MOORLACH CAMPAIGN UPDATE — Fruit Basket — July 5, 2016

I’ve only been in the State Legislature since last March. But, I’ve now gone through two budget cycles and a few bargaining unit ratification exercises. And I’ve seen a massive long-term spending initiative — the minimum wage — approved within hours of its introduction, similar to SB 400 back in 1999 (which began the massive public employee defined benefit pension plan enhancements that are now coming home to roost).

Consequently, with a Governor and Legislature that does the following, bad things are going to happen in the future.

1. Approve ever increasing annual budgets without fully addressing long-term unfunded liabilities and deferred road maintenance.

2. Agree to bargaining unit agreements that give larger salary increases in order to have employees pay for their retiree medical, which only exacerbates the defined benefit pension plan liabilities (and not one employee will actually fully fund their retiree medical — a sad smoke and mirrors maneuver).

3. Granting a 50 percent increase in the minimum wage, from $10 to $15, that not only impacts a significant number of state employees who perform in-home support services, but also puts significant pressure on other government jobs through wage compaction or where their contracts are tied to some multiplier of the minimum wage​.

Add to this recipe an investment market that is not providing positive results for the last two years, thus requiring ever increasing pension plan contributions, and you can see the mess that has been created.

But, that’s not all, this group also wants you to approve bond measures in the fall that will further impact the state’s annual budgets in the decades to come.

Locking in major spending initiatives is reprehensible. No wonder the cry for ever more taxes is all we’re hearing.

What else is there to do? Stop the massive spending increases? Not with this majority running Sacramento.

Hire brighter contract negotiators? Not with a Governor who is beholden to these very same employee unions.

Stop caving in to ballot-measure leverage? No. This Governor would rather offer a similar terrible deal than to fight the public employee unions that gathered the necessary signatures.

Their answer is to continue raising taxes and fees, hoping that it doesn’t exasperate the state’s high income generators enough to push them to move out of state. Not a week goes by without someone telling me that they are leaving California. This weekend, it was a young couple heading for Ohio.

Let me remind you that the state’s budget is supported by taxes, of which two-thirds comes from personal income tax. Of those that pay, some 17% pay 87% of these tax revenues.

In fact, some 1 percent pay 50 percent, which is confirmed by the LA Times article, the first piece below.. To make the point, I joked about sending a fruit basket to these taxpayers to thank them for staying in California. I guess reporters do listen in on hearings.

Taxpayers are listening. The OC Register has a letter to the editor that reacted to an "all is fine at Caltrans" submission this past week. Someone in Tustin gets it and his comments are in the second piece below.

BONUS: The third piece is an invitation to participate in my July 13th fund raiser. For me to continue our efforts to share some fiscal saneness in the Capitol, I need you to assist financially in any way that you can. Please invite as many of those who deserve a fruit basket to attend. You will enjoy hearing Chris Epting’s account of President Teddy Roosevelt’s visit to California, a major excursion for that day. His insights will amaze you. I hope to see you then.

Can Gov. Jerry Brown keep the promises he made with Proposition 30?

By Chris Megerian

The day after California voters helped patch the state’s recession-battered budget by approving Proposition 30’s temporary tax hikes in 2012, Gov. Jerry Brown promised to treat the money as a short-term stopgap.

“It will be my goal to make sure the state is in such fiscal health that we can keep gliding into the future without having to go back to the well for more taxes,” he told reporters at the time.

Four years later, making good on both of those commitments — keeping the taxes temporary and keeping red ink out of California’s budget — has presented a predicament for Brown.

A coalition of unions and other advocacy groups is pushing a new initiative, which will be on the November ballot as Proposition 55, that would keep some of Proposition 30’s taxes instead of letting them expire as Brown pledged.

Proposition 30 raised the sales tax by a quarter-cent through 2016, and it increased income tax rates on individuals making at least $250,000 annually until the end of 2018. Proposition 55 would let the sales tax hike lapse but keep the higher income tax rates until 2030.

Without the increased revenue, the state could face a $4.3-billion deficit in the coming years, according to Brown administration estimates. The gap would be even larger if California’s economy slows down or is struck by another recession.

Rather than “gliding into the future,” Brown would be forced to slash spending shortly before finishing his final term.

The scenario is “not pretty” and education funding could face billions of dollars in cuts, said Jennifer Wonnacott, a spokeswoman for this year’s tax campaign.

“Schools are just beginning to recover from the cuts that were made during the recession,” she said. “But there’s still a long way to go.”

The money from Proposition 55, which nonpartisan legislative analysts estimate would range from $4 billion to $9 billion annually, would go to local schools, community colleges and public healthcare.

Brown has not endorsed the initiative, but neither has he opposed it. Once it became clear that the tax campaign was moving forward earlier this year, Brown insisted that supporters tweak the proposal and ensure that some of the money raised would be deposited into the state’s newly strengthened rainy-day fund. The original version had exempted the revenue from that requirement, which Brown called a “fatal flaw.”

Brown has insisted that the state can manage any deficit that could occur, whether or not voters pass Proposition 55.

“I am prepared to manage without it,” he said in May. “I am prepared to manage with it.”

Critics feel Brown is trying to have it both ways — keep the budget balanced but avoid backtracking on his promise that the taxes would be temporary.

“There’s a wink involved,” said Joel Fox, a conservative political consultant who campaigned against Proposition 30 four years ago.

The tax extension is being pushed by some of the state’s most powerful organizations, including the California Teachers Assn., the California Medical Assn., the Democratic Party and the Service Employees International Union.

Also on board are top Democrats, including Lt. Gov. Gavin Newsom and Treasurer John Chiang, who are jockeying to succeed Brown in the governor’s office. Legislative leaders in the Capitol endorsed the initiative, too.

