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October 30, 2010

Prop-a-Day: Propositions 25 and 26

The sixth in a series of articles on California's upcoming November ballot initiatives. California allows citizens to legislate by way of an initiative system that bypasses the General Assembly to pass laws. As we have seen in the past, the initiative system allows a simple majority of voters to do really dumb things, like take rights away from people just because they feel like it. California Supreme Court Chief Justice Ronald George has said that it is this initiative system that makes California's government "dysfunctional." Hopefully these articles will give Californians more information than can be found in apocalyptic television ads.

As I mentioned in my earlier discussion about Proposition 22, California's budget system is messed-up-wacky. The 1966 overhaul of the state constitution inserted a requirement that two-thirds of the legislators must agree on a budget in order for the budget to pass. Combine that with a redistricting system that has, for the last thirty years, been designed to keep everyone exactly where they are, and you have the makings of a legislative deadlock. All it takes is one-third plus one, and the budget process comes to a halt. This has led to late budgets in 25 out of the last 30 years and compromises that were made not because they were good, but because they were expedient.

Proposition 25

California's budget problems won't be resolved until 1978's Prop. 13 is repealed. But Proposition 25 is halfway there. It replaces the two-thirds requirement for approving a budget with a simple majority. It further adds a penalty to the legislature for not having a budget on time: until the budget is passed, legislators won't get paid, and they won't have any of their expenses paid for. This is a pretty good inducement to get a budget passed, don't you think? It has been suggested to me that this is unfair to poorer legislators and places power in the hands of wealthier legislators, which may be true theoretically, and may have been actually true if we kept the two-thirds requirement. But a simple majority is easy to find in the General Assembly, and if they can't come up with that for a budget, then they've got bigger problems than not getting paid.

Here's Some Fun Scare Tactics

I was perusing the "No on 25" website and found some fun scare-ya statements designed to perpetuate fear about Prop. 25. Here's my favorite:

Eliminates the Constitutional right of voters to use the referendum to force a vote to repeal bad legislation or taxes disguised as fees.

This is an outrageous lie. It's "outrageous" because any literate person can read the text of Prop. 25 and discover that it absolutely does not do anything remotely close to that. Prop. 25 is, of course, supported by Chevron and the California Chamber of Commerce. Vote yes on Prop. 25.

Proposition 26

This is a companion proposition in the sense that it also deals with taxes. According to Prop. 26's supporters -- who are exactly the same groups that are against Prop. 25 -- politicians in Sacramento are getting around Howard Jarvis' Prop. 13 by disguising higher taxes as "fees." The problem is that the definition of a "fee" is different from that of a "tax." A fee is a charge levied upon a particular group of people and used to pay for public programs either in support of those people or to fix problems those people have created. A vehicle registration fee is a charge levied only on people who register a car in California; the fee goes to pay for the maintenance of the roads on which those vehicles drive. So it's vehicle owners paying for the maintenance of their roads.

Prop. 26 is incredibly sneaky: it mandates that any "fees" passed by the legislature be subject to the same two-thirds majority requirement that all other taxes are. While Prop. 26's supporters maintain that "taxpayers" are being tricked into paying higher taxes, not all taxpayers are within Prop. 26's scope. The legislative analyst notes:

The change in the definition of taxes would not affect most user fees, property development charges, and property assessments. This is because these fees and charges generally comply with Proposition 26's requirements already, or are exempt from its provisions.

So who would be affected by Prop. 26?

Generally, the types of fees and charges that would become taxes under the measure are ones that government imposes to address health, environmental, or other societal or economic concerns.

Ah, it's all so clear! Prop. 26's supporters, who are gigantic corporations, are tired of paying regulatory fees. They don't want to have to pay to have the state clean up their messes or mitigate the environmental problems created by their business. Their analysis includes the old bromide that, if the legislature increases business' regulatory fees, those businesses will just pass the cost on to consumers. While this might be true, the businesses ignore the agency of that decision: the state does not mandate such a transfer; businesses choose to make such a transfer. The other argument is that the taxes take care of what economists call externalities: side effects of doing business that are not factored into the price of a product; e.g., pollution, which is hard to quantify. Ostensibly, the cost of, say, gasoline should take into account the environmental damage caused by drilling for oil, refining oil, and burning gasoline. A tax on gasoline merely corrects that error so that the price of gas reflects not only the cost of the gas itself, but also the cost to the environment.

