Monday, October 24, 2011

Why We Shouldn't Trust Sacramento to Sort Out the Housing Crisis

Earlier this month, California Attorney General Kamala Harris made waves by pulling out of talks for a 50-state settlement with the nation's largest mortgage lenders. In the minds of Harris and her supporters, the dollar figures being discussed weren't nearly large enough to compensate struggling Golden State homeowners for the damage inflicted on them by unscrupulous banks. Yet according to this story in the Sacramento Bee, you might want to think twice about trusting the government to be any more honest when it gets into the home-financing business.

The report concerns the practices of California's Housing Finance Agency, a government body that offers low-interest loans to first-time buyers. According to the state Senate Office of Oversight and Outcomes, HFA has been doing a lot of foreclosing on its borrowers these days. Trouble is, many of the people it's kicking out of their homes aren't actually delinquent on their loans; rather, these people are renting the houses out while they continue making payments on them. In many cases, these folks moved into larger houses and were unable to sell their first homes on the weak market. HFA, apparently, has decided that renting out a home after taxpayers have given you money to buy it is a violation of federal law.

So, let's get this straight: the government uses taxpayer money to subsidize home purchases, reducing supply and pushing prices through the roof; this backfires horribly, as the price increases make homes so unaffordable that the market collapses; the government takes no responsibility for its role in these events, and blames private lenders for their misleading loans and ruthless foreclosure practices; and now the government is . . . using an obscure bit of federal policy that no borrower knew about to throw people out of homes, even though those people are current on their payments.

What Kind of California Town Do You Live In?

While much of California is a mess these days as a consequence of the weak economy and years of overspending, it's important to remember that there's a lot of variation across its towns and cities, in terms of fiscal health and the ability to take their troubles seriously. Not all governments are created equally irresponsible here. As these three stories illustrate, California cities often fall into one of three types.

Deadbeats. If you read this blog regularly, you're probably aware of many municipal governments openly flirting with bankruptcy these days &mdash the cities of Montebello, Santa Ana, and Bell come immediately to mind, along with the Mendocino County Recreation and Parks District. There are also many governments right on the edge of major financial trouble. As an example, consider Stockton. Back in May, the Central Valley city was struggling to close a mammoth $37 million hole in its budget. Though it ultimately fixed that deficit, the problems created by years of overspending and borrowing on a foolish downtown revitalization effort remained, and yesterday, the city warned it could default on redevelopment bonds issued in 2006. According to an October 12 filing with the SEC, the debt service on those bonds exceeds revenue by almost $900,000. In other words, the city is broke.

Welfare Queens. Of course, not being completely out of money doesn't mean your government is doing well. As an example, consider the city of San Bernardino. Unlike Stockton, it isn't broke; but as one of the poorest cities in the country, it's hardly doing well. Almost half of the town's residents are on welfare &mdash either Medi-Cal, food stamps, or cash assistance &mdash and all told, it receives a staggering $524 million a year in federal and state welfare assistance. In other words, San Bernardino's economy consists in large part of cash transfers. It's not in danger of declaring bankruptcy, but ask yourself whether paying people to be poor is a sound model for an economy that leads to greater wealth.

Beacons of Sanity. With all the bad news these days, it's important to remember that there are municipal governments in the Golden State trying to do right by the taxpayers. The most obvious example, of course, is Costa Mesa, which is attempting to implement steep cuts in spending to get out ahead of ballooning pension costs before they turn into a crisis. Yet the town of Pleasanton, in Alameda County, also deserves a tip of the cap. In addition to being one of the nicest towns in northern California, Pleasanton is embarking on a plan to cut its pension debt by at least 10% in the next five years. Currently, city employees contribute almost nothing to their retirement benefits; under the City Council's new plan, concessions on these contributions will be used to pay down its unfunded liabilities ahead of schedule. While the plan doesn't go far enough &mdash Pleasanton's unfunded liabilities sit somewhere between $82 million and $144 million &mdash they've got the concept right: taking on short-term pain and deferring spending in order to keep debts from snowballing.

Friday, October 21, 2011

Cap and Trade Moves Forward in California

Nothing better defines California's governing class these days than the determination to bend the state's economic future to their will. You see this in their willingness to abet organized labor's desire to destroy the private sector in the name of class warfare; you see it in their efforts to force green technology to become a viable, self-sustaining industry via taxpayer subsidy; you see it in their belief that excessive regulation and taxation have no effect on economic growth. But most of all, you see it in their unwillingness to consider that it's harder for a modern economy to function without power. And now, Californians will learn this the hard way, as the Air Resources Board has voted to move forward with implementing a cap-and-trade program starting next year. That's right: a state whose unemployment rate has hovered around 12% for months, and where almost 1 in 5 residents lives in poverty, will have to figure out how to jump-start its economy while being charged a tax on the power it uses to do so. Also of note: none of the states currently taking jobs and dollars out of California has plans to implement a similar system.

Thursday, October 20, 2011

California: Where Tax Breaks Are Okay If They Allow the State to Play Favorites

Insofar as Sacramento is run by a Governor and a Legislature incapable of imagining an economic recovery not centered around green energy and massive public works projects, it shouldn't really surprise anyone that the only Californians who stand to see breaks on their taxes are the Democratic party's political favorites. Yet sometimes it takes stories like the following to remind us that California is less a socialist People's Republic and more a fascist command economy.

First up, those of us following the Solyndra bankruptcy scandal might remember that President Obama wasn't the first politician to throw public dollars at the Fremont solar firm: that would be former Governor Arnold Schwarzenegger, who extended $34.5 million in tax breaks to the company last November. After Solyndra collapsed, the public became aware of an obscure state board called the Alternative Energy and Advanced Transportation Funding Authority, by which California offers tax incentives to promote green technologies. By the admission of Treasurer Bill Lockyer, the board makes no effort to judge the viability of the companies that receive these incentives, so basically all you need are good lobbyists. You may remember that Lockyer called for a moratorium on the tax breaks in the wake of Solyndra's bankruptcy, in order to explore changes to the program. Unfortunately, that was a month ago, and now Lockyer has gone back to supporting it. So, never mind that the taxpayer dollars awarded to green-tech firms have been largely wasted, or that it's never been clear that these firms can exist in a truly competitive market: Sacramento is bound and determined to play favorites with our money, and it doesn't look like that's going to change.

Of course, for a glimpse into the worst sides of California politics, few places reward curiosity better than San Francisco. You might remember the city's plan, first announced in July, to declare ex-convicts a protected class on par with racial minorities and LGBT residents. The idea was to prevent discrimination by landlords and employers, with Jerry Brown's realignment plan creating an expected influx of low-level felons to the city. According to the San Francisco Chronicle, the Board of Supervisors is now preparing to go even further, with plans to offer tax incentives to city businesses who hire felons. The plan is still a work in progress, but the tentative goal is to save a firm $10,000 against their payroll tax obligations for every felon they hire into full-time employment. We know what you're thinking: "Wait a minute, why should it be easier for a convicted felon to find a job than someone who's worked hard and obeyed the law their whole lives?" To which we'd reply: welcome to politics in San Francisco.

