Position Papers

California Budget Reform

1) Under existing law, every year, the Legislature and the Governor set a budget based on what they expect revenue to be. Instead, they should set the budget on the lower of:

1) what they expect revenue to be, or

2) what the revenue actually was in the previous fiscal year. 

When revenue is growing, the extra amount will earn interest. When revenue is falling, the legislature will have one year's lead time; they can spread the necessary cuts over two years.  It will take some years to phase in this proposal. To be conservative, let's give it 10 years. After 10 years, we will collect money in the current year, put it in an interest-bearing account, and not spend it until the next year. What's in that account is what we have to spend. 

A fiscally responsible Governor can begin to implement such an approach immediately. Such a Governor would line-item veto across the board a small amount, to get the state on course for hitting the mark in 10 years' time. Assuming fiscally conservative Governors, we could actually effectuate this without a Constitutional amendment, just by using the line-item veto which already exists. 

This approach prevents the Legislature and Governor from assuming unrealistically that revenue will be higher than it actually is. Indeed, it takes the assumption work out entirely.   We should budget on the basis of the amount of money we know the state has, not the amount of money politicians wish it had.  
  
2) If the state experiences a revenue shortfall or expenditure rise greater than 2% in any given quarter, as measured by any one of the following (Finance Director, Legislative Analyst, Controller), then the Legislature must put aside all other business and bring the budget within balance in 30 days.   If the Legislature has not succeeded, then automatic expenditure cuts across all items (to the extent permitted by the US Constitution), adequate to make up the short-fall should take effect. 

 3) When the state budget deadline is reached, but no new budget has been agreed upon, the previous year's budget should continue. This creates a continuing appropriation, that prevents drastic cuts in services. Here are other states that have a provision for continuing appropriations such as I'm proposing for California: Alaska, Arizona, Idaho, Indiana, Kansas, Minnesota, Nevada, New Hampshire, North Dakota, Oklahoma, and Wisconsin. 

  4) Until other reforms are made, the Governor should exercise the line-item veto to cut expenditures down to the level of realistic revenue. Instead, Governors are often co-opted into the process of spending more than the state has, by promising not to line-item expenditures favored by legislative leaders in return for getting the Governor's own priorities into the budget. The budget is presumed to be balanced based on unrealistically high expectations of revenue, or by shifting funds between accounts. This gives up the one essential function the Governor has for preventing budget deficits. 

Unfunded State Liabilities

The state has more than $64 billion in unfunded pensions, and $22 billion in state employee retiree healthcare obligations above what it can pay. Those numbers are from 2016; they have grown since then. The state appropriates money annually to fund its pension and retiree health payouts that year. This is a hand-to-mouth existence, putting the state at great risk if pension payments or retiree health benefits rise. California should take advantage of currently low interest rates to bond the state’s unfunded liabilities. At 3% interest, the annual charge to the budget would be under $4 billion, using a 40-year payback. California would thus smooth out this otherwise potentially volatile expenditure, and lock in historically low interest rates.

Going forward, the state needs to make reforms in its pension system using a more realistic assumption of rates of return and switching to a defined-contribution rather than a defined-benefit system to the maximum extent allowed by constitutional law. The reforms recommended by Govern for California are particularly worthy of consideration.

No-Bid Contracts

On June 20, 2017, the Sacramento Bee commented on a State Auditor’s report that had just been released. “The report estimates that the state spent $44 billion on noncompetitive contracts worth $1 million or more between 2011 and 2016, a substantial sum that auditors said underscored the need for better management.” For all state contracts in excess of one-half million, competitive bids should be required.

Earmarked Projects to Gain Votes

The Los Angeles Times of April 6, 2017, reported, under the headline: “Divided Senate approves gas tax and vehicle fee increases to raise $5.2 billion annually for road repairs.”

The plan was forcefully pushed by Gov. Jerry Brown as a necessary response to 23 years without a gas tax increase, which has resulted in a backlog of $130 billion in repair and replacement projects throughout the state.

The governor and legislative leaders ended up giving nearly $1 billion to specific transportation projects in the districts of legislators who had been on the fence before voting for Senate Bill 1.

Appropriations should be in broad categories, not identified to specific districts or Legislators. The Congress abolished earmarks; the California State Legislature should do the same.

Cap-And-Trade Revenues

The August 2017 auction of cap-and-trade certificates brought $935 million to California government revenues. The Legislature was not long in spending it. $640 million was allocated to Governor Jerry Brown’s high-speed rail project. (article)

In future years, 25% of the revenues generated by California’s cap-and-trade program are earmarked for the high-speed rail line. This project, championed by Governor Brown, is now more than 10 years behind budget, and more than three times its originally estimated cost.

Cap-and-trade requires businesses with large green-house gas production to pay for a certificate to emit. This has added to the cost of doing business in California.

