MOORLACH UPDATE — Ready to Rumble — January 14, 2017

It’s a Scriptural admonition to "count the cost." Several newspapers printed the OC Register‘s Teri Sforza’s piece on the particulars of Federal funds that come back to California in the piece below.

I know what a being a donor municipality is all about. The County of Orange generates the second highest personal income taxes of all the 58 counties in California. Does it get back all that it sends to Sacramento? No. Does Sacramento care? No, as Orange County is a conservative bastion in a very liberal state.

California is a donor state to the Federal government. Does Congress care? Probably not.

Orange County was defiant with Sacramento while I was on the Board of Supervisors (see MOORLACH UPDATE — R&T Code Sec. 97.70 — November 15, 2011 november 15, 2011 john moorlach and MOORLACH UPDATE — VLF Theft — October 1, 2011 october 1, 2011 john moorlach). It didn’t turn out well.

So you don’t see Orange County being defiant with Sacramento, as it could hurt it more. I would think that the same mentality is in place in Washington, D.C. So why exasperate it? Why have even larger opportunity costs from failing to bring back more to the Golden State? Defiance can be very costly (see MOORLACH UPDATE — Art of the Deal — January 13, 2017 january 13, 2017 john moorlach).

But, that’s not all. Here is a listing of the Senate Resolutions that were submitted and voted on during the Swearing-In Session on December 5th:

SR 1 — (Hernandez) — The seating current and newly elected State Senators
SR 2 — (Cannella) — Election of President pro Tempore
SR 3 — (De Leon) — Selection of Rules Committee Members
SR 4 — (De Leon) — Approval of Standing Rules of the Senate
SR 5 — (Galgiani) — Inform the Governor that the Senate is Duly Organized
SR 6 — (Mitchell) — Inform the State Assembly that the Senate is Duly Organized
SR 7 — (De Leon) — Contributions of Immigrants and a Request for Rational Immigration Policies and Opposes Bigoted and Racist Descriptions of Immigrants

For the details of SR 7 see MOORLACH UPDATE — Thirteen! — December 6, 2016 december 6, 2016 john moorlach and http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SR7.

Here is the list of the remaining current Senate Resolutions:

SR 8 — (Moorlach) — Relative to the Peaceful Transfer of Power in the U.S.
SR 9 — (Jackson) — Opposes Defunding of Planned Parenthood
SR 10 — (Nguyen) — Recognize May 15, 2017, as Ao Dai Day
SR 11 — (De Leon) — Change a Member of Rules Committee (Modify SR 3)
SR 12 — (Atkins) — Support for a Woman’s Fundamental Right to Control Her Own Reproductive Decisions and Support Services Provided by Planned Parenthood
SR 13 — (Pan) — Recognize the Lunar New Year Celebration on January 27, 2017
SR 14 — (Pan) — May as Asian and Pacific Islander American Heritage Month

SR 11, a ministerial function, has already been approved.. SR 9 and 12 were heard in the Senate Judiciary Committee, where I serve as Vice Chair, yesterday morning and were approved along party lines (5-2). But, SR 8 is being held up by Senate leadership.

With such a strong negative reaction to the election of our next President, I decided to do a Resolution that welcomes the President-Elect and encourages, just like current President Obama and Senate President pro Tem De Leon have, a peaceful transition (see http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SR8).

Senate Resolutions 7, 9 and 12 have some strong barbs directed at incoming President Trump. SR 8 doesn’t even mention his name and would provide the olive branch that I have been recommending.

I’m hoping to have my Senate Resolution heard on the Senate Floor during Thursday’s Session (it was not included in Tuesday’s agenda). Next week should provide for some fun maneuvering before the Inauguration. Stay tuned.

Is California ready to rumble with incoming President Trump over tax money?

By Teri Sforza,tsforza

If Donald Trump were elected president, Jerry Brown quipped before it actually happened, we’d have to build a wall around California to defend ourselves from the rest of the country.

That was a joke, the governor quickly added. Such a wall would be 1,000 miles long, cost billions and be showy even by Golden State standards.

But the sentiment behind it was no joke at all.

