California Insider

A must-read story from Kelly St. John at the San Francisco Chronicle, the tale of Oral Lee Brown and her adopted class of first-graders. Sixteen years ago, Brown told two-dozen first-graders at Brookfield Elementary School on the poor side of Oakland that she would pay their way through college if they graduated from high school. Earning $45,000 as a real estate agent, Brown began setting aside $10,000 a year in a trust fund to make good on her promise. In the end, 19 of the children graduated and entered college, many the first in their families to do so. This is more than just a heart-warming feature. It's a provocative story that tells us how lives change when our expectations rise, for whatever reason.

Here's an interesting report from the Rockefeller Institute on how far state revenues have fallen during the current downturn. The governor's office is promoting it as evidence that Gray is not to blame for California's mess. And indeed, it does show that, except for Alaska, California had by far the largest percentage decline in tax revenues between 2001 and 2002. As has been exhaustively reported here, that's because of our dependence on the progressive income tax and the huge run-up in capital gains during the stock market boom. The report also shows how the revenue decline exceeded what you'd expect for the relatively mild recession we endured. Having said that, it doesn't excuse California policymakers, from Davis on down, for committing the entire windfall to ongoing spending and tax cuts, and from failing to react with any seriousness until long after the stock market had peaked and begun its tumble. Everyone knew where the money was coming from, and how quickly it could disappear. A little more prudence would have made the whole thing much easier to manage.

It’s almost certain now that the gov, in his revised budget Wednesday, will be proposing a deficit retirement plan in the $10 billion range, with a half-cent increase in the sales tax to retire the bonds. This is a version of the idea proposed a couple of weeks ago by Assembly Republicans, who want to move the deficit off-book and retire it over time out of existing revenues. Such a proposal from Davis would likely trigger a huge row over whether to pay off the debt with new taxes or out of existing revenues. But that’s not the most important issue. However the debt is eventually financed, it’s crucial that the rest of the budget be balanced with credible, conservative revenue projections and an honest outlook on expenditures. The worst solution would be to move this massive deficit off the books, then immediately start building a new one by continuing to spend more than is coming in from taxes. So while everyone is screaming about another Davis proposal to raise taxes Wednesday, look at the fine print and see what he proposes to do with the rest of the budget, and whether he offers projections out at least as far as his deficit finance plan extends.