the fight for equal opportunity in education lives on.

According to a 2011 study, more than 40% of black students were assigned to schools that are underperforming, and they are much less likely to graduate high school. Among high school graduates in 2010, just 52% of black males and 58% of Hispanic males completed high school in four years, compared to 78% of white males.

That’s why education remains a civil rights issue — the civil rights issue of our time, and it demands action from all of us.

Fighting for school choice is one of the ways to take action. For most students today, their neighborhood or zip code determines their school. That means some kids, by no fault of their own, are forced into a failing school. They don’t have a choice.

That’s not equal opportunity, and it’s not fair. No parent wants to see his or her child languish in a bad school. Parents want what’s best for their children, and that’s why Republicans believe they should have the ability to choose the right school for their children. That’s why the Republican Party is the party of school choice.

School choice takes many forms. In some places, it means opening charter schools, which have greater flexibility to adapt to the unique needs of their students. In other places, it means allowing students in one public school to attend a different public school. It means having alternatives like magnet schools and virtual schools and protecting parents’ right to home school. And it can also mean giving students in underperforming schools scholarships to attend a private school.

For example, under the leadership of Gov. Bobby Jindal, Louisiana established the Louisiana Scholarship Program, which gives funds to low-income students to escape underperforming schools and attend a better private school. More than 90% of students using the program are minority students.

In the District of Columbia, a similar program supported by Republicans in Congress is also getting results. It’s also extremely popular among D.C. families. A Department of Education study found that students enrolled in the D.C. Opportunity Scholarship Program had a 91% graduation rate. That’s more than 20 percentage points above the graduation rate for those who didn’t receive a scholarship.

When a D.C. student named Tiffany, who’s now in college, was asked what an Opportunity Scholarship meant for her, she recounted that after applying, “I started praying every day because I didn’t want to go to a neighborhood school.” School choice meets an urgent need — and can be an answer to kids’ prayers.

By empowering parents over bureaucrats, school choice challenges all schools to do better.

When parents can choose among various options for their children, it produces competition. Competition breeds innovation, and that in turn leads all schools to improve and find ways to serve the needs of their students. When Florida enacted a school choice program under Gov. Jeb Bush, schools across the state improved.

Despite its merits, though, there are those who oppose school choice. Some haven’t taken the time to see the profound difference it can make. But too many of them, especially those school choice opponents in elected office, are more concerned about what the special interests want. Groups such as teachers’ unions will go to great lengths to fight school choice. That’s because they’re looking out for adults, not for our kids.

It’s hard to understand why so many in the other party, including the Obama administration, oppose proven school choice programs like those in Louisiana or in the District of Columbia, whether their opposition takes the form of lawsuits, legislation, or misinformation.

Opposition is nothing new. The Milwaukee Parental Choice Program, the first of its kind, has endured legal challenges from those who wanted to maintain the unacceptable status quo. As a lawyer in Wisconsin, I was part of the legal team that defended the program. School choice won in court, but my experience reminds me that we won’t be able to fix our schools without a fight.

That fight happens in cities, state capitals, and Washington. This month, the U.S. House of Representatives, led by Republicans, passed legislation to expand charter school options. Sen. Tim Scott recently introduced the CHOICE Act, and other Republican senators, including Rand Paul, Marco Rubio, Pat Toomey and Lamar Alexander, have offered proposals in the Senate to expand school choice. Hopefully, Democrats in the Senate and the White House will come on board.

School choice doesn’t solve every problem, but it has proven tremendously effective in raising graduation rates and achievement levels for low-income and minority students. It has offered alternatives for students, including those with disabilities, whose needs weren’t met in their local schools.

And by empowering parents over bureaucrats, school choice challenges all schools to do better — helping all of our kids.

We uphold the legacy of Brown best when we continue the work of tearing down barriers to educational opportunity. As former President George W. Bush said recently, “Education in America is no longer legally separate, but it is still not effectively equal.”

Until equal opportunity in education is a reality for all kids — of all races, of all backgrounds, of all abilities — our work isn’t done.

