Jobs - how government temporarily put people to work in the 1970's and how it's now failing workers

It is clear that for the long term we have lost 10 million jobs in the United States, including 1.2 million in California, compared to the employment level at the end of 2007.

After watching the most recent efforts of our national and state leaders to provide "solutions" to get the employed back to work, one has to wonder why the simplest solution is ignored. In 1973 President Richard Nixon signed the Comprehensive Employment and Training Act. It was legislation that had a number of components, one of which had the most impact on unemployment and was simple.

Through the State employment departments, block grant funds allowed state and local government and non-profit organizations to hire unemployed people.

Again, it was simple. What the federal government did was say to each State, here's some short-term money - say for two years. Put people to work. For instance, the Economic Stimulus Appropriations Act of 1977, which was signed by President Jimmy Carter on May 13, 1977, funded providing 725,000 people with gainful employment in 1978 and 1979.

Or we could do the Obama $447 billion American Jobs Act which involves mix of $253 billion in tax cuts and $194 billion in newly authorized spending. Included are the following:

• Cut Social Security withholding on people who already have jobs even further - from 6.2% on their first $106,800 of wages, down to 3.1% from the current stimulus cut-rate of 4.2% set to expire at the end of the year; plus cut the employer share to the 3.1%; and if a business hires a new worker or gives an existing worker a raise, all payroll taxes will be waived; most of this will do nothing in the immediate future for someone who is now without a job nor is it clear that it will offers much to increase employment more than would occur without it, but it represents $240 billion of the proposal.
• About $30 billion would be allocated to keep teachers from being laid-off and, perhaps, allow hiring a few back; an additional $5 billion would be allocated for public safety personnel; this would avoid some layoffs, but it is not likely to help many now unemployed for the $35 billion.
• About $49 billion would be allocated to an unemployment insurance benefits extension which would help some who are currently unemployed.
• About $90 billion would be allocated to several different infrastructure/public works construction projects, which within 12 months would start to trickle into the economy probably employing construction workers now working.
• The remainder would be allocated for various programs from retraining and student summer jobs next year and funding $10 billion in private construction, some of which would help a few of those currently unemployed in the long term.

As an alternative, if the entire $447 billion were put into funding two years of an employment program similar to what was done in 1977, it would put 5 billion unemployed persons back to work. Like that old program, some of the money would be wasted by states, local governments including schools, and non-profit organizations. But generally, the waste would be no more than the waste in Obama's proposal other than the Social Security contribution reduction.

Which brings me to the whole "let's don't pay enough Social Security contributions" approach to stimulating the economy. I thought the Social Security program had a funding problem. If the entire $447 billion were put into employing people directly instead of cutting the Social Security contributions, in addition to getting those contributions back up to normal the newly employed and their employers would contribute an additional $19 billion of that stimulus money into the Social Security fund.

And around half of the currently unemployed would be paying income and Medicare taxes and spending the rest. This would result in an immediate increase in consumer spending which would lead to private sector expansion.

In addition to the Obama proposal, we had proposals by Governor Moonbeam and Legislators here in California. These included a $1 billion tax shift that would have spread out tax breaks to California businesses, an eight year $3.2 billion extension of a tax on private utility customers to fund clean technology research and energy-efficiency programs, and a $500 million tax credit program to moviemakers.

Of the proposals, only the moviemaker tax credit passed. None of these programs would put people currently unemployed back to work soon.

Again, if something similar to the 1977 federal program could have been crafted, California could have put more than 20,000 unemployed persons back to work.

If a direct employment program had been adopted and put in motion by January 2012 at both the federal and state level, somewhere around 500,000 unemployed Californian's and 5 million unemployed American's could have temporary jobs doing things for their communities.

Instead, we'll likely be cutting by $3,311 a year Social Security withholding on employed folks making more than $107,000 and, as a bonus, giving their companies the same amount of money. And we'll be providing Comcast through it's subsidiary Universal Studios a tax credit on movies produced in California. Ironically, all of this is brought to us by Democrats.

The Great California Slump - Brown v Bezos

Two names - celebrities really - are playing games with The Great California Slump and the future well-being of California families.

Governor Jerry Brown was in Las Vegas on Tuesday at a green energy conference where commenting on the lack of new investment in California infrastructure he said: "It's dangerous, it's shortsighted. But it's a product of this notion that taxes are like some kind of a sexually transmitted disease, and government is all the problem."

Brown was at the green energy conference because he (and his national policy doppleganger Obama) are believers in the concept that the tech industry, the newest being green energy technology, is going to somehow save the economy and pull California out of The Great California Slump.

While Brown was in Vegas making smart remarks dutifully and amusingly reported in the California press, Solyndra shut its doors and laid off 1,100 workers. Solyndra, the Fremont maker of solar technology that President Obama visited May of last year, because it was a model for green jobs in America admitted in a news release that it could no longer compete with foreign manufacturers. Obama said last May "companies like Solyndra are leading the way toward a brighter and more prosperous future."

Essentially, Brown and Obama have yet to figure out that in the Bay Area/Silicon Valley - the area of the technology booms - the number of jobs in 2010 were the same as in 1990. The technology business model does not create permanent jobs as I explained in a previous post under the section Small Lie 1.2 - Technology will save us.

It makes venture capitalists and founders rich. Yes, venture capitalists lost money on Solyndra. They do that. That's what venture capitalists do - lose 19 times and win big on the 20th. But in this case, the U.S. Department of Energy also lost a half a million dollars.

The reality is, these ventures don't create jobs in America. They hire engineers and other tech types. They succeed or fail. In either case, they lay off engineers and other tech types. New ventures hire the engineers and other tech types. No real job boom is created.

Sometimes they set up manufacturing operations. Intel recently shut down its last plant in Silicon Valley laying off a few thousand workers. Now so has Solyndra.

The fact is Silicon Valley and the Bay Area are not the place to look for a model of how to put Americans back to work. It's that simple. Except Governor Moonbeam (he likes the name) and the President don't seem get it.

Jeff Bezos is the founder, President, Chief Executive Officer, and Chairman of the Board of Amazon.com. Like it or not, Bezos company is the most successful internet retailer ever. He and his company have been made the face of evil by Brown and California Democrats, out-of-state internet companies that don't collect California sales taxes.

At the behest of Brown, the Legislature passed a bill in an attempt to force Amazon to collect those taxes. Amazon has been attempting an end run around that law by seeking an initiative to effectively repeal it. The Legislature plans to pass another bill which would repeal the first bill and adopt a similar but different law thereby thwarting the initiative efforts of Amazon which have already cost millions.

Last week Amazon reportedly offered to open six new distribution centers in California in the next three years that would create an estimated 7,000 jobs. In return, Amazon wants an exemption from having to collect sales taxes until sometime in 2014.

On Thursday morning Brown indicated to the press that he's leaning against Amazon.com's proposal. He says we need the $200+ million revenue. He says this even though someone on his staff knows the State is looking at a $10+ billion and growing deficit, a deficit that wouldn't even miss $500 million if Californians can't get jobs.

Two problems with this scenario should make everyone in California, including the press, angry with Brown and Bezos.

First, Brown is incompetent in everything but being a winning politician, winning meaning he panders to the press and wins elections. If he weren't that way, he would not be at green conferences as they will produce nothing for California families during The Great California Slump.

Second, if Jeff Bezos can in the next three years open distribution centers in California employing 7,000 people, it would be nearly a criminal act if he does not do so even if his political extortion attempt fails. California's economy is failing at levels significant to the national economy. The biggest single problem is unemployment. Whether or not his company has to collect sales taxes should not determine if he will give 7,000 Californians jobs.

Obviously, there is no auditorium, hall or stadium big enough to hold these two men and their egos, but somehow someone should get them together, force them to work out an agreement.

Get an education and be adaptable to thrive in the mid-21st Century

It was about the year 2000 that a friend who is a couple of decades younger than me commented "I don't see how my children will be able to afford a house."

I responded with my opinion that in order to be prepared to thrive in the mid-21st Century today's young people will need to get an education and become very, very adaptable. (For the California working class, getting a good education was still within reach in 2000 without incurring a boatload of debt. But that's not the subject here.)

Floating around in my head as I formulated that opinion in the late 1990's were terms like "bourgeoisie", "plutocracy", and "technocrat" and the name "Pareto."

Unfortunately, relatively few Americans have a meaningful understanding of the three terms - in fact most Americans would have some Palinism/Bunkerism understanding of them.

Less than 3% of Americans know who Vilfredo Pareto was and maybe less than 1-in-3 of them have an accurate picture of Pareto's writings, erroneously associating him with the implemented version of Fascism of Mussolini.

Two apparently unrelated pieces of information recently came to my attention which reminded me of my advice of over a decade ago. This also reminded me of those terms and the writings of Pareto.

