What taxpayers should know about the California budget

BudgetCalifornia voters are pretty good at figuring out what is going in the state capital when it hits them directly. For example, recent polling shows that citizen awareness of the $5.2 billion annual gas and car tax is very high and, incidentally, very negative.

But the same can’t be said when it comes to the more complicated and arcane actions of our state politicians such as the annual California state budget process. While Californians are painfully aware that taxes are very high (they’ve been watching their friends and neighbors moving out of state at record pace) they typically have little comprehension of where their tax dollars go. That’s not surprising since California ranks dead last in budget transparency according to a recent study by U.S. News & World Report.

Nonetheless, here are the main takeaways that every California taxpayer should know.

First, the budget is huge – over $125 billion in general fund spending – by far the largest budget in California history. Since the recovery began after the great recession, taxpayers have infused California’s General Fund with $41 billion and special funds by $28 billion. That translates into a 63 percent increase since 2010. And property owners have done their part as well. With real estate values fully recovered (and then some) property tax revenues are up 72 percent. This is where our schools get the lion’s share of their money.

Second, the budget is only balanced if you ignore debt. The majority party is practically breaking their arms trying to pat themselves on the back for a “balanced budget.” This is like a family celebrating the fact that they paid all their bills this month but ignoring the fact that they have a mortgage that is way beyond their means over the long term. California’s pension debt is, by some measurements, close to a trillion dollars.

Third, the budget is, as usual, full of tricks and questionable accounting. One of the more dubious ploys involves borrowing from special funds. This year, there’s a proposal to borrow $6 billion (with a “b”) from the state’s Surplus Money Investment Fund to reduce the unfunded liability of the state’s pension fund, PERS. While there is agreement that appropriating more money to PERS now helps to reduce unfunded liability in the future, that payment should come from current revenue, not a special account designed to cover ongoing operating expenses.  Let’s call this for what it is: Paying your Visa bill with your MasterCard.

The budget is being praised for adding a couple billion more to the state’s rainy day fund (technically called the Budget Stabilization Account) bringing it to over $8.4 billion. But recall during the last recession, the budget shortfall was many times that amount. Thus, while it seems like a lot of money, the state’s reserve funds remain woefully inadequate. You can’t save a penny a day for a couple of years and think it will be enough to fix the roof when it collapses.

Other trickery includes several dozen so-called “trailer bills.” These are supposed to be budget related bills – many are not – that can pass with a simple majority vote and are not subject to citizen referendum. Because they can be jammed through on short notice without citizen recourse, they are a favorite tool of the majority party to effectuate big policy changes. Two examples of this are the gutting of the California Board of Equalization – one of the few state tax agencies in America actually accountable to voters – and a blatantly political power grab by changing the law as it relates to recall elections designed solely to throw a lifeline to a tax-and-spend democrat who cast the deciding vote on the gas and car tax hike.

Bottom line? The majority party has adopted laws and policies which will unquestionably push state spending permanently higher by expanding programs, increasing welfare costs and giving their political funders – labor unions – higher compensation via costly collective bargaining agreements. Our elected leadership is driving California right off the cliff.  Thelma & Louise would be proud.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This piece was originally published by the Orange County Register 

Recall effort stymied by Sacramento

Members of the California Legislature apparently believe they have the power to change outcomes they don’t like. This is like awarding the NBA Championship to Cleveland by retroactively mandating that all of Golden State’s three point baskets be counted as only two.

While basketball is not on the minds of lawmakers, they are working to interfere with something of much greater value to average Californians, their constitutional right to recall elected officials. The Sacramento politicians think they have found a way to derail what appears to be a successful grassroots effort to recall state Sen. Josh Newman, who cast a key vote imposing a new $5.2 billion annual gas and car tax on already overburdened taxpayers.

The power of recall is a powerful tool of direct democracy. The secretary of state’s website says, “Recall is the power of the voters to remove elected officials before their terms expire. It has been a fundamental part of our governmental system since 1911 and has been used by voters to express their dissatisfaction with their elected representatives.”

