Why Not Sustainability in a Spending Limit?

Last week, Gov. Jerry Brown delivered the keynote address at a sustainability summit hosted by the Los Angeles Business Council. While the summit focused on California’s environmental, energy and water policy, we have to wonder whether the governor will exert the same effort in support of fiscal sustainability now that he has called a special session to deal with California’s spending limit.

While a rainy day fund measure has been slated for every ballot since 2010, it has been repeatedly moved back by the majority in the Legislature who fear it would prevent them from spending every last nickel when revenue to state government expands. Brown wants to tinker with the language, and to his credit, move forward to allow the voters to have the final say.

Unfortunately, most of those who push for tax and budget reform are big government advocates focused exclusively on the sustainability of government, its workforce and the vast array of special interests that thrive off taxpayers’ dollars. Those on the government team tend to look to reforms that would stabilize and even expand revenue in tough economic times, meaning they would continue to suck vast amounts from the private sector at a time when taxpayers can least afford it. Among their proposals are taxing services — placing new burdens on very small businesses — and eliminating Proposition 13 limits on property tax bills. They see that under Proposition 13, property taxes are the most reliable source of revenue in good times and bad — when values decline, because of residual value, tax payments do not — they illogically assume they can allow taxes to fluctuate with the market, and maintain the same stability in revenue.

What is needed to protect both the ability of government to provide essential services and the wellbeing of taxpayers, is a return to an effective spending limit. During the 1980s California had the Gann Spending Limit but it was weakened to a point of irrelevancy by subsequent initiatives sponsored by powerful education and transportation interests who chafed under the constitutional provisions that limited their freewheeling spending agenda.

Of course, the very notion of a spending limit grates on those who believe they have a presumptive right to the earnings of citizens and the private business sector. And this is exactly why a spending cap is such a necessity.

When talking about spending caps, we must make sure that the cap is the real deal and not just some stand-alone “rainy day” fund
riddled with loopholes. A real spending limit must accomplish what the name directs: limit the growth in the rate of government spending. That rate, of course,should be adjusted for population and inflation, but what should be the metrics for each? Should population growth adjustments be dependent on raw census figures or, for school spending, should the population be enrollment? For inflation, is CPI an adequate measure, or is some hybrid warranted?

The short answer is that there is more than one way to establish a growth factor that will be effective. What must be avoided at all costs is a growth factor that ratchets only in an upward direction, effectively nullifying the structural limitation. But if we impose a hard cap, should overrides be allowed with a supermajority vote of the Legislature? In a word, no. Overrides must be temporary and voter approved. If overrides by the Legislature are permitted with a supermajority vote say, for emergencies, they should be required to be paid back.

For California taxpayers, an acceptable spending limit would, among other things, allow a portion of excess revenue to be spent on infrastructure and debt repayment in addition, of course, to rebates to the taxpayers via adjustments in the sales rate.

So let’s focus on “sustainability” for all, including taxpayers, not just those who profit from unrestricted government spending.

(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. Originally published on HJTA.)

CA Vies with other States’ Film Tax Credits

The marjimmy-fallon-tonight-show-hed-2014ket for movie and television production is now an incentive-laden free-for-all. Faced with fierce competition from statehouses around the country, two California assemblymen have introduced a new bill upping the stakes in the tax credit arms race.

Assembly Bill 1839 has been introduced by Raul Bocanegra, D-Pacoima, and Mike Gatto, D-Burbank. The bill offers enlarged tax breaks to the big-budget productions that lawmakers from Los Angeles to Sacramento want to see back in California.

Back in 2009, then-Gov. Arnold Schwarzenegger won support for the $100 million-a-year credit program still in place today. Now, however, funds have run out. Tallying up the economic productivity boosted since then,  Bocanegra and Gatto say AB1839 should extend California’s industry tax credit to 2022. Some 270 projects under the current law yielded $4.75 billion and 51,000 new jobs, mostly high-paying, the assemblymen told the Los Angeles Times.

Fifty-nine legislators have co-sponsored AB1839, prepared to quadruple the $100 million annual credits that current law provides.

In Los Angeles, the effort has the strong backing of Mayor Eric Garcetti. “Film Czar” Kenneth Ziffren, head of the city’s Entertainment Industry and Production Office, talked up the benefits of the bill when it passed out of committee by a unanimous bipartisan vote.

According to the Hollywood Reporter, however, the state Senate lacks the Assembly’s unbridled enthusiasm for AB1839, and Gov. Jerry Brown remains noncommittal, although he has signed incentive bills in the past. So far, the governor’s office has expressed optimism, but little more.

Bidding war

Despite the bill’s strong support among industry figures and top Los Angeles officials, critics say studios are now simply exploiting a bidding war among states convinced their productions are worth the tax gift. “Regional on-location film production” has actually risen this year in California, but production dependency on tax credit has increased, too.

Meanwhile, other cities lavish credits on productions they say pump up the local economy. New York City’s “Filming is Good for NYC” campaign is estimated by city officials to funnel some $400 million from film production into the municipal economy.

The New York initiative has played a powerful role in pulling big-ticket programs away from Hollywood. Today, top brands and shows across the spectrum haven’t hesitated to follow the money.

When Jay Leno was replaced with Jimmy Fallon on “The Tonight Show,” for instance, it relocated from Los Angeles to New York City for a cool $20 million in tax incentives. Garcetti is now fighting against New York Gov. Andrew Cuomo for the favor of CBS’ “Late Show,” which could move to Los Angeles now that Stephen Colbert will take over from longtime host David Letterman.