First, I became aware of a 4-page card-stock insert ad in the September 2011 issue of Vanity Fair for NBC's new 2011 Fall scripted series "Playboy Club". This was a very large print ad expenditure by NBC in a magazine with a limited appeal for a broadcast network TV show. I didn't understand why NBC would spend this much money to advertise a TV show in magazine that targets the fashion industry and upscale young adults.
While I was still rolling this around in the back of my mind, I came across a piece in Advertising Age headlined On the Road to Riches: Those Under 35 With $100K Household Income subtitled "Study Finds Growth for Brands Will Come From Those in 'Emerging' Tier to Wealth" which offered the following chart:

The article provides the usual statistics about how the income for most Americans families has stalled since 1970, a fact that I have prattled on and on about in previous posts here. But the article provides an interesting focus on the data:

The wake of the global economic recession has shown a spotlight on the yawning divide between the richest Americans and everyone else....

And while the social and political effects of this inequality may be cause for concern, the accrual of wealth among the very few is of great consequence for marketers, since 10% of U.S. households "account for almost half of the consumer spending" and represent about one-third of total GDP....

Simply put, a small plutocracy of wealthy elites drives a larger and larger share of total consumer spending and has outsize purchasing influence -- particularly in categories such as technology, financial services, travel, automotive, apparel and personal care.

But just who today is truly affluent? And which group is on the path to the rich life?

A study from Digitas titled "Affluence in America: The New Consumer Landscape" finds that an individual's career choice is perhaps the most important factor in determining whether he or she will ultimately land among the affluent....

It turns out a major predictor of wealth is one's earning a high income in his or her 20s. Those below the age of 34 in households earning between $100,000 and $199,999, identified as the "Emerging" tier, have a far greater chance of eventually crossing the golden threshold of $200,000 than those who achieve household income of $100,000 later in life, identified above as "Aspiring."

The article then gets right to the core rationale of the NBC ad placement:

Before the downturn, luxury marketers embraced the concept of "mass affluence." Buoyed by fatter stock portfolios and exploding equity in real estate -- and encouraged by easy credit -- a larger portion of the population, mainly in the Aspiring tier, considered itself wealthy enough to buy luxury goods. But in 2011, these consumers no longer "feel rich"....

The real growth for luxury brands will come from those in the Emerging tier....

...The Emerging tier presents a golden opportunity for luxury brands to reach consumers who will likely be wealthy in the future -- before they begin to more actively police their interaction with advertising.

This explains the NBC ad. NBC has suffered from ratings problems. NBC needs to find advertising revenue. NBC is focusing on the sophisticated "Emerging" tier which will allow the network to sell advertising for luxury brands hopefully establishing itself in a powerful niche market. NBC may be making a foolish expenditure, but the news release on the Digitas' Study provides the following:

KEY FINDINGS:

• The Mass Affluent ($100-$199K household income level) has disappeared.
  • They don't have the leveraged spending power they once had and now have to live on income alone.  Not surprisingly, an overwhelming majority (53%) classify themselves as middle class.  They have been replaced by:
    • The Class Affluent -- earn $200K HHI or more yearly and 54% classify themselves as upper-middle class.
    • The Emerging Affluent -- earn $100-$199K; same as the Mass Affluent yet are under 35 years old.

• The Rise of the Class Affluent (in a "class" by themselves):
  • Earns between $200K HHI (the minimum threshold for true affluence in America according to our findings) and $1 million+ HHI annually.
  • Represents the minority -- only 8.5 million in a country of 307 million people.
  • Three tiers of Class Affluence.
    • The Affluent -- $200K–$499K HHI -- The Creative Class: The Affluent are the creative class. They are likely to work in creative fields or industries, like software design, publishing, architecture, advertising, or journalism.
    • The Wealthy -- $499K–$999K HHI -- The Money Class: Likely to work in Finance and Consulting.
    • The Rich -- $1 million+ HHI -- The Leadership Class: They are individuals who run companies and influence industry. They command the highest incomes and make decisions that affect many. They can be found in high-income careers, like financial or legal services, or break-out industries like Internet properties/services or real estate.  
  • In terms of media behavior, Digitas has identified a direct correlation between level of affluence and digital media usage.  Early adoption of new digital devices, digital content consumption, and mobile usage all increase with affluence.  

• Emerging Affluent: 5.5 million people who are currently in the work force and on their way to affluence.
  • They have the same HHI as the Mass Affluent ($100K–$199K) but are younger, under 35.
  • Emerging Affluents work in careers that will eventually deliver affluence -- financial services, legal services, and engineering -- but they are still in the low to middle management tiers.
  • This group has all the attitudes of the truly affluent. They consider themselves opinion leaders, follow trends, love to travel, and are passionate about food and dining. They pursue both stylish youth-oriented brands like Scion, Diesel, and Samsung and true luxury brands like H. Stern, Tiffany, St. Ives, and D&G.
  • What sets this group apart from all others is their intensely digital media behavior.  Universally digital, members of this class use mobile devices for communicating, consuming content, enjoying music, and gaming. They use social networks and blog, and they prefer apps to 411 to research restaurants, recommend products, or get deals from marketers.

The important thing to remember about this whole marketing discussion and the chart above is that it is all about 44 million Americans out of 310 million, or 14% of the population.  Simply 266 million Americans are perceived to be too poor to matter because they are. For decades, their  disposable income has been or become insufficient to make significant purchases beyond necessities. As a group they can't make a difference by choosing to buy one brand of a high-profit luxury product over another.

The second thing to keep in mind is that about 27 million of the 44 million - "The Mass Affluent" or "Aspiring 35+" also are no longer of any import to the discretionary consumption economy - after The Great Recession they are basically unable to afford more than to make house and car payments, send their kids to college, pay their bills, buy groceries and clothes, and worry about their old age (saving for retirement is out the window). As the news release says, the "Mass Affluent" ($100-$199K household income level), also described as the "Aspiring age 35+," has disappeared - meaning achieving affluence is out of reach.

That leaves about 17 million folks, or about 5.5% of population.

And of those folks, only the under-35 "Emerging affluent" or 1.8% of the total American population both:

• Are still influenced by advertising to have their buying patterns altered through marketing efforts; and 
• Likely will have sufficient discretionary income in the future to make the market costs worthwhile.

Hence, NBC's new ad effort.

And that is interesting, but to do a bit of a twist of some words from the Advertising Age article, while the marketing implications of this study are important to some, the social and political effects of this shift may be cause for concern.

This returns us to the meaning of the writings of Vilfredo Pareto which cannot be discussed without a common understanding of three key words. Let's start with two of the words:

• Bourgeoisie is a social class characterized by their ownership of capital and their related subculture.
• Plutocracy is rule by the wealthy or rule through power and influence provided by wealth.

Neither of these words is new to political science, nor is there some new understanding of economics and politics related to these terms. They were emotionally loaded by political ideologues of the 20th Century, but they have relative simple meanings. American's seem to have trouble hearing words like this without some gut ideological reaction.

As used here, the third word, technocracy, needs some further consideration beyond a definition.

In it's simplest rendering technocracy is a form of government in which engineers, scientists, health professionals, and other technical experts are in control of decision making in their respective fields. But in this discussion, a literal technocracy is not a concern. Rather, a significant change has occurred since 1950 that has altered our economy and, in the end, influences our political and social systems.

In the discussion of technocracy, Wikipedia notes:

...Engineers were faced with a conflict between physical efficiency and cost efficiency in the new corporate capitalist enterprises of the late nineteenth century United States. The profit-conscious, non-technical managers of firms where the engineers work, because of their perceptions of market demand, often impose limits on the projects that engineers desire to undertake.

The prices of all inputs vary with market forces thereby upsetting the engineer's careful calculations. As a result, the engineer loses control over projects and must continually revise plans.

Indeed, when the transistor was invented, it was invented by folks at Bell Laboratories, a subsidiary of AT&T. Typical of the times, most significant research and development (R&D) was funded either by major corporations or the Government. While this system brought significant resources to the lab, it also kept the bean counter mentality in the middle of everything holy to the researchers. This slowed things down. And the financial benefits from discoveries - the incentives - went to the corporation or the universities and Government, not to the persons who made discoveries and designed new ways of doing things.

While that model of R&D continues (though in some cases less vigorously), a whole new process opened up with the advent of "venture capitalists." The relationship between venture capitalists to the "idea people" who create early-stage, high-potential, high risk, growth startup companies is critical to understanding how our economy has changed.

This relationship altered the bean counter influence in the lab and, more significantly, shifted the benefits of success to the founding members of the startup companies, usually "techies," and to the venture capitalists. In this process, the seeds were planted to undermine the social status and economic security of the class described above as the "Aspiring" or "Mass Affluent."