Will Judge Save Stockton Taxpayers From SECOND Bankruptcy?

Stockton is a bankrupt city, in part because of mismanagement and the high cost of the collapsing pension system. While all creditors are taken a massive cut and will be paid pennies on the dollar. But, CalPRS is going to get 100& of what is owed—yet a bond company is being offered $94,000 for $35 million in bonds (not a typo). Worse, the city has decided to make no reforms in the pension system, while paying one hundred cents on the dollar to CalPRS.

Now a judge may be the only official with common sense in this case.

“A federal bankruptcy judge, looking at several options, could rule in the Stockton bankruptcy that pensions can be cut, possibly clarifying whether CalPERS has special protection as an arm of state government.

A judge in the Detroit bankruptcy has already ruled that pensions can be cut like any other contract debt. Ballots mailed to Detroit employees, retirees and bondholders last week would approve negotiated cuts or, if rejected, risk having deeper cuts imposed.”

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Stockton bankruptcy judge looks at pension cuts

Ed Mendel, CalPensions, 5/19/14

A federal bankruptcy judge, looking at several options, could rule in the Stockton bankruptcy that pensions can be cut, possibly clarifying whether CalPERS has special protection as an arm of state government.

A judge in the Detroit bankruptcy has already ruled that pensions can be cut like any other contract debt. Ballots mailed to Detroit employees, retirees and bondholders last week would approve negotiated cuts or, if rejected, risk having deeper cuts imposed.

In a filing this month backing a retiree appeal of Detroit’s eligibility for bankruptcy, CalPERS argued that, unlike the city-run Detroit pension system, its an “arm of the state” operating under state laws protected in municipal bankruptcies.

The CalPERS filing said the court ruling in the Detroit bankruptcy nullifies part of the federal bankruptcy law, section 903, that “expressly preserves a state’s laws governing its creatures not withstanding the filing of a chapter 9 (bankruptcy) petition.”

U.S. Bankruptcy Judge Christopher Klein said last week during a four-day trial on the Stockton plan to exit bankruptcy, continued until June 4, that the pension issue is a “festering sore” for California.

“It’s conceivable I could conclude that (Stockton’s) CalPERS contract could be impaired and the (financial reorganization) plan not be confirmed,” Klein said, according to a report in the Stockton Record newspaper.

“Or I might conclude the CalPERS contract can be impaired, but in this case the decision (by the city) not to do so made sense. Or I could decide CalPERS can’t be impaired because of California law. That’s what’s going on in my brain. This is an opportunity to get to the bottom of it.”

Stockton was forced into a rare exit-plan trial when talks under a court-appointed mediator led to debt-cutting agreements with all major creditors except two Franklin bond funds, who say they would only get $350,000 for a bond debt now worth $37 million.

A turnaround consultant hired by Franklin suggested in a report filed in March that Stockton could fall back into insolvency if the city’s largest debt, “unsustainably high” pension costs, are not reduced in bankruptcy.

Klein said before the trial he wanted to be sure that Stockton would not face a second bankruptcy if growing pension costs are not addressed. He mentioned reports that Vallejo has budget problems after emerging from bankruptcy without touching pensions.

A Wall Street credit-rating agency, Moody’s, said in February that without pension relief Vallejo and the two California cities currently in bankruptcy, Stockton and San Bernardino, are at risk of returning to insolvency.

Vallejo officials said they considered trying to cut pension debt, but did not after CalPERS threatened a costly legal battle. The Stockton plan does not cut pensions, saying they are needed to be competitive in the job market, particularly for police.

The employee share of cuts in the exit plan is staff and pay cuts, lower pensions for new hires under a statewide reform and the elimination of retiree health care, a $544 million long-term debt replaced by a one-time payment of $5 million.

Judge Klein upheld Stockton’s immediate cut in retiree health care after filing for bankruptcy in June 2012, noting that the result may be “tragic hardships for individuals” before claims are addressed in an exit plan.

The judge’s retiree health care ruling cited a part of the federal bankruptcy law, section 904, that prevents the court from interfering with the “governmental powers” and “property or revenues” of the debtor.

