Schwarzenegger names Reiss to UC Regents

Schwarzenegger has appointed Bonnie Reiss to the UC Board of Regents. Reiss is a longtime friend of the governor and his wife, Maria. She was an adviser to his campaign and later on his senior staff, and also served on the state Board of Education.

Californians sour on guv, lawmakers

The latest PPIC poll shows Schwarzenegger's approval rating dropping in the wake of the state's budget problems and concerns about the economy. He is now at his lowest level since the summer of 2006. The Legislature is sinking too. It's interesting how closely the lines tend to track. This suggests that folks react almost as much to the perceived dysfunction of state government as they do to partisan policy choices.

Volunteer bill shot down

The Senate Labor Committee today rejected SB 1345, a bill to remove the sunset provision on a law that allows people to volunteer on projects paid for with government funds. Organized labor opposed the bill, arguing that anyone who works on such a job -- including clearing brush from streams or rebuilding a park playground -- should be paid. Sponsors still hold out hope that a separate bill that simply extends the sunset provision might still pass. Without some legislation, the law will expsire and volunteers will no longer be allowed to work on public projects.

Perata's foreclosure bill moves forward

Senate Leader Perata's latest bill on foreclosures, similar to one that came one vote from passage in the Senate earlier this year, has cleared the Judiciary Committee. Unlike the original bill, SB 926, the new bill, SB 1137, allows lenders to speak with borrowers by phone rather than in person before filing a notice of default. The new bill also deletes a proposed requirement that lenders notify borrowers in writing of pending changes in interest rates. Perata said that after discussions with the industry, he realized that rates on some loans fluctuate so frequently that the information he wanted to require would have been out of date by the time it arrived in the mail.

The bill also requires financial institutions to maintain foreclosed properties and give tenants 60 days, rather than 30 days, notice of an eviction.

Balance the budget -- your way

Next 10 is out with its updated Budget Challenge, an online tool that allows you to make spending and tax decisions to try to balance the state budget for the long term. You can take the challenge here.

Back-breaking review

The auditor has just issued a report ripping Schwarzenegger's Board of Chiropractic Examiners for breaking state open meeting laws and generally being incompetent.

Bowl me over

This is Bowl. And this is my column on his issues with Sacramento's new cat licensing law.

State employment up, or is it?

Interesting analysis from Beacon Economics on today's rosy employment numbers for California. Beacon isn't buying it. They say the regional numbers don't add up to anything like the statewide numbers, some of the occupational data look suspect, and a large chunk of whatever is real is probably from the end of the writers' strike:

State employment rose by 18,600 jobs in February... a solid increase by itself but completely incongruous with more regional results. In fact, we believe that this number is incorrect and will be revised downward next month.

One reason for our skepticism has to do with local results. There are 28 MSAs in the state that together represent roughly 95 percent of total employment. Added together these various economies added only 2,400 jobs in February. While the way these figures are generated allows some gap between the two, it cannot reasonably be this large. In past situations with a similar imbalance between the regional and state level data (or even between the state and national data), when there is a significant gap, it invariably ends up being the aggregate figure that is revised down.

Unemployment fell in the state, but not due to an increase in household employment. Rather, there was a sharp decline in the size of the labor force, likely due to the continued problems in the construction industry. Household employment remains flat, again out of line with an expanding payroll workforce.
There is also the issue of where job gains are coming from. Weakness continues in the financial services, construction, and manufacturing sectors. Professional services also showed some weakness.

These losses were offset by truly remarkable gains in private education and logistics... neither of which make much sense from an intuitive basis given the time of year or what we know about the slowing of the economy and traffic through the ports.

At the regional level the area with the largest increase in employment was Los Angeles, largely due to an increase in motion picture jobs after the end of the writer strike. Overall, the economy there has lost jobs over the last quarter.
The rest of Southern California continued to show job losses over the past month and quarter.

The San Francisco Bay Area is more of a mixed bag, with losses in the East Bay offset by continued strength in San Francisco. San Jose remains neutral with little job growth in the past quarter

The Central Coast and Central Valley are mixed, but on balance continue to grow at a slow pace.

Guv vetoes child care bill

Gov. Schwarzenegger has vetoed SB 867, the bill to unionize grandmas and other family members who provide subsidized child care to former welfare recipients. Unlike his earlier vetoes of similar bills, Schwarzenegger did not provide a detailed critique of the idea. He simply said he couldn't sign it given the state's structural deficit.

Where the new spending has gone

Interesting chart from the Senate Republicans, as part of this presentation by their new leader, Dave Cogdill. One thing not reflected clearly here is the increase in payments to local governments to backfill for the car tax cut the governor implemented when he took office. I believe that money is buried within the nominal increase in K-12 spending because of the intereaction of the property tax, Prop. 98 and Prop1A. The backfill was about $2.7 billion in 03-04 and is now $6 billion.