It all may seem mind boggling, but not when you consider the writings of Vilfredo Pareto (1848-1923).

In The rise and fall of elites after substantial statistical research Pareto explained that elites rise to power, maintain dominance, and then fall; but only if another elite is struggling to take its place.

Indeed, though his times and experiences were different, Pareto noted that economic reality was not a pyramid with its sides from rich to poor sloping gently from one class to the next. Rather it is very fat on the bottom where most people live, steeply sloping to a very thin top where we find the bourgeoisie.

In between we have a narrow neck of turmoil and motion: families rising and falling, some members climbing by talent or luck but most ultimately hitting a ceiling while other members fall. At the top are the elite of the bourgeoisie, the Plutocracy, who control wealth and power for a time – until they are replaced through some change, sometimes a revolution, sometimes economic evolution.

Today about 266 million Americans live somewhere in that fat bottom lacking affluence.

Another 27 million were in the narrow neck getting a glimpse and feel of affluence, in turmoil and motion, but now find that they have fallen or at least hit an impenetrable bottleneck.

The remaining are the "Class Affluent" or "Emerging Affluent" - the American Bourgeoisie, the social class characterized by their ownership of capital, a portion of whom constitute the American Plutocracy, for the most part, ruling indirectly through power and influence provided by wealth.

What happened in the late 20th Century is that the members of the old American Bourgeoisie and Plutocracy started giving way to those who, when they gave it any thought, probably would prefer that we lived in some version of a technocracy, but who have been too busy to engage in politics except occasionally.

One of Pareto's works is entitled The transformation of democracy in which he explains the how and why democratic forms of government undergo decay and are eventually reinvigorated through a shifting balance among the countervailing forces of centralization and decentralization of power, economic expansion and contraction, and liberalism versus traditionalism in public sentiment. And it ties to his concept of  the rising bourgeoisie replacing the old bourgeoisie.

It is no coincidence that we see the President Obama and the Governor Brown paying regular visits to the leaders of the bourgeoisie in Silicon Valley and other centers of new technology. It reflects the change.  Our leaders after President George W. Bush will not be holding hands with a leader of Saudi Arabia. Members of the bourgeoisie who still do are members of families on their way out - out of power and wealth - a slow evolutionary process, but inevitable according to Pareto.

The problem to be solved for Americans not on the chart above - those with annual incomes of less than $100,000,  and for those in the Aspiring 35, is how to survive and thrive in the 21st Century.

The new bourgeoisie derives from enterprises that do not to create jobs except for a relative few. Manufacturing and support for their products is eventually outsourced. That is why the Bay Area/Silicon Valley had the same number of jobs in 2010 as it did in 1990.

The new bourgeoisie cannot relate to the undereducated even as they permit, indeed advocate, tax policy that is destroying education. As technocrats they cannot relate to the complexity of public education - they believe it can be engineered, put computers in front of kids not teachers. (In California we are discovering that the poorly performing students in this new machine are being thrown out like defective parts.) As I noted in previous posts, the irony is that most of the technocrats were products of California's public university system.

It appears that a cyclical significant disruption has impacted our economy as the change in the American Plutocracy evolves. I'm not sure how inevitable this was or is, but by 2000 it was clear to me it was coming.

Perhaps President Obama and the Governor Brown understand the disruptive change going on. But it appears to me that they are throwing 94.5% of the American population under a bus when it comes to ameliorating the effects of the change. And that leaves a political vacuum in the United States similar to the one experienced in the European democracies in the 1920's, giving rise to demagogues similar to Michele Bachmann and Rick Perry and ultimately to despots.

I told my friend that in order to thrive in the mid-21st Century today's young people will need to get an education and become very, very adaptable.

Here comes Governor Sunbeam

As they say, it's déjà vu all over again.

In an article by Silicon Valley Mercury-News "clean technology" reporter Dana Hull we learned over the weekend:

During his first two terms nearly four decades ago, Jerry Brown became famously known as Governor Moonbeam. Now he seems destined to become Governor Sunbeam.

With the epic battle over the state budget finally behind him, Brown's first major policy initiative aims to fulfill the ambitious goal laid out in his campaign: to develop a clean-energy economy in California.

Brown wants the state to produce 20,000 new megawatts of renewable electricity -- enough to power 20 cities the size of San Francisco and roughly one-third of the state's current peak use -- by 2020. That would nearly triple the amount of electricity that California currently gets from renewable sources.

The plan includes the fast-tracking of large, utility-scale renewable power plants. But 12,000 megawatts are to come from "localized electricity," small systems located close to where energy is consumed that don't require new transmission lines. A variety of technologies, from biogas to wind, will play a role. But solar panels -- on the roofs of commercial buildings and along the banks of state highways -- will be a dominant element.

"The future of energy is not Texas oil," Brown said last month at the groundbreaking for the Blythe Solar Power Project, a massive solar power plant under construction in Riverside County. "It's California sun."

Richard Caperton, an energy policy analyst with the Center for American Progress, said the scale of Brown's energy ambitions are unprecedented. "Doing it statewide, at this level, is unheard of," he said. "This is the sort of goal that countries in Europe and Asia are operating with."

Hull has clearly identified Brown's goals for this term - to be identified with the next big technology thing - one that has already become important and will ultimate become big regardless of anything Brown does. This sounds so familiar - in fact a memory:

To celebrate California's leadership in space (51% of NASA's procurements in 1977 went to California - the next state was Alabama with 8%) and the occasion of the first free flight test of the Space Shuttle, Governor Jerry Brown hosted a "Space Day" on August 11, 1977, at the Museum of Science and Industry in Los Angeles.

The event was organized by Russell Schweickart, on loan to the Governor from NASA, and cosponsored by the state and the aero-space industry. It got widespread news coverage because 1) Brown had always been seen as strictly Mr. Era-of-Limits, 2) the Carter administration was giving signs of reducing the NASA budget, 3) it was the summer of the phenomenal success of the film "Star Wars'', and 4) Brown was the first major political figure to offer a national vision of space adventure since President Kennedy.

Speaking at ''Space Day" were all of the major NASA leadership (including the new NASA Adminstrator Robert Frosch) and also Gerard O'Neill, Carl Sagan, Jaques Cousteau, Bruce Murray , head of the JPL and Robert Anderson - head of Rockwell International, which built the space shuttle.

To end the program former ''beat poet'' Michael McClure read a new work, ''Antechamber'', against the silent showing of a film made of the most spectacular NASA footage. Michael, who is a proponent of space exploration but not of space colonies, jotted some poems during the course of the day's talks and gave us permission to print them here.

Next morning, August 12, most of the "Space Day'' participants were at Edwards Air Force Base, along with 68,000 other kibitzers, to see the smoothly successful first atmospheric flight of the space shuttle Enterprise.

Brown is still the same guy he was 36 years ago. He likes hobnobbing with the tech folks. It gets him good press and leaves the impression he's "with it." He did it back then, he's doing it now. He likes to pursue policy objectives in tech fields, policies that are unrealistic for the time. He did it then, he's doing it now.

So a year before Prop 13 he was at a conference on space in Los Angeles. If he had been a responsible Governor and State Government leader from 1975-77, Howard Jarvis would not have had a cause. Instead he chose to become Governor Moonbeam. Brown failed as a leader then.

Here we are with Jerry Brown and without a realistic political leader for our government in crisis. Instead of dealing with the myriad of problems which are in his purview, according to a UCLA News Release: "On July 25–26, the governor, in partnership with the UCLA Luskin Center for Innovation and Bank of America, will host "The Governor's Conference on Local Renewable Energy Resources" at UCLA, exploring how the public and private sectors can drive local energy generation to meet that 12,000 megawatt goal."

Brown leads things off with a panel discussion featuring David Crane, the CEO of NRG Energy, Rick Needham, Google's (GOOG) director of green business operations and Lyndon Rive, CEO of SolarCity. Keep these names in mind.

This morning The Sacramento Bee gave us a warm explanation of Brown's energy policy:

The idea behind local energy generation is to put small systems close to where the energy gets used so that the environmental impact is minimized and new transmission lines aren't required. Think rooftop solar, for instance.

Yes, think roof solar. Then the article mentions:

Meanwhile, the governor is jumping into a court case challenging a large solar energy project in the Mojave Desert.

Brown announced last Friday that he has filed what's known as an amicus brief asking a federal judge to deny a request to halt completion of the Ivanpah project, which his office says will create as many as 1,000 construction jobs and produce enough energy to power 140,000 homes.

It leaves you to figure out what's really going on, though at least in a subtle way let's you know it isn't about a few solar panels on your roof.

