What's wrong with California?

[pecunium]

Mostly, not much. It's got wonderful people; is large enough that those who want to get away, can. The majority are tolerant enough that really crazy people can stay, and the really conservative types aren't chased out.

But it's got problems. Big problems. Money problems. Most of them stem from one cause, and the ways in which a couple of sets of politically motivated people have managed to exploit them.

The prime cause of our woes isn't a lack of money in the state, but rather a lack of money in the government. We have about 10 percent of the US population, and produce about 13 percent of the US GDP.

The problem goes back to 1978, and Prop. 13. Prop. 13 was a reaction to a couple of problems. There was a big increase in the value of housing prices. The county assessors would reassess properties every couple of years and the tax would jump (when a house goes from 12,000 to 40,000, the tax bite is pretty dramatic). The worst part was the reassessments weren't on a schedule. The increase was usually a surprise.

So Prop. 13 capped the amount which a property could be assessed (one percent of total value), and limited the increases when the property was reassesed. Reassessement could only be done when the property sold, or when certain types of remodelling was done.

That's not the most pernicious aspect of Prop. 13. That's later in the bill.

Section 3. From and after the effective date of this article, any
changes in state taxes enacted for the purpose of increasing revenues
collected pursuant thereto whether by increased rates or changes in
methods of computation must be imposed by an Act passed by not less
than two-thirds of all members elected to each of the two houses of
the Legislature

The same is true of referenda.

Which makes it hard to get new taxes passed. Historically California has met special needs by passing limited sales tax increases. They are usually well built; with a sunset clause, a sort of bridge fund, while other things level out. In the early '80s the LA Rapid Transit District was raising prices like mad. In two years the fare went from 50 cents (and a dime transfer) to a $1.25, with a quarter transfer. The transfers went from being good for a couple of hours (in effect $.60 was one way to your destination), to being good once, with an extra $.25 letting you use it once more. If you need four busses, it was going to cost $3.00 to go one way.

So we passed a .05 percent increase to our sales tax (in the areas served by the RTD), and fares went back to the previous level. That lasted for five years, and the fare (when the tax went away) rose to $.85/.25. Today it's $1.25.

But with a 2/3rds requirement, it's almost impossible to get such things passed. It takes something as dramatic as the RTD problem to get one, at a local level, and something just this side of the end of the world to get it at the state level. The politcians are afraid of losing their seats, and the folks in the parts not so affected don't see the point.

But bonds... bonds only require a simple majority to pass. They are touted as not costing the taxpayer anything ("no increase in taxes"). But that's only half true. Yes, there is no increase in taxes. That doesn't mean the taxpayer pays nothing. It means the money comes out of the general fund.

And come out of the general fund it does, because the cost of a bond is usually twice what the bond generates. That's before the loss in tax revenue is factored in. State and municipal bonds are tax free, which means it's has a secondary loss to state revenue.

The worst part, of course, is all that money is removed from the general fund; it can't be used for other things. Since taxes can't, effectively, be raised to cover those things which they othewise might. Which leads to someone getting the idea to use a bond issue to cover it, and the postive feedback loop builds.

The easist fix would be to change the way in which those two things are done. Most bonds pass with between 51-54 percent of the vote. Most taxes fail with between 56-60 percent of the vote.

If we could make it 55 percent for both, the tide would shift, which would solve a lot of our problems, becuase, when all is said and done, tax and spend makes a lot more sense than borrow and spend.

Comments

[nelc.livejournal.com]

Would it need a simple majority to change the law, or would it have to be a 2/3 majority?

Also, what is a "transfer"? From context, it looks like changing from one bus or train to another? Why do they charge for that? I saw a comment on Boingboing recently about someone being fined/having to buy a new transfer because their transfer was late, so I guess that was the time limit thing, but I'm struggling to understand how you can be charged for hanging around a platform at all, so I must be missing something.

[redbird]

If it's like other transit systems, it's a change from bus to bus or between bus and rail; New York City used to charge for those, now gives you one free with a ride within a two-hour period (subway-to-subway transfers are generally free). Boston has a complicated system where the bus costs less than the subway, and if you transfer bus-to-subway they charge you the difference, and subway-to-bus shows as "transfer accepted."