In his opening remarks last week, the attorney for Franklin, James Johnston, said the evidence will show that Stockton can pay Franklin even “after paying in full its largest unfunded liability,” pensions expected to take 18.5 percent of the budget by 2019.

Johnston said the Stockton plan has a 15 percent budget reserve, a $2 million contingency fund and available public facility fees. He said the Franklin loan collateral, two golf courses and a park, is worth $15 million not the low value assigned by the city.

Not mentioning Vallejo, the Franklin attorney said the turnaround expert, Charles Moore, would show that the Stockton exit plan to pay pension debt in full is not consistent with the minimal payment of the Franklin debt.

“It’s not a feasibility issue but a fundamental issue of consistency,” Johnston told the court.

Late in the second day of the trial, the judge said he had some questions for the California Public Employees Retirement System. “If I just rubber-stamp plans, I might as well just be a potted plant,” Klein said, the Record reported.

David Lamoureux, CalPERS deputy chief actuary, who had given a deposition but was not scheduled to testify, told the court on the third day about basic CalPERS operations, including how pensions can be cut outside of bankruptcy.

If a CalPERS contract with a local government is terminated, CalPERS calculates the debt or “unfunded liability” that must be paid to cover the pensions promised plan members in the future.

After the payment, CalPERS becomes responsible for the pension debt and cannot get more money from the local government employer if funds fall short as pensions are paid during the life spans of the plan members.

So CalPERS uses a low investment earnings forecast to discount the future debt of terminated plans, 2.98 percent rather than the usual 7.5 percent. If the two Stockton plans were terminated now, CalPERS would ask the city to pay about $1.6 billion.

If a city cannot pay all of the debt owed for a terminated plan, the CalPERS board has the power to evenly cut pensions to an amount that would be covered by what the city was able to pay.

But after the payment has been made and responsibility for the plan shifts from the city to CalPERS, if the terminated pool falls short the funds of all of the state and local government plans in the system could be used to cover the shortfall.

The terminated pool is financially healthy as of June 30, 2012, with members from about 90 small plans and $178 million in assets to cover $84 million in future pension obligations.

Lamoureux said there are two ways a CalPERS plan can be terminated: at the request of the government employer, which takes effect a year later, or by action of CalPERS if plans do not make their required contributions, effective 60 days later.

San Bernardino did not make CalPERS payments for a year, owing $17 million before resuming payments last July. Skipped payments by a big plan may be one reason CalPERS lowered its discount rate for terminated plans from 4.82 percent to 2.98 percent.

Last week CalPERS agreed to delay an August hearing on its appeal of San Bernardino’s eligibility for bankruptcy, saying in a joint filing with the city that the delay is “critical to the success of the ongoing mediation,” the San Bernardino Sun reported.

 

Confused Guv Brown— “Fires related to climate change” Not Arsonist and Bad Management

Rahm Emanuel said “never let a good crisis go to waste”. Our confused Guv Brown is listening to him, carefully. The 20,000 people forced to evacuate due to the San Diego fire would laugh at Jerry Brown claiming climate change is causing our fires—they know it was arsonists. Jerry also forgot that part of the reason we have so many wildfire, besides arson as the cause, is the Federal government does not allow dead trees to be taken down and brush is not allowed to be taken from the forest—so small fires become gigantic.

Maybe if environmentalists stopped “protecting” the forest, the fires would be smaller and easier to contain. Government policies and arsonists are the cause of the fires—plus, of cause nature with lightening, etc. Brown claims he has a balanced budget, while the State has a $340 billion debt and a $10 billion cash deficit. He is the one that needs protection—from himself, very confused.

““As we send billions and billions of tons of heat-trapping gases, we get heat and we get fires and we get what we’re seeing,” the Democratic governor said on ABC’s “This Week.” Major wildfires in the San Diego area, due in part to extreme drought, forced thousands of residents in the area to evacuate.

“Humanity is on a collision course with nature, and we’re just going to have to adapt to it the best we can,” he (Guv Brown) added.”