Tuesday, October 18, 2011

Deadbeat Alert: CalSTRS, San Diego Unified Are Out of Money

File this one under "I am Jack's complete lack of surprise": yet more agencies of government in California are about to run out of money. First, Voice of San Diego reports that the San Diego Unified School District is on the edge of insolvency. The reasons for this should be familiar to observers of this state's politics; salaries and benefits have continued to escalate while funding from Sacramento has shriveled, and the education trailer bill in the state budget prevented the district from laying off teachers in advance of mid-year "trigger" cuts. As such, a takeover by the state may be in the works. In exchange for a loan from California's taxpayers to keep its bills paid, the district will relinquish all local control of its schools to Sacramento. The superintendent will be fired and the school board stripped of all real authority, and parents and students will have to trust that an unelected state administrator will be more responsive to their needs. In other words, it's pretty much a losing proposition for everyone save a few bureaucrats in the state capital.

That's pretty alarming, but it's nothing compared to the noises coming out of the nation's second-largest pension fund, CalSTRS. If the Governmental Accounting Standards Board goes through with new rules for reporting unfunded liabilities, the retirement fund for California's public school teachers could see its 30-year unfunded liability triple from $56 billion to roughly $150 billion. Mind you, CalSTRS officials don't see that as a serious problem; to their thinking, they're well on their way to closing the gap back up. But they're worried people might be freaked out by the size of the number. Says Alan Milligan, CalSTRS' chief actuary, "There's going to be a perception problem – what is the cost of the pension system?" Um, yeah. Local governments, and ultimately taxpayers, are going to have to make up whatever shortfall the fund's investments don't. If that shortfall gets massively larger, it's going to break the budgets of those governments. It's actually slightly more serious than a "perception problem."

Monday, October 17, 2011

Is a Population Exodus California's Only Hope?

We tend to like the work of Dan Walters at the Sacramento Bee, but every once in a while, even the dean of California journalism misses a pitch. In his latest piece, Walters offers the following hypothesis: a massive exodus of population could be just what California's beleaguered economy needs. You see, back when the Cold War ended, the middle class in southern California took a series of body blows as the aerospace industry largely picked up stakes and left the region. As a result, between 1.5 and 2 million Californians left the state between 1990 and 1994. In Walters' view, this exodus helped to speed the state's recovery, and the lack of a similar outflow of people may be the reason the current recession has persisted so long.

Walters' argument, unfortunately, leaves two critical questions unanswered: did California's economy actually recover later in the 1990s, and if so, by what mechanism did the loss of population contribute to it? The aerospace collapse in the 1990s revealed, pretty clearly, that the free-market demand for the industry's products was far lower than it had believed during the command-economy days of the Cold War; similarly, the 2007-08 collapse showed us that actual demand for housing, even in California, was far lower than Alan Greenspan's easy money had led us to believe. Recovery, then, would seem to imply either a rebound in these sectors, or a reallocation of economic resources into more productive areas. But it's not clear that either happened in the 1990s &mdash we saw a brief period of illusory prosperity at the end of the decade, as venture capital flooded into absurdly overvalued internet stocks, and we saw a housing bubble &mdash and it certainly isn't happening now. The exodus certainly brought the state's unemployment rate down, but taking people out of the labor force isn't the same thing as creating new jobs for them.

As Walters points out, the fact that the current recession hit the housing market especially hard is one reason why Californians haven't left in similar numbers to pursue work elsewhere: it's tough to contemplate relocation if it's going to involve short-selling your house or going through a foreclosure. He's also entirely correct to note that the extension of federal unemployment benefits has had a hand in keeping people from moving on. But his grasp of the underlying economics is completely off. It's typical of pundits and politicians to view unemployed workers as a drag on the state, rather than individuals capable of productive work. Ultimately, losing a large chunk of the population isn't going to get California working again; that isn't going to happen unless Sacramento releases its strangehold on the private economy, and sets its many innovators free to do what they do.

Gut and Amend: This is What Democracy Looks Like!

File this under ". . . and the last pony finally crosses the finish line": it's finally occurred to the Sacramento Bee that there's something wrong with the California Legislature's "gut and amend" practices. Better late than never.


"Gut and amend," of course, refers to the Legislature's practice of taking shelved bills, stripping out their language, and inserting new language at the eleventh hour. The most notable example of this in the most recent session, of course, was SB 202: in order to slip a gift to organized labor onto Jerry Brown's desk with little public scrutiny, Berkeley Democrat Loni Hancock deleted a proposal about filing fees for ballot initiatives and replaced it with a plan to move all ballot initiatives to November elections. Another bill created by this process was SB 292, which will exempt crony capitalists in Los Angeles from worrying about CEQA. The last session featured 22 such bills, all but three of which were signed by the Governor.

We've written a bit about the contempt that Sacramento clearly has for the public (see here and here), so nothing about gut and amend is terribly surprising to us. Still, there's really no positive spin that one can put on it: lawmakers are clearly using this procedural loophole for no other reason than to push bills through before the public has a chance to read a lot about them. Even if you're a believer in the idea of good government, you should find this alarming. How can you be sure that your elected representatives are doing your bidding if they're explicitly trying to hide their actions from your attention?

Sunday, October 16, 2011

Dan Walters: Don't Trust Democrats in Sacramento

Over at the Sacramento Bee, the always-interesting Dan Walters offers a reminder to California's voting public and to the Republican minority in the Legislature: the promises of Jerry Brown and the majority Democrats aren't worth the breath it takes to make them. That might not be a shocker to our readers, but it is important to keep pointing it out.


For one thing, there's SB 202, the controversial bill abolishing June ballot elections so as to enable organized labor to focus their resources on one election every other year. Notably, this bill pushes a vote on a spending cap measure off until November 2014; unsurprisingly, labor unions and spending-addicted Democrats despise the proposal. Veterans like Walters remember, of course, that Democrats' agreement to put the cap amendment on the 2012 ballot was the compromise that broke the eternal 2010 budget stalemate. Then there's AB 1319, which bans the use of BPA in the manufacture of baby bottles and sippy cups; this flies in the face of 2008 legislation requiring regulations of industrial chemicals to be subject to rigorous scientific evaluation, rather than being imposed by lawmakers. And then there's SJR 13, which urges Energy Secretary Steven Chu to reject permits for the construction of a windmill farm in Baja California. Even though Sacramento voted earlier this year to allow renewable energy to come from nearby out-of-state sources, now they're worried the Baja project will cost jobs.

Back when the current state budget was finalized, we noted that Brown and the Legislature had slapped the voters in the face in the process of the negotiations, claiming that punishing them for violating Prop 25 was unconstitutional and passing several provisions that appeared to violate Props 22 and 26, which the voters had approved just months before. Given the contempt for the public evidenced then, it shouldn't be surprising that California lawmakers feel no obligation to keep their word. As Walters puts it, they broke these promises without hesitation simply because they could get away it. While that might be a luxury of having a strong majority position, it shouldn't be forgotten by anyone. Keep it in mind the next time you're told that a tax hike will be temporary, that a spending program is too important to be cut, or that promises of future cuts will be kept. If these folks can get away with breaking their word for their own benefit, they'll do it.