[pecunium.livejournal.com]

A transfer is from one bus/train to another (and it can be from train to bus, bus to train; for the MTA the two are the same system).

One can be fined for being on the platform because the present system is $1.25 for one way, in a given time, or $5.00 for an entire calendar day.

For the trains there is a zone, inside of which one has to have a valid ticket. If one didn't buy a ticket, or only got a one way ticket, one is in violation.

[jpmassar.livejournal.com]

The 2/3rds requirements are part of the California Constitution.

To amend the constitution requires a majority vote of the people via referendum. The legislature cannot, by itself, amend or revise (http://en.wikipedia.org/wiki/California_Constitution#Amendments_and_revisions) the Constitution.

[pecunium.livejournal.com]

Sort of.

The Assembly can't do it, by itself. It can intiate change.

The legislature can convene a convention, to address issues which need changing. The convention presents a change. The legislaure passes it out (with a 2/3rds majority), which then goes to the people for ratification.

That is the requirement for, major changes (which aren't defined). That Prop. 8; as a change to a fundamental right, should have been considered a major, not minor, change, is the argument presently being weighed by the Calif. Supreme court.

[pecunium.livejournal.com]

It would be a simple majority. One of the other, glaring, flaws in Calif. is that simple changes to the Constitution only take a simple majority of those voting.

But changing Prop. 13 is a third rail. It's seen as sacred. Even if it were tried in an off-year, off-cycle, election people would turn out to vote against any such change.

And there would be no way to avoid mention of Prop. 13.

But yeah, if I had a couple of million dollars, I'd write that proposal. Short, and sweet.

And it would lose.

[jpmassar.livejournal.com]

State and municipal bonds are tax free, which means it's has a secondary loss to state revenue.

That's not necessarily a proper analysis. If the bonds were not tax free, the interest rate would be higher, costing the state money.

If the bonds were not tax free to Californians (and not to others, as is generally the case) then people outside California would buy the bonds, and the interest payments would flow outside the state, instead of to residents who are more likely to spend that money in-state thereby potentially generating tax revenue.

To the extent that California has more tax-free bonds outstanding than other states (per capita, say), one effect is that the rest of the US is subsidizing California borrowing (vis a vis the federal tax-free-ness)

So there are a number of mitigating factors. Whether they completely erase or even exceed the effcdt you mention I don't know. I suspect this is the subject of some economic debate, probably inconclusive.

[pecunium.livejournal.com]

As may be. It happens that there are a lot of bonds bought by out of state players, because state/muni bonds also tend to be at a reduced federal rate.

In any case the usual formula is value of bond x two = cost of bond; removed from general fund. That means the work the money does is only half the cost.

That's a helluva price to pay.

[harimad.livejournal.com]

I agree with you about CA finances; you laid it out far more clearly than most can manage. I have two points to add.

Point the first: there is an advantage to bonds that you do not touch upon. The voters know where the money goes. You can survey voters "Would you agree to a .5% (half a percentage point) increase in sales tax to fund [activity]?" Sometimes the answer is yes but the sales tax increase doesn't pass anyway. Why? Because it goes into the general fund and the voters don't trust the government to spend it as planned.

On the other hand, if a bond is raised for [activity], then the voters know where the increased funds are going.

Point the second: the extreme gerrymandering of the state contributes mightily to the problem. Districts almost NEVER change parties. The real fights are in the primaries, which leads to extreme policies. Take your few million and propose that a nonpartisan, nonpolitical committee draws district lines, as in Iowa. (The trick of creating such a committee is left to the reader's imagination.)

[pecunium.livejournal.com]

But dedicated sales taxes don't always go into thee general fund (see the RTD), how they are written determines that.

Which is why local increases pass. Folks who are paying for that reduction in the RTD don't mind. When a tax measure wants to fix US 101, the folks in Bakersfield can say, "I don't drive on that road, what do I care?"

But bonds, bonds are free.

Yeah, I'm bitter. I look at the huge amount of money going to pay for bonds, and I think, you know, for a couple of percent in taxes, we could have the best damned colleges, roads in good repair and medical for everyone.