Wildfire

Jerry Brown: Fires related to climate change

By JONATHAN TOPAZ, Politico, 5/18/14

The Republican Party is “in denial” about climate change, California Gov. Jerry Brown said on Sunday, suggesting the wildfires in his state were related to global warming.

“As we send billions and billions of tons of heat-trapping gases, we get heat and we get fires and we get what we’re seeing,” the Democratic governor said on ABC’s “This Week.” Major wildfires in the San Diego area, due in part to extreme drought, forced thousands of residents in the area to evacuate.

“Humanity is on a collision course with nature, and we’re just going to have to adapt to it the best we can,” he added.

The governor also took a swipe at Republicans for denying climate change, which he said was likely to blame for the increase in wildfires. “It is true that there’s virtually no Republican who accepts the science that virtually is unanimous,” Brown said. “There is no scientific question. There’s just political denial for various reasons best known to those people in denial. But whatever the thoughts of the Republicans, we in California are on the front lines.”

Brown said that the wildfires in California are “under control for the moment,” but the state is in a serious fire season. And host George Stephanopoulos noted that the state has seen twice as many fires already this year than the average over the last five years.

“As the climate changes, this is going to be radically different future than was our historic past,” he added.

Brown touted California as the nation’s leader in climate change, saying the state will continue to make investments to reduce greenhouse gas emissions.

 

 

Corruption or Incompetence Found in Guv Brown Administration?

The man that created the pathway for a hydrogen highway in the State of California formed a company that would develop and build the hydrogen stations. Though he has no experience in this, the firm has never built anything, he still got a $27 million grant from the State. Smells worse that a three day old dead fish.

“Fully 58 percent of the money – $27.5 million – will go to one company if the commission gives its final approval. Action was due May 14, with the commission’s agenda estimating it would need just 10 minutes to dole out the funds.

What’s wrong with that? The company getting all that cash – from vehicle license fees – is FirstElement Fuel, which has never built or managed anything. Its co-president is Dr. Tim Brown, until last Oct. 1 a senior scientist in the Advanced Power and Energy Program at UC Irvine.

While there, Brown was the principal designer of the Energy Commission’s map for placement of hydrogen stations, most to consist of pumps added into existing service stations.”

This is how Obama operates—our confused Guv thinks he is the President.

Photo courtesy of ohad*, flickr

Photo courtesy of ohad*, flickr

Conflict of Interest, Cronyism Dog Hydrogen Highway

Tom Elias, Santa Monica Mirror, 5/18/14

Looking for a new reason to distrust a state government that won’t even expel legislators when they’ve been indicted or convicted?

Then examine $46.5 million in grants announced by the state Energy Commission in early May for building refueling stations to serve the hydrogen-powered cars due to appear on California roads as early as next year. These grants thoroughly pollute the coming hydrogen highway.

Fully 58 percent of the money – $27.5 million – will go to one company if the commission gives its final approval. Action was due May 14 (Editors: say Wednesday here if running this on or before May 20), with the commission’s agenda estimating it would need just 10 minutes to dole out the funds.

What’s wrong with that? The company getting all that cash – from vehicle license fees – is FirstElement Fuel, which has never built or managed anything. Its co-president is Dr. Tim Brown, until last Oct. 1 a senior scientist in the Advanced Power and Energy Program at UC Irvine.

While there, Brown was the principal designer of the Energy Commission’s map for placement of hydrogen stations, most to consist of pumps added into existing service stations. Under a contract with UCI, Brown also trained Energy Commission staffers on how to use the material he developed for the commission. Some of those staffers evaluated grant applications this spring.

If these obvious conflicts of interest aren’t problematic enough, there’s also the fact FirstElement filed a 900-page grant application barely four months after Brown left UCI. It included commitments from more than 20 service stations to allow FirstElement to install hydrogen pumps. Officials of competing companies say it’s unprecedented to recruit so many stations and develop a 900-page proposal in so little time.