In fact, Governor Moonbeam-Sunbeam has taken on the non-profit Western Watersheds Project. From their web site:

In January Western Watersheds Project filed suit in federal court to halt construction of the Ivanpah solar power plant project being built on public lands in the Mojave Desert. The project site consists of 5.4 square miles of high quality habitat for the Endangered Species Act protected desert tortoise. WWP California Director Dr. Michael Connor has maintained that the U.S. Fish and Wildlife Service relied upon the project proponent's self-serving science that woefully underestimated the number of desert tortoise that would be impacted by the development.

According to the BrightSource web site, the ISEGS - "which counts NRG Solar, Google and BrightSource as equity investors - is currently the largest solar plant under construction in the world. The project is being constructed by Bechtel."  According to the same web site here's the investors Brown is advocating for (you'll remember some of these companies mentioned above "Brown leads things off with a panel discussion featuring David Crane, the CEO of NRG Energy, Rick Needham, Google's (GOOG) director of green business operations....) :

Yes indeed, Governor Governor Moonbeam-Sunbeam is now a shill for the likes of Morgan Stanley and Chevron. Then there is the other big player NRG Solar, a wholly-owned subsidiary of NRG Energy. You've probably never heard of NRG Energy. So let's allow them to tell you about themselves:

NRG Energy is a Fortune 250 wholesale power generation company headquartered in Princeton, New Jersey. We own and operate one of the industry's most diverse generation portfolios (including nuclear, wind and solar power) that provides nearly 26,000 megawatts of electric generating capacity, or enough to support nearly 21 million homes. NRG’s retail businesses, Reliant Energy and Green Mountain Energy Company, combined serve more than 1.8 million residential, business, commercial and industrial customers.

Hmmm. Well that's the spin from their web site. Here's what this international energy holding company told investors in their annual report:

As of December 31, 2010, NRG had a total global generation portfolio of 193 active operating fossil fuel and nuclear generation units, at 45 power generation plants, with an aggregate generation capacity of approximately 24,570 MW, as well as ownership interests in renewable facilities with an aggregate generation capacity of 470 MW. NRG’s portfolio includes approximately 24,035 MW in the United States and 1,005 MW in Australia and Germany, and approximately 265 MW under construction, which includes partner interests of 120 MW. In addition, NRG has a district energy business that has a steam and chilled water capacity of approximately 1,140 megawatts thermal equivalent, or MWt.

Governor Brown's in court defending these guys from the endangered desert tortoise. All so that you can put solar panels on your roof. Boy does this guy know how to spin for the press.

The coming bankruptcy of a court system - the end of a 40-year California government process

California's budget has become a serious problem for some serious people - our judges.

Of course, like the other two California government branches and our State's finances, our court system has been thoroughly screwed up. And like California government generally, the process of screwing it all up began in the 1970's.

Nobody remembers low cost local justice courts that used to handle infractions, misdemeanors, and small claims. They were presided over by a Justice of the Peace, frequently a non-lawyer because the pay was low. In 1974, after a unanimous California Supreme Court held that it was a violation of the right to due process to allow a non-lawyer justice to preside over a case that could result in jail time, California gradually eliminated the justice courts. It gave attorneys an opportunity to create more jobs for themselves.

These courts could have, of course, continued to try infractions and small claims at a low cost. But in the 1970's all three branches of California government were infected with runaway stupidity.

Jerry "Moonbeam" Brown was elected Governor in 1974 and the justice court issue, like runaway taxes leading to Proposition 13, wasn't on his agenda then. Instead he wanted to put a political stamp of his own on the state's justice system and in 1977 appointed Rose Bird Chief Justice which like most things Brown did then was politically stupid and governmentally inept. In 1986 Bird became the only Chief Justice in California history to be removed from office by the voters.

Five years later, in 1991, Gov. Pete Wilson appointed Ronald George chief justice. From a law standpoint, George was well qualified. He was first appointed to the bench by Gov. Ronald Reagan in 1972 and received four more promotions from governors Jerry Brown, George Deukmejian and Pete Wilson. When Wilson appointed George Chief Justice in 1991, the relationship between the Supreme Court and the Legislature was strained. Since then, in addition to showing excellent legal scholarship, George restored that relationship.

George, who retired at the beginning of this year, noted he did so with the satisfaction that the California court system has the respect of the Legislature and Governor as a coequal branch of government. (Since the public's approval rating of the Legislature and Governor are, and have been for years, at the "those morons" rating, I'm not sure that's good, but....)

One other thing that George accomplished is to take control of the courts away from the 58 counties to, according to George, ensure consistent and equitable budgets for the entire judiciary.

And he became the manager of a multi-billion dollar courtroom construction program funded by a special bond issue approved by California's dimwit voters.

George became one of the State's more powerful bureaucrats through the Lockyer-Isenberg Trial Court Funding Act of 1997 when the Administrative Office of the Courts, which the Chief Justice runs, became a major state agency now with 1,700 judges and 21,000 other employees spending $4 billion a year.

When The Great California Slump reduced General Fund Disbursements 19.2%, from a high of $107.3 billion in 2007-08 to a low of $86.7 billion in 2009-10, things had to give on the court scene. As noted by columnist Dan Walters:

As the state's fiscal situation deteriorated, George found himself vying with advocates for schools, prisons, health and welfare programs and other claimants on a much-diminished state revenue stream. Standing with George and Cantil-Sakauye on Thursday, Schwarzenegger slyly alluded to George's ceaseless pleas for more money.

George also found himself dealing with rebellious lower court judges who complained that they were being forced to close the courtrooms to save money as the AOC expanded its staff and as a troubled statewide court computer system piled up costs.

The Cantil-Sakauye mentioned in the quote is current Chief Justice Tani Cantil-Sakauye, George's replacement. George and the 1974 court left her with a mess not unlike the mess Jerry Brown left himself.

The computer system, known as the California Court Management System, a symbol George's efforts to centralize judicial management bypassing locally elected judges, resulted in the Alliance of California Judges, local judges who sponsored legislation that would affirm the right of local courts to manage their affairs, legislation that failed this year.

State Auditor Elaine Howle issued a critical report:

AOC has consistently failed to develop accurate cost estimates. Projected in 2004, the AOC's earliest available cost estimate for the system was $260 million, an amount that grew substantially to $1.9 billion based on the AOC's January 2010 estimate. Over the same period, complete deployment to the superior courts has been postponed by seven years, from fiscal year 2008-09 to fiscal year 2015-16.

After that report came out, the chief administrator of the AOC William Vickery retired. But that didn't solve the problem for Cantil-Sakauye who Friday had to give the bad news to the judges - their once $4 billion budget was now more like $3 billion and $350 million was to be spread to the local courts.

"It has never been worse," said Cantil-Sakauye.

The cuts will close some courthouses including some George's bond issue built, reduce court hours, and delay civil trials, custody decisions and divorces in some counties. Local judges attacked. From the LA Times:

San Francisco County Presiding Judge Katherine Feinstein took jabs at the statewide administrative office that runs the court system and lectured judicial leaders about their solemn duties.

She said her court has sent layoff notices to 41% of staff and plans to close 25 of 63 courtrooms while the Administrative Office of the Courts has been devising grandiose schemes that "are sucking tens of million of dollars from the trial courts."

The San Francisco court will be more seriously impaired than many other superior courts because it previously spent all its reserve funds to avoid layoffs. It now will lose nearly $5 million in addition to a previous deficit of $8 million paid from reserves. Most other courts figured out how to minimize the expected long term impact of The Great California Slump by retaining at least some reserves.

Feinstein did not explain why the San Francisco court management made such a stupid choice.

Not all the courts have been quite as foolish. According to a Redding Record Searchlight article headlined Judicial council spares counties cuts for 2012-13:

Shasta County Court Executive Officer Melissa Fowler-Bradley said Friday the judicial council's action was "pretty much" what she expected, adding the budget cut could have been a lot worse.

Still, she said, it's not going to be easy to handle.

Earlier this month, Fowler-Bradley said the court's five-day-a-week branch in Burney will be open only Wednesdays after Sept. 9. That change is expected to save about $120,000 annually in personnel costs.

But that leaves her with $620,000 to cut from the Superior Court's $15.5 million budget.

"It's going to be tough," she said, though she's hopeful that layoffs and work furloughs can be avoided.

But then there's this from an Associated Press article:

Then there's San Joaquin County, the crime-plagued capital of the Central Valley, home to Stockton, always among the top ten cities in foreclosure rates. Among other significant cuts to its overwhelmed court system, San Joaquin is planning to stop deciding all small claims cases. More than 3,000 were filed last year.

The county is pleading with state court leaders for extra funding so it can reopen its Tracy courthouse and restart hearing small claims cases.

"It's horrible for litigants," Presiding Judge Robin Appel said. "These people simply will not have their day in court."

So in 1996 George had to solve the problem of lack of respect by the Legislature and Governor brought on by Brown the last time around. Now Cantil-Sakauye has to solve the problems left behind by George's centralization of power at the state level, while dealing with the results of The Great California Slump.