In the 29th Senate District, covering parts of Orange, Los Angeles and San Bernardino counties, voters have been busy exercising their right to recall their tax-raising representative Josh Newman. Much to the surprise of Sacramento insiders, it looks like the campaign will succeed in gathering enough signatures to force the senator to be held accountable in a special election — already the secretary of state has instructed county registrars to begin counting the signatures. The chance that the recall of one of their own will be successful has lawmakers panicking. Their solution is to surreptitiously change the recall rules that have been in place for over a century.

500px-Capitol_Building_MG_1600_Sans_watermarkWith little notice, the Legislature amended Senate Bill 96, as it was about to pass in connection with the state budget on June 15, for the purpose of changing the rules governing the current recall effort. The purpose of the bill is shamelessly transparent: “It is the Legislature’s intent that the changes made by this act in the Elections Code apply retroactively to recalls that are pending at any stage at the time of the act’s enactment… .”

Their end game is delay. They want to delay the ultimate vote on ousting Newman for as long as possible, despite the constitutional guarantee to have the vote as quickly as possible — between 60 days and 180 days from the recall petitions having been certified.

Here’s how they do it: First, they try to delay the petition review process by requiring the county Registrars of Voters to check the validity of every signature submitted. Normally, the registrars are permitted to check a random sample of the signatures, saving both time and money.

Second, and more disturbing, is the provision buried deep in the text that states, “Notwithstanding any other law, the Secretary of State shall not certify the sufficiency of the signatures [on the recall petitions] until the Legislative Joint Budget Committee has 30 days to review and comment on the estimate [of recall costs] submitted by the Department of Finance.”

Here’s the kicker. The Department of Finance is part of the governor’s office and the bill does not require the governor’s office to prepare that analysis under any time limit. Gov. Brown, who has already come out against the recall, can simply delay that report indefinitely, which, in turn, would hold up certification of the recall effort and the ultimate election.

Perhaps it should come as no surprise that those in power in Sacramento will stop at nothing to retain their power and influence, putting their own interests ahead of those of average Californians. But lawmakers who disrespect voters should be wary. Polls show that nearly 60 percent of Californians oppose the new gas tax. The higher taxes will kick in just before the beginning of next year’s election season. Voters are very likely to remember who is responsible and choose to retire multiple representatives, not just a single senator, in the regularly scheduled 2018 election.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This piece was originally published by the Orange County Register

The California caste system

Caste system IndiaAfter the Legislature imposed billions of dollars in new car and gas taxes on Californians last month, a friend emailed me to register his disappointment and disgust: “It’s like we live in an apartheid society where the politically powerful live in luxury and laugh at the working people of our state.”

Sadly, his point is accurate. The separation between the ruling class and the rest of Californians is becoming more extreme by the day. So much so, in fact, that California is beginning to resemble a society based on a caste system, meaning a formal structure of social stratification (usually associated with India) deriving from the hereditary division of the population into the highest caste (Brahmins) and various castes below.

California’s high cast Brahmins reside primarily in coastal enclaves including the San Francisco Bay Area, Santa Barbara, Malibu and the west side of Los Angeles but they are also numerous in the Silicon Valley and Hollywood. These elites tend to be high income or wealthy and can afford to separate themselves from the trials and tribulations suffered by average citizens. This immunity from “real world” problems allows them to obsess about issues like bathroom access, climate change or the president’s hair. They lack respect or compassion for less fortunate citizens and, if truth be known, they find those outside their caste to be annoying.

And a gas tax? This tax to them is nothing when they can avoid paying it by plugging in their $120,000, taxpayer subsidized Teslas. And if their cars do run on gas, they never even bother to check the price. These are folks who wouldn’t be caught dead in a Walmart.

