Food Stamp Junk Food Bans Miss The Real Problem

In the past year, legislation has been introduced in Washington and half a dozen states to further restrict the use of food stamp benefits (renamed SNAP–Supplemental Nutrition Assistance Program–benefits).  Florida is the latest (joining California, Texas, Illinois, Oregon and Vermont), where a bill to ban purchases of “non-staple, unhealthy foods” (whose author cited potato chips, cookies and sodas) with SNAP benefits just passed one committee vote.

Unfortunately, preventing substantial diversions of aid funds from donors’ intended purposes to others that recipients choose is virtually impossible.  Every government transfer program allows resources given for one purpose to have far different effects than intended.  Not just food stamps, but other in-kind transfer programs, cash aid, municipal bond issues, lottery funds for education, humanitarian foreign aid, and more.  In each case, earmarked expenditures replace dollars that would have been spent in the same areas, freeing them to be spent however recipients choose.

SNAP benefits are equivalent to a cash transfer for almost all recipients, because the vast majority would purchase more food than their benefit allotments. The benefits simply replace money recipients would have spent on food anyway, freeing that cash to use as they wish.  That remains true for food purchases that would remain eligible after the new restrictions.  For example, if a low-income family would have spent $300 on “healthy” food and $100 on “junk” food, $150 in SNAP benefits can be used to replace “healthy” purchases that would have been made with cash, and would place no restriction on purchases of “junk,” or anything else, for that matter.  That is, the resources go where the recipients want, not where the latest “reform” tries to dictate.  All that will be added are fights over what is restricted (e.g., diet soda has far fewer calories than orange juice), more complicated rules and higher administrative costs.

The same issue faces other in-kind programs as well, such as housing and winter heating subsidies.  To the extent subsidies replace money that would have spent on those items, earmarked funds are diverted to whatever uses recipients select.  This expands bureaucracies, but does not, in fact, control recipients’ use of funds.

Similar problems haunt bond measures to fund particular government spending programs, as for schools.  Diversions of such funds to uses different than those advertised have been so common that citizen oversight boards are now created (with limited effect) to convince voters of public agency trustworthiness to get bond issues passed.

Other examples include state lotteries promoted to supplement education funds. Politicians, taking into account those additional funds, pare other budgetary support for education. The dollars released are then spent however the state government decides, just as if the lottery proceeds went directly into its general fund.  As professors Patrick Pierce and Don Miller concluded in a study of education funding, “Regardless of the state, the educational spending rate declined once a state lottery went into operation.”

The same sort of diversions can hobble the effectiveness of humanitarian foreign aid.  The aid frees up resources otherwise required to buy such supplies, allowing them to be spent wherever the recipient government chooses.  As a result, much is lost to corruption or converted to other uses, including military spending, often used by recipient governments to terrorize those the aid was intended to help or to threaten neighboring countries.

With so many government assistance programs’ goals dramatically undermined by diverted resources, one wonders why relatively small diversions of SNAP benefits to “junk” food can create headlines, but much larger diversions elsewhere get little notice.  Perhaps only those diversions that become infamous enough to threaten public support are addressed, while many others are ignored, to maintain the illusion that government programs are more effective in achieving their goals than they are in fact.

(Gary Galles is a Professor of Economics at Pepperdine University.)

The Wealth of Our Nation

This week Hillsdale College held a symposium on Adam Smith. Four days of intellectual stimulation and a chance to reflect on the wisdom of what most would call the first economist.

Smith recognized that people coming together to trade among themselves would result in an increase in living standards for all. He noted that the role of government was limited (as was declared by America’s Founders). It’s fitting that Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nationswas published the same year that the Declaration of Independence was signed.

Smith’s other published book, The Theory of Moral Sentiments, is less well known – but it was well read in his time and went through six editions. A powerful work, it lays out his observations of human behavior and an understanding of how and why certain customs lead to greater social harmony. For example, a society in which we can interact with one another peaceably to our own benefit requires a sense of propriety. Smith teaches that traditions are important – and a foundation of conservative thought from Edmund Burke to Russell Kirk.

But “Wealth of Nations” is his most famous work.

“Wealth of Nations” is one of those great books that everyone has heard of but few have read. It was a delight to spend time at Hillsdale with people who had not only read Smith – but had studied him. American would benefit if every legislator read Smith.