San Francisco: Where Even the Pets are Statists

It's been a while since the city of San Francisco gave us a piece of really great absurdity to write about. Yet given that the city by the Bay has banned Happy Meals at local McDonald's, wants to ban goldfish, wants to make convicted felons a protected minority, and has little intention of taking its massive spending and pension shortfalls seriously, we knew it was only a matter of time. The Bay Citizen reports today on a new political action committee making its influence felt in San Francisco's mayoral race: DogPAC, which represents the city's dogs and is officially endorsing Supervisor John Avalos.


Though none of them are registered to vote in the city, DogPAC president Bruce Wolfe (yes, his real name) is proud to represent the interests of San Francisco's 180,000 dogs. The group is primarily concerned about a proposal to require leashes at Golden Gate National Recreational Area, and will send mailers and possibly raise funds for Avalos, who is fiercely opposed to the plan. Other candidates, including Dennis Herrera and Bevan Duffy, are taking the PAC very seriously as well. While we applaud the dogs for taking a stance against further regulation of private behavior, we really hope a bad precedent isn't being set here. Knowing how San Francisco politics tend to work, it's probably only a matter of time before DogPAC is asking for more from the taxpayers.

Saturday, October 15, 2011

Selfless Public Servants Race to Abuse the Pension System

In case you were still looking for reasons why California has gotten itself into a half-trillion-dollar hole of unfunded retirement liabilities, this report from the Sacramento Bee should help clarify a few things. Back in April, you may recall that Jerry Brown offered a list of pension reform proposals that included the elimination of so-called "air time" purchases. This refers to the perk that allows state employees to purchase additional years of service beyond what they've actually worked, so as to count it towards their pensions. Hard as it might be to believe, a state that allows employees to get credit in retirement for fictional work can sometimes find it hard to control costs. Well, according to the Bee, a lot of public employees are nervous that the Legislature may move to end this obvious abuse of the taxpayers' trust: in the last fiscal year, over 12,000 members of CalPERS made inquiries about air time purchases, a 23% jump from the year before. In July and August, about 1,000 more such requests came in to California's pension giant. Over 4,800 workers purchased air time last year, a 16% jump from the prior year. The volume of the inquiries has apparently stretched CalPERS' massive staff thin. Many observers link the increased interest in the benefit to Brown's plan to terminate it. Said one: "It's like a closeout sale. The governor probably didn't intend it, but suggesting that (the program) should end was good advertising." So, just in case you were still wondering whether government workers care about the effects of their actions on taxpayers, there you have it.

Just What California Needs: More Debt

Throughout 2011, Californians have been inundated by calls for higher taxes, both from our elected leaders and the mainstream press. Yet none of those voices have ever offered a clear explanation of why tax hikes are a better solution for the state's chronic cash shortfall than, say, reducing its spending commitments. Indeed, even though voters remain hostile to new taxes and businesses are hardly in a position to absorb new burdens, Sacramento is planning on dramatic increases in spending in the coming years. One has to imagine that, unless the voters have a change of heart in the coming months, the state will turn to its other time-tested way of paying for the status quo: borrowing.

On one hand, that process appears to be well underway, with yesterday's report that Treasurer Bill Lockyer is planning to offer $2 billion in bonds next week, including $1.8 billion in tax-free munis and $200 million in infrastructure bonds. While California was recently able to borrow at very low yields, interest rates on Treasuries and other government issues are off of their September lows. Since late September, Lockyer will have issued $4.4 billion in government debt, which will likely cost almost $9 billion for taxpayers to pay back. Keep in mind, also that debt service now accounts for almost 8% of the general-fund budget. In the end, borrowing is just a way for Sacramento to fool itself into thinking that a painless way of preserving the status quo exists.

On the other hand, California Water Wars has an interesting piece on the political obstacles that may be facing the state's latest water bond. We would've hoped that California might have enough common sense to realize that borrowing over $11 billion to purchase and landscape private property is a bad idea for a state in recession, but old habits die hard. Currently, lawmakers are debating ways of cutting the size of the bond to increase the chances of passage at the ballot next November, but it's not clear what form those cuts will take. Insofar as the deal that put the bond on the ballot represented a difficult compromise between various interest groups, it might not be a simple question of dropping projects. In its current form, the bond would stand a good chance of being rejected by the voters who shot down a variety of tax hikes last year. Though presidential-election ballots tend to bring higher turnout, and hence more spending-happy Democrats, three measures on the same ballot are likely to bring a higher-than-normal conservative turnout: a move to weaken term limits, a new cigarette tax, and a constitutional "rainy day fund" amendment.

Thursday, October 13, 2011

Throwing Money At Yet Another Downtown San Jose Boondoggle: The Repertory Theater

If the past few months have taught us anything, it's that the government of San Jose really has its priorities in order. The city may be losing its long battle with insolvency, it may have shed hundreds of jobs in recent years, and its public pension debt may be an unfolding nightmare. But the city council is setting these issues aside to tackle the really important problems, like insufficiently regulated private businesses. And today we see them taking on another vitally important matter: keeping the Repertory Theater alive. That's right; a city that just laid off dozens of police officers and eliminated over a hundred other jobs is renegotiating its 2006 bailout to ensure that the money-hemorrhaging theater doesn't go under. Basically, the Theater is seeking to restructure its payments on the $2 million it owes the city, so that it can make smaller payments over a greater number of years. Keep in mind, of course, that its downtown auditorium was constructed at taxpayer expense, and is operated at taxpayer expense. Also keep in mind that auditors are gloomy about the Rep's prospects for survival. Somehow, we're guessing that San Jose residents would rather have a few more cops on the street, or lower taxes, than be forced to pay for a the Theater that not nearly enough people enjoy.

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Milken Institute Cheers California's Lousy Economy

Yesterday, we wrote about the refusal of California's political and media classes to face up to the depths of the Golden State's troubles these days. Yet, as Steven Greenhut reminds us over at Cal Watchdog, it's easy to overlook the contribution that policy think tanks in the state make in reinforcing this denial. We've taken our hacks at the Public Policy Institute of California before, but it bears pointing out that the PPIC has done a great deal to softpedal the state's grim economy. Contrary to what these folks might have you believe, just because firms aren't moving their headquarters doesn't mean they're creating jobs here. Irvine's Joseph Vranich, who helps California firms expand and relocate elsewhere, can tell you that his business is booming. Now, Santa Monica's Milken Institute is getting in on the act, with a new study claiming that California is among the best in the nation at retaining highly skilled workers.

The release of the study coincides with an Institute-sponsored "State of the State" conference in Los Angeles today. This conference included appearances by the usual political hacks and crony capitalists (or, in the case of Gavin Newsom, both), as well as a one-on-one session featuring Jerry Brown and Michael Milken himself. (Brown apparently said that he wouldn't take a pension until he'd passed pension reform, then later admitted he was joking.) For us, the timing couldn't be worse, as the last thing the attendees need to be told about the economy is what they want to hear. The study argues that California remains an excellent place for highly skilled technology workers, and its conclusions call for increased public education spending. Yet most everyone who actually lives and works here could tell you that the real story is a lot more complicated than that.