Next in the caste hierarchy are the politicians and members of government employee unions. While the Brahmans may help to elect the politicians, as do the unions, this second tier caste is much less secure because they still have to scrounge for financial advantage. The unions — representing the highest compensated state and local workers in all 50 states — are constantly seeking more pay and benefits. And because the politicians are constantly trying to consolidate and expand their influence, they establish a symbiotic relationship with the unions to keep campaign contributions rolling in that guarantee reelection. (Some electeds, who have spent years living off the taxpayers’ dime, genuinely fear they may not be qualified for work in the private sector and so will do almost anything to keep a grip on power.)

These politicians will parrot the concerns of the Brahmins about matters like the environment, but they do not have a committed belief system. They trip all over themselves in their rush to make environmental law exceptions for projects like stadiums that are backed by wealthy interests or unions in a position to secure or advance the politicians’ careers.

The next rank on the scale of who’s who in California are the non-working poor. While the upper classes do not want to rub elbows with them, they are regarded as useful because their votes can be purchased through extensive entitlement programs that are paid for by the very lowest class.

On the very bottom rung of the stature ladder, the equivalent of the Indian’s “Untouchables,” are working Californians, and the lowest of these workers is anyone who labors at a job that requires perspiration — these are regarded as little more than beasts of burden.

When the elites bother to consider members of the working class, they regard them as a source of tax revenue and little more. Ideally, to their way of thinking, they exist to pay taxes and not make waves.

A massive new gas tax adding to the burden of working Californians? Why it is just the price of being able to share a beautiful state and great weather with their social betters.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

This piece was originally published by the Orange County Register

The reason why California taxes continue to skyrocket

TaxesBefore the ink on the governor’s signature has dried on the largest gas tax increase in California history, Sacramento Democrats are fully intending to break their promise to dedicate the new revenue to fixing our crumbling roads. In the upcoming budget, there is a proposal to divert 30 percent of this gas tax increase to items and programs completely unrelated to repairing our roads and highways, such as park maintenance and job training for felons.

Regrettably, these bait-and-switch tactics are now so commonplace in Sacramento that few notice. For many years, billions in transportation dollars have been diverted from road building and maintenance to the general fund, which has created the crisis we are currently facing. Why would anyone think things will be different now with the new $52 billion car and gas tax hikes?

There are many other examples of lawmakers misleading the public when promoting new taxes. Sacramento sold the recent tobacco tax increase on the November 2016 ballot to voters as a way to fund Medicaid. After the proposition passed, the revenues were simply swept into the general fund and, as a result, doctors and millions of Californians on Medicaid are not receiving the funds which they were anticipating.

Just last week, we witnessed the annual practice of passing 40 “shell” budget bills that are virtually devoid of written content. The blanks will be filled in as the majority party rams through all the deals it makes behind closed doors. Even with the passage of a new constitutional amendment — Proposition 54, discussed below — requiring bills to be in print for 72 hours, the sheer volume of budgetary language makes it difficult for the public and media to truly know how taxpayer dollars are to be spent.

Sacramento may not know how to manage money and prioritize spending, but legislative leaders do know how to dissemble and divert public attention from the reality of the budget process. They prefer to keep average folks in the dark because they know the public would never approve these budget diversions.

Voters clearly stated they prefer transparency and public participation when they approved Proposition 54 last year. The proposition requires that legislation be in print and available for public view for three days before being voted on. Majority lawmakers opposed this reasonable measure because it blocked them from introducing legislation and immediately passing it, without public comment, often in the dead of night. For Sacramento insiders, secrecy and deception are a way of life.

Californians deserve real budget transparency in order to change this broken process and to reform the bait-and-switch culture that has led to a state that has become simply unaffordable. Ultimately, it is middle class and working class families that are harmed the most by the bad policies coming out of Sacramento. Affordability is one of the biggest and most important issues facing this state, but we are moving in the wrong direction because new taxes and fees continue to be imposed in the false belief that more government and higher taxes are the answer.

It should surprise no one that California ranks dead last in the nation on budget transparency. This needs to change if we want the Legislature to change its focus to promoting the wellbeing of average Californians.