The book was an analysis of why parts of the world were mired in abject poverty while Britain enjoyed “opulence.”

“Yet it may be true, perhaps, that the accommodation of an European prince does not always so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king,” notes Smith.

This is an important point for two reasons. First, emerging market capitalism had made the lowest social order in Europe wealthier than the wealthiest of those in societies based on central planning. This is even truer today.

Look at the top 25 percent of countries in the Fraser Institute’s Economic Freedom of the World Index, and you’ll find that the per capita income of the bottom 10 percent is $8,735. Look at the lowest 25 percent and the per capita income of the bottom 10 percent is barely above $1,000.

Secondly, the gap between the richest and poorest in the United States and other market capitalist states is not as large class warriors would have us believe. I tell my students that the difference between their life style and that of Bill Gates is not that great. Like Gates, they live in a house with indoor plumbing and air conditioning (80 percent of all poor households in the US have air conditioning) though his may be bigger. Like Gates, they have a car (three-quarters of all Americas’ poor have their own car) though his may be nicer. Like Gates, they can fly to California though he may have a private jet. Like Gates, they probably eat what he eats, and so on. Basically, they live a similar life.

Now compare their life to someone living in a refugee camp in Somalia. That is a stark contrast. In this time of Occupy Wall Street rage Smith’s observation is worth repeating.

Adam Smith told us what we need in order to achieve this wealth for all, including the “industrious peasant.”

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things,” he wrote.

Our federal government has grown far beyond this to the point where it regulates our daily life from how much water our toilet may flush to what kind of car we may drive. The massive health care and financial regulation bills of the Obama administration do not fit Adam Smith’s prescription for an opulent society. Perhaps in 2012 we will return to the philosophy that brought us the wealth of our nation.

(Dr. Gary L. Wolfram is the William E. Simon Professor in Economics and Public Policy at Hillsdale College. Originally posted on The Detroit News.)

Think Long Comes Up Short: Report calls for higher taxes in CA

California’s ongoing budgetary and political dysfunction has spawned a host of reformers backed by wealthy donors. The latest scheme, released with much fanfare in late November, is a report produced by the Think Long Committee for California and funded by billionaire Nicolas Berggruen. It’s called A Blueprint to Renew California, and it leaves much to be desired.

Most of Think Long’s proposals—the creation of a “citizens’ accountability committee,” additional spending on infrastructure and education, streamlining the environmental-permitting process—are window dressing for the main one: a $10 billion tax increase, imposed through a ballot initiative that would go before voters in 2012. And then, after it gets voters to sign off on the tax hike, the committee (like many in California’s majority party) wants to rein in the voter-initiative process. Berggruen and Think Long believe that the key to renewing California is to raise taxes on almost all Californians. Their plan would make the state’s tax code less progressive by trimming the corporate tax rate and imposing a new sales tax on services. The goal: to provide still more revenue to a state government that’s already bloated and wasteful.

Think Long released its utterly conventional recommendations with a burst of self-congratulation: “At a time when political leaders in both Sacramento and Washington seem hopelessly mired in gridlock, the committee has shown that difficult bipartisan compromise can be reached if politics is set aside and the public interest is put first.” These words might be more persuasive if Think Long weren’t composed of so many politicians who wielded power during the period when California’s budgetary problems became unmanageable. The committee’s members include former governor Gray Davis, bounced from office in the 2003 recall election; former assembly speakers Bob Hertzberg of Los Angeles and Willie Brown of San Francisco; and former state supreme court chief justice Ron George. Other advisors include former governor Arnold Schwarzenegger, current lieutenant governor Gavin Newsom, and Los Angeles mayor Antonio Villaraigosa. Most of these are poster children for what’s wrong with California; they are an unlikely group of saviors.

The report ignores the Golden State’s real problems: excessive government spending and dominance by public-sector unions and other special interests. The closest that Think Long comes to acknowledging them is three perfunctory paragraphs at the report’s end, which cite the pension crisis crushing municipal governments and offer this solution: “We recommend that the governor, legislature and local government officials make it the highest priority to work with public employee unions to find ways to address the long-term costs of pensions and the unfunded liabilities that have already been built up.” That’s as far as it goes.