Taxing services? A reality check

Gov. Schwarzenegger says he is open to a discussion of extending the sales tax to services. That always seems like an attractive option. There are billions of dollars in potential tax revenue behind the proposal. But there also a ton of complications, and good arguments against it. For a summary of those, see this report by Dave Doerr at Cal-Tax. He wrote it five years ago, When Gray Davis said he was open to the idea.

Rainy day funds

This LA Times editorial, "Don't automate the state budget," makes a spirited defense of the messy democracy that comes with the annual squabble over revenues and spending. They argue against Schwarzenegger's proposal to create a larger rainy day fund and shift power to the governor to make spending cuts when the Legislature declines to do so.

They're right about the power-shift. That is a bad idea. But it's misleading to argue that the other part of the governor's proposal, which tries to smooth out the state's revenue flows, amounts to putting the budget's toughest decisions on auto-pilot. By that logic, the Legislature and the governor should start from scratch with the entire tax system every year, since, by leaving it in the law, they have put it on auto-pilot. The same with every program in state government. I am a fan of "zero-based budgeting," but that might be taking things a tad too far.

We might never again see a revenue boom and bust as dramatic as the one early in this decade. But just the normal ups and downs in California's revenue stream can be traumatic. There's nothing wrong with skimming off a bit of that revenue in good times and saving it for the inevitable downturn. Even Liz Hill supports a version of the same idea. There will still be plenty of good old-fashioned politics to be had over what's left after the rainy day fund gets its fill.

Chamber v. Brown

A Cato blogger thinks California will lose a Supreme Court case challenging a law limiting the anti-union activities of employers who accept contracts to work for state.

One thin dime

Senate Leader Don Perata says Democrats won't leave Sacramento this summer "as long as the governor intends to cut education by even one dime." His members seem to be backing him up on this threat. So assuming they are serious, the next question becomes, "one dime" from what level? From what they got this year, from what they expect to get next year, from their per pupil amount? The definitions here could swing the answer by several billion dollars.

One reasonable interpretation would be per pupil spending. To give the schools the same amount of money per student next year as they are getting this year would cost about $1 billion more than the governor has proposed. Remember, the much discussed "$4 billion cut" is off the workload budget -- an inflated number that does not necessarily reflect what the schools have received or even what they expected to get next year.

If they coupled flat per-pupil spending with reforms allowing the schools to spend their money as they wish, districts could probably manage through the year with few if any layoffs.

Goodbye, Liz Hill

Everyone who has read my columns or my blog knows the admiration I have for the legislative analyst and its leader of 22 years, Elizabeth Hill. The office under her leadership has become an invaluable source of straight, fact-filled information on the workings of state government and on proposals to change it. Today, Hill announced that she will retire at the end of this legislative session. The joint legislative budget committee will conduct a search for her replacement. We can only hope that the committee and the Legislature will find someone committed to continuing the tradition Hill inherited and advanced. If not, if the Legislature compromises even a bit in the direction of a person who might be tempted to shade the analyses to please a partisan boss, we're all in big trouble.

Oil taxes

Speaker Nunez has revived the idea from Prop. 87 -- defeated at the polls -- to levy a severance tax on oil companies, and he is coupling it with a "windfall profits" tax on the same firms. All of the money raised -- an estimated $1.2 billion -- would go to the schools.

I'm intrigued by this proposal on several levels, and more inclined to be open toward the severance tax than the profits tax. Here are some thoughts and questions:

--Supporters of the severance tax say California is the only one of the 22 oil-drilling states that does not have one. That must make California, relative to the other states, a more attractive place for oil companies to drill. At least with all other things being equal. We probably have other things here -- regulations, other taxes, higher prices -- that make it less attractive, but the lack of a severance tax would mitigate those to some effect. If it becomes more attractive to drill for oil in Texas than in California, will that reduce production and employment, and would that reduce the amount of net revenue the tax would generate? Is there a union representing oil workers? How do they stand on this?

--To the extent that you make California oil more expensive at the wellhead, you make imported oil relatively cheaper. That means more of the oil we use would be imported. So much for reducing our dependency on foreign oil.

--This proposal promises to somehow prevent oil companies from "passing through" the new taxes to consumers. I don't know how, exactly, you do that. If they raise prices, how do we know if they are passing through the tax, or the rising cost of oil, or raises for their CEO or blue collar workers? It seems like it would take a massive bureaucracy to sort through all of that. And the question is, why? The Democrats are fighting global warming by increasing the regulation of carbon emissions, and threatening either a carbon tax or an auction for pollution credits to make carbon-based products less attractive to consumers. Wouldn't passing this tax through to consumers have the same effect?