About one week after this column revealed in early March that Brown had applied for tens of millions of grant dollars under a system he essentially designed, the Energy Commission requested a written opinion from the state Fair Political Practices Commission on whether Brown was in conflict of interest. In its 40-year history, the Energy Commission never before requested such an opinion.

That opinion emerged as a rubber-stamp document filled with legal sophistry. Example: “Dr. Brown was an employee of UC Irvine while operating under a contract with the Energy Commission. The research and education that the Energy Commission gained during that contract might have informed (his grant application), but we cannot say the contracts are the same or even that one necessarily led into the other,” the FPPC said. Translation: the state’s ethics watchdog says Brown can receive the state money because it can’t prove he drew the map to benefit himself. Even if this was possible.

Of course, the state Supreme Court in 1980 ruled that conflict of interest laws are intended “not only to strike at actual impropriety, but also to strike at the appearance of impropriety.” The FPPC cited this passage, but then paid it no heed. FPPC general counsel Zackery (cq) Morazzini refused to answer questions about the ruling, as did Brown, his attorney and Energy Commission officials.

Then there’s the fact that FirstElement’s proposal exposed the new company as something like a surrogate for the large international commercial fuel firm Air Products and Chemicals, which saw grants of its own pulled back by the Energy Commission after this column in 2012 revealed a pattern of cronyism in that year’s awards.

FirstElement’s proposal says the company is a “consortium of  partners,” with financing from Toyota Motor Sales and all equipment  and hydrogen fuel to come from Air Products, which will also install the pumps. Executives of Air Products and Toyota for years have attended meetings of the California Fuel Cell Partnership (annual dues: $87,000) with Energy Commission staffers. This was part of what led to the earlier allegations of cronyism.

So contrary to the FPPC’s convoluted opinion, the large new grants to Brown and FirstElement reek of conflict of interest and a revival of cronyism.

Which means that if the Energy Commission, as expected, gives final approval to the announced grants, Californians will have a dirty hydrogen highway and one more multi-million-dollar reason to distrust state government.

 

California among worst in the nation in school segregation

In the 1970’s local schools throughout California spent tens of millions of dollars to assure our schools were “integrated”. This, even though we never segregated out students. The lack of diversity was based on where people lived and therefore sent their children to neighborhood schools.

Ever since then the quality of California education massively declined—and the real segregation began. Now, Los Angles schools have 10% white students. Go to Oakland and you have the same. Schools in East Los Angeles are almost entirely Hispanic. Choice of housing by parents, not government decisions created this issue. Yet, the schools get worse because we are so bigoted that liberals believe who you sit next to in a classroom is more important than the quality of the education.

“Even within school districts, racial divides persist. In Oakland Unified, the average Latino child attends a school where 83 percent of the students are black and Latino, compared with the average white child who attends a school where 45 percent of students are black and Latino.”

Walton_High_School_New_Classroom

Housing choices, not government regulations!

Report: California among worst in the nation in school segregation

By Sharon Noguchi, San Jose Mercury News, 5/14/14

As racial separation in education steadily grows, California now leads the nation in children going to school with their own kind, a UCLA study released Wednesday contends.

On the 60th anniversary of the landmark U.S. Supreme Court Brown vs. Board of Education ruling intended to dismantle segregation, the report by UCLA’s Civil Rights Project says that California students are more likely than ever to attend racially isolated schools.

In the Bay Area, most schools followed the same pattern, though were more integrated than schools in Southern California.

The report analyzes data on all the state’s school districts and a few charter schools. It shows segregation both at school and state levels has come to be widely accepted. The average white student in Union Elementary District in San Jose attends classes that are 19 percent black and Latino, while across town the average Latino student in the Alum Rock Union district attends a school that is 82 percent black and Latino.

Even within school districts, racial divides persist. In Oakland Unified, the average Latino child attends a school where 83 percent of the students are black and Latino, compared with the average white child who attends a school where 45 percent of students are black and Latino.

Those results, study co-author Gary Orfield said, are “disappointingly predictable.” But the surprise is the racial separation unfolding in the suburbs, including the South Bay and East Bay. “The sheer scope of the Latino transformation is more than what anybody expected,” Orfield said.