Nothing in the report comes close to articulating major reforms that would help the state stretch its dollars. For instance, the nonpartisan Legislative Analyst’s Office recently reported that the cost of incarcerating inmates in California has more than doubled over the past decade, the result not only of court decisions regarding inmates’ health care but also of escalating compensation costs for correctional officers. A braver committee would have considered prison privatization or constraining the influence of the noxious California Correctional Peace Officers’ Association, which resists even modest reforms and holds outsize influence over both parties.

Even soft-pedaling, Think Long provoked the ire of the California Teachers Association. The CTA resents the committee’s proposal to junk Proposition 98—which directs 40 percent of the state’s budget to education from kindergarten through community college—even though the report goes on to propose an extra $5 billion for the schools from other sources.

Every would-be reformer knows that something is wrong with California’s budget and political process. But most have tended to be left of center and have offered ceremonial, symbolic reforms that don’t get to the heart of the state’s problems. Think Long is the latest example, and its “blueprint,” like the work of its many predecessors, is likely to be soon forgotten.

(Steven Greenhut is director of the Pacific Research Institute’s Journalism Center, editor in chief of CalWatchdog.com, and a columnist for the Orange County Register. This story was first posted on City Journal.)

CA Budget Crisis May Torpedo Tax Increase Initiative

State Controller John shocked California legislators when he sent a letter announcing that the State will run out of cash on March 8th without the legislature agreeing to allow the State Treasurer to delay $2.4 billion in payments to universities, counties and Medi-Cal, plus borrowing another $3.3 billion from Wall Street bankers.

The Controller’s announcement comes just two weeks after California Gov. Jerry Brown gave his State of the State speech to the combines Legislature, then immediately hit the road in a two- day campaign swing through Southern California to tout his November ballot initiative to raise taxes on all Californians. At a stop with 50 of Orange County’s top business leaders and CEOs, the Governor outlined how he was already making severe budget cuts, reorganizing state government, and implementing a 12-point pension reform plan. Brown said he offered these actions as credibility before asking business to support his November tax initiative. The Governor added that he welcomed California’s future population growth and assured his audience that the State’s future is bright. Brown reiterated his support for the nation’s first high- speed rail system and for expeditious completion of the environmental review on a proposed project to fix the state’s water delivery system that has devastated Central California farmers.

California lawmakers had been assured by the Brown Administration’s Department of Finance that the State had sufficient cash reserves through the end of the State’s June 30th fiscal year. But Controller Chaing warned that for the first six months of the fiscal year state tax revenues came in at $2.6 billion below budget and spending came in at $2.6 billion over budget. The Controller’s announcement came on the same day that the Assembly budget committee approved and sent to the floor legislation already approved by the State Senate that would supposedly fund the State until the end of the year by empowering the Treasurer to borrow $865 million from other segregated California Trust funds.

Controller Chaing warned that the State would be unable to make timely payments to vendors and other governmental agencies of at least $730 million beginning on March 8th and would be short billions of dollars more through at least April 13th. Furthermore, Chaing warned the State needed to restore at least a $2.5 billion reserve to handle the timing of large payments through the end of June. Although the Sacramento Bee quoted Democratic Assemblyman Bob Blumenfield of Woodland Hills that the $5.4 billion shortfall was small relative to the $10 billion state leaders were prepared to borrow last year, Republicans questioned the ability of the state pay back the accounts. The Bee reported that Michael Cohen, chief deputy director of Brown’s Department of Finance, said the state would pay back special funds whenever programs need the money to operate. Cohen also said the state is spending more money than expected because courts have blocked some cuts, while some savings may come later in the fiscal year than forecasters predicted.

This new budget crisis comes at a very difficult time for the Governor after he travelled the state selling his tax initiative as necessary to prevent draconian funding cuts to popular K-12 schools. Early polling had indicated support was growing for the initiative. But if voters learn the November initiative if passed would only fund this year’s budget losses and still result in draconian cuts to schools, support for the tax increase may collapse.

(Chriss Street is a financial writer and speaker, and is author of the book, “The Third Way.”  Visit his blog for more information.)

