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Thursday, November 4, 2010

Thursday, November 4, 2010

After the Deluge

It will take some time to grasp the meaning of Tuesday's election for higher education and the state in general.  But it is possible to take some preliminary bearings.  Clearly the biggest victory was the defeat of Meg Whitman.  While Jerry Brown has never shown himself to be a friend to UC, he does not share Whitman's conviction that the state's problems lie in the coddled public sector.  Consequently, he does not seem to share her vision that the way to economic recovery is to fire thousands of public workers, skew the tax system even more in favor of the most wealthy, or demonize poor immigrant workers (who apparently have not sacrificed enough for their betters).  In addition, Brown is more likely to address pension questions through negotiations with unions than through an effort to re-write retirement through a fear-driven, personally funded, initiative.  Voters also moved the budget process forward with the passage of Proposition 25 which overturns the 2/3 rule for budgets.  But the question here is whether half a loaf is really better than none.  While the budget no longer requires a 2/3 majority raising taxes still does--so the majority still may be unable to find the revenue to fund the programs that the state needs.  

Indeed, we should recognize that the election provides little comfort to those who think that the state faces a revenue problem--Proposition 24 which would have rolled back tax boondoggles granted to corporations failed, Proposition 26 which extends the 2/3 requirement from taxes to fees, passed, Proposition 22 which would limit the State's ability to draw funds from cities and county revenues passed, and Proposition 21 to aid state parks failed.   The Democrats may be in control of the state government but whether they can find revenue enough to help both education, the poor, the infrastructure, etc remains doubtful.

On the national level there is little reason to hope.  The Republican victories in the House and in many of the Governorships bodes badly both for getting out of the Great Recession. increasing unemployment, or getting the Federal government to invest in the country.   Obama is likely to seek common ground with the Republicans on Arne Duncan's plans to have markets drive public education.  And whereas voters in Arizona and Florida rejected plans to cut funding to schools, voters in Washington and Oklahoma refused to raise to support schools.  Indeed, it is possible to see Proposition 24 as a battle between schools and corporations where corporations won.

In all, not a pretty picture. 


cloudminder said...

personally, I don't think all is lost.
yes, 24 went down but there are other pieces of legislation to be revived in 2011- the challenge is getting them visibility on the local news and informing the citizenry about them. I am referring to bills like: "Yee Reintroduces Corporate Tax Accountability Legislation
Tuesday, September 21, 2010

SACRAMENTO – SB 1391, authored by Senator Leland Yee (D-San Francisco), would have allowed the state to recoup corporate tax credits given for the purpose of creating jobs if the business instead decreased jobs or moved out of the state. Despite earlier passing the Senate on a 22-11 vote and the Assembly on a 46-28 vote, the bill failed by 1 vote on concurrence.

Yee reintroduced the bill (SBx6 20) in the sixth extraordinary session.

Tax expenditures for corporations are often created with the argument that they will create jobs and fuel economic development. Yet, under existing law, it is nearly impossible to track which companies are receiving tax credits and if those subsidies are meeting the job creation goals of the expenditure. Corporations are even permitted to take taxpayer money and relocate to other states.

“It is wrong for California to provide upwards of $14 billion in corporate tax credits without transparency and accountability,” said Yee. “It is unconscionable that some lawmakers are willing to vote for devastating cuts to social services and education, and then oppose commonsense legislation that would stop corporations from getting billions of dollars in tax breaks. If a business fails to keep its word to create jobs, or in some cases even move out of the state, taxpayers should not have to foot the bill.”

SBx6 20 would allow the state to recoup or “clawback” any future tax expenditures given to a corporation that fails to meet employment or investment commitments.

Specifically, this bill would require corporations to annually submit to the Franchise Tax Board what tax credits they are claiming along with the number of full-time jobs at the company. Corporations receiving tax expenditures would be required to payback the entire amount of any assistance if the corporation had a net decrease in the number of full-time employees in the state over a three year period. There would not be a hiring obligation, but rather a requirement that corporations maintain the same number of jobs if they receive public subsidies.

“This bill sets clear expectations for corporations and guarantee that the state’s investments yield measurable results in the form of job retention and creation,” said Yee.

Currently, 20 states have implemented similar corporate accountability for tax expenditures laws, including Arizona and Nevada.

Many corporations receive major credits and exemptions from dozens of state taxes. In fact, the tax credits passed as part of the September 2008 and February 2009 budget “solutions” will cost the state $8.7 billion in lost revenue from 2008-09 to 2014-15 and ongoing $2-2.5 billion yearly.

Unlike all other budget programs, tax expenditures are not required to be reviewed annually. There exists little spending control; there is no definition of problems or goals before a tax expenditure is created; there are numerous opportunities for tax evasion; and it is difficult to scale back or eliminate tax expenditure programs because it requires a 2/3 vote, while only a majority vote is required to establish such a credit.


and as I ask in my most recent post- if Yee is not in the state legislature - who takes up the cause?

cloudminder said...

also, please remember that Prop 25 passed- it is possible to inform people so that they fully understand and vote in their own interests. but we have to keep up the fight. not just sit idle for the next 18 mos licking wounds.

cloudminder said...

oh gosh, one final point sorry for the multiple posts! - you write: "While Jerry Brown has never shown himself to be a friend to UC,"
Jerry is an alum- and there shouldn't be purity tests for friendship with UC for the alumni group imo- i chalk it up to different perspectives. Also, one of the key comments Jerry Brown has made on the campaign trail and in his victory speech about one of his charter schools - the military one- is that he points out its graduates have gone on to UC as a measure of its success. Those comments don't strike me as coming from a non friend- but rather a friend that holds UC accountable. But we will see how it plays out.

cloudminder said...

also, bringing transparency to the Multi-BBBilliondollar auxiliaries at UC and CSU might also help the cause in CA. Bills like 2010's SB 330 would help.
okay, now i'm done, scouts honor.

Michael Meranze said...

Thanks for the comments. I am not advocating hopelessness. But I do think that we need to be clear about where we stand. I have hopes that Brown will be better this time around--last time he seemed to have too little appreciation of what his father had accomplished and that seems to be changed. And Prop 25 is part of the way there--but we also need to recognize that there is little to suggest that people are interested in raising revenue and little to suggest that Brown is prepared to lead that discussion. Maybe Prop 25 will lead to that. But there is an argument that Prop 25 passed because it would dock the pay of legislators after they failed a budget deadline. I am hoping that is wrong--but given the other proposition results it isn't completely out of the question.

I also think that we have to recognize that there is less to cut in the public sector than people want to believe. More Transparency will help--and in UC more focus on the core systems would help--but the propositions all share a genuine reluctance to trust the government and government institutions with the money they need. If people are going to insist that there has to be more government cuts before they will consider more revenue then it will be a long struggle. It is not an argument for passivity to say that.

Unknown said...

So it will be interesting to see what a Democratic governor with a Democratic Legislature and a majority vote for the budget will do to the University. Some have said that the only reason UC and CSU didn't get bigger cuts this year was Governor Schwarzenegger'S insistence that they not be cut further.

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