The legislative analyst isn't fooled: Prop. 26 would just permit businesses to engage in unsafe or detrimental business practices without paying higher regulatory fees. Mom and Pop's hardware store would be unaffected. Chevron would be. Vote no on Prop. 26.

October 11, 2010

Prop-a-Day: Proposition 23

If ever there were a proposition that was a naked attempt to destroy regulations purely for the purpose of making money, it is Proposition 23. As has been recorded in the news, Prop. 23 is funded almost entirely by two out-of-state oil companies: Tesoro and Valero. To their credit, Tesoro and Valero are sleazier than you thought they were: the official title of this proposition is the "California Jobs Initiative." Who could possibly vote against jobs?

In 2006, California passed a law -- popularly called "AB 32" (even though it should now be called California Health & Safety Code ยง 38500, since "AB 32" was the law's name before it became a statute) -- designed to bring California most of the way in compliance with the Kyoto Protocol. It mandates a reduction in greenhouse gases to 1990 levels by 2020, or about a 20% reduction. Business don't like this law because it will force them to -- horrors! -- modify their business practices so as to pollute less. That's all this proposition is designed to do: allow businesses to continue to pollute.

Businesses* accept as axiomatic the proposition that the requirement of a reduction in pollution will necessarily increase the cost of doing business. The Legislative Analyst isn't so sure. On the one hand, businesses might have to scale down production in order to pollute less, resulting in less output and a lower GDP for the state. On the other hand, any potential job losses under AB 32 would before offset by the creation of a cottage industry of new businesses that would create environmentally-friendly technology, including cleaner fuels. That was the whole point of AB 32: to make California the national -- if not world -- leader in so-called green technology.

Nevertheless, Prop. 23's proponents couch the initiative in terms of job creation and job loss; AB 32 would only go into effect after four consecutive quarters of unemployment under 5.5%. This has happened only three times since 1970. 

* See the asterisk after the word "businesses"? We're not talking about Ma and Pa's general store, or even Joe the Plumber's subcontracting company. Despite what pundits might claim, "small" businesses are not in danger, here. No, AB 32's effect would be felt by very large companies that pollute on huge scales. The U.S. Chamber of Commerce encourages and promotes the bromide that, when gigantic, multinational corporations with tens of thousands of employees and annual revenue in the billions of dollars are injured by a statute, that means that small businesses -- you know, firms with a payroll of between 0 and 9 employees, which make up 79% of employer firms in this country -- necessarily suffer. Baloney. Organizations like the U.S. Chamber of Commerce -- which are composed of the aforementioned giant, billion-dollar firms -- don't care about the best interests of the consumer, job creation, or anything else. They're concerned that they'll be making slightly less than the outrageous amount of profit they're making now. Any other arguments are hogwash.

Tesoro and Valero didn't pick the number 5.5% because they're concerned about job growth. They couldn't care less about jobs (because, hey, the smaller the payroll, the more revenue gets pocketed as profit). They picked that number because it's as close as they can come to saying, "This law shall be enforced when pigs fly" as they can. 

The issue of the environment is going to go away. The future is in businesses that don't pollute as much as businesses of the past used to. The clock is ticking on energy companies that dabble only in fossil fuels. Obviously, vote no on Prop. 23.

October 9, 2010

Prop-a-Day: Proposition 22

Don't you hate it when, after spending all year diligently earning property tax revenues, the General Assembly swoops in and borrows some of them to make up for a deficit in its annual budget? The proponents of Proposition 22 sure do. And they're out to stop it.

Like 2001: A Space Odyssey, Prop. 22 is long and complicated. On one side, you've got the support of the California Professional Firefighters. On the other side, you've got the support of the California Fire Chiefs Association. Teachers are pitted against librarians, nurses against the police. It's a veritable Civil War out there.

Some Background

About half of the state's budget woes can be traced to Proposition 13, passed by (what else?) initiative in 1978. Prop. 13 required a two-thirds majority of the legislature to agree on increases in either ad valorem property taxes, or any other state income tax. 
California is one of only 13 states that require this "supermajority" in order to increase taxes.

