Propositions and the damage done

“I caught you knockin’ at my cellar door. Baby, baby can I have some more? Ooh, Uoh, the damage done…” Neil Young.

Looking at the election less than three weeks away, one might question how a sad song from forty years ago about heroin addiction might relate to how voters will determine if new taxes are to be raised for the State and local governments. In this case we are dealing with government agencies that have been addicted and “strung out” to the same tax and spend stratagies for over a generation.

While the State of California has sunk deeper in debt with budget deficits and unfunded pension obligations for public employees, shortages in revenues continue to plague all levels of government. This election cycle is no different. It is replete with the usual short term fixes (if that) being offered to keep essential educational and public safety programs running.

Of particular note is State Proposition 30 that increases the sales tax .25% for four years and adds taxes for those earning $250,00 or more for year for seven years with the proceeds to be used for public schools and and public safety to the tune of about $6B per year. State proposition 38 is a stronger version of 30 with income tax raises being used to fund approximately $10B per year for 12 years to fund K-12 years and reduce state debt.

If both of these propositions win, the one with the largest amount of votes would prevail. In addition, it is doubtful that any long terms debt obligations would be reduced.

On the local level we have Measure Q in Contra Costa County hopes to yet another parcel tax of $75.00 per home per year to pay for fire protection and 911 services on a local basis.

Of the three, proposition 30 makes the most sense as it will have the least fiscal impact on creating jobs in California and locally in Contra Costa County.

Prop 30, engineered by Governor Jerry Brown, with little co-operation from the Legislature, props up public schools for a few years, but does nothing to dealing with educational reform, unfunded mandates, evaluations, or teacher performances. If Proposition 30 pass, it would be more of the same with Teachers Unions calling the shots as they presently do in propping up California’s dilapidated educational system.

To Governor Brown’s credit, he was able to extract a tiny reduction of pay and benefits from public employees in getting Prop 30 placed on the ballot. But this amount is minor and is a leap of faith for future concessions that Governor Brown feels he can extract in years to come.

In contrast to Proposition 30 is 38, which would give additional funds to education as the cost of passing crippling state income taxes that many fear would act as job killers and continue the exodus of jobs from California to Texas, Arizona, New Mexico, Florida and other States with favorable business climates.

Unfortunately, these “soak the rich and middle class” proposals such Prop 38 often end up producing less revenue than they project. With fewer people working and more jobs leaving the State, there is less revenue to be collected by these special taxes. This is especially true when tax measures increase the number of public workers (be they police, teachers, fireman, etc…) at the expense of private sector jobs.

This type of economic multiplier effect should be considered by voters in passing Measure Q dealing primarily With fire fighters, ambulance and 911 emergency services. This parcel tax, while improving much needed services in this area ignores the structural reforms (pay and pension) needed to make the district sustainable.

Even with this huge tax raising proposal, little would be done to deal with unfunded pension liabilities which are taking virtually half of every public safety dollars today? In short, if the public did not have these obligations, a new parcel tax would be unnecessary or be a much smaller amount under Measure Q.

Liberal voters in California should seriously consider the costs Proposition 30, 38, and Measure Q entail as they go to the polls this election. They should tell Sacramento that true fiscal reforms must take place before voters open their checkbooks come election day.

Unfortunately, as Neil Young said, “Every junkie’s like a setting sun” and voters will probably continue to feed the public employees unions, inefficient regulatory agencies, Caltrans, wasteful Public Assistance programs, and other government programs that has brought California to its fiscal knees.

Tagged as: California budget, fire district, measure Q, Neil Young, parcel tax, Proposition 30, Proposition 38, tax measure