Teacher’s Union Victimizes Our Kids for Sake of Money and Power

In perhaps the most in-depth study on the subject to date, three Ivy League economists studied how much the quality of individual teachers matters to their students over the long term. The paper, by Raj Chetty and John N. Friedman of Harvard and Jonah E. Rockoff of Columbia, tracked 2.5 million students over 20 years, and using a value added approach, found that teachers who help students raise their standardized test scores have a lasting positive effect on those students’ lives beyond academics, including lower teenage-pregnancy rates, greater college matriculation and higher adult earnings. (The authors of the study define “value added” as the average test-score gain for a teacher’s students “…adjusted for differences across classrooms in student characteristics such as prior scores.”)

The only caveat from the authors is that using test scores in teachers’ evaluations could lead to “teaching to the test or cheating.” Nothing new here. Some people, when involved in any kind of competition, will try to gain unfair advantage or cheat outright. Typically, it’s a small part of the population and those who do should lose their jobs and face criminal charges.

The lesson is clear: test scores can give us a great deal of information about who the really good teachers are. But California Governor Jerry Brown, unfazed by the blockbuster study, actually called for less testing in his recent State of the State address.

No, Governor. In fact, we need more testing. In California, English and math are tested yearly starting in second grade. But history and science are tested only every few years. Tests should be given in the four core areas every year. As a former American history teacher, I could never figure out why there was no 6th or 7th grade history test. Why wait for grade 8 and throw in a few questions from the 6th and 7th grade curriculum? Never made any sense to me.

Senior Director of Education Studies at the Pacific Research Lance Izumi wrote in the Orange County Register last week,

“Brown’s education agenda contains a mishmash of proposals, some of which are steps backward and some that are mildly positive. On the clearly negative end, the governor, who has never been a fan of student testing, wants to reduce the number of tests and increase so-called ‘qualitative assessments.’ Trouble is, the reason tests are important is because they offer objective quantifiable data to measure student progress and the effect of teachers and schools on learning.”

While Jerry Brown’s call for less testing is wrongheaded, it isn’t surprising. Testing as a tool of assessing student progress has been around since Day 1, but using student test scores as a measure of teacher effectiveness has caused a backlash in some quarters. There is subset of teachers who laments that there is “more to teaching than just test scores.” And of course they are right, to a point, but they take their case to an extreme and dismiss testing completely. The ringleaders of the anti-testing zealots are the teachers unions, and their agenda has nothing to do with kids or their education. The California Teachers Association, by far the biggest political spender in the state, is about power and ensuring that the disastrous status quo is not disturbed.

Actually, teachers unions operate under the early 20th Century industrial mentality which stipulates that everyone can stick a widget on a car equally as well. Therefore, all widget stickers are equally good and all widget stickers should make the same amount of money. Substitute education for widget,teachers for widget stickers and students for cars, and you fully understand the teachers union model. Once this antiquated notion is truly grasped, the unions may find themselves in trouble, forced to acknowledge that some teachers are better than others, and that some are so bad that they shouldn’t be in the classroom at all. Once that is accepted as truth, better teachers might demand to be paid more than mediocre ones. And the good ones may not be so compliant if they’re the ones who get laid off instead of an inferior teacher who has been on the job longer. Thus, the whole concept of teachers as interchangeable industrial workers starts to unravel. And what could be worse for a group whose main lot in life is to keep acquiring buckets of money and enormous power being exposed as pushing a model that never should have been applied to the teaching profession in the first place?

The good news is that much of the rest of the country is catching on. Teacher quality has become a major topic of discussion with educators, the media and politicians of late. From Oklahoma to New York to Louisiana to New Jersey, states are getting serious about teacher evaluation, all using the results of standardized test scores as a significant part of the equation.

Good teachers matter a lot, and bad teachers can ruin a child’s future. Test scores are very helpful in identifying those teachers and value added methods are good ways to analyze test scores. But California, essentially governed by CTA, their bought-and-paid-for legislature and their man in the governor’s mansion will be the last state to do anything meaningful in this area. That means that one-tenth of the country’s children will continue to be victimized by a cartel that cares a lot about money and power and not a whit about them.

(Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network. This article was first posted on Union Watch.)

Democrats Fail to Govern California

Governor Jerry Brown and the Democrats in the state legislature are failing to responsibly govern California. State Controller John Chiang said earlier this week that California would need “additional cash management solutions” because state tax revenues are $2.6 billion less than what Governor Jerry Brown and the Democrats assumed in their slapdash budget last year.