Prop. 13 was passed with the help of the late Howard Jarvis, an anti-tax activist. Jarvis got Prop. 13 passed by spinning it to landlords as a way for them to save on property taxes. He simultaneously spun it to tenants as a way for them to prevent their rents from increasing. The logical leap here was that landlords would pass property tax increases on to their tenants, and it was in tenants' interest to vote for Prop. 13, as well. This was before the advent of rent control laws in California. That year, California property tax revenue - which went to local governments - declined by 57%. 
After its passage, it was revealed that Prop. 13 did not cause rents to decrease; rather than pass property tax savings on to tenants, landlords were pocketing the savings. This led to modern rent-control ordinances.

The effect of Prop. 13 was to decrease revenue to both state and local governments.

The other half of California's budget problems relate to the requirement that a two-thirds majority of the legislature is required to pass a budget. California is one of only three states with this requirement. It is the only state that requires a two-thirds majority both to pass a budget and to raise taxes. The combined effect of these two measures is to render California unable to finance itself.

This provision of the constitution was added to the California Constitution in 1966 as part of Prop. 1A, which drastically overhauled the state constitution and made many modifications to the operation of the state government. Prior to 1966, California's was a "part-time" legislature, meeting only every odd-numbered year for general subjects and in even-numbered years for budget-related subjects. Prop. 1A required the legislature to meet every year, during which it would consider all subjects.

The California Legislature is required to pass a budget by June 15 of every year. For the last twenty years, it is failed to do so, owing largely to the two-thirds majority requirement. A minority of legislators can bring the government to a halt.

So that's where we are. The instant proposition deals with the first issue; that is, tax revenues. (But don't worry; the second issue will be dealt with in Prop. 25!)

What does this Prop. 22 do, anyway?

A couple of things. Currently, the Legislature can borrow money from local tax revenues to make up deficits in the budget. California, along with 48 other states, requires that the budget be balanced every year, so the money has to come from somewhere. 
Prop. 22 would prevent the legislature from borrowing local tax revenues for any reason.

Prop. 22 also inserts a provision into the state constitution to prevent community redevelopment agencies from paying property taxes on any property owned by the agency (except for taxes paid pursuant to statutes requiring taxes for local school districts) and prevents the state legislature from reallocating any revenue raised by community redevelopment agencies for any purposes not specified in the Health & Safety Code.

Revenues from the state vehicle fuel tax will now be deposited into a trust fund called the Highway Users Tax Account, which will pay for highway construction and maintenance. The legislature is forbidden from borrowing money from this account. 
The legislature is also forbidden from borrowing revenue from the Public Transportation Account, which is now established as a trust fund to be used only for public transportation purposes.

The only way to reallocate funds from either the Highway Users Tax Account or the Public Transportation Account to other transportation jurisdictions is: (1) for the California Transportation Commission to hold at least four public hearings on the issue; (2) published a report on the issue; and (3) have the legislature  pass a statute by a two-thirds majority modifying the reallocations.

What's the harm in all this?

For one, the protections given to redevelopment agencies is alarming. Community redevelopment agencies work to revitalize blighted areas, and they are often successful in attracting new business to the area. But the property allocated to the agency would be tax-free. As California Professional Firefighters President Lou Paulson notes in the the San Francisco Chronicle:

Statewide, 12 percent of all property tax dollars are diverted into these agencies - $6 billion is earmarked for developers and can't go to schools, police, fire services or the poor.

Counties (which by and large oppose Prop. 22) have lost millions to redevelopment. Los Angeles County alone has seen $45 million drained away, not available for cash-strapped vital services. Prop. 22 would lock these cash grabs into the state Constitution.

This is what Prop. 22 opponents mean when they declare, "If Proposition 22 passes our schools stand to lose over $1 billion immediately and an additional $400 million every year." That statement by itself sounds shrill. Why couldn't Lou have put his Chronicle statement in the voter guide?

The big harm from Prop. 22 comes in that it effectively requires the state to cut funding for lots of things, since passing tax increases is pretty much impossible. Prop. 22's proponents, in capital letters, declare, that Prop. 22 "will STOP RAIDS of LOCAL GOVERNMENT and TRANSPORTATION FUNDS." EMPHASIS IN ORIGINAL! I've always been of the opinion that, the more caps there are in an argument, the poorer the argument is. 