--The "windfall profits" tax would be applied to any individual or corporation earning more than $10 million from the oil business. Is there an economic or moral rationale for such a tax? They already pay personal and corporate income taxes. Why should they be singled out to pay a higher rate than all other individuals and businesses? Are their profits somehow different from those earned by banks, insurance companies, housing developers, gun manufacturers, tobacco companies, and newspapers? A "windfall profits" tax reminds me of "hate crimes." A crime is a crime, no matter the motivation. And a profit is a profit. Why should it matter which industry or line of work it came from?

--All of the money raised by the tax -- an estimated $1.2 billion -- is going to go to the schools. Schools are popular, but is that the best use of the money, at a time when enrollment is flat while people are being turned away from health care and the poor might be going without cost of living increases in their monthly stipends? Further, does it help solve the state's budget problem?

It seems like if there is a structural deficit, and you raise more revenue but then you spend it all on schools, you still have a deficit. It would be no different than what the state did in those boom years when they got unexpected revenue and spent it all. I would use all extra revenues, whether unanticipated or generated by a tax increase, to pay down debt and other one-time obligations while holding ongoing spending flat until the state was in the black again.

--Prop. 98. What are the implications for the future? Does plowing all that money into schools increase the base for Prop. 98, obligating the taxpayers to higher spending even as revenues from the tax will presumably decline as we wean ourselves off oil and oil company profits decline?

Just wondering.

*An earlier version of this item suggested that the bill was primed to fly through the Assembly. Clearly it's ready to fly to the floor but will be stopped there by the two-thirds vote requirement.

Drill and thrill

This is a very interesting and important story about the difference between the way math is taught in Singapore and in the United States, and the story of one heavily minority school that is finding success doing it the Singapore way.

Fiorina hits the campaign trail

Carly Fiorina, the fomer Hewlett Packard CEO, will be campaigning for McCain, and possibly doing a dry run for a race for governor in 2010. The Republican bench here, after all, is not very deep.

Penalizing tomorrow's homebuyers

Robert Samuelson explains why it's a mistake to prop up the housing market.

Movie ticket sales hit record

But production costs are up, too, industry leaders say.

Bargain hunting in housing

This LA Times story is more anecdotal evidence that buyers are starting to scoop up what they consider bargains in the housing market.

The crash of the salmon stocks

I've always been intrigued by the politics of the fishing industry. My perception is that these guys tend to be conservative, leave-us-alone types, and they are not normally considered environmentalists. But their business depends on preserving the stocks of fish so that they can continue to catch them, and sell them. Now the salmon population is crashing and the industry is trying to figure out what to do. One thing many of them are arguing for: fewer diversions of water from the Sacramento-San Joaquin River delta. More here, from the Santa Rosa Press Democrat. If anyone has more insight into this crisis and its potential effects on people and the economy, please send a note. It's something into which I'd like to delve deeper.

High court hears marriage case

The California Supreme Court -- as high courts usually are -- was a tough read today as it heard the state's gay marriage case. And the breakdown may not fall along traditional partisan or ideological lines. Justice Moreno, appointed by Gray Davis, seemed skeptical of the case presented by supporters of same-sex marriage, while Justice Kennard, a Deukmejian appointee, sounded sympathetic. Kennard, in fact, asked a couple of tough questions to the state lawyers defending the law, and then asked the exact same questions to the lawyer for the city of San Francisco, to whom they amounted to softballs which she promptly smacked out of the park. Justice Chin, a Wilson appointee, at one point asked the city's lawyer if the lawyers for the other side hadn't just made "your argument for you?" The only justice who seemed certain to go one way or the other was Marvin Baxter, the Deukmejian appointee, who sounded as if he was set against same-sex marriage.

The "unelected" legislative analyst

Jon Fleischman takes on Legislative Analyst Elizabeth Hill because (gasp) Hill has presented an alternative budget proposal that includes some tax increases.

Fleischman suggests that Hill -- he calls her the "unelected analyst" -- is wrong to offer legislators ideas about action they can take to balance the budget, rather than simply telling them why the budget is unbalanced. He is curiously silent about the cuts Hill proposes, which in many cases are deeper than those the governor has offered. And Fleischman doesn't seem to care that Hill's proposal, unlike anything proposed by the governor or any legislator, is actually balanced and would remain so for five years, given today's economic projections.

Fleischman is wrong about how Hill should be doing her job. The analyst's office makes policy recommendations all the time, almost all of them aimed at making government more efficient. And there is absolutely nothing wrong with that -- or with her proposing an alternative budget. I serously doubt that Fleischman would be slamming her if she had proposed an "all cuts" budget and shown lawmakers how she thought it could be done. He is cloaking his ideological differences with Hill in the clothing of process.

Trying to hem Hill in by calling her "unelected" makes her sound like some regulator or judge who has overstepped her bounds. But Hill works for the Legislature. She has no power over state policy. Her job is to advise her bosses on whatever course of action her office thinks is best. And that appears to be exactly what she is doing here.