School districts contend that they are indeed battling for equity. San Jose Unified spokeswoman Traci Cook said the district offers choices in enrollment, free busing and magnet schools to lure students out of their neighborhoods, all part of a voluntary integration plan.

But 30 years after the district was sued for segregating Latino students, the average black or Latino student goes to a school that is 69 percent black and Latino, while the average white or Asian student goes to a school that is only 39 percent black and Latino.

Similarly, in Contra Costa County’s Mount Diablo Unified School District, the average Latino student attends a school that is 60 percent black and Latino, while the average white student attend a school that is 30 percent black and Latino.

The most segregated schools are in those communities that are overwhelmingly poor or wealthy. The average West Contra Costa black student attends a school that is 80 percent black or Latino; the average Hillsborough white student attends a school that is 92 percent white and Asian.

The highest incidence of segregation is in Los Angeles and the Inland Empire, according to the report. Some of the most integrated schools are in the Fresno and Sacramento areas. Locally, the most integrated districts include Newark, Milpitas, San Mateo Union High and Castro Valley.

Statewide, by the report’s measures, Latinos and African-Americans are among the most racially isolated in the nation, which the report says “calls into question the state’s racially progressive image.”

The average black student in California attends a school that is 82 percent students of color. The average Latino student attends a school that is 84 percent students of color. While historically Texas was more segregated than California, the report says the Golden State has moved backward faster. In fact, 7.3 percent of California’s 10,000 schools are 99 percent nonwhite.

Overwhelmingly, low-income students are concentrated in schools with black and Latino students.

The risk of such separation, the report warns, is that Latinos, the fastest growing segment of California’s population, attend schools of poorer quality and fewer opportunities, and have the least success in higher education. The report warns that when “the group with the most severe educational problems replaces the groups that have greater educational success, the pattern of schooling deserves and demands urgent attention.”

The UCLA report contrasts today with just 20 years ago when no racial or ethnic group attended schools of overwhelming poverty, and all schools had substantial middle-class enrollment.

Among remedies the authors suggest are coordinating housing and education policy, improving teacher training in diversity, collaborating regionally and across districts, placing the strongest teachers with the most needy students and giving students from segregated schools priority in college admission.

But overall the report’s tone is dismal. Noting that California lacks initiatives or even discussion of the goals of Brown vs. Board, the report says, “Segregation is again being accepted as normal, and its spread into suburbia is not being addressed, although people are leaving communities because of it.”

Riverside Property Owners Forced to Pay Property Tax on Government Mandated Habitat Land

Imagine being told you have to give your land to “habitat”—determined by government and environmentalists. Oh, you get not a dime for your land, you may not use it. But, YOU must pay property taxes on the land you are not allowed to use!

“The agency faces pressure from people whose property has been targeted for eventual acquisition and who want to sell now, at the same time the agency is juggling depressed funding and higher-priority land purchases.

Several landowners are using a rule in the Western Riverside County Regional Conservation Authority’s bylaws to force the agency to buy their land. The property was identified as wildlife habitat in a 2003 conservation plan, a blueprint to establish a wildlife reserve system for 146 protected plants and animals, including several endangered species.

The property owners say the habitat designation prevents their property from being developed, and they must still pay annual property taxes.”

Another unintended consequence, part of the reason California is in a Depression. CEQA, AB 32, “habitat”, high taxes—Texas looks better every day to California firms and families.

http://www.dreamstime.com/-image18514272

Habitat protection falters as land owners push back

Ten years into a plan to protect wildlife and foster development, sagging funds and property owner demands lead to conflict

BY DAVID DANELSKI, Press Enterprise, 5/18/14

THE HABITAT PLAN

Under federal and state permits, the Western Riverside County Multiple Species Habitat Plan allows development and road work in habitat areas when other land can be acquired for a wildlife reserve system.

History: Approved by Riverside County and 14 cities in the western part of the county in 2003 and became effective a year later.