Back in July, we (and Palo Alto economist Steve Levy) noted that California's economy was taking on a schizophrenic character: while some sectors, notably the tech firms of San Francisco and Silicon Valley, are showing robust growth, the recovery isn't pulling many other sectors along. Insofar as the Valley is looking for people with very specific sorts of skills, this explains why the good times there haven't translated into any sort of broader recovery in the state. Unemployment and poverty in California are as grim and as persistent as ever, and Sacramento remains determined to wage war on the private economy here. You can even argue (as we have) that the growth in the tech sector is largely a factor of Ben Bernanke's quantitative easing; the VCs on Sand Hill Road, after all, are usually near the front of the line any time the Fed decides to print a few hundred billion dollars into existence. We would also point out that high technology may face new hurdles once AB 32 goes into effect; it'll be much harder to operate things like server farms when the cost of power skyrockets. The point being that California's hostility to industry is not without consequences, and more are likely on the way.

Montebello: Whistle-Blowers, Not Public Corruption, Are the Real Problem

Very quietly, the Los Angeles County town of Montebello has turned itself into one of the most troubled cities in California. Back in April, state controller John Chiang announced an audit of the cities finances amid rumors of accounting irregularities. This was followed by investigations by the FBI, the Department of Housing and Urban Development, and Los Angeles County, and the city was ordered to return millions in HUD funds due to regulatory violations. Chiang's audit, released last month, found that Montebello had misspent some $31 million, and recommended that it refund some $3.6 million in inappropriate charges. While all this might suggest a government in desperate need of transparency and accountability, you'll be happy to know that the city council doesn't see things that way. To the city's leaders, Montebello's biggest problem is whistle-blowing by council members.


According to the LA Times, the council is weighing new rules for how councilmembers communicate on behalf of the city. One such rule would require members to bring to council meetings a written description ("expressed in complete sentences") of topics they plan to discuss publicly. Other rules would clarify who serves as the city's "spokesperson," as well as proper uses of city letterhead. As you might guess, this isn't a coincidence. Councilwoman Christina Cortez has attracted the ire of other city officials since taking office in a 2010 recall election, mostly for making public accusations of corruption and requesting investigations from Chiang's office and from LA County. Many of those requests have been delivered on city letterhead. Councilman Bill Molinari blames Cortez for triggering Chiang's investigation, though the controller claims his own suspicions about Montebello's records led to the audit. Unsurprisingly, Cortez thinks the new rules are intended to silence her, and many government-watchdog groups agree. The head of LA's Center for Government Studies finds the move "really troubling," and the director of Southern California's ACLU chapter said, "I do worry that in this context, they are trying to censor or shut down the dissident member." Which makes sense: when you're a government whose corrupt dealings have brought it to the edge of insolvency, clearly keeping those dealings secret needs to be your priority.

Deadbeat Alert: Santa Ana May Miss November Payroll

Ouch. We've been following growing concerns about the finances of the Orange County city of Santa Ana for a few weeks now. Unfortunately, the ominous signs are really piling up. When its budget was shown to be much less balanced than advertised, the city moved swiftly on plans to outsource over a dozen city services, and reports this week suggest it may file for bankruptcy. Well, the news isn't getting any better. According to Voice of OC, the head of Santa Ana's SIEU chapter says the city might not be able to pay all its employees in November. Apparently, union officials have been notified by Santa Ana's finance director that, unless large concessions can be negotiated quickly, some workers won't see their paychecks.

City Manager Paul Walters has apparently denied the report, saying, "There is no immediate concern for the city being able to meet our payroll obligations. Based on the latest information we expect that to be the case fro the remainder of this fiscal year." But with City Hall already operating with a skeleton crew and no reserves to lean on, it's not clear where the money will come from. Stay tuned.

Los Angeles Pressures Scientists Into Retracting Medical Pot Study

Last month, we wrote about a new study by Santa Monica think tank RAND, which demonstrated that neighborhood crime actually increased after a number of medical marijuana dispensaries in Los Angeles were closed. These data flew in the face of the anecdotal claims of California's law enforcement community, which has argued for years that such dispensaries are a magnet for crimes like burglary. Well, in an illustration of what happens when scientists produce research that doesn't serve the interests of the state, fierce criticism from LA's city attorneys has led RAND to pull the study report from their website. According to spokesman Warren Robak, "As we've begun to take a look at the report, we decided it's best to remove it from circulation until that review is complete."

The LA Times describes the city's objections to the study as follows: the RAND team failed to ensure that the dispensaries closed last June by a city ordinance actually shut their doors; its time frame (10 days before and after the closure date) was too brief to capture relevant crime trends; and the study only looked at minor property crimes, rather than a wider range of offenses. All of these objections are fair, but were acknowledged as limitations of the research in the study report. There's simply no such thing as a piece of social science research that's problem-free. Moreover, their objection to the short time frame makes no sense: the fact that property crimes jumped 60% in the neighborhoods surrounding closed dispensaries suggests a real relationship at work. Los Angeles seems to be suggesting that such crimes would've plummeted after this spike if RAND had studied the neighborhoods long enough; is this really any more likely than a continuation of elevated crime rates?

Looking more closely, it appears that scientific rigor isn't really what's bothering Los Angeles. The RAND report is just one study, after all, and no serious scientist would say that it conclusively answers the question of whether pot dispensaries cause crime. Yet it's something that critics of the statist party line on medical marijuana can point to, and the statists don't want that. In their letter to the study's lead author, city attorneys Jane Usher and Asha Greenberg wrote, "Until you publicly retract your work, we expect the Rand publication to be referenced nationwide, at incalculable avoidable harm to public health and safety." In other words, we don't like what your work found, and we demand you publicly repudiate it. It remains to be seen, of course, what the results of RAND's review might be; frankly, we'd be a little surprised if they didn't put the study right back online. Ultimately, when it comes to social science research, RAND is on firmer ground than the city of Los Angeles, and no one likes to see what appears to be an attempt to censor science.

(Full disclosure: I used to work as a consultant to RAND, and while I haven't worked with any of the researchers involved in this study, I do know some of them.)

Wednesday, October 12, 2011

California Exceptionalism, Debunked

Denial is a funny thing, especially when it comes to facing the future in California. A few weeks ago, Vanity Fair published an interesting case study on the Golden State, and while their diagnosis of the state's troubles missed by a wide margin, they pulled few punches as to how serious those troubles are. Yet this is the exception rather than the rule; most people sizing up our problems here remain in the grip of the "mass delusions" that San Jose Mayor Chuck Reed described to Vanity: "We’re all going to be rich. We’re all going to live forever. All the forces in the state are lined up to preserve the status quo." Back in May, you may recall Sen. Ted Lieu's casual dismissal of Standard & Poor's unflattering assessment of the state's finances. Lieu's argument, essentially, was that California can't default on its debts because it's not allowed to. It doesn't appear to have occurred to anyone in Sacramento that the money might actually run out some day. Even worse was a May editorial from the Sacramento Bee, which essentially denied that California's bad business climate could matter when its weather is this, like, totally awesome. Quoth the editors: "Head to the river, drive to the ocean, get in some spring skiing or putter around the garden. All that is good. But with some tweaks here and there, our state would become much better." Dude! Righteous!