Perhaps it's time to revisit 1974 and the subsequent decisions to close the locally controlled Justice Court system. Maybe it's time to find a less expensive way to deal with small claims, divorces under our no-fault law, building code violations, landlord-tenant disputes, infractions, and maybe even some misdemeanors where the penalty is only fines.

And maybe we ought to get rid of any prosecutions under State law for violations related to marijuana. Let the feds clog their courts.

Or we can just watch our jurists attack each other while that branch of our government fails to serve us. That sounds so much more like California in the 21st Century.

A California Government Finance Stabilization Proposal

Economists specializing in state and local government finance agree that the one major "structural" problem in California's government is Proposition 13. We rely too heavily on volatile tax sources like income, corporate, and sales taxes. A greater share of government funding needs to come from property taxes. Here's my California Government Finance Stabilization Proposal:

1. Use the the Corporation Tax single sales factor income allocation rules as proposed in Governor Brown's January 10, 2011 Budget.
2. Cut the current Personal Income Tax to generate a third less revenue, exclusive of the Proposition 63 1% rate (leaving it unchanged).
3. Keep the state sales and use tax rate at 5% (down from 6%) and effectively collect the use tax on out of state purchases on the Form 540.
4. Increase the Proposition 13 property tax rate from 1% of assessed value to 1½% of assessed value.
5. Restore and fund from property tax revenue the Williamson Act to conserve agricultural properties; place two-thirds of the remaining revenue derived from the 1½% rate in a state special fund to fund education, from pre-school to graduate school, and to fund health care and day care for infants, toddlers, and k-12 students; return the remaining revenue derived from the 1½% rate to the counties for distribution under the same formulas used previously, excluding  allocated to school districts, community college districts, and the Office of the County Superintendent of Schools.
6. Remove property other than owner-occupied residential property from the assessed value near-freeze of Proposition 13; for owner-occupied residential property, assessed value shall be determined as provided by existing law.
7. In the case of rental residential property, the assessed value should be tied to changes in tenants and rents paid by new tenants.
8. In the case of all non-residential property, the assessed value should be increased 10% a year until it is equal to market value.
9. Establish a spending ceiling for general fund and special funds (exclusive of federal funds, enterprise funds, and funds spent on Presidentially declared disasters) that is equal to fiscal year 1990-91 spending (the base spending year) adjusted as follows:
   • for spending other than spending for K-12 schools, community colleges, and prisons the base year adjusted by the cumulative change in the CPI and the cumulative change in population;
   • for K-12 school and community college spending, the base year adjusted by the cumulative change in the CPI and the change in the number of students attending all K-12 schools and community colleges;
   • for prison spending the base year adjusted by the cumulative change in the CPI and the change in the offender population; and
   • place any surplus revenue into a "rainy day fund" to be used in years when revenue fails to support spending within the ceiling.

Mentalist Fans: CBI Layoffs Possible

FACING THE BUDGET AX

What happens when reality could derail fiction? As I noted in my June 29 post, one of the cuts in the adopted State of California 2011-12 Budget has a potential significant impact on CBI employees Teresa Lisbon, Kimball Cho, Grace Van Pelt, and Wayne Rigsby and consultant Patrick Jane.

Following the adoption of the budget, California Attorney General Kamala Harris issued a news release in which she noted "The Bureau of Investigation and Intelligence and Bureau of Narcotic Enforcement will also likely be eliminated...."

Let someone thinks this is baseless hand wringing by Harris, a number of law enforcement officials around the state joined her including San Diego District Attorney Bonnie Dumani who issued a letter stating:

The purpose of this letter is to share my concern with the proposed cuts to the California Department of Justice, Division of Law Enforcement (DLE). As the elected District Attorney of San Diego County, my office investigates and prosecutes crime along California's border on a daily basis. It is through collaboration with the Division of Law Enforcement that we are able to see results from our efforts to stem the tide of violent crime crossing into California.The work of the Bureau of Narcotics Enforcement and the Bureau of Intelligence and Investigations is a key piece to a statewide strategy to prevent gang crime.I understand the challenges in balancing the state's budget, but urge you to keep in mind that most local law enforcement agencies are taking severe staffing reductions, especially the smaller agencies, and we will need the assistance of DLE more than ever.

One has to wonder if the 2011 fall season opener will begin with Lisbon telling her team of possible layoffs. Would make for an interesting story arc. Of course if the CBI gets the ax....

(Yes, I know the show is fiction. And for those who a stickler's for details, the current agency name is the California Bureau of Investigation and Intelligence. But for years it was known only as the California Bureau of Investigation as can seen from this old web page dating back to the early 2000's.)

The ins and outs of funding the drug war in Mendocino's tight economy

So I'm looking at my local newspaper and see the following headline: County recognized as significant drug trafficking area.

Now exactly why Mendocino County would be so recognized, I can't imagine.
Anyway the wording "recognized as" somehow seems like something related to an honor. Well maybe it's not an honor, but it may be handy. According to the story, the Sheriff says:

The HIDTA Program can provide assistance to Mendocino County in assessing regional drug threats; designing strategies to focus efforts that combat drug trafficking threats; developing and funding initiatives to implement strategies; facilitating coordination between Federal, State and local efforts; and improving our overall effectiveness and efficiency of drug control efforts.

So apparently we are part of this program and in the company of others around the nation according to this map:

This is very timely because according to this article the new California state budget will cut $35.8 million out of the State Department of Justice law enforcement budget next fiscal year and another $35.2 million in the year after that, probably resulting in the loss of $40 million in matching federal funds over the next two years. This could cause the loss of up to 600 law enforcement positions and eliminate the bureau of narcotic enforcement and the bureau of investigations and intelligence.

Hopefully whatever the Mendocino County Sheriff's Office loses in Governor Jerry "Moonbeam" Brown's budget will be replaced by President Obama Administration's new push to go after medical marijuana. I'm not sure how it will work since Mendocino County licenses medical marijuan growers, but somehow the money will flow.

And the overall governmental craziness continues as we join with Alameda, Contra Costa, Lake, Marin, Monterey, San Francisco, San Mateo, Santa Clara, Santa Cruz and Sonoma counties in participating in this program.

The Will-of-the-Voters Budget

Notwithstanding any other provision of law or of this Constitution, the budget bill and other bills providing for appropriations related to the budget bill may be passed in each house by rollcall vote entered in the journal, a majority of the membership concurring, to take effect immediately upon being signed by the Governor or upon a date specified in the legislation.

This language seems pretty straightforward to me. It's part of our State Constitution, Proposition 25 approved by 55.1% of the voters on November 2, 2010, the same day they elected Jerry Brown Governor and elected a Democratic majority in each house of the State Legislature.

On June 28, 2011, that Legislative majority approved a budget containing major spending cuts in all program areas, sending it to Brown who said he's on board with the budget bill.

But also it's a budget predicated on significant revenue growth. In the first seven months of the current fiscal year, 2010-11, the total of Corporate, Personal Income, and Sales Taxes exceeded 2009-10 by 12.16%. Based on that surprising news, every budget proposal discussion since February has assumed continuation of the growth.

The problem is February through May the 2010-11 total was the same as 2009-10. If February - May is indicative of a trend, the adopted budget will be $10-$12 billion short on revenue without even considering the gimmicks that may not work because they are illegal.

This may be the worst California General Fund Budget ever adopted. But it is truly the Will-of-the-Voters Budget.

The voters did not give the ability to raise taxes to a majority of each house of the Legislature, assuring that taxes would not be raised. The voters did not elect a majority in each house of the Legislature that would completely eviscerate funding for schools, caring for children, caring for the aged and the infirm, law enforcement, courts, fire protection, emergency medical services, libraries, etc. But the voters did set in place a system that would result in major funding cuts for all those government services during bad economic times.

With complete foreknowledge, the electorate put in place a system that could only produce this Will-of-the-Voters Budget. And the list of knowledgeable people who supported establishing this system is an impressive list of wise and politically savvy folks - just ask them.

So imagine my surprise when I read on the San Francisco Chronicle website who angrily came out swinging in reaction to the Will-of-the-Voters Budget:

The president of the California Statewide Law Enforcement Association -- who happens to work as a DOJ special agent -- also had some choice words for the governor and Democratic legislators. Alan Barcelona accused Democrats of welcoming drug gangs to California and called the budget cut "absolutely astounding."

Gee,the California Statewide Law Enforcement Association is on the list of wise and politically savvy folks who supported Proposition 25.

Department of Justice (DOJ) funding is a good example of "where the rubber meets the road" in State Government, so let me take some time here to review the truth for Mr. Barcelona and others.