But instead we have schools which old buildings, and laid-off teachers, roads we can't keep in repair, and a deficit.

Jarvis, and Reagan and the lot of 'em. Poisoned the well.

I'm not against bonds, but they ought to be emergency measures. Raised for things which can't wait (say retrofitting a bridge). A sane tax policy, and enough foresight to plan ahead would be the way to go.

We don't (and can't; because of Prop. 13) have that.

[eagle]

Yeah, I wholeheartedly agree with your analysis. About four years ago I started voting a blanket NO on every state-wide bond measure, no matter what it's for, even if it's for something that bonds are actually good for, because enough is enough and we need to get the finances in shape before we can start using bonds properly again.

I'm voting against the lottery borrowing in the current special election for the same reason.

[pecunium.livejournal.com]

I vote against "Improvements" to the lottery on progresive principles. As a tax-generator they are regressive.

I am not against them on moral principles, but anything which is designed to make them more "profitable" I won't support.

[eagle]

There's that too. In the presence of simultaneous efforts to improve education and teach better money management skills, state-run lotteries always strike me as a bit hypocritical. There's a certain aura of "ideally, we'd want everyone to understand why this is a sucker's bet, but in the meantime, thanks for the voluntary tax contribution SUCKER!" that I really dislike.

I don't have any problem with gambling as a general concept, and there are always going to be people who gamble without understanding the odds. And I know some people enjoy playing the lottery even fully understanding the odds. But I get really uncomfortable when government is in a position of getting more money by fooling the populace more effectively. It's a conflict of interest with what I consider to be more core purposes of government.

[pecunium.livejournal.com]

When I played the lottery it was as part of a work-pool. Five bucks a week and I treated it as entertainment. By having a ticket I could imagine what I might do with all the money I might get (esp. when the pot was huge).

I knew that one ticket or fifty (which latter was about what we had. I think at peak it was 16 people x $5.00), was about the same. I also knew that one dollar wasn't the psychological investment five was.

And it was cheap.

But there are people who don't get the odds. Someone in Calif. got a hunch. He was certain he was going to win, if he mortgaged the house and bought lottery tickets with the money.

Needless to say, he lost.

[don-fitch.livejournal.com]

Thanks for pointing out several bad aspects of Prop. 13 of which I wasn't aware. AS a home-owner on a limited & pretty much fixed income, I benefit greatly from 13 in that my annual Property Tax is affordable, but that direct benefit is probably far smaller than the indirect harms it causes me as a result of the fact that the law benefits enormously the Corporate property-owners. (Speaking broadly, property can be re-assessed (to something close to its market value) only when the title of ownership changes hands, and Corporate owners rarely sell their property, they lease it out.)

I do find useful the regular election-time mailings from The Howard Jarvis 'Save Prop. 13' Taxpayer's Association -- what they tell me to vote against, I vote for, and vice versa. (I have no serious objection to limiting tax increases on primary residences -- what 13 was originally sold to the voters as being -- but in fact its major function seems to be to shift a lot of tax burden from wealthy investors to Middle- and Poor-Class citizens, and I think that is, on balance, unhealthy for our society.)

Bond Issues have become a knotty problem for me. They are usually for things I think need to be done, but they double the cost, and we (the taxpayers) _do_ pay for them, one way or another -- and for the interest that gets paid to the moneylenders. *sigh*

[pecunium.livejournal.com]

Don't forget the commissions they make on selling the bonds.

Yeah, I'd like to see some changes.

Were it me, I'd make it residential. I'd have a different rate for rental properties. I'd make a reappraisal for mortgages which take money out (which only happens now if the money goes back into the house as a serious remodel).

For business properties I'd make a fixed schedule.

Because business puts a lot of strain on infratructure, and uses a lot of services.

[asimovberlioz.livejournal.com]

I do find useful the regular election-time mailings from The Howard Jarvis 'Save Prop. 13' Taxpayer's Association -- what they tell me to vote against, I vote for, and vice versa.

Same with me. Howard Jarvis and his political heirs are my enemies into all eternity.

And whenever I watch "Airplane!" with other people (as for example at cons, or at the LASFS Clubhouse, or wherever), I boo Jarvis' appearance on the screen and his name in the credits. Always.