This by no means is a surprise.

In November 2010, California voters passed Proposition 25, an amendment to the California Constitution which allows for a simple majority to pass the state’s budget. With that, and the re-election of Brown, the Democrats assumed complete control over California’s budget.  As they say, with great power comes great responsibility. So far, the Democrats have proven themselves incapable of handling the responsibility of a simple majority budget.

California’s impending insolvency is just more fallout from Governor Brown and the Democrats exercising their new powers. The Democrats currently control both the executive and legislative branches of government, but are having some serious trouble managing this on their own.  Instead of trying to engage Republican leaders for ideas, the Democrats simply insist on having only one point of conversation: taxes. Raising taxes on already struggling Californians seems to be the Democrats idea of cooperation.

What’s more interesting is that last week, the Democratic  Speaker of the House John Perez and Senate President Darrell Steinberg sued to block withholding of lawmakers’ paychecks, the people’s recourse for holding lawmakers accountable in return for granting the majority party their simply majority budget power. This week, the Democrats are demonstrating why that lawsuit is so important to them. Contrary to what they would have you believe, the Democrats are only concerned about their pay, and clearly not with the state’s ability to provide services to those who truly need them.

If they were truly concerned, they wouldn’t have put together the “smoke and mirrors” budget that they did last summer – the budget was filled with many political solutions, but nothing to restore confidence in the economy.

So thus far the priorities of the Democrats have been:

  1. Taxes Increases
  2. High Speed Rail
  3. Green Jobs

None of these are priorities for Californians, yet the Democrats continue to insist on them. Californians are beginning to expect this from the Democratic leadership – instead of using their power to bring real reform to California, they’ve decided to pursue their own agenda. I imagine that this November will be a real wake-up call for the Democrats, when they realize that Californians have moved on from supporting the Democrats and their “more-taxes-solves” everything approach to governing California.

(Tom Del Beccaro is the Chairman of the California Republican Party. This story was first posted on Fox & Hounds.)

California Redevelopment Agencies Begin Defaulting

Public officials are scrambling in the wake of the Supreme Court’s decision in California Redevelopment Agency vs. Matosantos to react to their loss of tax-increment financed redevelopment, which served as their piggy-bank under the Community Redevelopment Law for the past 65 years. The California State Legislature and their crony capitalist allies will desperately try to resurrect new tax and economic incentives to reclaim their ability to interfere in the California real estate markets. But barring any last minute emergency legislation, many redevelopment agencies will go into financial distress and be forced to hammer-sale huge amounts of depressed California real estate to avoid default.

Redevelopment agencies have incurred debt to finance “improvements” to private properties in their districts. The primary source financing has been $31 billion of tax-allocation bonds. These bonds were issued to finance property improvements and are to be repaid from hoped for increases from property tax collection if the improvements increase the assessed valuation of the properties. Local cities and counties often provide the start-up capital before bonds are issued.

Given the speculative nature of real estate development, prospectus for redevelopment bonds were loaded with risk factors; including decline in the value of real estate, failure of the project to generate increased tax increment, and changes in California state law. Given also that cities and counties generally dominate and control the redevelopment districts, local politicians would appear to have substantial liability regarding the activities of the districts. Unfortunately, all three risk factors identified in the prospectus have now occurred.

According to Seth Merewitz, Municipal & Redevelopment Law partner at Best Best & Krieger:

“If redevelopment is not reinstated in some fashion by the legislature, then the successor agencies will be charged with meeting enforceable obligations entered into by the redevelopment agency as well as performing many other wind down functions. Moreover, the successor agencies will begin the process of selling off all of the commercial, industrial, residential and even vacant land assets currently held by redevelopment agencies across California. This inventory of property for sale throughout the state will present vast opportunities for investors to

pick up real estate assets and trigger future economic development or add more real estate inventory to a flooded and depressed market.”

Many redevelopment districts now fantasize they can enter into Public-Private Partnerships to maintain their unfinished projects. The concept is that the skills and assets of public and private sector can be shared to deliver facilities for the use of the general public. Unfortunately, crony developers usually acquired properties in redevelopment districts with small down payments and relied on the district to sell unsecured tax-free bonds at interest rates of 4-5% to finance 100% of their property improvements. If the projects succeed, developers made huge profits and the bondholders got paid in full. But if projects failed, developers simply turned the properties over to their secured lender, thus leaving the unsecured bondholders and the district at huge risk.