Instead of using the cap-and-trade revenues for the high-speed rail, the state should direct the funds earmarked for the train to retire the outstanding bonds that were sold to construct the train. When those bonds have been retired, the cap-and-trade revenue should be directed to increase the California earned-income-tax-credit. That will augment the earnings of the poorest workers in California, while expanding the number of jobs available here. This will offset, in part, the effect of the cap-and-trade program that increased the cost of doing business in California. Virtually every other interest group has laid claim to the money for other pet-projects.

Energy

Energy consumption can be divided into two major sectors – electricity generation to power our homes, offices, factories and, in the future, our automobiles and transportation energy for our cars, trucks, airplanes and most ships.

In electricity generation, there are many options to improve our generation infrastructure. Nuclear energy is an obvious, safe alternative, which the United States needs to develop much more fully; previously, we led the world in nuclear generation. Now, while our collection of 104 reactors in use remains static, there are 331 reactors supplying power in 29 other countries around the world. New generations of reactors are being phased in elsewhere; we must avail ourselves of this safe and low-cost energy technology. California needs to eliminate unnecessary litigation and regulations that block development of nuclear energy facilities and drive up their cost. American power companies have submitted applications to build some 26 new reactors in the United States; our country needs to see these projects to completion.

Wind systems are now close to providing electricity at near grid parity in pricing. Solar systems for both concentrated applications in desert regions and rooftop usage in urban areas are also becoming more competitive as entrepreneurs and investors develop ever more cost-effective solutions. Projections that wind, solar, geothermal and even wave/tidal solutions will vie with power generation from coal are encouraging. These alternative energy resources should also be supported in California’s research universities.

Government should become an early adopter of the new renewable-generation technologies now being brought to market. Governmental purchasing power would stimulate demand in these fledgling American industries and help reduce their cost as manufacturing volume increases.

Oil dominates the transportation energy sector; over the last decade, oil imports have peaked (in 2005) and biofuels have grown, now accounting for over 8% of gasoline consumption and some part of diesel usage. California should support research at its universities in the science of increasing our biofuel output and increasing the transition of our transportation fleet to biofuel and, ultimately, electricity-powered vehicles where energy efficiency is optimized. (Just touch an automobile engine and then an electric motor to realize how much wasted heat energy is consumed in internal combustion engines!)  

Opiod Crisis

The California Department of Public Health reported almost 2000 opioid overdose deaths in California in 2016. https://pdop.shinyapps.io/ODdash_v1/. These deaths, and increased addictions, need to be countered in the immediate and the long term. The national opioid crisis has been termed an epidemic by the Centers for Disease Control. Its origins appear to be the massive increase in prescription of opioid pain-killers over the last decade, coupled with an increased availability of illegal opioids both domestically and from foreign sources. Here are steps that California needs to continue, and to develop, to respond to this epidemic.

1) The California Department of Public Health has contacted medical care providers in the state with a menu of available assistance for patients exhibiting increasing opioid dependence. This informational contact should be continued. (learn more)

2) The Medical Board of California should be relied upon to provide the best practices for medical professionals who prescribe opioids. Their current guidance is almost three years old and should be updated. It is a delicate balance between pain management and avoiding risk of addiction, on which professional medical guidance is most helpful. (learn more)

3) Naloxone is an immediately effective antidote to opioid overdose. California needs to make Naloxone available to all first responders in the state. This program is currently being administered by the California Department of Public Health and should be continued.

4) The state of Maine has had some success with a regulation setting a maximum dosage for opioids-per-patient on an annual basis. The Medical Board of California should be tasked with deciding whether to enforce such a limit in California. (learn more)

5) The federal commitment to solving the opioid epidemic has focused on importation of opioids from other countries, especially China, Mexico, and Canada. California should assist with federal efforts to crack down on illegal drug imports.

6) The new federal budget will likely include increased funds for assisting state efforts to curb the epidemic and deal with its consequences. California’s Congressional representatives should ensure that California’s share of federal assistance is at least proportionate to our share of the national program.

Taxes

Living Within Our Means

California should spend no more than it raises in taxes (except for long-range infrastructure projects suitable for bonds). Further, California should adhere to a policy of not raising taxes, barring a true (and rare) emergency. State government should budget based on existing taxes, rather than proposing increased expenditures fueled by increased taxes. The natural growth of the state’s revenue, as our population and economy grow, is enough for our state’s reasonable spending needs. We have to learn to live within our means. Others are constantly imagining new spending programs and proposing higher taxes to pay for them. It requires discipline to spend no more than we have, and a respect for the fact that the government doesn’t own the revenue it collects—the people do.