With Trump set to take office next week, California is hastily constructing a legal, philosophical and cultural rampart to protect its progressive agenda from expected attacks by a newly conservative federal government — the bureaucratic equivalent of Sacramento flipping the bird to Washington, D.C.

The state’s strategy includes the California Legislature’s hiring of former U.S. Attorney General Eric Holder and his firm for $25,000 a month.

It might be an expensive gesture. While California pays more in federal taxes than any state, and gets less back from D.C. than it puts in, Trump has threatened to withhold federal dollars from communities that defy him on issues like immigration.

It’s unclear how the conflict will play out (for one thing, no president can direct every dollar spent by the federal government), but the stakes are high.

California relies on tens of billions of federal dollars to help pay for health care, education, social services, law enforcement, infrastructure and other programs. Less money in any of those areas could leave some of the state’s most vulnerable residents reeling.

“This isn’t just Trump versus California,” said Scott Graves, research director for the independent California Budget & Policy Center in Sacramento. “They’re attempting to implement an ideology that would have devastating effects on white working-class voters, seniors and lower-income children in all 50 states. It’s an effort to unravel the social safety net that has been constructed over the past 50 years.”

CHANGE NO. 1: OBAMACARE

In 2015, nearly one-third of California’s $275.3 billion budget — $86.2 billion — came from the federal government, according to the state’s most recent audited financial statements. This fiscal year, federal dollars play an even greater role, fueling 36 percent of state spending.

And that’s just a fraction of the federal dollars pouring into California.

Defunding Obamacare — something federal legislators started to do this week — would blow a $16 billion hole in California’s budget. Brown, who unveiled a new state budget earlier this week, said it’s a hole the state can’t easily backfill.

Folks are waiting, wondering and worrying.

“There’s a part of me that can’t believe, in my heart of hearts, that the people in power who actually understand how things work are going to totally destabilize our health care system in this way,” said Kim Rueben, an expert on state and local public finance at the Urban-Brookings Tax Policy Center at the Urban Institute.

“There’s always some uncertainty when you switch administrations, but it’s amplified because it’s not clear what Trump’s views will translate to,” she added. “(Trump) has said contradictory things.”

Whatever the next move, California is ready to rumble. As Texas was to Barack Obama — Texas sued the federal government over overtime pay rules, immigration policy, transgender bathroom directives — California may be to Trump.

PLANNING A DEFENSE

The California Legislature has hired former U.S. Attorney General Eric Holder and his firm for $25,000 a month.

Holder “will be an important resource as we work with the governor and the attorney general to protect California from the reckless overreach we expect from Donald Trump and the Republican members of Congress who have so cravenly enabled him,” Assembly Speaker Anthony Rendon, D-Paramount, said in a statement.

The Legislature confirmed U.S. Rep. Xavier Becerra, a Congressman since 1992, to replace Kamala Harris as California’s top lawyer on Friday. Becerra says he’ll mount Texas-style opposition to Trump policies, from stop-and-frisk policing to crackdowns on undocumented immigrants to any potential creation of a “Muslim registry.”

“Disturbing statements uttered during the recent presidential campaign have given rise to legitimate fears that the new federal administration might seek to adopt policies that would discriminate against people based on factors such as religious belief,” Becerra said in a nine-page letter to state Assembly members considering his nomination.

“Any such policies would be antithetical to the deepest constitutional values and traditions of this nation — a nation founded in part by men and women fleeing religious persecution.”

Immigration, abortion, climate change, gun control, voting rights — Becerra stands ready to defend the state’s stance on them all, he said. He will use the weight of his office “to protect California’s most vulnerable people.”

The general wisdom is not to pick on someone bigger than you, and it has some Republican lawmakers worried.

“If the majority party continues to poke President-elect Trump with a short stick, then they better be prepared with a Plan B,” said state Sen. John Moorlach, R-Costa Mesa, in a statement. “And, as far as I can tell, there is no alternative plan should these combative moves not be received well by the incoming Trump administration.

“We cannot, and must not, jeopardize federal funding to our state, counties and cities,” Moorlach added. “They cannot afford it, especially with increasing pensions costs at the door.”

WHO GETS WHAT?

If this is a David v. Goliath battle, California may be a particularly well-placed to torment the giant, if not quite slay him.