Once upon a time, banks were willing to take the huge risks in financing development “deals”, but those days are over! The few banks still willing to finance commercial developments demand the property owner have 55% equity , pay 12% interest rates, plus 3-5% points in fees.

State Controller’s office stated the Supreme Court’s decision will generate $1 billion in additional taxes in the next budget year and increasing amounts in subsequent years. Redevelopment agencies have on average leveraged $1 in tax increment revenue into $18 of indebtedness. Redevelopment agencies owe $31 billion in bond debt and another $9 billion directly to the cities and counties that sponsored the districts. Consequently, with the loss of $1 billion in property tax revenue, the state-wide leverage of redevelopment agencies just doubled.

Panic of default is already beginning to build for many redevelopment agencies. Their local city and county sponsors are probably trying to incentivize developers to rescue “orphaned projects” with expedited permit processing, pre-entitled land, and major increases in density. But with bond payments due every six months, hammer-sale property liquidations may soon begin.

(Chriss Street is a financial writer and speaker, and is author of the book, “The Third Way.”  Visit his blog for more information.)

Democrat Super Control of State Senate Means More Taxes Likely

Many of the news stories that reported on the California Supreme Court’s decision to keep the proposed state senate districts as drawn by the Citizens Redistricting Commission in place for 2012 — even though a pending referendum against them likely will qualify for the ballot — focused on the Democrats ability to secure two-thirds of the senate so that they can pass tax increases. This decision and the tax issue will surely alter the rhetoric of state senate campaigns.

A candidate’s view on taxation will be the central issue in swing senate districts. Even though the chatter is that Democratic leaders are looking for a way to raise taxes, don’t expect Democratic candidates to put on their campaign placards: Vote for Jane Smith, She’ll Raise Your Taxes.

Despite mixed results in recent polls, voters are not jumping for joy over the chance to pay more taxes. Debate over the candidates’ position of taxes will highlight many senate campaigns.

This is not to say the Democrats suddenly will decide against raising taxes if they have the two-thirds majority. They have given every indication they have been chomping at the bit to do so. However, it might be easier for Democratic legislators to hail tax increases when they know their Republican colleagues will be there to stop those taxes than to actually face their constituents after they vote for tax increases that will take effect.

A newly Democratic controlled senate will vote for taxes from time to time. Especially, if taxes are perceived to fall on someone else – that famous man behind the tree in the ditty, “don’t tax me, don’t tax thee tax the man behind the tree.” In other words, the rich and the business community better watch out.

The Democratic legislators will also feel pressure from the public employee unions who are for tax increases. Remember the public unions that marched to Sacramento a couple of years ago demanding $40 billion in new taxes? Pressure from the public unions for taxes will be put on Democratic candidates with threats of withholding electoral support if they don’t comply.

But those candidates will have to consider the feelings of the general public on taxes, for it is the voters, not the union leaders, who have the politicians’ fate in their hands.

If Democrats secure the two-thirds vote in the state senate and do vote for tax increases or fee increases in the coming years, taxpayers and the business community should consider this a warning shot across their bow if the Assembly ever goes two-thirds Democratic as well. Reconsider a proposal I suggested last year.

Give the people the final check on tax issues by changing the constitution to allow for referendums on tax measures.

(Joel Fox is the Editor of Fox & Hounds and President of the Small Business Action Committee. This story was first posted on Fox & Hounds.)

Dems Vote to Slash School Funding

Anyone involved in state politics would concede that it would be a cold day in hell when Democratic legislators vote to cut school funding, especially to schools in their own districts. But that it exactly what happened on Tuesday.

This week, the Assembly Budget Committee passed SB 81, a fast-tracked bill that supporters say would restore the trigger cuts in the Gov. Jerry Brown’s budget to the Home to School Transportation program. By doing this, legislators reversed a $248 million school bus and transportation cut, and transformed it into a reduction that instead targets cuts in each of the state’s K-12 school districts, more “equitably and evenly.” Or so they say.