Comparative State Tax Burdens

State and Local Taxes

• California - 11.4% (#4)

• NY - 12.6% (#1)

• NJ - 12.3% (#2)

• AZ - 8.9% (#34)

• TX - 7.5% (#47)

Property Taxes (average percent of market value)

• California - 0.81% (#34)

• NY - 1.64% (#11)

• NJ - 2.38% (#1)

• AZ - 0.80% (#36)

• TX - 1.90% (#6)

Highest-Bracket Income Tax

• California - 13.3 (#1)

• NY - 8.82% (#8)

• NJ - 8.93% (#6)

• AZ - 4.54% (#40)

• TX - 0 (#51)

Gas Tax (cents per gallon)

• California - 53.5 (#1)

• New York - 42.64 (#3)

• NJ - 14.50 (#49)

• AZ - 19.00 (#43)

• TX - 20.00 (#42)

Income Tax at $50,000

• California - 4.34%

• NY - 5.46%

• NJ - 2.54%

• AZ - 3.06%

• TX - 0

Sales Tax

• California - 7.5% (#1)

• NY - 4.0% (#38)

• NJ - 7.0% (#2)

• AZ - 5.6% (#28)

• TX - 6.25% (#12)

Sources: Tax Foundation, Forbes, American Petroleum Institute

Adopt Business Tax Reform to Incentivize Hiring People in California

Multi-state tax rules should encourage hiring in California. Many companies do business across state lines. They have income from many sources. Each state wants to tax that income. Some states simply apply a percentage formula, depending on how much of the business' product is sold within the state. For agriculture, extractive industries, thrift and banking industries, California uses a more complex formula. It includes reference to the numbers of employees in California as opposed to other states, the amount of property (including real property) owned in California as opposed to that owned in other states, and the amount of sales made in California. Since California's business tax is high, 8.86%, the 8th largest among the 50 states, the result of using this three-factor test is to create an incentive for companies with operations in many states not to expand employment in California. California should go to the single-factor test, using sales, for all businesses, as other states have done. This removes the tax penalty for expanding employment, or building plants, within California.

Here are the states that have already made this kind of change: New York, Texas, Massachusetts, Illinois, Oregon, and Arizona.

Eliminate Taxes on Productive Equipment

After 2003, California became one of the very few states that taxes machines employers purchase to make products. Forty-four other states exempt manufacturing equipment from their sales or property taxes, 20 others explicitly exempt research equipment. In 2014, this tax was partially repealed. The state should repeal this tax in its entirety. California should apply its tax to final products, not the machines that are used to manufacture those products, or businesses will locate in other states that don't tax the means of making goods. This will also result in higher employee productivity in California, which should increase employee wages. The data from the 2014 changes show that this change will gain revenue for the state, not lose it.

File One Income Tax Return, Not Two

Hours are wasted by Californians having to fill out a separate income tax form, different from their federal returns. For individuals, the state income tax should be a set percentage of what the individual pays in federal income tax. The only departures from this should be what federal law compels: for instance, that interest on federal bonds and the interest earned on bonds issued by other states cannot be taxed by the states.

Preserve The 2/3 Requirement for Tax Increases

Under current law, any tax increase requires a 2/3 vote, and that should continue. Otherwise, California will increase its taxes even more. We already are the state with the highest marginal income tax rate. California is not so unique in requiring more than a majority vote for tax increases, though those wishing to spend money often try to say we are. These other states require 2/3:  Arizona, Arkansas, Florida, Louisiana, Oregon, South Dakota; these other states require 3/5: Delaware, Mississippi, Nevada; this state requires 3/4: Oklahoma.

California’s Competitiveness

Since it started ranking states as the best and worst for doing business in 2006, up until the most recent measure, Chief Executive Magazine has placed California at the single worst, #50, for every year. This is an abominable record. It advertises that our state is hostile to business, and that companies thinking about locating in California would do better almost anywhere in the US. (“CEOs Select Best, Worst States for Job Growth and Business” & “2017 Best & Worst States for Business”)

Regulatory Reform

Except in the case of emergency of health or safety, California should issue no new regulations without conducting an analysis that California needs to exceed whatever federal standards exist in the relevant issue, and whether the cost of California doing so, including the cost in lost jobs, is outweighed by the benefits to California.

California should undertake a rolling sunset of all existing regulations that have been in force for more than 25 years, covering roughly 20% of all these regulations every year. The regulations would automatically expire, unless the state agency affirmatively and specifically re-promulgates each one, having passed the tests required in the immediately preceding paragraph.

All new regulations should carry an automatic sunset within 10 years. If they are valuable, they can be re-promulgated – but based on evidence relevant to the current time, not the past.

Revenue Derived from Regulatory Charges

Whenever the state imposes regulatory charges, the revenue should be directed to lowering the burden on doing business in California that resulted from the regulation in question. See, for example, the proposal that the cap-and-trade revenues currently directed toward the high-speed train be redirected to increase the earned-income tax credit for low-income Californians.

Litigation Reform

California’s legal system is costly, inefficient, and hinders job growth. Indeed, the United States Chamber of Commerce ranks California as having one of the “worst” legal liability systems in the United States (44th out of 50). (Source: 2008 US Chamber of Commerce State Liability Ranking Study “2008 Chamber Study”, page 15)

The Chamber further notes that businesses evaluate legal liability systems when they make major business decisions, such as locating in a particular state (Id. at p. 9). Every frivolous court case strains our legal system and imposes unnecessary costs on small, medium-sized and large businesses. We can reduce these unnecessary court cases very simply: if someone starts a court case and loses, that loser should pay the winner’s court expenses. We should apply this rule to cases between parties that have contracts and consequently encourage businesses to settle their disputes out of court. In applying it to tort lawsuits, we should be mindful that access to justice not be precluded by the prospect of paying huge attorneys’ fees run up by the other side. So, some portion of the other side’s legal costs should shift to the losing party, with the judge able to decide what is appropriate in each case.