The latest example of this comes from California Watch, which today takes on the declaration of California Lutheran University's Center for Economic Research and Forecasting that the state is "is fast becoming a post-industrial hell." They don't sugarcoat the statistics CERF cites &mdash the persistent 12% unemployment rate, the falling jobs numbers, the 16% poverty rate (with a much higher cost of living than most states), being home to two of the 10 poorest cities in America (Fresno and San Bernardino), falling wages, a collapsed housing market, bad schools, worse traffic, and middle-class flight &mdash but somehow finds a way to dismiss them. "[I]t’s also true that the flip side of the California dream has always been an apocalyptic sense of doom and gloom." We've always had earthquakes, and fires, and drought. Novels and movies have envisioned the apocalypse here, and Charles Manson even tried to start one. "But Helter Skelter has never actually occurred. And people keep moving here, for the gorgeous weather, or the magnificent scenery, or the amazing people, or the freedom, or the hope of getting rich." As ex-Governor Schwarzenegger said last year, even as the state was sinking under the weight of recession, "No matter where you go in the world, [t]here's no one screaming, like, 'I can't wait to get to Iowa.' That I can guarantee you. They want to come here to California."

It's little wonder that our political and media classes have such a hard time taking California's problems seriously, when they'll go to such lengths to deny that those problems exist. It's not apparent that California Watch's arguments are even faintly true, for one thing: only an idiot would come to California for the freedom, and given the regulatory and tax environment people are increasingly skipping it as a place to get rich. More importantly, though, there are real people behind the statistics from CERF, and there are real reasons why they're dealing with persistent poverty and unemployment. Put simply, the California that people like Ted Lieu dream of was largely a product of federal government subsidy and intervention, and that dream is rapidly coming to an end. The Golden State's economy has been badly out of balance since the end of the Cold War, and apart from abortive bubbles in stocks and real estate it hasn't shown a genuine sign of life since. The status quo is not coming back. Like it or not, the party is over.

Is the Prison Realignment "Political Malpractice"?

The Bay Area was largely unmoved by news of the resignation of Oakland police chief Anthony Batts today. Batts had clashed frequently with Mayor Jean Quan and the City Council, and struggled with the Herculean task of lowering the state's highest violent crime rate while seeing his budget cut and 150 officers laid off. While many speculate that the impending federal takeover of the OPD, pursuant to 2000's "Riders" scandal, had a role in pushing him out, we wonder whether it might have been something more immediate: the state prison realignment, which went into effect this month.


If the chorus of complaints from California's cities about the realignment is any indication, Batts might well have decided to cut his losses. Yes, the mayors of the Golden State's largest cities are very unhappy about the realignment; in a letter to Jerry Brown, the leaders of LA, San Francisco, San Diego, San Jose, and five other cities claimed that the state is facing a "brewing public safety crisis" if it doesn't give them more money to handle the new prisoners. Noted grandstander Antonio Villaraigosa even referred to the plan as "political malpractice" last week. Essentially, the cities want an immediate infusion of guaranteed money to cover their realignment-related costs, and want a November 2012 ballot initiative to constitutionally guarantee the money thereafter.

We can't imagine running big-city police departments is an easy job, and it will only get harder if, like Los Angeles, they're forced to move officers over to help probation departments supervise newly released offenders. Still, it's hard to avoid the sense that the mayors doth protest too much. After all, local governments had months to weigh in on the plan before it was passed; one has to wonder why they weren't raising concerns then. Granted, that was before Sacramento raided cities' vehicle license money to the tune of $130 million to pay for the realignment. But still, they had to know that the plan would impose costs on them. We suspect that the complaints are about appearances. It's hardly a secret that the political class in California wants budget cuts to be as painful and frightening as possible, so as to wear down voters' resistance to new taxes. It remains to be seen whether realignment will create a crisis of safety in California's cities, but we'd guess that none of these folks wants to see a good crisis go to waste. Brown did, after all, promise to get them the money one way or the other.

California: Making Hiring More Risky Will Reduce Unemployment

We thought we'd given a decent run-down of the Legislature's swings and misses in their most recent session, but in the thick fog of economic ignorance hanging over Sacramento, it looks like we missed a few notable bills. One of the new laws put into effect by Governor Brown last weekend, we're sad to say, is AB 22.

With the unemployment rate holding steady at around 12%, California clearly needs to get serious about improving its economic climate. Unfortunately, all signs suggest that Sacramento has no intention of loosening its strangehold on the state's private sector. And AB 22 only demonstrates the extent to which California is moving in the wrong direction. The bill, as we discussed back in August, prohibits private businesses from conducting credit and background checks on prospective hires (managerial positions, and jobs in banking and finance, are exempted). As with most of the economic regulations the Legislature puts forward, the bill is likely to make hiring more, not less, risky. Firms will become leery of promoting newer hires into managerial roles, and could be exposed to lawsuits by applicants who challenge the classification of open posts as managerial. Moreover, it's naive to assume that only managers are offered chances to defraud a business; according to a survey of retailers nationwide, 40% of losses were the result of employee theft. In other words, hiring could slow down even more after this law goes into effect.

Confusion at the Ventura County Star: Private Sector Socialism?

There's lazy writing, and then there's lazy writing. The first sort happens to everyone to writes regularly, and hopefully is something you try not to repeat but otherwise shrug off. But the second kind of piece stands a chance of haunting you, of becoming the example people choose when they argue that you don't know what you're talking about. For a great illustration of what deeply lazy writing looks like, we need look no further than Timm Herdt's latest offering in the Ventura County Star.


If there's any rule that's almost universally true in policy analysis, it's that everyone's IQ drops 50 points the moment they begin discussing health care. And most bad health policy writing follows the same basic plan: start with a completely unwarranted and misleading assumption, then follow it through to its logical conclusion. In Herdt's case, the basic assumption is that insurance is a socialist concept, and private insurance constitutes "private-sector socialism." He writes: "The concept is elegantly socialistic: Individuals make regular payments into a collective pool of money, and when any among them suffer a loss they can tap into that collective pool for assistance in their time of need." As such, he's ecstatic that Jerry Brown signed SB 946, which requires private insurers to cover behavioral treatments for autism. In his view, it's improper for insurers to refuse to cover a treatment someone thinks is necessary, even though health plans estimate the mandate will add $850 million to the cost of providing health insurance next year. "Whatever the cost, it will have to be borne because it is part of the collective contract upon which insurance is based. . . The model of private-sector socialism just doesn't work when one party regularly cashes the monthly checks from the other, then arbitrarily decides it doesn't have to uphold its part of the bargain."

There's so much muddled thinking here that we hardly know where to begin. Health insurers aren't in business to be Santa Claus; they're in business to profit by agreeing to pay part of the cost of your health care, in exchange for regular payments. The share they're willing to pay, as well as what treatments they're willing to cover, is part of the agreement they make with plan members. Yet Herdt, like the villian in an Ayn Rand novel, would have you believe that the agreement obligates the insurer to pay any claim a member makes, because, you know, to each according to their need. But no insurer in their right mind would enter into such a contract. Herdt also fails to grasp a very basic problem with health insurance that makes his vision of "private-sector socialism" impossible to achieve: moral hazard. The equivalence he attempts to draw between homeowners' and health insurance is laughable: no one buying homeowners' insurance becomes more likely to burn down their home, but almost everyone with health insurance is more likely to make claims on their benefits. When it comes to being able to pay for something you want using someone else's money, few people define their "needs" very strictly. Which is why private-sector socialism doesn't work much better than the traditional variety.

