Revised numbers: California employment flat in 07

Economist Steve Levy offers this first-cut analysis of today's revisions by the EDD of California's job growth numbers for 2007:

Job growth in California slowed to nearly zero in 2007 according to just released revisions of job estimates by EDD.

Job growth between January 2007 and January 2008 was 14,900 or 0.1% for the past 12 months. Downward revisions in manufacturing, construction and finance resulted in estimates of sharp job losses in each sector during the past 12 months—( -69,300 jobs in construction, -23,600 jobs in manufacturing and –35,300 jobs in finance). Job gains were concentrated in professional services (+33,400); education and health services (+41,800) and government (+50,200).

The state lost 20,300 jobs (seasonally adjusted) between December 2007 and January 2008. These estimates combined with the latest national economic news confirm that the state has entered a period of slow or negative economic growth that is likely to persist for at least a few months.

Year-over-year job losses were recorded throughout Southern California metro areas while job gains were recorded throughout metropolitan areas in the Bay Area. In both cases the change in job levels was small but there was a clear difference between the two large regions in 2007.

I will post a link to the actual report here as soon as I can find it on the EDD's awful web site.

The governor's fuzzy budget math

Amid the confusion over Schwarzenegger's position on tax increases, there's another problem: his fiscal logic on the issue is faulty.

In his appearance yesterday in Los Angeles, the governor said he was open to closing loopholes on the magnitude suggested by Liz Hill ($2.5 billion) -- so that the state could give more money to education.

But Schwarzenegger's budget as proposed does not erase the state's structural deficit. So if he raises taxes AND gives more money to education, or any other state program, he is still in the same boat. He brings in $2.5 billion more and spends $2.5 billion more. He's still got a deficit. Nothing has changed. It might even be worse because Prop. 98's minimum guarantee for school funding would then be ratcheted up even higher.

The tax increases, if there are any, have to largely replace the one-time gimmicks and deferrals in Schwarzenegger's proposal. That way, the state actually makes progress toward balancing the budget over the long term.

His comments suggest that the governor still does not understand -- or accept -- the long-term budget math. That's why he fumbled his big chance to solve the problem in 2003 and it's why he has kicked the can down the road every year since.

Every decision he makes should be accompanied by a three-year or five-year projection of its financial consequences under different economic scenarios. Otherwise he is flying blind. Remember the Prop. 98 deal that he made in 2003 and broke a year later? Sounds like he is heading down the same road again.

Tax increases ok, just not those tax increases

The governor -- and his spinners -- tried to back him away from what sounded like a full-throated endorsement this morning of the tax increases proposed by Legislative Analyst Liz Hill -- about $2.5 billion a year in personal and business tax hikes. But the end result, even if it didn't move him much from where he was before, is a very clear statement that he considers "loophole closures" to be very much on the table. He would probably like a different menu of revenue raisers than Hill proposed. But no one can doubt now that he is more than open to some kind of tax increase. The question will be: Does it really matter? They will still need two Republicans in the Senate and 6 in the Assembly to go along, and so far, there is no indication that those voters are there or will be there.

No wifi in capitol of the high tech state

Reporters in the Capitol are petitioning the governor and legislative leaders to add a wifi network so that they -- and the public -- can go online while inside the building. I've been mildly irritated at the lack of a network myself, and that's one reason I bought a cell phone air card. But the card hardly works either, because the Capitol's thick walls keep out most of the signal....How do they expect us to live blog the revolution?

Audit examines health care receiver's budget

The Office of the Inspector General has taken a look at the budget for the federally appointed receiver overseeing prison health care. Not surprisingly, the OIG has raised some questions, including why the receiver needs to pay a dozen of its employees more than the $225,000 annual salary of the secretary of the Department of Corrections and Rehabilitation. You can find the full report here.

A case against subsidizing college tuition

Ilya Somin says most of the benefit goes to people who don't need it. An excerpt:

Not only are government subsidies for government tuition unnecessary, they also victimize the truly disadvantaged people in our society: those who lack the educational qualifications to go to college in the first place (usually due to a combination of poor public schooling and a flawed family environment). These people pay some of the taxes that support subsidized tuition for college students who are likely to end up far wealthier than they are. They are also indirectly harmed by the diversion of public funds to tuition subsidies and away from other priorities that might do more to advance the interests of the truly poor. Government tuition subsidies are a classic example of a policy that redistributes wealth to the relatively affluent under the guise of helping the poor.