California’s present legal system is like a lottery ticket, but with almost no price to enter. Thus, many frivolous lawsuits are filed. Why not? There's no downside. The “loser-pays” rule will immediately reduce unnecessary frivolous litigation and promote a more efficient legal system.

This idea is not theoretical. Our neighboring state Arizona has implemented this very concept (Arizona Revised Statutes §12-341.01). Not surprisingly, the US Chamber of Commerce ranks Arizona as having one of the “best” legal liability systems in the country (14th out of 50) (Id. at 15). States that have enacted litigation reform show improved economic and job performance. (“The Link Between Liability Reforms and Productivity: Some Empirical Evidence/ Comments," Brookings Papers on Economic Activity (1998) (Kessler, Shepherd, Klevorick and Campbell).

Employment Regulations

1) Unless employees by secret ballot vote to the contrary, time-and-a-half must be paid for hourly-wage employees in California who work more than 8 hours a day. Federal law requires the same after 40 hours a week. The difference penalizes California employers and employees who choose to work four ten-hour days, for instance. California should conform to federal law.

2) For all of its prior history, California exempted agricultural workers from the time-and-a-half requirement after 8 hours. This reflected the reality that farm work needs to be done when the season is at hand. However, this was changed in 2016, phasing in a new system where agriculture is treated no different from other industries. The result is an increase to the cost of growing crops in California.

Employers will incur an increase in cost by undertaking the administrative burden of swapping out groups of workers after 8 hours and bringing in a new group for the 2 hours in a typical 10-hour day during harvest. There is no guarantee that employers will simply pay the time-and-a-half to the original group of workers. Other employers will simply not carry on operations after 8 hours, resulting in a loss of take-home pay for farm workers. This law should be repealed.

3) California law does not require overtime pay for professionals; a 2005 law creates the presumption that an employee making more than $36 an hour is such a professional. However, this requires a huge amount of recordkeeping of actual hours. A simpler approach would exempt any worker making more than $75,000 a year.

4) Under existing law, all workers on "public works" must be paid prevailing wage. This has been defined to mean any project receiving state funding, with the result that volunteers can no longer be used for teaching, environmental clean-up, etc., if the project receives any state money. The law should be changed to allow volunteer teachers and other service-providers.

Immigration

California needs immigrants. Our high-tech sector is dominated by engineers and entrepreneurs who were not born in America. Our farms are worked by immigrants, some who came here legally, some who did not, but the overwhelming majority of whom add value to our state. If we deported immigrants working in nursing homes and health care facilities, neither would be adequately staffed.

Immigrants are doing well in our schools and universities, whether they arrived with papers or were brought across our border without them, carried in their parents’ arms. The absurdity of deporting immigrants who add value to our state and our country is clearly shown in the practice of deporting those whom we invite to receive advanced degrees at California’s universities—and then we force to leave. Paraphrasing a great California entrepreneur, Scott McNealy, we should staple a green card to every Ph.D. diploma from the UC system.

In 1994, California passed Proposition 187, cutting off all social services to those who entered our country illegally. A federal court struck down Prop. 187, and Governor Davis refused to appeal.

The approach of cutting off social services to immigrants was wrong. The prospect of school-age children idle on the streets of our cities, open to being recruited by gangs instead of getting an education, is unconscionable. So also is the thought of a sick person too afraid to go to a clinic. And if his or her ailment was communicable, all of us would be at risk. The right was wrong on this.

The left is wrong, too. Some on the left, driven by their strong aversion to President Trump, led the state to become a “Sanctuary State.” Even when local law enforcement wants to cooperate, this law prevents California sheriffs from turning over criminals appropriate for deportation unless the federal officials had obtained a court order for each of them. Immigration arrests thus have shifted from safe areas, like county jails, to street arrests, in neighborhoods and homes, where the danger to law enforcement is much greater, and, incidentally, the likelihood of picking up someone else than the intended individual is greater. Some local law enforcement, however, prefer not to send information to the federal immigration authorities as a routine matter, citing their concerns about trust in the local immigrant communities. The decision should be up to the local law enforcement. The current “Sanctuary State” law prohibits such local decision-making.

Also, some on the left say no to any physical barrier at the border. Yet California already has such a physical barrier. If an opponent to any physical barrier is consistent, she or he would tear down the border barrier at San Diego or Calexico. They would also remove the immigration and custom desks at our airports. When returning from out of the country, why not allow individuals to pass directly to ground transportation, rather than waiting in line at customs?

Furthermore, secure borders achieve more than immigration goals. Our nation and our state are experiencing an opioid epidemic; most of those illegal drugs are smuggled across our border. Open borders would give up on cutting off that flow.