Jon Coupal is president of the Howard Jarvis Taxpayers Association. Vince Fong represents California’s 34th State Assembly district, which includes portions of Bakersfield and the communities of Bear Valley Springs, Oildale, Maricopa, Ridgecrest, Taft and Tehachapi.

This piece was originally published by the Orange County Register and the HJTA

Why the recall of Josh Newman is justified

Candidate for the US Senate Josh Newman speaks with supporters at his campaign rally Tuesday at Yardhouse in Brea.  - ADDITIONAL INFO/// - ROD VEAL/CONTRIBUTING PHOTOGRAPHER - 110916.Elex.Senate29 - 11/8/16 -  Candidate for the US Senate Josh Newman hangs out at his campaign rally Tuesday at Yardhouse in Brea.

State Sen. Josh Newman, who has been in office less than six months, is the target of a credible and well organized recall election. The recall effort was instigated by reform and taxpayer interests over the passage of Senate Bill 1 which imposes a permanent $5.2 billion annual tax on gasoline and vehicle registration. That tax increase, never approved by voters, has generated vocal public criticism.

But why Josh Newman? Shouldn’t all legislators who cast a yes vote for this regressive tax on California’s middle class be held accountable? That is arguably true and there may be more recall efforts launched in the near future.

Nonetheless, there are several legitimate reasons why Sen. Newman deserves to be at the top of the list.

Opponents of the recall have suggested that a recall is only justified in cases of gross malfeasance or corruption. While those are certainly good reasons to target a legislator in the middle of a term, they are not exclusive reasons. It wasn’t that long ago when Gov. Gray Davis’ attempt to increase the car tax — one of the very taxes at issue here — led to his successful recall. His opponent, Arnold Schwarzenegger, actually dropped a car from a crane in an illustration of how unpopular the car tax hike was. In short, some actions justify a severe political response.

Second, it is readily apparent that Josh Newman is a bad fit for the Senate district he represents. Yes, he was duly elected, but only by the slimmest of margins. This is a district that should have been relatively easy win for a fiscal conservative. However, as we know from the statewide vote, many voters expressed strong negative feelings for the Republican at the top of the ticket — Donald Trump — and even those Republicans and independents who weren’t thrilled with Hillary Clinton, many still couldn’t bring themselves to vote for Trump. But Donald Trump won’t be on the ballot in a recall election which vastly increases the chances for success.

Third, the 29th Senate District has a large contingent of middle-class voters. Much different from the West Side of Los Angeles or San Francisco, a lot voters in the 29th District have seen their housing costs and other cost of living items increase without a matching increase in their incomes. For them, a huge increase in the gas tax and vehicle registration tax hits the family budget hard. Coastal elites don’t care how much the cost of gas is — most don’t even bother looking at the price — but working Californians do. A recall election will make Newman explain to the voters of his district why he voted against their interests.

Fourth, in addition to sending a message to other tax-happy legislators about the consequences of big middle-class tax hikes, replacing a progressive with a fiscally responsible individual would deprive Democrats of the two-thirds supermajority they need to impose even more tax hikes without voter approval. The California Taxpayers Foundation has calculated that, in the first four months of the new legislative session, progressives have proposed $155 billion in new taxes. Depriving Democrats of the two-thirds supermajority they need to pass tax hikes is more than a legitimate policy objective — it is critical for saving the state from liberal lunacy.

Fifth, the anger among California voters has not subsided from the day Senate Bill 1 was jammed through the legislature. If anything, the more citizens learn about this attack on their pocketbooks, the more incensed they get. Grassroots taxpayer groups have legions of members who are angry drivers reaching for their pitchforks and torches. The Howard Jarvis Taxpayers Association alone has several thousand active members in Senate District 29 and they haven’t been shy about wanting something done and done now.

It would have been preferable for the Legislature as body, and Sen. Newman in particular, to have not imposed a punishing tax hike on California drivers. But they did, so they have only themselves to blame for political retaliation.

Jon Coupal is the president of the Howard Jarvis Taxpayers Association.