“It’s something we need in order to continue to make sure that our fiscal shape continues to be healthy,” said Assembly Speaker Anthony Rendon (D-Paramount). “I think we need it in order to preserve programs I think are important at the current funding levels.”

Brown pushed for Proposition 30 in 2012 after promising voters he wouldn’t raise taxes without asking for their permission. At the time, the state was facing a multibillion-dollar budget deficit and Brown was slicing money from government programs for the poor to make ends meet. Without the taxes, he said, there could be billions of dollars more in cuts to schools.

Brown pushed for Proposition 30 in 2012 after promising voters he wouldn’t raise taxes without asking for their permission. At the time, the state was facing a multibillion-dollar budget deficit and Brown was slicing money from government programs for the poor to make ends meet. Without the taxes, he said, there could be billions of dollars more in cuts to schools.

Brown pushed for Proposition 30 in 2012 after promising voters he wouldn’t raise taxes without asking for their permission. At the time, the state was facing a multibillion-dollar budget deficit and Brown was slicing money from government programs for the poor to make ends meet. Without the taxes, he said, there could be billions of dollars more in cuts to schools.

In the years since Proposition 30 passed, the state’s economy has rebounded, contradicting opponents’ warnings that higher taxes would choke growth. Brown has also restored spending that was cut during the recession, although not as much as his fellow Democrats in the Legislature would like. They’ve urged him to loosen the purse strings even more when it comes to child care, public healthcare and other programs.

Brown has refused, warning about the possibility of another recession and insisting on bigger deposits into the state rainy-day fund.

“The surging tide of revenue is beginning to turn,” he said in May.

California is particularly vulnerable to economic downturns because it relies heavily on taxing the wealthy, whose incomes rise and fall with an unpredictable stock market. Roughly half of the state’s income tax revenue came from 1% of taxpayers in recent years, according to state statistics. State Sen. John Moorlach (R-Costa Mesa) joked during a Wednesday hearing that lawmakers should send California’s wealthiest residents a fruit basket to thank them for not moving to more lightly taxed states.

It’s an issue Brown and the Democrats who control the Legislature have not addressed. Betty Yee, the state controller in charge of managing Sacramento’s cash flow, has called for changes to stabilize California’s finances, but she’s also endorsed extending the Proposition 30 income taxes.

“The revenues generated by this temporary tax on higher incomes will be needed to pay California’s bills with minimal reliance on external borrowing,” Yee said in a statement. “However, this is not a permanent fix, but rather another sign that we must immediately get to work on comprehensive tax reform in this state.”

It appears that Californians are inclined to agree. In a poll released in April by the nonpartisan Public Policy Institute of California, 62% of likely voters said they supported extending the taxes.

It’s unclear how much opposition there will be.

“I don’t see much money for the campaign,” Fox said. “There will be people on radio talk shows, maybe some mail.”

The Howard Jarvis Taxpayers Assn., a reliable opponent of tax measures, said it would oppose the extension. The National Federation of Independent Business, which represents small business owners, has spoken out against it as well.

If voters agree to extend the taxes, what happens when they come close to expiring a second time? Wonnacott didn’t make any promises.

“Any decision to whether to pursue another extension or not would be made in the future,” she said.

For his part, Brown isn’t telling voters how they should treat Proposition 55.

“I’m leaving that to the people of California,” he said.

chris.megerian

Twitter: @chrismegerian

Letters: Caltrans spending money in wrong places

Re: “Improving Caltrans requires new revenue and reasonable reforms” [Opinion, June 30]: Mr. Brian P. Kelly thinks there should be an increase in user fees for transportation infrastructure. The users have been paying higher fees than any other state in the union. According to AAA, “California motorists pay $13.5 billion in related taxes, fees and other charges,” July/August Westways magazine. The same magazine states, “The state’s general fund owes $20 billion in general obligation bonds used for transportation, as promised to voters when they approved them in 2006.” The monies the people of California pay for road repair and or new construction are being used elsewhere. We need to get those monies back where they belong along with getting the proper leadership in Caltrans. Sen. John Moorlach is trying, but other senators and assemblymen need to step up.

Mr. Kelly sounds like a long-time politician: All we need is more money, so just tax some more. What we need is people that will spend the money in the department it was designed for.

Tom Parker

Tustin

You’re Invited to a

Moorlach for Senate 2016 Fundraiser

Please Join:

Assemblyman Travis Allen – Assemblyman Bill Brough – Assemblywoman Ling Ling Chang – Assemblyman Matt Harper – AssemblywomanYoung Kim – Supervisor Andrew Do – Supervisor Shawn Nelson – Irvine Mayor Steven Choi – Anaheim Mayor Tom Tait – Costa MesaMayor Steve Mensinger – OC GOP Chairman Fred Whitaker – OC GOP Chairman Emeritus Scott Baugh – Michael Capaldi – Dr. JustinMcCusker – Rick Muth – Mark Bucher

SPECIAL GUEST:

Chris Epting – Author, discussing one of his most recent books,

in honor of the National Park Service Centennial

Topic:

"Teddy Roosevelt In California — The Whistle Stop Tour That Changed America"

Opportunities:

Co-Host: $4.200 – Gold Sponsor: $2,000 – Silver Sponsor: $1,000 – Bronze Sponsor: $500 – Individual Tickets: $250

When:

July 13th 2016 – 5:30 – 7:30 PM

Where:

Pacific Club

4110 MacArthur Blvd

Newport Beach, CA 92660

RSVP:

David – david

Paid for by Moorlach for Senate 2016 (ID# 1376462)

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