California has one of the largest economies on Earth, state Sen. Kevin de León has boasted. It’s one of 50 states but provides the federal government with an oversize 12 percent of its tax revenues, according to IRS statistics.

And while there are many different ways to slice the numbers, California sends more treasure to Washington, D.C., than it gets in return, according to our analysis and the analyses of many others.

Here’s a breakdown of the fiscal flow:

• Money in: The federal government pours more than a quarter-trillion dollars into California’s governments, residents and businesses each year. The total was $283.6 billion in fiscal 2016, not counting the salaries of federal employees who work here.

About half of that — $143 billion — went to residents as direct payments (such as Medicare and food stamps), insurance payments (unemployment, flood insurance), and other types of assistance (such as reimbursements for prescriptions for veterans), according to the U.S. Treasury Department.

• About one-third of it — $93.3 billion — came as grants, mostly to state and local governments, “to carry out a public project or service.” This pot is considered most at-risk in the current showdown. The biggest chunk of money — $60 billion — went to the state Department of Health Care Services, with transportation, education and social services getting most of the rest.

Most of the remainder — $47.2 billion — is awarded to California businesses that contract with the federal government. Lockheed Martin and Health Net had the biggest contracts, at $3 billion each.

All told, Los Angeles County residents, governments and businesses got $22.6 billion from the federal government last year. Orange County got $7.7 billion; Riverside, $6.1 billion; and San Bernardino, $4.9 billion.

The city of Los Angeles stands to lose a half-billion dollars in direct grants from the federal government over its vow to protect undocumented immigrants. Santa Ana, another self-declared “sanctuary city,” has $123 million on the line.

• Money out: Californians paid $362 billion to the federal government in fiscal year 2015, about $100 billion more than they got back, according to the most recent IRS statistics.

That $362 billion includes income taxes paid by individuals and businesses, as well as payroll taxes (Social Security and Medicare), federal gas taxes, and estate taxes on very large inheritances. It captures nearly all federal revenue — about 90 percent — and is a solid measure to use, according to researchers at the Committee for a Responsible Federal Budget.

Similar comparisons by WalletHub and The Tax Foundation found that California is one of the least “federally dependent” states in the union, which is another way of saying it’s a giver, rather than a taker.

A 20-year snapshot by The Economist found the same to be true over the long haul as well. Between 1990 and 2009 California sent $4.25 trillion to Washington, and got $3.91 trillion back.

MORE THAN TAXES

Still, for all the fear and loathing, Trump’s federal government may turn out to be good for many people in California, if not for their governments, said Rueben, the public finance expert at the Urban Institute.

If Trump follows through on tax reforms that lower the rates on capital gains, dividends and corporate taxes, it would be a big win for California’s tech economy, she said. Promises of big infrastructure spending could create jobs and stimulate the economy as well.

“Individuals might be better off under a new administration,” Reuben said. “It’s just not knowing what it means for everything else.”

In the meantime, California should quit the posturing in what’s essentially a dangerous game of chicken, Moorlach said, and focus instead on reaching across the aisle.

“I can just imagine Trump calling up Jerry Brown. ‘Hey, you know that $3.3 billion you wanted for high speed rail? Never mind,’ ” Moorlach said.

FACTBOX:

CALIFORNIA VS. TRUMP

The Golden State is committing itself to programs the incoming administration is expected to oppose. Here, from Gov. Jerry Brown’s budget proposal for 2017-18, are his plans to counteract the effects of poverty:

California has an extensive safety net for the state’s neediest residents. Since 2012, the general fund has incurred new poverty‑focused obligations totaling about $18 billion annually. The budget continues to fund:

• The rising state minimum wage, which is scheduled to increase to $11 per hour in 2018 and to $15 per hour over time.

• The expansion of health care coverage under the federal Affordable Care Act, which provides millions of Californians with insurance.

• The first cost‑of‑living adjustment for Supplemental Security Income/State Supplementary Payment recipients since 2005.

• The repeal of the maximum family grant rule in CalWORKs, which denied aid to children who were born while their parents were receiving aid.

• Increases in child care and early education provider rates and children served totaling $837 million.

SOURCE: U.S. Department of Treasury, Bureau of Fiscal Services, Fiscal Year 2016

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