One argument Somin does not make but could is that the subsidies themselves drive up tuition. If colleges charge whatever the market will bear, then the subsidies simply give people more money to give to the colleges. If the average family could afford $5,000 a year without the subsidy, that's what colleges would charge, and if you give that family an extra $3,000, then the colleges will start charging $8,000 instead, more or less. The higher the subsidy, the higher the tuition.

Post-partisan press release

Schwarzenegger's announcement that he is elevating his adviser and coordinator on volunteerism and public service to cabinet level status includes canned quotes from Hillary Clinton, Barack Obama and John McCain.

Cooling the earth with innovation and profit

The president of Environmental Defense tells Wired why he thinks venture capitalists and entrepreneurs, not government regulators, are the ones who will stop global warming.

UPDATE: This Popular Mechanics piece on the "air car" suggests that ED's confidence in markets might be well founded.

Misfire

Alex Tabarrok explains why Oakland's gun buyback won't do any good, and could accomplish the opposite of what was intended.

The other state budget -- always balanced

Here's a goofy question. Why is the special funds side of the state budget always balanced, even as lawmakers and the governor struggle to deal with billions in shortfalls and deficits on the general fund side of the budget?

This year the special funds will total $26 billion. That's more than the entire budgets of all but a few of the states. Yet year in and year out the special fund side -- funded by fees and earmarked taxes -- is balanced with relatively little rancor.

The easiest answer is that the general fund pays for entitlements and for programs where costs are more difficult to control, such as the state prisons. But that can't be the entire answer.

I think it has something to do with the way the money is distributed, and the mindset. Look at Prop. 63, the mental health program funded by the new, voter-approved tax on million-dollar-earners. That tax is producing hundreds of millions of dollars a year, and the money is distributed in grants to local agencies by a state commission. Everyone knows they have a certain amount of money to spend, and that's how much they spend. No more. The same is true for dozens of other programs funded by fees and special taxes.

On the general fund side, there is no such accountability. With hundreds of programs thrown into one pot, no single program is accountable for its contribution to the general fund deficit. And when revenues run short, all of the progams are in competition for the now limited amount of money.

I am not a fan of ballot box budgeting or budgeting by formula, but maybe there is a lesson for the general fund budget writers in the way the special fund side of the budget just keeps humming along.

Split personality

Below are brief excerpts from two letters I received from readers in the past 24 hours. Either I am crazy, or they are. But either way I found it amusing:

1. "I have been reading your editorials for several years and I have come to realize that you are deeply tied to the unions of the state both private and public."

2. "In Weintraub's world, men and women would be paid the least amount possible, and unions would be banned."

Finally!

Someone has come up with a detailed, alternative budget that actually balances over the long term, at least based on the best economic and fiscal analysis available today. And that someone, of course, is the ever-valuable legislative analyst's office.

The five-year plan recognizes the obvious: California's state government must either cut spending, raise taxes, or both. It would entail some difficult decisions for members of both parties.

The big one: three revenue-raisers that would total about $2.5 billion a year. They involve a reduction in the dependent credit, a rollback of the research and development credit and a limit on the losses that corporations can carry forward and use to reduce their taxable income in the future.

Read the whole thing.

'I was priced out of the market until now'

This Fresno Bee article on falling home prices is significant for two reasons. First, it covers the rarely seen flip side of the story: lower prices mean more affordable homes for buyers, including first-time home buyers who were frozen out of the bubble market. Second, it suggests that some of those buyers are now moving into the market, at least in Fresno. Eventually, that's what it will take -- more demand -- to bring equilibrium back and stop the slide.

Why I love California...

Because on a Presidents Day Weekend you can forget about budget bills and early primaries and failed health care reform and instead....

On Saturday you can ride your bike in the foothills of the Vaca Mountains outside of Winters...

Where you can make a new friend...

And then on Sunday you can cross-country ski in the Sierra near Donner Summit...

And then on Monday you can get back on the bike and ride on the coast near Bodega Bay....

While waiting for the leader in the Tour of California (Jackson Stewart) to climb the biggest hill of the day.