This piece was originally published by the Orange County Register

Let localities opt out of sanctuary status

Maria Ortiz, at left, a Mexican immigrant has been living in the United States for 23 years. "I am single. I work so hard to stay. I never needed support from the government," Ortiz said. She is not a citizen and works as a janitor, she said during an immigration protest outside Rep. Ed Royce's office in Brea. ///ADDITIONAL INFORMATION: – MINDY SCHAUER, ORANGE COUNTY REGISTER – Shot 111713 – immig.fast.11.19 Advocates for immigration reform will camp our near the office of Rep. Ed Royce for five days, where they will stage a fast. They are asking OC's Republican leaders in Congress to publicly support an overhaul to the nation's immigration laws, including the so-called pathway to citizenship that would create a process for some 11 million people living in the U.S. illegally the right to become citizens.

Grandstanding California politicians seem intent on outdoing each other in finding new ways to appear to be resisting the policies of our new president. Efforts to ban cooperation by local agencies with the federal government on immigration issues include working to make California a “sanctuary state.”

As prominent elected officials beat their chests in defiance of federal law, they ignore the fact that their actions could jeopardize the wellbeing of millions of Californians who depend on the hundreds of billions of dollars Washington provides our state, the majority of which goes to support vital services to our most vulnerable citizens.

While the governor and the majority of the members of the Legislature seem intent on putting California’s share of federal dollars at risk — sort of like playing Russian roulette only the gun is aimed at the heads of taxpayers and the needy — there is an alternative. Assembly Bill 536 (by this column’s coauthor Assemblywoman Melissa Melendez) would protect the billions of dollars California currently receives in federal funding.

Assembly Bill 536 allows counties to opt out of any state laws that may result in a loss of federal funding. By electing not to implement a state law that jeopardizes funding, counties will then work directly with the federal government to receive the allocations to which they would otherwise be entitled.

While the majority of lawmakers may see themselves as heroically standing up for their principles, they don’t speak for millions of California who depend on federal dollars to help them survive. And they do not speak for taxpayers who do not want to pay new taxes to make up for the mistakes of irresponsible politicians and their misguided laws.

This is not a trivial issue, although one might think so after listening to the Sacramento leadership. Approximately 40 percent of California’s budget is allocated through the federal government. California receives $368 billion in federal funding, or about $9,500 for each Californian. The funding is most prominently used for welfare benefits and retirement pensions; however, the federal government spends money in various capacities in California — from infrastructure upkeep and maintenance, to assisting refugees.

Here are a few examples of what is at stake:

  • California’s Department of Health Care Services received almost $54 billion from the federal government in order to provide health care services to millions of low-income and disabled Californians each and every day.
  • California’s Department of Education receives almost $12 billion from the federal government, which include K-12 and higher education.
  • California’s Department of Social Services, which is responsible for the oversight and administration of programs serving California’s most vulnerable residents, receives $7 billion from the federal government. Those programs include food stamps, child welfare and veteran services to state a few.

Average Californians are desperately in need of sanctuary. They are the ones in need of a “safe space” where they are protected from the frivolous yet dangerous actions of the self-aggrandizing political elite who are gladly putting the welfare of so many at risk. Lawmakers should pass Assembly Bill 536 and allow county boards of supervisors to spare their constituents from a disruption of federal benefits.

Jon Coupal is the president of the Howard Jarvis Taxpayers Association. Melissa Melendez is the Assembly representative for California’s 67th Assembly District.

The hidden costs of gas-tax legislation

gas prices 2For the last three weeks this column has focused on both the policies and politics of the $5.2 billion annual transportation tax increase. In the unlikely event that some have forgotten — or were on another planet — the taxes include a substantial hike in the car tax as well as a 12 cent increase in the gas tax.

However, as one might hear in a low-budget, late-night television ad, “But wait, there’s more!” Specifically, the gas-tax hike which politicians tell us is 12 cents per gallon — which is bad enough — in actuality could be as high as 19 cents gallon. How is that possible?