The 27-member committee passed SB 81 with a vote of 20-5, with two abstentions; 15 Democrats and five Republicans voted in favor of the cuts. Five other Republicans voted no.

The day before, the Assembly passed AB 1172, by Assemblyman Tony Mendoza, D-Artesia, to make it more difficult for charter schools to be approved by school districts, based on a nebulous definition of “negative fiscal impact” to the district.

It has been a tough two days for California charter schools.

Budget Woes

Last summer, the Legislature passed a majority-vote budget that relied on “trigger” cuts, if by December 2011, revenues were not at the levels that were expected when the budget was enacted.

SB 81 “restores a reduction of $248 million to the HTST program for Fiscal Year (FY) 2011-12 and replaces this with a reduction of $248 million to school district, county office of education and charter school funding,” the bill’s analysis states.

But if the bill was equitable, fair and even, why single out charter schools for the funding reduction?

California’s public charter schools do not receive any of the state’s home-to-school transportation funds. Instead of just taking money back that had been previously allocated to traditional public schools for transportation, this would be just a sizeable budget take-away for the charter schools.

Underfunding Charter Schools

The Legislative Analyst’s Office just released a new report, “Comparing Funding For Charter Schools and Their School District Peers,” and not a moment too soon. The report is two years overdue, according to charter school advocates.

The report found that charter schools have been substantially underfunded compared to traditional public schools. “Completely closing this funding gap in 2012-13 for the roughly 440,000 charter students projected statewide would cost $133 million,” the LAO reported.

Add this new cost onto the disproportionate cuts charter schools have faced since 2008, and it appears that there are many lawmakers who don’t want charters around.

Charter schools are funded at a base year rate, with 2008 as the base. But many charter schools were either not in existence, or very new in that year. Jed Wallace, CEO for the California Charter Schools Association, said this can cost charters as much as $1,000 per student in state funding.

“On top of that reality, charter schools are blocked from borrowing the same tax revenue notes as traditional public schools,” Wallace explained. “They borrow at a 1-2 percent rate. We have to go to capital markets and pay 15-20 percent interest.”

Supporters and Opponents

Assemblyman Brian Nestande, R-Palm Desert, asked that a representative from Gov. Jerry Brown’s office comment on the bill, which reverses one of the trigger cuts in Brown’s budget. “The governor is okay with the current version of the bill,” reported Michael Cohen with the Department of Finance.

“I am frustrated with a lot of other members,” Nestande said to the committee. “This is not a new issue. Some districts are getting disproportionately hit. It should have been addressed previously and was not.”

Nestande said after the hearing that while the state has to fix this problem with the budget we have, charter schools are deliberately short-changed.

The governor proposed creation of a new block grant funding program for K-12 schools, from which schools could choose to have bus service if they need it. Nestande said that the governor’s proposal would allow school districts manage their own affairs, including transportation needs. Some school districts have serious transportation issues, and others do not.

“It’s a catastrophic problem in my district and in many other rural parts of California,” said Assemblyman Wesley Chesbro, D-Arcata. “Garberville students have no other options for going to school. And there are no public transportation systems. For some parents, it would be three-hours to and from school,” Chesbro added.

“There are 770 square miles, and one high school,” said Dr. Paul Stanton, Superintendant of the Humbolt Unified School District. “And there are no sidewalks.” Several officials from the Humbolt School District traveled six hours in school buses to attend the hearing, along with many Humbolt area school children.

Supporters of SB 81

SB 81 had many union supporters at the hearing, including the California Teachers Association, the Los Angeles Unified School District, State Superintendant of Schools Tom Torlakson, the California School Boards Association, the California School Transportation Officials and the California Labor Federation.

While the transportation cut would hit some rural districts disproportionately hard, Torlakson has not actively addressed this issue.

“Enough was enough,” Torlakson said in response to Brown’s announcement of the elimination of home-to-school transportation. “It’s a sad day for California.”

‘Taking hundreds of millions of dollars from our schools — on top of the $18 billion in cuts they have already suffered — will only make life harder for students in California’s chronically underfunded schools,” said Torlakson in December, when it became clear that the state budget trigger cuts would go into effect.

Torlakson had a representative at the hearing on Tuesday, but she merely stated his support for the bill.