Tuesday, October 11, 2011

Redevelopment Debts Backfiring on Fresno

There are days when it feels like all we do is write about insolvent California governments. Yet with state lawmakers at out of the capital, and at least a few months before we need to start thinking about the trigger cuts in the state budget, the biggest political news out here is what's going on in places like Santa Ana. And Montebello, And Compton. And Orange County. And the Mendocino County Recreation and Parks District. And one day, possibly in San Jose and San Francisco as well. By the sound of this report at Cal Watchdog, you might as well add Fresno to the list of municipalites threatening to become the next Vallejo.

Times are indeed tough in the Raisin Capital of America these days. As of August, the unemployment rate in the Fresno metro area was 15.8%, almost 7% higher than the national average, the benefits of rising food prices being more than offset by the utter collapse of its housing market. What's more, the decisions of the government in California's fifth-largest city stand to haunt taxpayers for years. According to Wayne Lusvardi, the month of October kicked off in Fresno with a three-notch downgrade by Standard & Poor's, all the way down to A; even worse, its lease revenue bonds were downgraded to A-. S&P's outlook on the city remains negative. Why, you might ask? Well, its reserve funds are nearly gone, and it's borrowed millions to pay off past deficits, leaving it in a precarious spot should the region's economy continue to worsen. So where did all the deficits come from? Apparently from overspending on ill-advised redevelopment projects. According to the current year's budget, Fresno is almost $15 million in deficit in its "Parking Fund," and almost $4 million in deficit on its Convention Center fund. In other words, this struggling town is currently devoting large chunks of its general fund budget not to the sorts of public services that many want from their government, but to servicing debts on money losers. And further downgrades of its debt may be forthcoming.

Will Santa Ana Declare Bankruptcy?

Ever since the Bay Area city of Vallejo declared bankruptcy back in 2008, observers of the California political scene have waited for more such dominoes to fall. With Meredith Whitney's recent prediction of a wave of sizable muni defaults across America, these fears have only intensified. Now, Voice of OC wonders whether the Orange County city of Santa Ana will be the next municipal bankruptcy in the Golden State.

We've been following Santa Ana's troubles for a few weeks now. To recap: the city's most recent budget looked reasonably balanced until the new fiscal year began; then, Sacramento's budget called for the seizure of its redevelopment money and vehicle-license funds, CalPERS increased the city's contribution requirements for its retirement benefits, and tax and fee projections began coming up short of the city's optimistic projections. Just like that, Santa Ana turned into a city with a $30 million budget hole, few reserves, and massively inflated personnel costs. The leadership there has begun considering plans to outsource over a dozen public services, including its fire department, its libraries, and the Zoo. Still, with cost-cutting negotiations with city unions having only begun, the option of a Chapter 9 filing is being discussed more and more at City Hall.

Whether or not Santa Ana ultimately opts for bankruptcy, of course, is an open question. To the extent that being a municipal government means never having to say you're sorry for accounting fraud, it's still possible that the city could find a way to balance its budget on paper. Back in June, you might recall that the city of Oakland was staring down a $58 million deficit in the fiscal year's eleventh hour. How did Oakland escape this? $30 million of the solution came from union concessions, but $28 million came from selling a blighted convention center to the city's redevelopment agency. Yes, you read that correctly: Oakland was able to erase $28 million in deficit by selling a building no one wanted from one part of the government to another. The underlying problem, of course, will still be there, but the point is that dubious means are available for averting bankruptcy.

Still, if such an option is unavailable, the similarities between pre-bankruptcy Vallejo and Santa Ana today are hard to ignore. Both got to the edge of insolvency through reckless government spending, with salaries and benefits for public safety personnel burning through over 70% of the general fund. And if the experience of Vallejo is any guide, tough times are likely ahead for Santa Ana. With the collapse of the East Bay's housing market and the closure of the Mare Island Naval shipyard (Vallejo's largest employer), what was once a solidly middle-class community near the Napa Valley quickly became a very troubled town. In the wake of the bankruptcy, sharp cuts to police and fire services have left it much more dangerous and unpleasant. Unfortunately, Santa Ana might weather such cuts very poorly; aside from being a heavily immigrant community with significant poverty, it's also one of the most densely populated cities in the United States.

Monday, October 10, 2011

California Counties Socializing Health Care as Fast as They Can

If you're still shaking your head at the spewing geyser of economic ignorance in Sacramento these days, you probably aren't going to want to contemplate the idiocy occurring at the local level. According to a pair of reports today, county governments all over our perpetually broke state are gearing up for the future by working feverishly to crowd the private sector out of health care in California.


First up, we have this report from HealthyCal, which describes how counties are incorporating "public options" into California's Health Benefit Exchange, established last year by AB 1602. The Exchange, you'll recall, is one of the key features of the Obamacare reform, establishing a "market" for the purchase of individual insurance plans by those without other forms of coverage. The prices and plans within the exchange will, of course, be tightly regulated by the state. Unfortunately for taxpayers (and, in all likelihood, plan beneficiaries), AB 1602 was written so as to allow public health care agencies to join in as well. This is a terrible idea, insofar as private plans will have to subsidize a greater and greater share of the premium to compete with government agencies that can subsidize premiums with taxpayer funds. It's also probably illegal, as many of these agencies would end up providing Medi-Cal coverage to ineligible Californians. The Board of Supervisors in Orange County, to their credit, closed this door as soon as the law was passed last year. But other counties, including Santa Barbara and San Francisco, are currently exploring their options, and it's not clear that they'll reach the same decision. Second, we have the other significant state-level component of Obamacare: a huge expansion of the Medicaid program. On that score, the LA Times reports that Los Angeles County is doing everything it can to enroll residents in its own program before 2014. The county's Department of Health Services is apparently hoping to give free health care through public clinics to as many as 550,000 new people. The expansion will add $150 million to the taxpayers' burden over the next two years, after which all the program's beneficiaries will be covered by the federal government.

Let's try to put this into perspective. California's government is perpetually about $20 billion in deficit, and many cities and counties up and down the state are experiencing terrible financial problems, and dramatically higher payments into the underfunded public retirement system are inevitable. Our economy is mired in a recession that shows no signs of ending, and even Bill Lockyer thinks that raising taxes any higher would hurt more than it would help. And Sacramento shows no sign of being willing to dramatically cut spending, either as a means of debt reduction or of making new spending revenue-neutral. Yet somehow the government here believes that subsidizing free health care on a massive scale, and effectively driving out private insurers, is both affordable and a good idea. Granted, public-sector bureaucrats are notorious for believing that any expansion of their bureaucracy is a good thing. But we've always felt that the verdict on Obamacare would be delivered by economic reality, and all signs suggest that it's going to be an utter disaster in California.

BREAKING: California Tax Revenues Way Down in September

For those concerned about California's ability to keep its finances together, there hasn't been much in the way of good news since the budget was signed in early July. The revenue backfill accompanying Jerry Brown's plan to wipe out the state's redevelopment agencies has gotten tied up in court; the governor and Legislature agreed to forego $200 million in tax revenues from online retailers like Amazon; the inability to agree on a plan for the new fire fee could cost California as much as $50 million; and three new lawsuits might delay even more of its provisions. But the most dubious feature of the budget was always its assumption that $4 billion in extra tax revenue would magically appear. This assumption was never a good idea, and it only looked worse when tax revenues came in over $500 million short of projections in July. And today, the Sacramento Bee reports that September tax revenues were over $300 million short.