The explanation is a bit complicated but important to understand. It involves a convoluted process known as the “gas tax swap” passed by the Legislature and implemented by the California Board of Equalization in 2010.

The gas tax swap eliminated the state sales tax on gasoline and replaced it with what was supposed to be a revenue-neutral per-gallon excise tax. This made it more legally defensible for the state to repay Proposition 1B transportation bond debt when California was in the midst of recession. The BOE was tasked with adjusting the numbers every year in a “backward looking” process so that California would collect no more revenue from the excise tax than it would have collected from the sales tax had it not been eliminated.

But here’s the kicker: The tax hike just jammed through the Legislature in less than one week by Senate Bill 1 contains a provision that, beginning in July of 2019, adjusts the base excise tax to what it was in July 2010 when the gas tax swap started. Currently, the excise tax on gas is 27.8 cents a gallon. But in July of 2010 it was 35.3 cents a gallon. So as it stands right now, that’s a seven cents per gallon increase, on top of the new 12 cents per gallon tax.

To read the entire column, please click here.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

More sleight of hand with gas tax hikes

gas prices 2If Gov. Brown and members of the California Legislature think that the backlash against the car and gas tax increases will subside any time soon, they are mistaken. The controversy continues to dominate both traditional and social media and, in fact, the more that taxpayers learn about these transportation tax hikes the angrier they get.

Our political elites are learning that taxes on cars and gasoline remain very unpopular because they fall disproportionately on the working Californians — which is where the majority of voters reside. And the resentment might only grow when the taxes actually kick. Just wait until the bills from the DMV start showing up in the mail starting in January of next year and the gas tax increase starts even earlier in November of this year.

There are times when Californians are simply resigned to pay higher taxes imposed by Sacramento, but this might not be one of those times. Many are calling for a referendum of the tax hikes only to be disappointed with the news that, under the California Constitution, a tax increase can’t be repealed via a referendum. Nonetheless, it is possible that the tax package can be rolled back via an initiative and some groups are pondering that course of action. Other interests want more immediate action and are openly discussing recall efforts against some legislators who supported the tax package. …

To read the entire column, please click here.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

Sacramento Failing to Account for Predictable Changes

Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

What is it with progressive politicians who believe that taxpayers won’t change their behavior because of tax policy? One would think that repeatedly seeing pie-in-the-sky revenue projections from big tax hikes that fall way short of reality would be a wake-up call.

In trying to project the impact of tax hikes on government revenues, the failure to account for predictable changes in behavior is called “static scoring.” And since many progressives mindlessly hew to this method of analysis, let’s call it “static cling.”

Static scoring is different from “dynamic scoring.” Dynamic scoring simply means taking into account predictable changes in behavior that result from tax increases (or tax cuts) to accurately project the amount of money that will be raised.

To read the entire column, please click here.

Proposition 13 is the original victim of ‘fake news’

prop 13As Proposition 13 approaches its 39th birthday, it is still subject to the same dishonest attacks in the media that were used against it when it was on the ballot in 1978. Proposition 13 was one of the first victims of “fake news.”

“The bigwigs in labor and business went all out to defeat 13,” said its principle author, Howard Jarvis. “They tried to outdo one another in issuing doomsday prophecies about what passage of 13 would mean.” The media slavishly supported the exaggerated and dishonest claims, often endorsing them through editorials and by giving prominent placement to negative stories on the tax revolt.

The politicians, including Gov. Jerry Brown, and government agencies from top to bottom weighed in. Here is a typical example: Before the election, Alameda County Transit told the public that passage of Prop. 13 would result in the termination of 80 percent of its 2,000 employees. Two months later, the Fremont-Newark Argus reported on the aftermath of the passage of Proposition 13, “To date, no one in the district has been laid off and officials now believe there will be no massive layoffs.” The paper added that three local fire districts that anticipated losing one-half to three-fourths of its staff, had not lost a single firefighter to Prop. 13.

To read the entire column, please click here.