Undermining Charter Schools

Public charter schools have never been fully funded by the state, and do not receive all of the block grant funds that the state’s traditional public schools receive. The LAO report confirms this.

With passage of SB 81, instead of cutting bus service, an across-the-board cut of $42 per student would take place for all public school students.

But charter schools are ineligible for bus money and are inequitably funded by the state. Charter schools would also be cut $42 per student, adding to the $301 per-pupil shortfall charter schools already have.

“The wheels of the bus are falling off the majority vote budget we just passed. We had other options of where to spend the money in the budget,” said Diane Harkey, R-Dana Point. ”The districts I represent, I called virtually all of the superintendents from the larger districts, and not one of them comes out a winner. This will go on and on. And the only reason is, we’re out of money.”

Assemblyman Bill Berryhill, R-Ceres, said his district will also be hit hard. He said, “We have enough money to do anything we want, just not everything. It’s a matter of priority.”

(Katy Grimes is CalWatchdog’s news reporter. Grimes is a longtime political analyst, writer and journalist. This article was first posted on CalWatchdog.)

Brown wants CA businesses to pay tribute to his Tax Initiative

Brown isn’t so much insurance commissioner as he is in the business of selling insurance. To understand this, realize that a major oil company, casino Indian tribes and health care providers have all contributed to Jerry Brown’s campaign to raise taxes on Californians, taxes that will hit average folks especially hard.

Why would Occidental Petroleum, Native American gambling interests and the California Hospital Association, among others, support making a bad situation – California already ranks at or near the top in almost every tax category – even worse? Certainly these savvy businesses are aware of the damage done to our state economy by high taxes and crushing regulations, which has just been confirmed in a report by the Washington, D.C.-based Tax Foundation that shows California ranking 47th out of 50 as a place to do business.

To support his budget that will spend seven percent more this year than last, the governor plans to increase income taxes on those making more than $250,000 along with a half-cent hike in the sales tax. A review of Brown’s initiative by the non-partisan Legislative Analyst shows that the bulk of the new taxes will come from the highly regressive sales tax. State Senator Rod Wright summed up the problem graphically, “If somebody makes $10,000 a year or somebody makes $300,000 a year, the sales tax on toilet paper is the same.”

The motive of those businesses siding with Brown becomes more apparent when their relationship with state government is examined more closely. The tribes have shown a tendency to make nice with those in power. Slot machines have proven to be cash cows and agreements with the state determine the number of slot machines the casinos are able to offer to gamblers. When new agreements are discussed, it wouldn’t hurt to be able to call in a chit with the governor.

It is even more clear as to why health care interests, including Blue Shield of California, would want to be on the governor’s list of friends. State government has significant regulatory oversight of both hospitals and health insurance companies. For some service providers, the state is a major client and it is the state that controls how much hospitals are reimbursed for care provided to the uninsured on an emergency basis. Although to citizen taxpayers, their actions may look shortsighted, perhaps for hospital and insurance company executives, helping the governor achieve his goals seems like a good insurance policy.

The advantage to a major oil company from helping the governor raise taxes may seem less obvious. However, several efforts are pending, including one by former President Pro Tem of the Senate and current chairman of the California Democratic Party, John Burton, that would saddle oil firms with an oil extraction tax. If you are a company looking to head off higher taxes on your business, contributing to the pet project of the man who wields the veto pen probably looks like a good investment. A few hundred thousand dollars today could head off millions of dollars in taxes later.

For average Californians who are unfamiliar with the nasty business of politics, know this: Governor Brown is feverishly working the phones to line up even more businesses to literally pay tribute, in cash, to his tax increase effort. But it also appears that most businesses have had enough and are standing up to the Governor’s political shakedown apparatus.

As John Kabateck, President of the National Federation of Independent Business and I stated in a recent open letter to state business leaders, “It is difficult to understand why, given California’s heavy tax burden any private sector entity doing business in California would support even higher taxes.”

We called upon the business community to do the right thing for all Californians who are anxiously awaiting relief – any relief – from the terrible tax-and-spend policies in Sacramento. We hope that business leaders and their organizations will step up to the plate for the good of all hardworking Californians, and help hold the line on taxes.

(Jon Coupal is president of the Howard Jarvis Taxpayers Association -– California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights. This story was first posted on HJTA.)