The sensible, practical, economically wise, and also compassionate approach is to be found not in the far right or the far left. Here is how an independent, moderate sees the solution. Those who entered our country illegally and broke our laws should be deported. California law enforcement officers should make their own decisions, locality by locality, as to how best to coordinate with federal authorities in doing so. Those who are already in the US, and have not committed any crime other than entering illegally, should be offered full participation in our country as citizens, as of the date the border is secure. The border is not secure simply because more leave California than enter; it is secure when virtually no one enters illegally. A physical barrier is not necessarily required everywhere, but it is absurd to exclude its value in some places. The United States has the right to decide whom we invite to enter our country, and whom we invite to become fellow citizens. Those should be individuals with skills that our country needs; and those who have already started making, or re-making, their lives here.

Infrastructure - Roads

The increase of 12 cents per gallon on gasoline, 20 cents per gallon on diesel, and from $25 to $175 on vehicle registration fees, enacted by the Legislature in 2017, was promoted as bringing enough revenue to pay for more than $5.7 billion in transportation improvements: $3.24 billion more for roads, $1.49 billion for state highways, $700 million for public transit, and $250 million for traffic reduction (learn more). These increases will push California’s gas tax from #7 among the 50 states, to #1.

Undoubtedly, this will lead to a loss of jobs, as cost of living for employees is a key factor in businesses’ decision where to locate. (There is some benefit, of course, from improved roads, but no one would predict that we will so improve our roads as to offset the effect of a one-third increase in gasoline taxes from the point of view of locating jobs in California, if an employer could choose another state instead.)

Could we have found $5.7 billion elsewhere? Yes. The Federal Railway Administration reported in January of 2017 that Governor Jerry Brown’s high-speed rail project will likely cost $10 billion just for the first segment (118 miles) alone. Whatever the eventual revenues from ridership (grossly overly optimistic at the time the state’s voters approved the project), the final cost is highly likely to exceed revenues by at least $5.7 billion. California voters were willing to bind our state to pay back the bonds necessary to construct a rail project that will cost us at least the amount the gas tax, diesel tax, and registration fee increase would bring.

The premises that convinced them to vote yes have all changed. Instead, the money should be spent on transportation improvement projects with a realistic probability of being done on time (not seven years behind schedule like the “fast” train already is), and of being of real benefit in diminishing congestion and commute times. The financial steps necessary to make this change require paying off the fast-train bond holders, squaring accounts with the federal government, and replacing the old bonds with new ones for road construction and repair. These steps should begin at once. If the prospect of doing so is realistic, then the gas tax increase can be repealed—and California can go back to being only #7 worst instead of #1 worst in the country.

Infrastructure - Water

Water is imperative for all aspects of California's growth: agricultural, industrial, commercial, and the healthy rearing of our children. However, California’s water supplies are threatened by our natural drought cycles. Increased development in southwestern states such as Nevada and Arizona also impact our water resources as California now receives less water from the Colorado River than it has in the past.

Storage

Climate change has led to more rain and less snow falling on California. Data from fifteen years ago already showed an alarming amount of water runoff into the Pacific Ocean: more than 26 million acre-feet of the 193 million acre-feet of annual precipitation. (Cal Dept. of Water Resources data, quoted in the Sacramento Bee, December 22, 2002). With the trend toward rain over snow, this waste has become even greater.

Seven years ago, The Public Policy Institute of California estimated that the greatest potential for new water supply between then and 2030 was improved urban efficiency, storage, and recycled municipal water. California needs more storage of all kinds: surface storage, underground storage, and recharging aquifers. New crop research has demonstrated a high tolerance for flooding fields, thus putting the water into aquifers that have been overdrawn during the drought.

The political left has been unwilling to build any more storage, although the 2014 initiative directed that $2.7 billion of the $7.5 billion of approved bonds go to that purpose. (No storage project had been approved as of June 2016.) (learn more)

The political right, while supporting more storage projects, has been unwilling to acknowledge the reality of climate change, believing, contrary to scientific evidence, that the snow pack will continue to serve as the state’s primary form of water storage.)

The solution is to reject the far left and the far right. A centrist, moderate approach is also the most pragmatic: store the water that would otherwise flow out to the ocean. This would allow us to revitalize the farm economy of the Central Valley, and the thousands of workers and their families that depend upon it. It would allow water to draw upon for environmental purposes when the drought years return.

Desalination

In 1961 President John F. Kennedy said, “If we could ever competitively, at a cheap rate, get freshwater from saltwater, that would be in the long-range interest of humanity (and) would dwarf any other scientific accomplishments." We are close to attaining the desalination technology necessary to achieve this great scientific accomplishment. Currently desalination is becoming ever more practical, as the cost of the energy required has declined.