How it works: Habitat suitable for the reserve system is identified in the plan. The Western Riverside County Regional Conservation Authority is governed by a board with representatives of the county and 18 cities. The agency buys habitat and manages the reserve system. Land where development is planned is given priority.

Funding: Developer fees, grants and donations.

A decade ago, Riverside County and 14 cities set up a regional conservation agency to acquire and protect wildlife habitat and remove red tape for developers who want to build in the western part of the county.

The setup became a model for local governments in California and elsewhere in the nation.

But some say the mission is in jeopardy. The agency faces pressure from people whose property has been targeted for eventual acquisition and who want to sell now, at the same time the agency is juggling depressed funding and higher-priority land purchases.

Several landowners are using a rule in the Western Riverside County Regional Conservation Authority’s bylaws to force the agency to buy their land. The property was identified as wildlife habitat in a 2003 conservation plan, a blueprint to establish a wildlife reserve system for 146 protected plants and animals, including several endangered species.

The property owners say the habitat designation prevents their property from being developed, and they must still pay annual property taxes.

Grace Kaelin is among five people who have owned 25 acres off of Florida Avenue in Hemet for more than 30 years. The land was targeted for eventual acquisition for the reserve system.

“Either buy us out or let us go, and if you don’t have the funding, leave town,” Kaelin testified at the agency’s April 7 board meeting. “We are still paying taxes. We are still clearing weeds.”

In most cases, the conservation agency seeks to buy wildlife habitat when development plans are in the works that would destroy it.

Kaelin is among a handful of owners who have invoked a rarely used rule that compels the agency buy land where no development plans are on file.

On top of that, a lawsuit settlement compels the agency to purchase 47.6 acres, also in Hemet, from a San Diego partnership for nearly $6 million. The deal will consume about two-thirds of the agency’s annual revenue from developer fees, its primary source of funds.

Dan Silver, executive director of the Endangered Habitats League, described the situation as an unsustainable run on the agency’s limited funds and a threat to its mission.

“They are forcing the authority to buy land that is more remote and that is not under the threat of development,” said Silver, who has followed the habitat plan since its inception and is a member of an agency advisory panel.

“They are forcing it to spend … unwisely and not strategically,” he said.

Scott Miller, a San Jacinto councilman and chairman of the agency’s board, said the controversy reflects financial stress that no one anticipated before the Great Recession.

Developers pay the conservation agency fees and, in exchange, the agency can endorse projects that otherwise would have to undergo review by state and federal wildlife authorities, an often lengthy process.

 

Gov. Jerry Brown’s teacher pension plan falls short

Our very confused Guv Brown has a “plan” to save CalSTRS, the teacher’s retirement plan. Currently, over $4 billion a year is going into the system—now he wants to add another $5 billion for a few years, then pay off the total unfunded liability over a thirty year period. Imagine the massive interest costs on this idea. Instead of reform, kicking a very expensive can down the road.

Plus, the teachers will have to pay significantly more—that translates into a pay cut. Maybe that is why the San Fran teacher’s union is demanding a 15% (not a typo) pay increase. In the end, the students will pay, along with the taxpayers, for this failure of Guv Brown to be an adult and fix the program.

“Brown now wants to start paying down the debt this year. But he would stretch the installments until 2046, meaning it would take 32 years to restore full funding and that the debt would continue growing for the first 12 years.

That’s not fiscally responsible; it’s merely less irresponsible than what lawmakers do now. Some legislators don’t get it. Senate President Pro Tem Darrell Steinberg, D-Sacramento, on Wednesday suggested lengthening — not shortening — the repayment period.”

pension debt

Daniel Borenstein: Gov. Jerry Brown’s teacher pension plan falls short

By Daniel Borenstein, Bay Area news Group, 5/17/14

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Teachers who now pay 8 percent of their earnings toward their pensions would face a phased increase to 10.25 percent by fiscal year 2017. School districts, currently paying 8.25 percent of payroll to pensions, would ratchet up to 19.1 percent by 2021. And the state share would increase from 3 percent to 6.3 percent by 2017.