Foreign competition

Los Angeles doesn’t just face competition from other American cities. Foreign countries have even gotten in on the act. The United Kingdom measured gains equivalent to $368 million after its tax credit package was expanded last April from feature films to high-end television shows like “Game of Thrones.” Kiefer Sutherland’s “24″ series is getting a London reboot thanks to the package.

California could once count on the economic benefits of the powerhouse entertainment industries. Over the past several decades, that’s changed dramatically. Sensing an opportunity, legislators in states ranging from Louisiana to Minnesota to Maryland to New York created a new way to attract production companies, films and television shows.

The idea was simple: pay them.

Rather than shelling out money up front, states offered tax incentives. The size and significance of these benefits have increased steadily over the years, and California’s entertainment industry has contracted apace. By one estimate, 16,000 jobs have been lost over the past decade.

Still, there are signs that the nationwide effort to poach Hollywood talent has hit a peak. Maryland’s tax credit negotiations over “House of Cards” dragged on for months, with some lawmakers angrily portraying the impasse as an attempted extortion. In Florida, that state’s $300 million incentive package is drawing fire for a new mandate requiring counties to help foot the bill.

With California just beginning to regain its budgetary footing, however, the political jockeying surrounding AB1839 is set only to intensify.

(James Poulos is a contributor to CalWatchdog. Originally published on CalWatchdog.)

Post Racial Society

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CA Politicians Fighting Over Spending Cap-and-Trade Money

From The Sacramento Bee:

We humans crave free money – which explains why we buy so many lottery tickets despite infinitesimal chances of winning. Politicians are no different.

Free money?

There is, of course, no such thing, but politicians consider money borrowed via bonds, federal aid and money from fees “free” because they can spend funds as they wish without directly tapping constituents’ wallets. So it means free of voter backlash.

Photo courtesy of jglazer75, flickr

Photo courtesy of jglazer75, flickr

Obama Economy Crushing The Middle Class

From The Daily Caller:

Nearly half of the new jobs created since 2008 are low-wage jobs, while 80 percent of the jobs destroyed in the government-inflated real-estate bubble were high-wage or medium-wage jobs, according to a new report by the National Employment Law Project.

In effect, almost 2 million well-paid middle-class jobs have been converted into low-wage blue-collar jobs since January 2008, through the five years of President Barack Obama’s economy, according to the report, titled “The Low-Wage Recovery: Industry Employment and Wages Four Years into the Recovery.”

(Read Full Article)

Barack Obama

Mitt Romney, Pete Wilson Endorse Neel Kashkari

From The Sacramento Bee:

Former California Gov. Pete Wilson and former Massachusetts Gov. Mitt Romney, the 2012 Republican presidential nominee, have endorsedNeel Kashkari in California’s gubernatorial race, the Kashkari campaign announced Monday.

The endorsements come with Kashkari, a former U.S. Treasury Department official, lagging in public opinion polls.



Harry Reid Slates Minimum Wage Vote

From Politico:

Senate Majority Leader Harry Reid on Monday set up a long-shot Wednesday vote on a proposal to raise the minimum wage to $10.10 an hour.

Senate Democrats will need 60 votes to open debate on the legislation written by Sen. Tom Harkin (D-Iowa) to gradually increase the wage and eventually peg it to inflation — a level of support that appears unattainable.

(Read Full Article)


California Key to Raising Graduation Rate

From The Sacramento Bee:

The high school graduation rate in the United States will not increase as quickly as experts think it can without more improvement in California, which educates one-fifth of the nation’s low-income school children and more Hispanic students than any other state, a report set to be released Monday concludes.

The “Building a Grad Nation” report, produced by a coalition of advocacy groups and researchers at Johns Hopkins University, credits the nation’s most populous and diverse state with developing effective strategies that helped push its 2012 graduation rate to 79 percent, an increase of five percentage points from two years earlier and one point below the national average.

(Read Full Article)

graduation college debt

Rick Santorum’s Winning Strategy

From The Daily Caller:

In 2012, Republicans were dead wrong about President Obama. With unemployment over 8 percent and the long-delayed economic recovery nowhere in sight, they assumed that he would lose to anyone they nominated. Obama had promised “hope and change,” but he had provided no hope, and the change was all for the worse. Even the liberal mainstream media expected that “anybody but Obama” would win in November.

Yet the president cruised to re-election. The critical swing voters — blue collar Americans from industrial and rural communities with generally conservative values — swung for Obama or stayed home. The people hurt most by the president’s disastrous policies chose him over Mitt Romney.

In the post-election polling, one amazing fact jumped out: Those who voted for a candidate because he “cared more” about people like them chose President Obama over Governor Romney by 81 to 18 percent. Even if you win voters over on your governing philosophy, leadership, and managerial competence, it’s hard to win an election if they think you don’t care about them.

(Read Full Article)

Photo courtesy Gage Skidmore, flickr

Photo courtesy Gage Skidmore, flickr

The Quiet Bailout of Detroit

From The Daily Caller:

President Barack Obama is using $100 million in taxpayer cash to help keep  Detroit’s pension funds afloat, contradicting his administration’s commitment to  avoid a bailout.

The federal $100 million is being described as “blight remediation,” but it  allows the city’s new managers to reshuffle more cash into the city employees’  pension funds, which were looted by city and union officials for several  decades.

(Read Full Article)