Brewing Battle Over Surplus: Legislature Projects $3.2 Billion Higher State Revenues than Gov. Brown

This week’s news that Gov. Jerry Brown is taking a hard-line on the budget, despite the approximately $4.5 billion in extra revenue that has come into the treasury so far this year, didn’t sit well among Sacramento Democrats who were hoping to restore spending cuts from past years with the expected additional funds.

That disagreement became even more exacerbated Friday morning when the Legislative Analyst’s Office (LAO) announced that, according to their analysis, state revenues will be $3.2 billion higher still than what Gov. Brown’s office has projected.

If accurate, the LAO’s numbers translate into an extra $400 million for this year, and $2.8 billion for the next fiscal year, which begins in July.

The California Tax Board announced in April that, so far this year, revenue has exceeded estimates by several billion dollars.

While both the LAO and Brown have urged restraint despite the higher-than-expected revenue, which analysts peg to wealthier taxpayers shifting income around to avoid the higher federal taxes that came into effect this year, many Democrats in the state legislature are eager to restore some of the social programs that got the axe during the Great Recession.

“No one should interpret these figures as an automatic green light to increase spending, but rather to pay off debt, build the reserve, and strengthen the middle class,” Assembly Speaker John Pérez said in a statement released after the LAO’s announcement.

Gov. Brown said this week that despite the bump in revenue “it’s not time to break out the champagne.” The increase in the payroll tax earlier this year, Brown argued, is going to slow down economic growth in the state, and any surplus above the prudent budget that Brown has put forward needs to be put towards the state’s reserve fund or towards paying off the debt.

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Sacramento Lawmakers Considering Pay Raises With Surplus?

If you asked the average Californian what the state government should do with this year’s expected budget surplus (if it ends up being real), issuing pay raises to state lawmakers would probably not be near the top of the list.

According to the Los Angeles Times, that’s precisely what some in the Sacramento legislature are looking to do:

Meanwhile, executives for the Senate and Assembly have written to the California Citizens Compensation Commission arguing that lawmakers in California are not paid as much as their counterparts in New York if stipends for committee assignments are counted.

The letter was seen by Commissioner Chuck Murray as an attempt by legislative leaders to persuade the panel to restore some of the pay cut from elected officials’ salaries in recent years. Asked about the possibility of raises this year, Murray said, “I don’t think it is warranted.”

Proposition 1F, passed by voters in 2009, prohibits pay raises for elected state officials unless there is a sufficient amount of funds in the state’s reserve fund, the Special Fund for Economic Uncertainties. For the first time since it was passed, California is on track to meet that threshold: on Thursday, the California Citizens Compensation Commission certified that the reserve fund currently meets the level set by 1F.

A recent study found that California lawmakers already earn the highest-base salary in the country, although executives for the legislature argue that, when taking other states’ legislatures stipends and pensions into account, the Golden States falls behind:

A survey by the commission found that the $90,500 base salary of California lawmakers is the highest in the country. However, Senate Secretary Gregory P. Schmidt and Assembly Chief Administrative Officer Jon Waldie wrote to the panel that New York legislators receive stipends for committee and leadership assignments that, on average, make their pay $4,500 higher than what is received by California lawmakers.

“Additionally, when you factor in the pension for New York, their total compensation package is much higher than California’s,” the two executives wrote May 9. California legislators do not receive pensions, but get $30,000 annually in tax free per diem payments.

In recent years, the California Citizens Compensation Commission has cut the salaries of elected officials due to the succession of budget deficits.

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Report: Speaker Pérez Exchanged Assembly Leadership Positions for Campaign Funds

The San Diego Union Tribune, in conjunction with the Center for Investigative Reporting,  ran a report Thursday morning that makes a strong case that Democratic Assembly Speaker John Pérez rewarded his Democratic colleagues who raised the most money for other Democratic campaigns with top leadership posts in the Assembly.

The report is based on memos that Speaker Pérez sent to Democratic colleagues in the Assembly during the 2012 campaign cycle.

The practice is not illegal, but, as the Union Tribune points out, serves as a stark reminder of the role that fundraising prowess, instead of policy clout, plays in Sacramento, “despite efforts to break this cycle.”