Prop. 22 will further hinder the state's ability to fund itself, a problem that has been forty years in the making. Lots of business interests want to finish the state off by making it nearly impossible to provide funding for anything, turning California into a Libertarian paradise. I'm sure Ayn Rand would be proud. Vote no on Prop. 22.

October 5, 2010

Prop-a-Day: Proposition 21

The third in a series of articles on California's upcoming November ballot initiatives. California allows citizens to legislate by way of an initiative system that bypasses the General Assembly to pass laws. As we have seen in the past, the initiative system allows a simple majority of voters to do really dumb things, like take rights away from people just because they feel like it. California Supreme Court Chief Justice Ronald George has said that it is this initiative system that makes California's government "dysfunctional." Hopefully these articles will give Californians more information than can be found in apocalyptic television ads.

What could be so wrong with an $18 vehicle registration tax that is designed exclusively to benefit the state park system? There's absolutely nothing wrong with it, unless you're a coal and oil billionaire. Proposition 21 would add $18 to the cost of annual vehicle registration in California, resulting in about $500 million in revenue per year for the trust, according to the Legislative Analyst. Prop. 21 is very explicit that the money would be held in trust "for the people of the State of California and used solely for the purposes of this chapter," which is wildlife conservation, expansion of state park facilities, operating state park facilities, etc. An oversight committee would also be established to make sure that the funds in the trust are being used for their intended purpose. The initiative is also quite clear that the money cannot be appropriated for any other purpose or loaned to the General Fund. And, as a taxpayer, you get a bonus! Vehicles subject to vehicle day-use fees and parking would get into California state parks for free!

So who could possibly be against this idea? "Americans for Prosperity," that's who. One of the great thing about front groups is that they have really vague names, like "Center for Children and Babies." Who doesn't like children and babies? And who doesn't like prosperity?

Turns out Americans for Prosperity is a front group founded by the Koch brothers, who operate Koch Industries, the second-largest privately-held corporation in the United States. The Kochs' interests lie in things like coal mining and oil drilling, but their extracurricular activities include sponsoring the Tea Party movement and trying to get environmental regulations overturned (more on that when I look at Prop. 23). If there's an anti-environment, pro-corporation (and I don't mean corporations as in "small businesses" like Mom and Pop's hardware store; I mean, gigantic, huge multinational conglomerates) message attached to an issue, you can bet that the Koch brothers are behind it. The Koches hate environmental regulation and don't seem to care at all about the environment except as a source of raw materials to make fossil fuel-based energy. I expect they have signed copies of Atlas Shrugged.

Don't be fooled by astroturf organizations like "Americans for Prosperity," and especially don't be fooled by their ham-handed arguments against Prop. 21.

$18 is hardly a lot of money to ask for the preservation of California's significant natural resources. Vote yes on Prop. 21.

October 4, 2010

Prop-a-Day: Propositions 20 and 27

The second in a series of articles on California's upcoming November ballot initiatives. California allows citizens to legislate by way of an initiative system that bypasses the General Assembly to pass laws. As we have seen in the past, the initiative system allows a simple majority of voters to do really dumb things, like take rights away from people just because they feel like it. California Supreme Court Chief Justice Ronald George has said that it is this initiative system that makes California's government "dysfunctional." Hopefully these articles will give Californians more information than can be found in apocalyptic television ads.

California currently uses a two-part system for creating its federal legislative districts. The California legislature -- which consists of the General Assembly and the Senate -- draws congressional districts with the advice of the Citizens Redistricting Commission, a multi-party body consisting of private citizens that have no ties to the U.S. Congress, the California state legislature, or any federal or state lobbying organizations.