The DOJ employs a lot of those expensive state employees we hear about from the anti-tax forces. For the past four years, now-Governor Jerry Brown was Attorney General (AG), the head of the DOJ. Here's how the functions of the DOJ were described in former-AG-now-Governor Brown's January 10, 2011 Budget:

The DOJ represents the people in all matters before the Appellate and Supreme Courts of California and the United States; serves as legal counsel to state officers, boards, commissions, and departments; represents the people in actions to protect the environment and to enforce consumer, antitrust, and civil rights laws; and assists district attorneys in the administration of justice.

The DOJ also coordinates efforts to address the statewide narcotic enforcement problem; assists local law enforcement in the investigation and analysis of crimes; provides person and property identification and information services to criminal justice agencies; supports the telecommunications and data processing needs of the California criminal justice community; and pursues projects designed to protect the people of California from fraudulent, unfair, and illegal activities. The DOJ receives funding support from the General Fund, as well as federal funds and a number of special‑purpose funds related to the Department’s regulatory and legal enforcement activities.

In Brown's January proposed budget, on Appendix Page 19 what one can learn is that the $0.6 billion projected 2010-11 expenditures in the DOJ increased 9% over 2009-10, even though federal funding dropped $4.5 million and General Fund support dropped $25 million.

What one can also learn is that in Brown's January 2011-12 budget proposal, DOJ spending was still 5% higher than 2009-10. This was true even though federal funding was projected to be slightly lower than 2009-10 and General Fund support was to be cut another $37 million (making the General Fund support reduction $62 million from 2009-10 levels).

So the Chronicle story tells us the folks at the DOJ, including newly elected Attorney General Kamala Harris, are upset about the adopted June 28 budget:

Harris' Department of Justice would see a $35.8 million reduction in its law enforcement budget next fiscal year, and another $35.2 million in the year after that. That $71 million cut could cost the DOJ another $40 million in matching federal funds over the next two years, said Division of Law Enforcement Director Larry Wallace.

"We could be looking at cuts in excess of $100 million," he said. "It's unprecedented, unsafe and unsustainable to the Department of Justice and it will greatly handcuff California law enforcement. We could lose up to 600 law enforcement positions if we take this hit, and possibly have to eliminate the bureau of narcotic enforcement and the bureau of investigations and intelligence."

Since these cuts were more or less included in the Governor's January 2011 budget which assumed an extension of temporary taxes, all this looks like political spin aimed at the anti-tax Republican base which is typically pro-law-enforcement.

On the other hand, it does appear from the quote noted above that California Statewide Law Enforcement Association President and DOJ employee Alan Barcelona "didn't get the memo" and appears genuinely angry at Democrats in the Legislature. Maybe Barcelona was surprised when Wallace, his boss, pointed out that the Will-of-the-Voters Budget eliminates jobs in the DOJ.

Unfortunately for Mr. Barcelona, Californian's aren't enamored with what they perceive as "the bureau of narcotic enforcement."  For the majority of Californian's the most visible squandering of law enforcement time and money is the marijuana eradication program. In fact, polls indicate that the majority of Americans, including many thinking conservatives, have second thoughts about the whole War on Drugs thing.

So when Californians expect every department in State Government to reduce spending because of The Great California Slump, given the choice of activities in the DOJ...

• prosecuting violations of consumer, antitrust, civil rights and environmental laws;
• providing persons and property identification, communications, data processing, lab and other services for the criminal justice community; and
• coordinating drug enforcement such as marijuana eradication;

...guess which activity many folks might think is the least important.

In the years immediately following the passage of Proposition 13 in 1978, then Governor Jerry Brown working with then Assembly Speaker Willie Brown started gaming the system. It has taken over 30 years, but it's over. Like many leaders in California's public employee labor organizations, Mr. Barcelona does not understand that we are nearing the end of the gaming of the governmental finance system.

When Californian's in 1978 decided to move away from the one stable governmental revenue source - the property tax - and shift to the volatile income and sales taxes, they presumably expected government to adapt. That means eliminating functions in hard times.

Governor Brown's May 2011 budget revision devotes 13 pages to such function eliminations most of which, I assume, have been incorporated into the final budget.

Interestingly in that May revision there is one reference to the DOJ:

DNA Identification Fund Shortfall - The May Revision proposes to transfer $10 million General Fund to the DNA Identification Fund, and restore $4.1 million Genera l Fund to the DOJ for lease revenue payments on regional forensic laboratories. Revenues to the DNA Identification Fund have not come in as projected; therefore, these changes are necessary in order to ensure the DNA and regional forensic laboratories are able to continue performing critical public safety work

In other words, "when push came to shove" Brown restored funding to a DOJ program that makes sense, seems necessary, and would have general public support.

That's how the process established by Proposition 25 is going to work. You don't furlough employees to save money like the Gubernator did. You particularly don't furlough employees at the DMV whose Department receives no tax money and is experiencing no reduction in fee revenue. You lay off employees working in tax supported functions based on how important you think those functions are to the people of California. And if you can't do those functions adequately, you stop doing them.

Now, of course, comes the part people will only begin to understand today. Late last night, the Senate approved Assembly Bill 114, the last of the budget followup bills needed to make the budget work. A key element in this bill "slides" $5.6 billion of tax revenue out of the State General Fund and into county revenue to support transferring prison inmates to county jails. It sounds reasonable. But the tax revenue no longer counts as State General Fund tax revenue which means it no longer is subject to Prop 98 that would require 40% of it on K-14 education.

Of course, in order avoid being lynched by one of their key constituencies, the teachers' unions, Democratic Legislators included a provision that suspends school district powers to issue teacher layoffs between now and August and requires districts to ignore the possibility of mid-year cuts for revenue projection purposes. Plus approved budget provisions requires that districts deal with a potential mid-year budget cut by slashing school days and laying off bus drivers rather than teachers.

The problem, of course, is that the budget cuts related to slashing school days and laying off bus drivers are the ones called "trigger cuts" and the bill require districts to bargain any further reductions in the school year with unions that represent teachers and non-classroom staff.

The "trigger cuts" relate to only $4 billion of the $11 billion in tax revenue growth over 2009-10 actual included in the budget. Here's how it works:

• If $1 billion or more of that growth fails to materialize, no cuts are needed and any shortfall will be dealt with in future years' budgets.
• If more than $1 billion but less than $2 billion of that growth fails to materialize, a list of $600 million in cuts will maybe occur and the rest of the shortfall will be dealt with in future years' budget.
• If more than $2 billion of that growth fails to materialize, $1.9 billion in cuts may be imposed including the ones on the schools and the rest of the shortfall will be dealt with in future years' budget.
• If not only the $4 billion, but some or all of the remaining $7 billion fails to materialize as is possible no solution is offered because that just can't happen - right?

According to the Sacramento Bee:

Gov. Jerry Brown and Democratic leaders have pledged to pursue a 2012 ballot measure that puts this "realignment" plan in the constitution, giving counties sufficient assurances that they will continue receiving money for providing services in lieu of the state. Based on AB 114, that measure also will include tax increases to pay for realignment in future years, just as Brown's original budget sought to do.

AB 114 says that if the voters reject this measure -- or if it never reaches the ballot -- the state must determine in November 2012 how much it would have owed schools for 2011-12 had the $5.6 billion never gone to local governments. Right now, that amount stands at about $2.1 billion. The money would be repaid over five years with 20 percent of it dedicated to paying off deferrals, mandates and other onetime purposes.

If the ballot measure fails, the bill seems to ensure that schools are essentially held harmless by the tax shift -- and that their base will effectively be $2 billion higher this year and in future years than Brown's original January budget proposed.

If the measure passes, schools will not get repaid that $2 billion, but they stand to get more money from voter-approved taxes in future years.

At this point, this is so convoluted I hope the language in the various bills as adopted makes some sense.

As I said before, this may be the worst California General Fund Budget ever adopted. But it is the Will-of-the-Voters Budget.

The morons in the Magic Kingdom

The Republicans in Sacramento are basically moronic. But we’re hopeful that they can realize we’re on an unsustainable trajectory here, one that is not fiscally responsible and one for which they are at least partially responsible. - Gil Duran, Brown's press secretary, in a interview with KPCC

California Government reflects the fact that the State is the Magic Kingdom as noted in a previous post. In keeping with that view, a key member of the Brown Administration declared the Republicans are the "morons" in our State Government? Really?

Here's what I wrote on January 11, 2010, the day after Governor Jerry "Moonbeam" Brown presented his budget proposal (emphasis added):

Foolishly I thought Brown was going to offer a severely reduced balanced budget to the Legislature with a possible solution such as proposing to increase the Proposition 13 tax rate of 1% of assessed value to 1½% of assessed value to avoid completely devastating our systems to educate and care for children. I thought he was going to create a serious discussion about the future of California government rather than attempt to put it off for five years.

