Dan Walters

Dan Walters: Automatic cost-of-living adjustments fading away

Dan Walters
Dan Walters

When Assemblyman Luis Alejo introduced his legislation to raise California’s minimum wage a year ago, it contained this language:

“Except as provided in paragraph (3), the minimum wage shall be automatically adjusted on January 1 of each year, commencing on January 1, 2017, to maintain employee purchasing power diminished by the rate of inflation that occurred during the previous year.”

It was a cos- of-living adjustment or COLA, and for decades, COLAs were routinely included in legislation for welfare grants, school aid and other spending, as well as state employee contracts.

By the time Alejo’s Assembly Bill 10 was signed by Gov. Jerry Brown nine months later, however, the COLA had disappeared and the bill merely increased the minimum wage in stages to $10 per hour.

It was evident that Brown had insisted on removal of the COLA provision – the latest chapter in a four-decade-long political battle.

Oddly, it began in the early 1970s with the man who preceded Brown in his first governorship, Ronald Reagan.

Reagan’s landmark achievement was an overhaul of welfare aimed, he said, at confining aid to the truly needy. His deal with Bob Moretti, the Democratic speaker of the Assembly, included, however, an automatic COLA in welfare grants.

Although Reagan campaigned on welfare reform to win the presidency in 1980, in California the welfare COLA was an irritant to his fellow Republicans. When Republican Pete Wilson became governor a decade later and faced a severe budget deficit, he denounced “autopilot spending” and sought suspension, if not elimination, of COLAs.

They became an annual bargaining chip during budget negotiations – sometimes suspended, sometimes expanded. In the late 1990s, the Legislature passed a hefty cut in vehicle license fees, but Democrats insisted that any tax cut for motorists be matched by a COLA for welfare recipients.

That “trigger” was pulled a few years later when then-Gov. Gray Davis was recalled, Arnold Schwarzenegger was elected as his successor and the new governor’s first act was to reinstate the car-tax cut that Davis had rescinded.

Welfare-rights advocates sued to enforce the welfare COLA and won their case.

Schwarzenegger then spent much of his seven-year reign trying to eliminate it and succeeded in 2009 as part of a budget deal that temporarily increased taxes.

Schwarzenegger also attacked, with some success, COLAs in state labor contracts and in other programs and they have been much diminished in state government, to the chagrin of liberal Democrats and their allies.

The shrinkage of COLAs contributed to Brown’s successful efforts to finally balance the state budget last year. And by insisting that Alejo’s minimum wage bill have no COLA, he indicated that he doesn’t want to see their revival.