Back in 2008, after concerns that the legislature needed oversight when it came to redistricting, Proposition 11 passed with a very slim majority, created the Citizens Redistricting Commission. The California Constitution now requires this commission to certify any new maps of congressional districts before the new district boundaries take effect, and proposed maps would be voted on by the people as a statutory referendum. Proposition 20 would change that in a few significant ways (here, "significant" has no normative meaning; it means only that the changes are a departure from the status quo):

  1. The legislature would no longer have any control over the modification of U.S. Congressional districts. The Citizens Redistricting Commission would have exclusive control over such districts.
  2. This exclusive power would extend to the California Senate, the General Assembly, and the Board of Equalization, which administers sales taxes, use taxes, fuel taxes, property taxes, and excise taxes.
  3. A "community of interest" is a new reason for grouping people together into a single legislative district; such a community has things in common, like transportation issues, work opportunities, or urbanity/rurality.
Some things won't change. The Commission will still be composed of the same number of people, with the same qualifications. The districts, with the one exception above, will still be created and modified according to the same criteria.

Okay, here's a confession: this article will talk about two propositions. As if California's initiative system weren't wacky enough, we can put competing initiatives on the ballot. If both initiatives are approved by voters, whichever initiative gets more votes becomes the law. Ultimately, the lawyers win: if you want to be an election consultant, there's no better place to do it than in California.

Prop. 20's arch-nemesis is Proposition 27, which effectively repeals Proposition 11: it eliminates the Citizens Redistricting Commission and eliminates the ability of voters to decide what the redistricting map looks like. Nevertheless, it similarly expands the ability of the legislature to draw districts for the state legislature and the Board of Equalization.

It's worth noting that the Citizens Redistricting Commission is supposed to meet after the year of the U.S. Census, which means that it will meet once every ten years. And it also means that this commission hasn't met yet. Prop. 27 supporters -- many of whom are California legislators -- want to kill Prop. 11 before it actually has any effect. The question comes down to whether you want an unelected, but multi-party, committee to draw district lines or elected, but partisan, legislators. Also don't forget that the legislators have a stake in the lines they draw, and like all legislative activities, there will be horse-trading involved.

I'll be voting for Prop. 20.

October 3, 2010

Prop-a-Day: Proposition 19

The first in a series of articles on California's upcoming November ballot initiatives. California allows citizens to legislate by way of an initiative system that bypasses the General Assembly to pass laws. As we have seen in the past, the initiative system allows a simple majority of voters to do really dumb things, like take rights away from people just because they feel like it. California Supreme Court Chief Justice Ronald George has said that it is this initiative system that makes California's government "dysfunctional." Hopefully these articles will give Californians more information than can be found in apocalyptic television ads.

Proposition 19 would, if passed, legalize the possession of up to an ounce of marijuana and permit the commercial sale of up to an ounce of marijuana. Prop. 19's inclusion in this election at all is the result of a perfect storm of crime and debt. Californians living on the southern border are intimately aware of the increasing violence caused by Mexican drug gangs; the only way to put such gangs out of business would be to eliminate the necessity for an underground trade in drugs by legalizing drugs. At the same time, California, like the rest of the states, is still reeling from the financial crisis. Assemblyman Mark Leno estimated that California can earn at least $1 billion annually in taxing marijuana sales. Sounds great!

But there are three groups of people who don't like Prop. 19: 

The anti-drug people, obviously. These are the people who would much rather continue with the status quo, which has worked swimmingly over the last thirty years. Put them together with the abstinence-only-education proponents, and you've got the cure for America's problems.

Other anti-drug people do make points that reasonable people can disagree with; for example, what about companies that perform drug testing? Many companies, often in situations where heavy machinery is involved, perform drug testing at random or after accidents in order to limit their own liability. I have always maintained that the answer to this question is to come up with a better test to determine whether a person has used marijuana any time in, say, the last hour rather than the last month. A Breathalyzer can determine the blood alcohol content, and through that, whether a person is drunk at the time the test is administered. Surely California, with its ingenuity, can solve a simple problem.

The medical marijuana people. You might be saying to yourself, "What? Shouldn't they be natural allies for Prop. 19?" Not so much. The medical marijuana people misapprehend the language of Prop. 19 and conclude that it would restrict the number of marijuana plants a patient or a patient's caregiver can grow and that it would pile more taxes on top of dispensaries.

I say "misapprehend" because nowhere in the language of Prop. 19 does it say that it would supersede laws for medical production and sale. Prop. 19 concerns commercial production and sale. Prop. 19 adds a new Article 5 to the California Health and Safety Code, and all of the language of Prop. 19 is directed at this Article. The laws created by Proposition 215 remain in force, and nothing in the language of Prop. 19 says otherwise.