Budget skirmish: round one

Both houses of the Legislature are expected to act today on the first package of budget cuts and deferrals designed to begin closing an estimated $14.5 billion gap between revenues and projected spending. The run-up to the floor votes has been true to form in both houses.

In the Assembly, after frequent consultations between Speaker Fabian Nunez and Republican Leader Mike Villines, the package won a bipartisan vote in committee and is expected to do the same on the floor. The package was vetted in sub-committee and there were few if any surprises by the time the members were asked to vote. Among other things, it cuts about $400 million in school spending and reduces rates paid to doctors who care for the poor, which would save about $550 million next year. The package also responds to a court ruling on transportation funding that blew a $400 million hole in this year's budget.

In the Senate, Republicans balked -- at spending cuts, no less -- in part because they said they had been blindsided by the package, having not seen it until a few minutes before the budget committee hearing. And one Democrat -- Joe Simitian of Palo Alto -- was stripped of a committee chairmanship after the vote, apparently because he too persistently pushed for an education package that would leave lawmakers more room to cut spending later if they chose to. This is par for the course in the Senate: a shortage of communication and a surplus of retribution.

In the end, both houses are expected to pass the package today on bipartisan votes. But this will be only the beginning, enough to stave off a cash-flow crisis, trim some spending in the current fiscal year and lay the groundwork for possible cuts in the months ahead. The real heavy lifting will be finding the cuts or revenue to balance the budget for the fiscal year that begins July 1.

Re-entry politics

The Schwarzenegger Administration has had some small success so far getting counties to consider hosting "re-entry" prisons where inmates who came from the county would serve the end of their sentences and get counseling and assistance finding jobs and housing. But Contra Costa County is saying "no." The Antioch folks in this article seem to have a point. But a county supervisor is quoted saying that no prison or detention center should be located anywhere in Contra Costa County. Hmmm. Does that mean the county is going to stop arresting and convicting people, too?

No cuts to schools -- in Spanish now too

The Education Coalition is rolling out a Spanish-language radio ad decrying the proposed school budget cuts in the governor's spending plan. You should be able to hear the ad here later this morning.

Free speech yes, obstruction, no

Hundreds of demonstrators are expected in Berkeley tonight as the City Council reconsiders a resolution condemning the Marine Corps and asking the service to shut down its local recruiting station. As ground zero of the "free speech" movement, Berkeley is unlike to take back its harsh words. But the council would be wise to rescind the part of the its action that seeks to help the protest group Code Pink disrupt the recruiters' work. The government -- in this case the City Council -- ought not be using its police powers to help private groups shut down an otherwise law-abiding business. And here the Marines' recruiting office is essentially a business, renting space from a landlord in a private building.

Gassing up

Not surprisingly, the Correctional Officers union takes issue with Liz Hill's conclusion that California prison guards don't need a raise. CCPOA spokesman Lance Corcoran had this to say in the Bee today:

"Last time I checked, no one at the LAO had ever been gassed," Corcoran said, referring to a practice where inmates throw bags of feces or urine at correctional officers. "No one at the LAO's office has to wear a stab-resistant vest.

"If the LAO believes that the job of a correctional officer is so desirable, then why don't they take off their pocket protectors, put on a jumpsuit and come work on a tier?" Corcoran added.

It appears that Corcoran missed the point of the report, but since his attitude is a common one, it's probably worth discussing. Hill's report said the state does not need to pay the guards more because 130,000 people a year apply for those jobs, and apparently enough of those 130,000 are qualified to fill the state's needs.

Whether Hill or any of her analysts would apply for a job in the prisons, or whether they think the jobs are "desirable" is beside the point. I would not want one of those jobs if it paid $250,000 a year. But that doesn't mean the base salary for a guard should be $250,000. The salary should be as close as possible to what it takes to attract and retain qualified people.

That's how the rest of the world works. It's about time state government started applying the same principle.

LAO: prison guards make enough already

The LAO says correctional officers are paid enough in this report on Schwarzenegger's proposal for a 5 percent pay increase. But the report also endorses most of the other changes the administration is proposing to increase managerial control over the prisons.