It’s also a blaring sign of the difficulties of removing entrenched political parties from leadership once they can use the power of incumbency to keep themselves in power.

(Read the full report from the Center for Investigative Reporting here.)

Pérez asked each of the Assembly’s 52 Democratic lawmakers to raise a total of $127,900, which would subsequently be divided between five targeted primary races, six targeted general election races, the state Democratic party, and the campaign for Gov. Brown’s tax hike measure.

Instead of asking them to make the campaign contributions themselves, Pérez wrote in the memos that all of the money should be sent to the Assembly Democrats office for “proper tracking.” (Read the memo here.)

Despite strict campaign finance laws in California designed to limit the flow of money into state legislative races, the Speaker, as the Center for Investigative Journalism points, out, developed “a strategy to sidestep the $3,900 donation cap and direct millions in contributions to key campaigns.”

In effect, Pérez was exploiting a loophole and avoiding the caps by asking his colleagues to donate more than $100,000 that, whether donated directly to the targeted candidates or to the state party, would wind up benefiting Democratic candidates in state legislative races.

Republicans lost in all the races the Speaker targeted.

There may have been a reason the Speaker’s office demanded that the Democrats contributions be sent to the Sacramento Democrats office, instead of directly to the candidates, for “proper tracking.” The same report shows that “those who gave the most money reaped larger benefits.”

According to that report, “lawmakers who gave more than $150,000 were likely to get multiple important posts. All 18 got one juice committee seat, and 16 got a leadership post, chairmanship of a juice committee or a seat on a second juice committee.”

Beneficiaries included Democrats Toni Atkins, Henry Perea, Roger Hernández, Mike Gatto, and Chris Holden.

If you didn’t pay up to the Democratic campaign machine, the benefits were far less lucrative, if not non-existent.

For lawmakers who steered less than $150,000 to the speaker, prospects were leaner, the analysis shows. From the report:

“Eighteen lawmakers gave between $40,000 and $150,000. Of those, two were named to leadership positions, and one became chairman of a juice committee. Prospects were poorest for lawmakers who gave less than $40,000. None of this group of 18 lawmakers was named to head a juice committee, and two were named to leadership posts.”

It’s not illegal, but it certainly is a revealing look at how the California Democratic Party can push its members into flooding the zone with campaign cash.

“Giving contributions to earn yourself a chair or a seat on a powerful committee is not how voters would like to see governing taking place,” said Phillip Ung, an advocate for Common Cause, which pushes for political reform. “When voters see someone is chair of a committee, their expectation is that person is there because that person is a policy expert, not because they bought that chair.”

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Gov. Brown Reveals Prudent Budget, Criticizes Sacramento as “Spending Machine”

California may be expecting an $850 million budget surplus this year, but don’t expect more spending. Democratic Gov. Jerry Brown released next year’s revised budget yesterday morning and, despite calls from Democrats and other special interests to use the extra money in the state coffers to boost social spending, he is putting his foot down.

The governor’s “May Revise,” a revision of the budget initially introduced in January, refuses to increase spending despite higher-than-expected income tax revenue flooding into the state treasury, and actually slightly decreases spending further, to $96.4 billion.

Brown argued that there is no evidence that the surge in tax revenue will last, and that California needs to begin paying down its debt and saving money instead of spending every dollar as it comes in.

“Everybody wants to see more spending,” Brown said. “That’s what this place is: It’s a big spending machine. You need something? Come here and see if you can get it. Well, but I’m the backstop at the end, and I’m going to keep this budget balanced as long as I’m around here if I can.”

“This is not the time to break out the champagne,” he warned.

The budget proposal does increase spending for education programs, and includes Brown’s controversial proposal to shift funding from better-performing to poorer-performing school districts. It does not, however, restore the heavy spending cuts to other social programs that the state was forced to make over the last several years.

Democrats criticized the proposal, while Republicans praised it.

“It’s important that we also begin making up for some of the damage done to tens of thousands of Californians,” Democratic Senate President Darrell Steinberg said. “Unless the Legislative Analyst has a different conclusion, the governor proposes few if any resources to restore cuts made over the past few years to the courts, and to health and human services.”