This news, of course, makes the "trigger cuts" in the budget even more likely. Which probably suits Brown and the Legislature just fine, insofar as the effects of the cuts will be borne by the working and middle classes in California, and this was always the goal of crafting the budget we got.

San Jose Looks to Deal With Unions on Pension Reform

Over at Calpensions, Ed Mendel has an interesting post on the negotiations taking place between the city of San Jose and its public employee unions over retirement benefits. Regular readers of Golden State Liberty will recognize how important these negotiations are, as San Jose is truly the front line in California's struggle to avoid financial Armageddon at the hands of unfunded pensions. The city has had 11 straight years of sizable budget deficits, and is already facing a deficit of at least $78 million for the coming year; the fastest-growing component of those deficits, of course, is retirement benefits. As we wrote back in June, California's third-largest city is rapidly approaching a crisis in which it can either risk a lengthy court battle by clawing back the benefits of current employees, or cut public services down to nothing. Which is what makes this story so interesting: could San Jose cut a deal with its unions to make its pension nightmare go away?

Will we get to retire the tsunami logo when we do a story about pensions in San Jose?
At issue are the unearned pension benefits of current city employees; no one is talking about touching the benefits of current retirees or the benefits current workers have already earned, and no one has disputed San Jose's authority to reduce benefits for future workers. Back in the spring, mayor Chuck Reed floated the possibility of declaring a state of economic emergency and putting a measure to reduce current workers' pensions on the November ballot. This would have likely triggered a court challenge, as earlier rulings have found that benefits promised on the date of hire are vested, and ultimately the City Council chose to table the plan until next year. But now, Mendel reports that the unions are close to agreeing to a plan that allows current workers to switch to lower pensions.

There are, of course, complications that need to be worked out. The unions assume that all "non-sworn" city employees would opt for the lower pension, but it's unclear whether the incentive to do so would be a carrot or a stick. The unions prefer carrots, like lower employee contributions or higher salaries, while San Jose would prefer the stick of higher personal contributions for those who opt for higher pensions. Representatives of the police and firefighters' unions assume that two-thirds of their members will choose lower pensions. Whether these assumptions are realistic is certainly debatable. It's also uncertain whether the IRS would continue to allow pre-tax pension contributions under the revised system. The feds have refused to authorize pre-tax contributions for Orange County's "hybrid" pension option, first approved in 2009; a similar delay could prevent the city from realizing any savings in their plan. Complications aside, though, the possibility of a deal is very welcome news for San Jose and its taxpayers.

Bad Bill-a-Palooza 2011: A Look Back

Like many of you, we've been watching the desk of Jerry Brown in recent weeks, in order to see which of the dreadful bills passed by the Legislature would get his signature. Now that the deadline for signing or vetoing bills has passed, let's take a look back at the horror of the 2011 Legislative session.


The Good
  • The best things that happened in this session, without question, were all the truly awful ideas of the Assembly that died in the Senate. These included John Perez's plan to forcibly disincorporate the Los Angeles County town of Vernon, Mike Feuer's health-insurance power grab, and the passed-but-gutted municipal bankruptcy bill. Full credit also goes to the Senate for killing Jerry Brown's corporate tax plan and his proposal to renew the energy surcharge, as well as his attempt to bait-and-switch on the fire fee.
  • Thankfully, the Governor vetoed SB 469, which would've required non-union megastore chains to pay for an economic impact analysis before being allowed to build new stores in the state.
  • Brown also vetoed AB 101, which would've turned the Babysitters Club into a labor union.
The Contradictory
  • Remember the Governor's veto message for SB 105, in which he declared that "not every human problem deserves a law"? Apparently some human problems still do deserve a law, including smoking in apartment buildings, alcohol purchases at self-checkout stands, tanning beds, access to HPV vaccinations, cell phones in prisons, shark-fin soup, the cultivation of industrial hemp, improperly-stuffed dead mountain lions, and (very, very unfortunately) visibly unloaded handguns.
The Absurd
  • Our favorite piece of ridiculous legislation, without question, was the bill allowing the state to issue bonds in denominations as low as $25. Is California really this desperate for cash? Wait, never mind. . .
  • Brown also signed the Legislature's deal with Amazon into law. In case you missed it, California gets a $200 million hole in its budget, and Amazon gets a year to lobby the federal government for a rule that overrides its future obligation to collect sales taxes in the Golden State.
The Awful
  • California's unfunded public pension liability likely tops half a trillion dollars, and may devastate its finances sooner than you'd think. But don't worry; Brown and the Legislature have no serious plan to do anything about it.
  • The Governor also signed into law a pair of bills weakening the California Environmental Quality Act for certain large construction projects. Truly, the only capitalism that flourishes here is crony capitalism.
  • He had the good sense to veto the nanny unionization bill and the anti-WalMart measure, but there are still plenty of gifts under organized labor's Christmas tree this morning. Farmworkers will have an easier time organizing into unions than before. Cities with bans on union-friendly project labor agreements (PLAs) will no longer receive state funds for public works projects. And ballot elections will only take place in November, so as to save the pocketbooks of organized labor from the costs of contesting June ballots.
  • When law enforcement wants to search your computer or your file cabinets, they need a warrant to do so. Apparently the Governor doesn't think the contents of your smart phone deserve the same protection, because he vetoed a bill to require it.
  • The state's public universities, currently struggling to absorb hundreds of millions in budget cuts, will have to accommodate a lot more students, as Brown signed into law the California Dream Act, which allows undocumented immigrants to receive public assistance to attend a UC or Cal State. We're going to pay for this . . . how?

Sunday, October 9, 2011

Jerry Brown Gives Taxpayers Something New to Pay For

When Jerry Brown vetoed Darrell Steinberg's "card check" bill, aimed at easing unionization among farm workers, many viewed the move as a decision to avoid wading into a politically explosive issue at a time when passing a budget was his priority. You'd think, with trigger cuts in the budget looming and the state's economy mired in recession, that a governor weary of a state where "every human problem deserves a law" wouldn't want to get caught up in a new distraction with the potential to derail other efforts. Well, you'd be wrong, because he's signed AB 131, the more controversial portion of the California Dream Act, into law.

A product of the Democratic Party's eagerness to court the Latino vote, AB 131 allows undocumented immigrants to apply for financial aid at the state's universities and community colleges, provided they've graduated from a California high school and have applied to legalize their immigration status. To put a finer point on this: we're typically told that taxes, income redistribution and social programs are an unavoidable part of living in a society, yet now California's taxpayers will be on the hook for thousands of dollars in loans to people who aren't technically part of our society. To put an even finer point on it, this comes at a time when the state is slashing hundreds of millions in funding from its universities. Presumably, this means that public education in California will have to do even more with less than they were before.