In five years, the opportunities to keep California "golden" will be even more severely constrained. This is some legacy the son of Pat Brown is going to leave us.

Of course, with these proposals he simply just restarted the same old political arguments....

On January 30, I noted:

"When we unwind what has been done (in the past)," Brown said, "it's very difficult," noting the outpouring of opposition. But if it's not done and the tax extensions aren't approved, he adds, the alternative is "so horrible that we don't want to release it."

On the following day, Brown compared the Republicans in the Legislature to those in Egypt not wanting to fair and open elections despite the fact the Legislators and Brown were just elected in a free, fair, and open election just 90 days before.

Guess what! This year the Democratic majority in the Legislature adopted a budget on June 15 without a voter-approved tax increase. We had a budget! It did seem to have many cuts, but was it really "so horrible that we don't want to release it?" Yes, it was filled with gimmicks, many of which would likely be determined to be illegal. The "gimmicks" violated one of Democratic Governor Moonbeam's promises to the electorate. So he vetoed the budget bill.

During his campaign last year, Governor Moonbeam promised that he wouldn't accept:

1. an unbalanced budget,
2. a gimmick-filled budget,
3. a budget that gutted education, medical care, and social services,
4. a budget that included new taxes not approved by the voters.

To balance the budget, Moonbeam was advocating what now would be a voter-approved tax increase. To get that on the ballot, he needs the votes of all the Democrats in the Assembly plus the votes of two Assembly Republicans and the votes of all the Democrats in the State Senate plus the votes of two Senate Republicans.

He has tried since January to get the Republican votes, but he couldn't get them. Despite the fact that he'd been California Attorney General the four years immediately prior to 2011, he didn't know he likely wouldn't be able to get the Republican votes. In my opinion if there is a "moron" here it is Moonbeam who didn't understand the situation.

As usual in politics, to get the four votes Moonbeam and Legislative Democrats would have to compromise. The negotiations were messy and a compromise would clearly alienate some of the Democratic constituency. On June 14, for the record the Republicans provided an outline of what they wanted which you can view here. Though there is some important ideas in the proposals, the Democrats were never going to accept the key elements.

And everyone but Moonbeam is "reluctant" to adopt a budget bill based on a tax increase approved by the voters because the voters are unlikely to approve a tax increase.

Moonbeam lost his public employee and teachers union support for an initiative effort because the polls make it clear that getting a majority of voters to approve a tax increase is unlikely. It is unlikely he will get the Republican votes he needs to put a tax increase on the ballot and even if he does, at the risk of repeating myself, getting a majority of voters to approve a tax increase is unlikely.

Assuming income and sales tax revenue projections in the vetoed budget bill were accurate (which is a questionable assumption), to avoid gimmicks and legally questionable proposals and to begin to repay money borrowed from schools and local government and to prudently provide for a 1-2% General Fund reserve, the Legislature would have to cut another $11± billion from the adopted budget which included $11 billion in cuts the Assembly Democratic majority really didn't want to make.

In a recent Sacramento Bee article, absent a tax increase the dilemma is described as follows:

"I don't think there's a responsible way to cut your way to a solution," said Jean Ross of the California Budget Project, which advocates for low- and middle-income residents. "There's not a way to still have viable programs that meet federal standards, court standards, constitutional standards and the standards of the voters of California."

That pretty much describes it all.

To make any significant cuts, the Legislature would have to cut spending for  K-12 schools and community colleges. The voters established Proposition 98 which prohibits that without a two-thirds vote to suspend its provisions for another year. The Republicans have rejected that and it is clear that the voters are looking at that with a great deal of skepticism.

To make any significant cuts, the Legislature would have to cut spending on Medi-Cal and various programs for the poor elderly and children all of which would face legal problems in court or with the federal government, the latter probably resulting in loss of federal funds which would result in even higher unemployment in California. As the Gubernator proposed, the state's welfare-to-work program could be eliminated, but it's unlikely there would be enough votes in either house of the Legislature to do that.

Today we have this news:

Gov. Jerry Brown and Democratic legislative leaders announced today that they have reached an agreement on a new majority-vote budget plan.

A story earlier today explained:

Gov. Jerry Brown and legislative Democrats are hashing out a new majority-vote budget that relies on $4 billion more flowing into state coffers but "triggers" mid-year cuts to education and other programs if that money never materializes.

The trigger cuts would replace some of the most dubious solutions in the previous Democratic budget, such as selling state buildings and imposing a quarter-cent local sales tax on a majority vote, according to sources unwilling to be named. If revenues fall short, cuts would hit K-12 schools and higher education, public safety programs and In-Home Supportive Services.

...The new budget includes a tax swap that redirects 1 percentage point of the statewide sales tax to counties for Brown's public safety "realignment," sources said. Under that plan, the state would redirect lower-level inmates to county jails and shift parole responsibilities. The tax swap has the added effect of reducing the state's Proposition 98 requirement for schools.

This raises the question of what's a "gimmick" when we talk about the budget.  I've prattled on in previous posts about what gimmicks have been included in the various budget proposals - including Moonbeam's - and in prior year adopted budgets. Fortunately, others have begun to catch on. The venerable Pew Center on the States Stateline web site explained what budget gimmicks are. The writer also noted that "editorial boards have praised Brown for exercising responsible fiscal judgement" then wryly noting that "Brian Joseph of the Orange County Register has written that Brown's own budget plan uses gimmicks too."

That Register article explains:

For example, the Democrats’ budget was blasted [by Brown] for deferring payments to education. Well, in January, Brown proposed deferring $2.1 billion in payments to education, although his May revision scrapped the idea because the governor planned to have extra money, either because of an uptick in the economy or because he assumed his plan for a tax extension would pass.

Or take the issue of borrowing. In his veto message, Brown complained that the Democrats’ plan included “costly borrowing.” That’s a fair complaint. But in January, the governor’s budget plan called for $1.8 billion in borrowing from special funds, which was later reduced by $744 million in his May revision.

Then there’s the matter of one-time fund shifts. These are particularly galling to budget purists, because fund shifts entail robbing Peter to pay Paul. They solve nothing long term and create a hole elsewhere. Brown’s May revise relies on at least two major fund shifts, diverting $98.6 million in Proposition 63 funds to county health services and moving about $1 billion in Proposition 10 (First 5 Commission) dollars to Medi-Cal.

The Pew Center article lists "five ways states hide deficits." For example, Gimmick #1: Putting off payments. California has a handle on this one - we use it extensively. The easiest one was a simple bookkeeping entry. We dated State employee payroll checks for June 2009 payroll July 1 instead of June 30. This was the least problematic of our State Government "putting off payments."

Gimmick #2: Accelerating revenue was used when we increased our income tax withholding tables and accelerated Corporate Tax estimate payments.

We've basically used up all possible versions of Gimmick #3: Using temporary money for recurring expenses.

The Legislature this year used Gimmick #4: Counting on savings that aren’t likely to materialize.

And Gimmick #5: Counting on revenue that isn’t likely to materialize is the key element in what appears to be a final budget agreement.

So the Legislature and Moonbeam cobbled together some budget just as happened in previous years. But it won't solve any real problems other than getting the Legislators and state vendors paid.

As I've noted before, the one major "structural" problem in California's government is Proposition 13. We rely too heavily on volatile tax sources like income, corporate, and sales taxes. A greater share of government funding needs to come from property taxes. I've outlined previously how the Proposition 13 system should be revised,  as follows:

• Proceed to use the Brown Corporation Tax proposal;
• Cut the current Personal Income Tax to generate a third less revenue;
• Reduce the state sales tax back to 5% (from 6%); and
• Increase the Proposition 13 property tax rate from 1% of assessed value to 1½% of assessed value and put two-thirds of the revenue derived from the 1½% in a state special fund to fund education, from pre-school to graduate school, and to assure health care and day care for infants, toddlers, and all students.
• Remove property other than owner-occupied residential property from the assessed value near-freeze of Proposition 13.
• In the case of rental residential property, the assessed value should be tied to changes in tenants and rents paid by new tenants combined with appropriate renters tax credits.
• In the case of all non-residential property, the assessed value should be increased 10% a year until it is equal to market value.
• Restore and fund from property tax revenue the Williamson Act to conserve agricultural properties.
• Establish a spending cap (general fund and special funds, exclusive of federal funds and enterprise funds) that is equal to a 1990-91 as base spending year:
  • for spending other than spending for K-12 schools and prisons the base year adjusted by the cumulative change in the CPI and the cumulative change in population,
  • for K-12 school spending the base year adjusted by the cumulative change in the CPI and the change in the number of students attending all K-12 schools, and
  • for prison spending the base year adjusted by the cumulative change in the CPI and the change in the offender population, all more or less as described in the Republican proposal.