California’s regulatory environment, however, continues to add cost. According to the California Department of Water Resources, permits from 15 agencies are required before a desalination plant can be built. (California Desalination Handbook, 73-74, prepared for the California Department of Water Resources by the California State University, Sacramento, Center for Collaborative Policy, February 2008). Lack of coordination and inconsistent requirements add to the time involved in building a plant

California should create regulatory teams with members from all pertinent agencies to work with desalination developers to streamline the administrative process – one interaction with government, not fifteen. The environmental concerns involved in desalination are not trivial. Marine life can be threatened by the intake of salt water and the brine left over after completion of the desalination process poses significant disposal issues. However, technological progress on research to address these issues has been promising. The State of California should assist this research. One of the best ways of doing so is through partnerships that allow intellectual property developed at UC or CSU in this field to be owned by the inventor, but with a perpetual royalty-free lease to the State of California.

Water Bonds

In 2014, Californians approved $7.5 billion in bonds for water projects. At least $2.7 billion was to be spent on water storage. As of 2017, however, none of the funds had been committed to specific water storage projects. (http://www.ppic.org/blog/how-is-california-spending-the-water-bond/). Other approved uses of the bond funds had raced ahead, especially preservation of endangered habitat. The state needs to expedite the construction of water projects much faster to meet our needs during a renewed drought.

Agriculture

California’s farms and ranches are the most productive in the world. They provide affordable food to our state and improve our nation’s international trade position. It is wrong to deny water to agriculture through unreasonable curtailments of the state and federal water projects, when cities and industries are not required to do the same. Farmers know the value of water and do not waste it.

Jobs in the Public Sector

The best job is a permanent job, created in the private sector in a growing California economy. Thus, we should do everything we can to foster an environment in California that will cause jobs to be offered here and to stay here.

Many of the proposals made elsewhere in these position papers, for regulatory reform, litigation reform, and taxation reform, will improve the jobs environment in California.

There is also a role for the State to play in employing Californians on projects to rebuild our roads, port facilities, water supply, energy supply, and other aspects of what makes our economy flourish. To finance these projects, the State should not go deeper in debt through general obligation bonds, and it would be harmful to economic recovery to increase taxes.

The source of revenue, rather, should be the users of the new and improved facilities themselves. Of the many billions of general obligation bonds already authorized, careful study should be done to determine which could be replaced with specifically funded bonds instead. Users of additional water supply, new and greener energy, and port improvements could all pay for the cost of those additional facilities over time. The long-term benefit to our state will be great, and in the near term, needed jobs, especially in the industries hurt by the slow-down in construction, will be generated.

Affordable Housing

Affordable housing is very scarce in most of California. This is an issue of huge economic importance to our state. If young families cannot afford to live in California, our state’s outward migration will be exacerbated, and our competitiveness diminished. From a personal viewpoint, it’s particularly distressing when parents see their children forced to move out of state, with the result often of denying the benefits of familial ties across the generations. We want to be close to our children and grand-children; the lack of affordable housing makes this more difficult.

The non-partisan Legislative Analyst’s Office reported on this crisis in 2015:

“High Housing Costs Problematic for Households and the State’s Economy. Amid high housing costs, many households make serious trade-offs to afford living here. Households with low incomes, in particular, spend much more of their income on housing. High home prices here also push homeownership out of reach for many. Faced with expensive housing options, workers in California’s coastal communities commute 10 percent further each day than commuters elsewhere, largely because of limited housing options near major job centers. Californians are also four times more likely to live in crowded housing. And, finally, the state’s high housing costs make California a less attractive place to call home, making it more difficult for companies to hire and retain qualified employees, likely preventing the state’s economy from meeting its full potential.” http://wwwlao.ca.gov/reports/2015/finance/housing-costs/housing-costs.pdf.

The LAO estimated that the rate of production of new housing would have to double to keep up with California’s expected population and economic growth.

Proposed solutions:

a) The construction of new affordable housing is impeded by the regulatory burdens in California that are not found in other states. Governor Brown proposed an expedited regulatory process for housing targeting lower incomes. His proposal should be revived, and passed—if the Legislature will not, then by initiative. Those regulations dealing with direct safety and health concerns should be preserved. Those that don’t qualify under that standard should be suspended for affordable housing.

b) “Prevailing wage” rules were demanded by some as a condition of supporting regulatory streamlining. This demand guarantees that housing will be less affordable. This condition should be resisted.

c) Affordable housing elements are required by state law as a condition of master plan approval, but some cities are built-out, so that the affordable-housing element has no practical effect. Affordable-housing obligations should be recast on regional bases, so that when built-out cities shift the need to build affordable housing to their neighboring cities, they help those neighboring cities financially.

d) The definition of what qualifies for the affordable-housing element should be adjusted to permit a broader array of solutions. For instance, single-room-occupancy units don’t qualify if each does not have its own kitchen facilities. However, some SRO’s share kitchen space, and that should qualify. The key is to increase the stock of available housing, not to make the requirements so stringent that less gets built.

e) The California Department of Housing and Community Development allocates the federal tax-exempt bonding authority, and overseas direct state grants, for competing projects. These resources should be directed toward the construction and rehabilitation of affordable housing as a priority above all other uses.

f) Emergency responses for the homeless involve vouchers for motels for mothers with children and use of armories for single men during winter months. The use of available state facilities for temporary shelters should be expanded year-round, including property managed by Cal Trans and the California National Guard, consistent with no diminution in the primary use of those properties.