Water bond enter circulation

The business-backed water bond has entered circulation as an initiative, according to the Secretary of State's office. Here is the official title and summary:

BONDS. WATER STORAGE, RELIABILITY, PROTECTION. DRINKING WATER. STATUTE. Authorizes $11,690,000,000 in bonds paid from state’s General Fund, allocated approximately as follows: 30% to dams and other surface and groundwater storage for the state water system and the Sacramento-San Joaquin delta (“delta”) or its tributaries; 23% to statewide water supply reliability projects; 21% to delta sustainability and ecosystem improvements; 14% to groundwater protection and water quality projects; 11% to statewide conservation and pollution cleanup including ecosystem and urban watershed protection; and 2% to water recycling. Creates commission with the power to finance projects, including delta water conveyance. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: State cost of about $22.8 billion over 30 years to pay off both the principal ($11.7 billion) and interest ($11.1 billion) costs on general obligation bonds authorized by the initiative. Payments of about $760 million per year. Unknown eventual costs, potentially in the hundreds of millions of dollars per year, to state and local governments to operate or maintain projects developed with these bond funds. (Initiative 08-0003.)

Steinberg to seek Senate's top post

Darrell Steinberg has made it official: he is running for pro-tem. But it's not clear from this piece whether he intends to try to get the job now or wait until Perata is ready to go. Perata intends to stay until the end of the year.

How local finance measures fared

Municipal Finance expert Michael Coleman has posted his preliminary review of local measures on the Feb. 5 ballot. He says 48 of 61 measures passed, including 7 of 7 majority vote measures and 30 of 38 school bond measures.

San Benito's still got it

I hate to keep carping on poor San Benito, but somehow that tiny county keeps nailing it. On all seven of the ballot measures, San Benito was on the winning side and, as of this morning's results, came within a percentage point of reflecting the state vote on each one. Those of you who have followed my blog for a while will remember that I stumbled on SB a few years ago while looking for a bellwether county to predict statewide election results. They have not disappointed since.

The Benitians did have some trouble with the candidates in the multi-candidate presidential primaries. But they got the order of finish of the top three correct (meaning the same as statewide) in each case. In each case they give the winners a bigger margin than did the state as a whole.

A good idea gone bad

Prop. 93 is turning out to be a lot closer than people thought, but it does not look as if Alameda County's vote or the late absentees will be enough to save it. The close result makes it appear that the reform that a lot of well-meaning people originally advocated would have passed if it had not been twisted to meet the needs of sitting legislators. If it had taken effect prospectively, as new members were elected, voters would have taken a kinder view of this thing. But then, of course, none of the sitting legislators would have raised a dime to pass it. We may yet see this idea rise again as part of a comprehensive package of legislative reforms, but in a way that cannot be hit as a self-serving ploy on the part of current lawmakers trying to avoid being termed out.

How California fares

The California Institute in DC provides this handy guide to how the Golden State fares in every program area in President Bush's budget proposal.

Fleischman's post-partisan friends

Jon Fleischman has a good item about the last-minute mailers in the term limits campaign, and the attempt by 93's supporters to tell one story to Republicans (it strengthens term limits) and another to Democrats (it weakens them).

Musical chairs

The final pre-election Field Poll suggests that Prop. 93, the term limits measure, is cratering as voters learn more about it. Republicans and independents are especially wary. This might have been inevitable. The early support was based on the idea that Prop. 93 would cut the total length of service allowed from 14 years to 12. But the true intent of the measure was to increase the length of service allowed in each house to 12 years, from the current six in the Assembly and eight in the Senate. Once voters learned this, they started turning against it.

The challenge for the yes campaign was that they could not aggressively make the case for longer service -- a case they needed to make in order to win -- without driving away those voters who wouldn't ever consider such an argument. So while the ads in favor did make a case for the value of experience, it was not a strong one. And with Insurance Commission Steve Poizner, the prison guards union and others funding a big campaign on the 'no' side, the opposing message did get out, loud and clear.

I still think the final result might be a bit closer than the polls suggest, because of a late surge of Democrats and independent voters coming late to the game. But it does not look as if that will be enough to save it.

And that will set off another round of musical chairs, not only in the full Assembly and Senate but also in the leadership, as both Senate Leader Perata and Speaker Nunez are termed out. Let the fun begin.