The pro-marijuana people. The people who smoke marijuana recreationally - which, as nearly as I can tell, is all of California - have two arguments. First, the economic one: marijuana prices will go up once producers have to pay taxes. Prop. 19 permits, but does not require, a municipality to tax marijuana sales and production. Thus, it is conceivable that a black market in tax-free marijuana flowing from jurisdictions without taxes to those with taxes would offset the potential state tax revenue, right?

Well, there's no guarantee that prices would go up. Since marijuana has never been legal for commercial sale, we don't know what would happen to the prices. There is every indication that prices would go down, as suppliers entered the industry, forcing the price downward in spite of the taxes. We also have the ever-present example of alcohol prohibition: during Prohibition, the price of liquor shot way up, which is why organized crime got into the business of providing bootleg hooch: it was extremely lucrative, since the demand remained the same, but the supply curve shifted left, causing a decrease in supply and an increase in the equilibrium price. Today, alcohol is taxed, and we accept it, but very few of us consider the option of making our own liquor because we don't want to pay $15 for a bottle of whiskey. It's convenience. And certainly, the ability of people to grow their own marijuana makes black market sales easier in a way that liquor doesn't, but there is the convenience issue again. The truth is, we really don't know what will happen to the existing marijuana price structure.

Their second argument is the moral one: once marijuana becomes legal, Big Business will enter into the picture (just like it did with the "organic" movement, which was as much an anti-corporate political movement as it was an agricultural one). This argument is moderately irrelevant, given that there is already a significant infrastructure in "local" marijuana production that companies like Philip Morris and R.J. Reynolds - excuse me, Altria - don't yet have in place. That, coupled with the questionable legality of marijuana on a national level, makes it unlikely that Big Business will enter into the market any time soon.

Bottom line: you don't need to believe these people. Prop. 19 is only the start of marijuana legalization. It's extremely broad and only lays out a framework by which marijuana can be legalized. Most of the real work in creating policies and tax structures will be left up to the municipalities that choose to benefit from the legalization. If it ever happens, that is. With marijuana still illegal under the federal Controlled Substances Act, law-watchers are anxious to see what will happen if the federal government decides to assert its authority once Prop. 19 passes (which it most likely will). Nevertheless, Prop. 19 is not scary and it won't hurt medical marijuana dispensaries or patients. Or anyone else for that matter.

Meg Whitman: She's sorry she got caught

Ever since we found out last week that Meg Whitman employed an undocumented immigrant as her maid even after finding out about her illegal status, Whitman has blamed a lot of people. She's mostly blamed Jerry Brown. So what does this say about her? 

For one, she's not sorry she continued to knowingly employ an undocumented immigrant for years. If she were, she would have said so. Her attitude is not surprising of the attitude of business owners across the country who are caught in a rhetoric fraught with schizophrenia. On the one hand, it's public relations suicide to say that you support undocumented immigrants in this country. So you have to appear that you find the notion distasteful and keep using the same tired old arguments ("they're taking jobs from Americans"). On the other hand, as a business person, you're concerned with the bottom line. And undocumented immigrants are really, really cheap. They'll work for practically nothing. They don't require benefits, and you can make them work as long as you want. They save you money. This is what Orwell called doublethink: the ability to believe two mutually exclusive things at the same time.

So who is Whitman upset at? Herself, for hiring an undocumented immigrant, in direct contravention of her opinion that people shouldn't hire undocumented immigrants? Of course not! She's mad at Jerry Brown, as she is operating under the assumption that this information was a strategic leak. That appears to be quite obvious, but the leak did not come from Brown; it came from anti-Whitman types like Gloria Allred.

Looking at Whitman's response, she seems to be angry that she got caught, not regretful that she hired an undocumented immigrant. In Whitman's defense, she and her husband had apparently done the due diligence in determining that Nicky Diaz Santillan was legal; but it turns out the documents were frauds. It was then, though, that Whitman continued employing Santillan even after Whitman found out.

Whitman's continued insistence that this is some sort of Democratic conspiracy avoids the issue and makes her look worse: she's just sorry she got caught.