State Support of Businesses: The Danger of Picking Winners Strategy

Government picking winners in private industry, on the assumed basis of their environmental benefits, is open to great misjudgment. The federal government’s waste of $535 million on a single company, Solyndra, is hard to refute. When government gives money to individual companies, it almost never does a better job than the free-market system. California should resist the temptation that occurs regularly to create special tax or other incentives to attract or to retain a single company, or industry. There is too much room for abuse in selecting the beneficiaries of governmental assistance.

Far better is for California to lessen its regulatory burden, lower its taxes, heal its litigation system, and improve its infrastructure – steps that will attract economic activity and the jobs it creates across many different fields.

Climate Change

The Earth’s climate is changing. To deny that fact is to reject scientific evidence. Humans contribute to climate change. There are other causes as well, including the epochal changes our climate has witnessed over the millennia. The Earth froze during the Ice Age and got warmer thereafter—and this cycle has repeated many times—with no influence of humans responsible.

California can make no meaningful contribution to stopping climate change if we act alone. The production of global-warming gases within our state is miniscule compared with the world’s production. It may also be fruitless even if all the world joined in, if climate change is overwhelmingly caused by cyclical factors. This point is often lost when we refer to global warming gases as “pollutants.”

For air pollutants like sulfur dioxide and particulate matter that cause smog, it makes sense for California to restrict businesses from putting more into the air. We breathe that air and we make our lives healthier by restricting pollutants here, even if countries like China do not. For global-warming gases, by contrast, there is no localized effect. Every unit of global-warming gases cut back in California has an effect on California only as it has an effect on the world—and that is vanishingly small.

When California imposes costs on business activities (including agriculture) that produce methane, carbon dioxide, and other global-warming gases, it creates an advantage for competing businesses located in other states or countries. Since those other states and countries lack California’s restrictions on global-warming gases, the net effect is to increase the world’s production of global warming gases.

The best approach to climate change, therefore, is a world-wide agreement restricting the production of global warming gases. The most efficient way to effectuate this approach is through a global carbon tax. If all of the US, along with all other countries adopted such a tax, there would be no benefit to shifting production from California to other states or countries. It was a mistake for the US to pull out of the Paris Accords, since that process is the only mechanism we have, at present, to move toward global rather than individual localized action.

California has adopted a cap-and-trade approach to global-warming gases, requiring utilities and businesses that produce such gases to purchase permits to do so, either from the state itself or from other producers who have been granted permits based on previous levels of output. This system is similar to a carbon tax, since the cost of a permit is equivalent to paying a tax. While not universal, California has engaged some other states and Canadian provinces in a pooled effort to trade the permits. A world-wide carbon tax is still a preferred approach, however, as it rewards improvements in technology that cap-and-trade does not.

As long as California requires companies to buy greenhouse gas certificates and competing states and countries do not, California’s employment will suffer. It is purely wishful thinking that “green jobs” will spring up in California to offset this effect. The environment in California is not made better than anywhere else on earth by our contribution to reducing greenhouse gases. So, this is not like saying we’ve created a better environment to live and work in California – as is the case, for instance, by our reducing smog. Green jobs will spring up wherever business conditions are most conducive for them to spring up and, for all the reasons detailed in the statement on California’s competitiveness, this is not going to be in our state.

What we can do, however, is to use the proceeds of cap-and-trade to make it easier to hire a worker in California. Instead of subsidies to the fast train, or to selected businesses, the proceeds of cap-and-trade should go to fund a greater earned-income tax credit under California state law. The result would be a boost in California employment, perhaps not enough to offset the brake on California employment from the cost of having to buy global-warming certificates, but at least something to offset that cost.

The environmental impact of cap and trade is not dependent on how its revenues are spent. The purpose is to reduce the production of greenhouse gases by making it more expensive to do so. An undesirable side-effect is to make it costlier to do business in California. Spending the proceeds on an increased earned-income tax credit can help alleviate that result.

Transparency in State Government

The state water bond initiative in 2014 was supposed to allocate $2.7 billion to water storage. As of 2018, no water-storage projects had been approved although many wetlands restoration and endangered species habit projects had been identified. This is illustrative of a serious problem in accountability. Voters approve initiatives under one set of assumptions, then find those who administer the bonds have different priorities.

The California State Senate hired former Attorney General Eric Holder to provide legal advice on suing the federal government. The Attorney General of California announces a new challenge to the federal government almost weekly. Californians need to know the cost of retaining outside counsel, like former Attorney General Holder, and the amount of resources taken away from important law-enforcement purposes, including criminal and environmental law, when state Attorney General lawyers are diverted to politically directed lawsuits.

All expenditures intended to influence a California campaign should have their sources identified. At every election, mysterious committees send out hit-pieces on candidates, without disclosing who is actually funding them.