A spending cap would be critical. Californians, as historically reflected by state spending, lack the discipline to not squander monies in good revenue years. But there's virtually no chance the voters would overhaul Proposition 13.

The Brown Administration had its one chance to make history by presenting a balanced budget for California on January 10, a budget balanced on cuts. It would have been unacceptable to everyone. But no one would have been able to find a legitimate way around it. And he could have called for the voters to solve the revenue problem.

But he didn't do that. So the Republicans are the morons and we have another gimmick-filled problem budget from the Democratic majority. And we're all here in the Magic Kingdom....

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Addendum: Confirming my view that our State has become the Magic Kingdom, we have this in the LA Times:

"That's nearly $11 billion in new revenue that the Democrats assume will magically appear," said Senate Budget Committee Vice-Chairman Bob Huff (R-Diamond Bar). "That's a wand that Harry Potter would be proud to wield."

The coming shift in California politics, or maybe politics as usual?

In the June 2012 primary election Californian's have a chance to significantly alter their state government.

Some think that the voters made a significant change when they approved the California Top Two Primaries Act in June 2010 and the Voters FIRST Act in November 2008. Maybe. But what we do in June 2012 will determine whether we have the ability as rational voters to take advantage of the changes or whether existing interest groups will just simply adapt to effectively keep things pretty much the way they are.

The 2010 Top Two Primaries Act requires that candidates run in a single primary open to all registered voters, with the top two vote-getters meeting in a runoff. That seems radically different than having candidates run in party primaries with the winners in each party meeting in a general election.

I'm not so sure we Californian's have the political capacity to make this work for us. It isn't radically different from the recall election process that gave us Governor Arnold Schwarzenegger. And the first tests of the process in April didn't seem to offer much promise.

But one year from now we have a chance to make the two Act's work for us at the same time to create a viable State government.

The 2008 Voters FIRST Act established the Citizens Redistricting Commission giving it, not the Legislature, the task of handling reapportionment of State Legislative Districts in 2011. In November 2010 the voters added Congressional Districts to the task.

Last Friday the Commission released the first draft of the 80 State Assembly Districts of about 465,674 people, 40 State Senate Districts of about 931,349, and 53 Congressional Districts of about 702,905.

Whatever else one can say about the results, the Commission did its job as outlined in the Act:

The commission shall establish single-member districts for the Senate, Assembly, Congress, and State Board of Equalization pursuant to a mapping process using the following criteria as set forth in the following order of priority:

(1) Districts shall comply with the United States Constitution. Congressional districts shall achieve population equality as nearly as is practicable, and Senatorial, Assembly, and State Board of Equalization districts shall have reasonably equal population with other districts for the same office, except where deviation is required to comply with the federal Voting Rights Act or allowable by law.

(2) Districts shall comply with the federal Voting Rights Act (42 U.S.C. Sec. 1971 and following).

(3) Districts shall be geographically contiguous.

(4) The geographic integrity of any city, county, city and county, local neighborhood, or local community of interest shall be respected in a manner that minimizes their division to the extent possible without violating the requirements of any of the preceding subdivisions. A community of interest is a contiguous population which shares common social and economic interests that should be included within a single district for purposes of its effective and fair representation. Examples of such shared interests are those common to an urban area, a rural area, an industrial area, or an agricultural area, and those common to areas in which the people share similar living standards, use the same transportation facilities, have similar work opportunities, or have access to the same media of communication relevant to the election process. Communities of interest shall not include relationships with political parties, incumbents, or political candidates.

(5) To the extent practicable, and where this does not conflict with the criteria above, districts shall be drawn to encourage geographical compactness such that nearby areas of population are not bypassed for more distant population.

(6) To the extent practicable, and where this does not conflict with the criteria above, each Senate district shall be comprised of two whole, complete, and adjacent Assembly districts, and each Board of Equalization district shall be comprised of 10 whole, complete, and adjacent Senate districts.

The problem facing anyone with this job is the complexity of creating 80 Assembly Districts of approximately the same size regardless of criteria used, but when you are told not to consider political parties, incumbents, or political candidates it is actually harder - it's easier to create boundaries with the sole objective to assure the reelection of incumbent office holders.

The point is to get rid of Districts that look like this District (click on the image to see a larger version):

The current State Senate District on the left puts together the people of these two communities:

1. Compton (indicated by the marker near the top right), incorporated in 1889, has a mostly lower income population of 96,455, is still often thought of as a primarily black community though Latinos are the largest ethnic group in a city that used to be notorious for gang violence, primarily caused by the Bloods and the Crips, plus Sureños gangs that are allied with the Mexican drug cartels, though latest reports show that Compton's violent crime rate has been reduced by 30% over the last ten years due to significant efforts of the population to reduce crime.
2. Palos Verdes Estates (on the ocean), incorporated in 1939, is a high-end residential community of 13,438 (mostly white) with no traffic lights and relatively limited commercial shop areas masterplanned by the noted American landscape architect and planner Frederick Law Olmsted, Jr., which regulates community aesthetics and architecture through an Art Jury, a non-governmental organization which must approve any exterior alteration to any building, fence, sidewalk, or other structure; most residences and business buildings within the city limits have uniform Mediterranean red ceramic tile roofs and often feature architecture with column and arch motifs, resembling European coastal communities; a substantial amount of land in the community is planned and dedicated as undeveloped open field habitat, an extensive system of hiking trails, and road bike lanes and mountain bike trails with equestrian facilities and horse trails are nearby.

The new proposed new Senate District including Compton includes many communities of people of mostly similar ethnic and economic makeup. And the proposed new Senate District including Palos Verdes Estates looks like this (click on the map to see a larger version):

The proposed district includes coastal communities but the boundary had to wrap inland to get enough people - it includes Beverly Hills not Compton.

Was this a perfect solution? Given the criteria to place together populations which share common social and economic interests, in which the people share similar living standards, use the same transportation facilities (limo's), have similar work opportunities, or have access to the same media of communication relevant to the election process, one can say it is as near to perfect as one can achieve.

The process is not without results that are imperfect. It's interesting to examine the North Coast, the area that is currently contained in Assembly District #1 and California Congressional District #1. The graphic below indicates how the current Assembly, Senate, and Congressional districts compare with the proposal click on the map to see a larger version):

What you discover is that the current Assembly District and the proposed Assembly District are similar though the latter is geographically larger because of population shifts in California.

Then you notice that the current Senate and Congressional districts wander over to an area around Sacramento while the proposed districts continue down the coast line to the Golden Gate, including Marin County.

One could argue that Crescent City residents might have more in common as with those in rural parts of the Sacramento Valley than with those in wealthy Marin, but in fact when one moves progressively from the south end of the proposed new Senate District, many Marin residents have much in common with many Sonoma County residents who have much in common with many Mendocino County residents who have much in common with many Humboldt County and Trinity County residents, who have much in common with Del Norte County residents.

The Senate and Congressional Districts containing Marin residents will change substantially:

Whoever designed the current Marin districts did something "interesting." The current Assembly District is about the same as the proposed one. But Marin is included with a San Francisco Assembly District in its current Senate District while it's included with Santa Rosa to the north for enough population for a Congressional District - but not San Francisco.

The proposed new configuration has an interesting effect on San Francisco. While it's Assembly and Congressional Districts aren't changed, it finally gets to be in a single unified Senate District if the proposals are approved as is.

So it seems this all works out. But there is one area that is sure to be contentious - Santa Rosa and the area of Sonoma County immediately surrounding it:

Here's the odd thing. In 2000 Santa Rosa and it's surrounds was included in an Assembly District that included much of Napa County and over into the Sacramento Valley almost to I-505.

But it was included in the North Coast Senate District and in a Congressional District with Marin which was not in that Senate District.

The Santa Rosa situation remains odd. The proposed Assembly District is similar to the current one. But it is proposed to include the Santa Rosa Assembly District with an Assembly District that includes Lodi to create a Senate District. On the other hand, Santa Rosa is included in a Congressional District that crosses the Sacramento Valley including Yuba City and into the Sierra's including communities like Frenchtown.

The apparent first need was to reduce population of a contiguous coastline North Bay Senate District population by about 250,000 to make it a viable size.  In the end, there may be no way to avoid this kind of oddity because of population shifts. If combining this way promotes the stated goals in 90% of California while not promoting some political objective, then we probably are stuck with situations like this.

Will the voters that created this Commission support it publicly or will we have the usual government agency public hearings where only opponents turn out in large numbers? Can the Citizens Redistricting Commission stand up to hostile attacks from interest groups on its proposal? I hope so, because it is clear they did a credible job.

But the real question is will it be politics as usual in 2012 after the dust settles? When it comes to encouraging people to run for office and voting for independent-thinking candidates, we Californians don't have a very good track record.