The Republican leader of the Assembly, Assemblywoman Connie Conway, called Brown  ”the adult in the room” with his new budget proposal.

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Obama Declaring ‘Windmill War’ on the California Condor?

Some environmental groups are not pleased with the Obama Administration’s decision to allow a wind farm based in Kern County to “take” – that is, in formal development speak, kill – one California condor over the project’s 30-year lifetime.

The decision, made last Friday by the Fish and Wildlife Service, grants Terra-Gen Power’s 318-megawatt Alta East wind farm legal protection if it kills one of the endangered species, since birds are often unintended victims of the sprawling turbines that come with such farms.

There are currently only 404 living condors, half of which are living in the wild.

It’s has led to an odd alliance between environmentalist groups disappointed in the Administration’s decision and energy advocates who are claiming that the Administration is giving unfair special treatment to alternative energy projects.

From the Washington Post:

The Obama administration has charged oil companies for drowning birds in their waste pits, and power companies for electrocuting birds on power lines.

But the administration has never fined or prosecuted a wind-energy company, even those that flout the law repeatedly.

“What it boils down to is this: If you electrocute an eagle, that is bad, but if you chop it to pieces, that is OK,” said Tim Eicher, a former U.S. Fish and Wildlife Service enforcement agent based in Cody.

But it’s not just about the perceived favoritism; environmentalist groups, like the Center for Biological Diversity, are nervous about the potentially harmful precedent such a decision sets.

“Where is the number that would be too many?” Lisa Belensky, a senior director at the organization, said. “The condor has such a narrow hold right now, and it really has started to come back, but we don’t want the first thing that happens [to be] they get killed by a windmill.”

Or, as the American Energy Alliance put it with a graphic on their Facebook page, “the US Fish and Wildlife Service has announced that a wind energy company in California will not be prosecuted for any California Condors that may be killed by its wind turbines.”

condor

 

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Bag Ban: Environmental and Economic Malpractice?

Bag the Ban, the plastics industry’s response to a series of attempts by lawmakers to ban or tax plastic grocery bags used by consumers, has released new information defending the environmental and economical superiority of plastic bags to paper. 

“Despite the facts, plastic bags have gotten a bad rap,” the organization says on its website. “Here’s the truth about your plastic bags and why they are the right choice for the environment, your wallet and your community.”

For example: it takes seven trucks to deliver the same number of plastic bags that just one truck can carry. 

The infographic also claims that bag bans have led to increases in shoplifting from people using reusable bags, and declines in business. 

Check out the whole infographic here

The controversy surrounding plastic bag bans has grown in recent months in California. One industry group launched a television awareness campaign last month to highlight the  costs of such bans. Democratic State Sen. Alex Padilla (SD20-Pacoima), a sponsor of such legislation in Sacramento, garnered criticism when he admitted that plastic bag taxes are designed to hurt consumers. California Rep. John Garamendi (CA03), meanwhile, is sponsoring similar legislation in Washington. 

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Anti Prop-13 Tax Bill Stalls in Assembly – So Far

A Democratic-sponsored bill that would effectively repeal parts of Proposition 13 was put on hold in the Assembly Revenue and Taxation Committee on Monday.

The bill’s sponsor, Assemblyman Tom Ammiano (AD13-San Francisco), said in a statement that he would use the extended time to meet with “newly interested parties to fine tune this bill.”

The proposal, AB188, would revise the state’s definition of “change of ownership” when evaluating commercial properties for property taxes. Proposition 13 currently allows for a value reassessment – and thus higher taxes – only when a commercial property changes hands. However, some businesses have dodged reassessment by arranging deals that allow the former owners to maintain a majority stake, thus dodging the “change of ownership” tax hike.

Liberal interests group call it a loophole, but business interests say that closing it will essentially amount to a massive tax hike and discourage investment in the state. The California Chamber of Commerce has labeled the legislation a “job killer.”

If the bill were to pass out of committee, Democrats would need a two-thirds majority to pass it, since it is a tax increase.

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