Candidates should be encouraged to limit the amount of money they spend in campaigns. Limits on campaign spending should be encouraged to the maximum extent permitted under First Amendment law. Until the US Supreme Court reverses its position that money is speech, candidates who choose not to abide by voluntary expenditure limits should be identified clearly by social media and news media whenever the candidate’s name is mentioned.

Public Safety: Police, Fire, and Emergency Services

We ask our police and fire personnel to risk their lives on our behalf. It is imperative that they are furnished with adequate material to perform their jobs, that they are paid appropriately for their work, and that they are not subjected to frivolous lawsuits that can bankrupt them personally.

Crime

Yes, there are “root causes,” but we need to insure speedy arrest, conviction, and punishment. Certainty of incarceration matters more than length of imprisonment. We can contract with other states and private prisons to house criminals less expensively. Setting a dollar value below which we won’t pursue criminals is wrong: it invites theft up to that limit. Making some depressant drugs available to addicts in a government-controlled setting reduces crime, overdose deaths, and the spread of disease. Democrats are keen to reduce law enforcement for what they consider petty crimes; Republican leaders view any departure from severe minimum sentences as being “soft on crime.”

Data Privacy

A Common Sense Data-Privacy Law

California should adopt this law: “No person, company, union, or other entity may disclose to another outside that entity information specific to an individual located or resident in California obtained from monitoring that individual’s purchases or electronic communications without the individual’s explicit, prior approval which shall be deemed to expire one year after such approval has been given. All entities requesting such prior approval must provide an alternative to any individual choosing not to grant permission, allowing as much of the service as is reasonable, commercially and technologically. Violation of this section shall be punished by a fine of $1,000 per individual whose information was disclosed, per party to whom disclosure was made.”

The gathering of information collectivized for marketing or demographic statistical purposes, including “big data” collection at grocery and department stores, would be allowed to continue, since it is not identified to an individual. If a data collector gives a user a box to check, and an individual chooses not to check it, the user has to be given some reasonable alternative to simply being denied. That would prevent coercing permission by threat of no access to the service.

Firearms

Gun control is a very divisive issue in California. The US Constitution protects the right of the people to keep and bear arms, but it does not prohibit reasonable regulation of that right. Different parts of the state, and of the country, have different situations regarding firearms. Families in farm country, far from a local sheriff’s office, need to protect themselves. For city-dwellers, however, publicly carrying a firearm might present a greater risk of harm. Should we defer to rules set by counties and cities rather than state-wide approaches? Should there be national minimum standards? The orthodox Republican view objects to virtually any curbs on gun ownership; the orthodox Democratic view requires a legislator to support virtually any restriction on gun ownership or use.

Minimum Wage

Minimum wage laws in California exceed the national minimum wage. When government increases the minimum wage, some workers lose their jobs. Employers automate. Suppose we didn’t make employers pay the higher wage, but used the general tax base to plus-up the wages of low salaried workers instead? Those workers would earn as much more as if we increased the minimum wage, and fewer would be laid off. Low-income workers need a hand: it’s barely possible for a family to get by on a minimum wage in California. Expand the earned-income tax credit instead of increasing the minimum wage. Democratic party chieftains, and their union supporters, demand support for virtually any increase in minimum wage level that is proposed. Republican party leaders tend to oppose spending government budget dollars to increase the earned-income tax credit.

Taxes

The “fair share” that any group has to pay should have some basis other than our desire to take their wealth from them. If we made the rich pay the same percentage in taxes that they have of our country’s wealth, or that they receive of the total income earned, their taxes would actually be less than they pay today in California. We don’t need to engender class hostility to justify taxation, just the realization that taxes are necessary to help those who can’t help themselves, and we should collect that revenue in the way least damaging to economic growth. Democratic elected officials support increasing taxes on the wealthy, no matter the fact that 5% of all taxpayers pay more than 50% of all the individual income taxes in California. Republican legislators oppose any increase in taxes, even balking at a carbon tax, with the revenue used to help businesses and employees that are hurt by steps to reduce global warming.

Corporate Taxes

Corporations don’t pay taxes: consumers, employees, or stockholders do. If we tax stockholders, less investment will result. Sometimes in our economic cycle, we are awash in money for investment, so such a policy does little harm. At other times, we need to encourage investment and discourage consumption, so the tax should fall on consumers. The right answer depends on where we are economically. The two major parties, once more, are rigid. Democrats see no economic harm in increasing taxes on corporations, and punishing companies that go overseas to avoid high levels of business tax in California. Republicans are doctrinaire against increasing corporate taxes, even to pay off the deficit.

Foreign Policy

We have adversaries. We have limits, too. Identify America’s allies and let the world know we’ll defend them, but don’t try to create and defend democracies everywhere. Avoid civil wars. Open our markets on a reciprocal basis. Trade is a great alternative to war; so be very careful about imposing tariffs. They are taxes, and they deprive Americans of the benefit of the economic law of comparative advantage. Democratic party leaders (especially President Biden) insist on buy-America rules; Republicans (especially former President Trump) see tariffs as beneficial to America.