Politically, of course, the bill is a time bomb, and we'll have to see whether it amounts to an open declaration of war against the state's Republican minority, which has raised Brown's ire by refusing to back his tax plan in the spring and his jobs plan last month. In his defense, the governor did back away from another contentious education bill, vetoing SB 185. This bill, which would've contravened Prop 209 by allowing state universities to consider race and gender in admissions decisions, sparked the controversial "Diversity Bake Sale" at UC-Berkeley a couple weeks ago. Of course, Brown made clear that he wasn't vetoing the bill out of respect for the will of the voters or the principle that it's tough to atone for past racial discrimination with more discrimination. In his veto message, he said, "I wholeheartedly agree with the goal of this legislation. Proposition 209 should be interpreted to allow UC and CSU to consider race and other relevant factors in their admissions policies to the extent permitted under the Fourteenth Amendment of the United States Constitution. In fact, I have submitted briefs in my capacities as both governor and attorney general strongly urging the courts to adopt such an interpretation." Rather, he cited separation-of-powers concerns in turning down the bill: "Our constitutional system of separation of powers requires that the courts &mdash not the Legislature &mdash determine the limits of Proposition 209."

Friday, October 7, 2011

Occupy This!

With arrests at protests in Sacramento and Los Angeles, and other events occurring in San Diego, San Francisco, San Jose, and Santa Cruz, it's safe to say that the Occupy movement has officially made its way to California. In case your only source of news is this blog, this movement (its heavy backing from organized labor won't let us call it "grassroots") began weeks ago on Wall Street, with doxens of angry hippies people protesting against the excesses of big banks and large corporations. Sort of. Usually a large protest of this sort involves a coherent list of demands, yet as this Reason article argues, Occupy is a decidedly heterodox movement. While many of the protesters are ridicule-worthy college students angry about corporations being all corporation-y, using their iPhones to Tweet about the evils of capitalism, it must be acknowledged that many of the attendees come from the ranks of the bailout-hating Tea Party, while others are Ron Paul supporters angry about crony capitalism and the Fed's role in the current economic crisis. What the protesters want, it seems, depends on whom you ask: some just want the bailouts to stop, some want to step up prosecution of police abuses, some want the government to do more about jobs, and so on. The demands of the original Occupy Wall Street, however, are a bit more outlandish: free college education and health care, a $20/hour minimum wage regardless of employment, a war on imported goods, and end to secret ballots for unionization, $2 trillion in spending on infrastructure and environmental restoration, a rapid abandonment of fossil fuel and nuclear power, abolishing credit reporting agencies, and immediate forgiveness of all debt on the planet.

You could criticize these demands on logical grounds &mdash um, now that you've done away with debt, how are you going to pay for all that spending and the free entitlements? &mdash but it seems like a waste of time. We really only have two thoughts in response to them. First, it's important to remember that the vision of the leaders of Occupy Wall Street is no less totalitarian than anything they think they're opposing. They might wax poetic about "democracy" and representing "the 99%," but what they're really demanding is the right to wear Sauron's Ring. When you have a mob of people each insisting on unlimited power to implement non-overlapping versions of paradise by force, what you get is anarchy. And not the good kind of anarchy. But second, we can't let the libertarians in these crowds off the hook very easily. As we've said before, we detest conspiracy theories and doomsday scenarios; complaining about an evil cabal of powerful interests &mdash whether it's labor unions, terrorists, the police, the banks, the corporations, or the political establishment &mdash is little more than giving in to the sense of dread and helplessness that our world tries to instill in you. If you're going to live a life of genuine freedom, embracing the idea that you're essentially powerless is not going to get you there. Your freedom begins with you, not with a crowd and certainly not with political action.

Why Do Californians Hate Their Government?

Readers of this blog who live outside California might be tempted to wonder: how can a state with a huge economy and tax base have a government that's spending itself into oblivion while making almost none of its citizens happy? It's a fair question. It'd make sense, after all, if they'd gotten themselves in financial trouble by showering too much money on schools and welfare benefits. Yet Jerry Brown and the Legislature have done nothing this year except cut spending on those programs, and the public generally despises them for it. So where is all the money going?


Well, part of the problem is that a lot of the money is going to things that people hate. Like the High Speed Rail Project. In spite of California's ongoing financial weakness, and in spite of recent poll results finding that almost two-thirds of respondents would cut funding for the Project, Katy Grimes reports that Brown's Department of Finance is trying to use last year's budget authority to appropriate millions more for it. It's not at all clear that issuing debt in the current fiscal year without approval from the Legislature is legal. Moreover, the request for more funds makes little sense, insofar as the rail authority's business plan has been delayed, and may not actually exist.

Another part of the problem is that Californians don't enjoy being lied to. It's abundantly clear to even casual observers that the state's annual budget negotiations are a shell game, and that none of the numbers can be trusted. As an example, Dan Walters provides an excellent look at the shaky math underlying Jerry Brown's county realignment plan. When his original plan to pay for the realignment using tax hikes fell apart in the spring, Brown decided to shift some $6.3 billion in mental health dollars and sales and car taxes to pay for it. Yet this shift reduced school funding by over $2 billion. Enter the shell game: Brown then "balanced" the budget by assuming that voters would effectively close this gap by approving new taxes in 2012, and by assuming $4 billion in magical new tax revenue. With the extra money not showing up and voters showing no sign of receptiveness to tax hikes, it's little wonder that many cities and counties are complaining that the realignment is shortchanging them. But surely the Governor has a plan, right? Well . . . "That's why I haven't outlined a full plan. . . I'm going to fix it. It's going to take me a couple years. And I'm going to present it to the people, and I pray that I have the eloquence and the clarity to put it before the people so they can make a judgment. If everything turns out, 'No, no, no,' then we'll regroup, we'll have a press conference . . . and I'll tell you the austere path that we will follow thereafter."

The First Casualty of Climate Change: Sensible Land Use Policy in the Bay Area

In general, we agree with James Altucher and others that the vast majority of media commentary (mainstream or otherwise) is nonsense intended to fill you with a sense of dread and helplessness. This is part of the reason why Golden State Liberty takes a tone different from other political websites; we want our readers to know about developments with the potential to threaten their liberty, but we don't see how it helps to indulge in conspiracy-theorizing or doomsday scenarios in which all of us are powerless. Unfortunately, the vast majority of people are willing victims of others trying to scare them. And the biggest scare story around these days, without question, is climate change. This story goes as such: a group of scientists took a few decades' worth of weather data, fit an equation system extrapolating climate patterns many millenia forward and backward in time, and concluded that the end of carbon-based life will result unless we allow the government virtually unlimited control over our lives and property. And few places embrace this doom and gloom more than the San Francisco Bay Area.

To give an example, the San Francisco Bay Conservation and Development Commission has adopted new rules requiring new shoreline land developments to prove that their benefits offset the costs of protecting buildings from rising sea levels. Never mind that the prediction of a 55-inch rise in the water's level by 2100 (the reason given for the change) has been debunked by the scientists who originally made it, with even alarmist scientists conceding that the rise in sea levels isn't occurring nearly as quickly as predicted. Never mind that science underlying the climate simulations has been called into serious question by the Climategate emails. And never mind that the empirical data with direct relevance to climate change (e.g., the NASA satellite study, and the more recent CERN study) have blown holes in the anthropogenic warming theory. As with all things pertaining to climate change, this is less about responsible policy and more about politics and control. The Commission itself seems determined to make a statement of their own importance. "What we’re doing today goes beyond the Bay Area," said Chairman Sean Randolph. "It has national significance." And naturally, environmentalists are pleased. According to David Lewis, executive director of Save the Bay, "These policies discourage projects that would develop in dumb places." Again, it's about control.