Jerry Roberts — journalist, author Calbuzz co-founder and host of Real Talk on the Santa Barbara Channels — spoke about the state of California politics last week to a packed Channel City Club luncheon at Fess Parker’s DoubleTree Resort. Here is the text of his remarks.
Introduction
Thank you very much, Lou.
What an honor to be introduced by my hero, Lou Cannon, which in the political writer business is like a ballplayer being introduced by Willie Mays or, since he’s a Dodger fan, Sandy Koufax.
Lou is a good friend and an extraordinary journalist. He honors Santa Barbara with his contributions to our community, with his work and his wisdom, and I salute him.
It’s a great privilege to be back speaking to the Channel City Club.
The last time I addressed the club was back in 2003, and I must admit I’m approaching this talk with some degree of trepidation.
At that time, Arnold Schwarzenegger was about to be elected governor of California and I had just been appointed publisher of a daily newspaper in Santa Barbara. Now it might be just coincidental, but things pretty quickly went downhill for both of us immediately after that speech.
I’m going to talk today about the current state of affairs in Sacramento, and since I’m focusing on politics, I want to begin by defining my terms.
Etymologically, the word “politics” has two roots: “Poli,” from the Greek, meaning the “many” and “tics” — meaning “blood sucking parasites.”
Actually that definition is not all that far from how the public views state politicians these days.
Among voters who re-elected Schwarzenegger just three years ago, only 25 percent now approve of his job performance which, ironically, is almost the same rating that former Gov. Gray Davis received shortly before he was recalled in 2003. And that figure looks fantastic compared to public opinion about our Legislature, which has only a 9 percent approval rating — right down there with lawyers, investment bankers and, of course, journalists.
When Arnold became governor he said he would work for free and not accept his $175,000 salary, so it’s fair to say that he’s been worth every penny.
Actually, I’ve heard confidentially that Schwarzenegger has finally found a way to close the state’s budget deficit. I can’t disclose the whole plan, but the bottom line is that Ventura County is now part of China.
This year, of course, we have an exciting campaign to replace Schwarzenegger, and the candidates have some great ideas for dealing with the state’s deficit.
Jerry Brown has promised that if elected he’ll give up the state limousine and drive a Saturn, which is of course where he thinks the cars are made.
Republican Meg Whitman, who started a famous online auction company, is proposing to sell California on eBay.
And there’s even a proposal on the November ballot to legalize marijuana and tax the sales, which if nothing else would help Caltrans fill all the potholes.
Where We Are
In all seriousness, the shameful spectacles of Sacramento in recent years have revealed widespread dysfunction of California state government, which has become a matter of national and even global notice.
The Economist magazine recently ran a long article on the state’s problems called “The Ungovernable State,” a headline which is the point of departure for my talk today.
I want to discuss a kind of perfect storm of political forces that have converged in Sacramento to create conditions of continuing crisis and a nexus of seemingly intractable gridlock. But I also want to touch on how this dysfunctional atmosphere has paradoxically energized a new push for political and economic reform in California.
California has serious, fundamental problems involving education, water, infrastructure and more, but they all begin with the grim reality of its badly out-of-whack budget.
The numbers change almost hourly in Sacramento but, as you know, the governor and the Legislature are currently facing a $21 billion deficit, about $6 billion in the current fiscal year and another $15 billion in red ink for the fiscal year beginning July 1.
This situation would be bad enough if the state was looking at just a one-year problem, but the legislative analyst has reported that California faces similar $20 billion shortfalls each year for the next five years.
As a practical matter, what does this mean?
Schwarzenegger’s latest budget plan would make statewide cuts in K-12 schools, which in Santa Barbara translate into curtailment of small class-size programs and a $320 per pupil per year reduction in state aid to education.
It means substantial reductions in law-enforcement supervision and oversight of recently paroled felons.
It means reductions in a host of local government services because the state has seized — excuse me, borrowed — $2 billion from cities and counties to help plug the gap in the state budget.
It means that thousands of academically eligible students will be blocked from enrolling at UCSB and other state higher education institutions.
It means cuts in grants for low-income senior citizens and people with disabilities — about 18,000 in Santa Barbara County alone — to meet basic living expenses.
And all this coming just a year after the Legislature and governor not only cut the budget substantially but also enacted the largest state tax increase in history, on income, retail sales and vehicle fees to name just three.
There are two basic factors underlying the deficit.
The first is the recession that has hit California harder than almost any other state and, in the process, reduced tax revenues to roughly the same level as 1999 when adjusted for inflation.
The second driver is more pernicious — a long-term structural deficit in which the state for much of the last decade has defied the laws of arithmetic by spending more in its general fund than our tax structure generated, covering the difference with borrowing.
Beginning with Gov. Davis’ last budget back in 2002, the problem has usually been papered over both with short-term borrowing, as well as $15 billion in 30-year bonds sold — not to finance capital projects but to cover annual operating expenses. These bonds are in addition to more than $70 billion in public works bonds approved in the same period, making interest payments the fastest-growing item in the budget.
As the governor likes to say, the day of reckoning has come; California’s broken political system has helped sink our credit rating to 50th among states, making it problematic for the state to continue its borrowing spree.
As a political matter, the annual struggle to pass a budget is currently focused almost exclusively on reducing expenditures.
The one substantial proposal to raise revenue is the governor’s effort to resurrect the Tranquillon Ridge oil project, off the coast from Vandenberg Air Force Base, which would bring in an estimated $1.8 billion in royalties during the 15-year life of a state lease.
But for the most part, the debate in Sacramento is all about cuts.
Journalists aren’t generally very good with math and when they write about “cuts” they’ve been known to just echo what their sources in government say; when you break it down, the “cuts” turn out to mean an agency is getting less of an increase from last year than they expected or asked for.
However, for the 2010-11 budget year, the governor has proposed general fund spending of about $83 billion. This compares to $66 billion a decade ago. In inflation adjusted dollars, according to the governor’s Department of Finance, his proposed budget represents about about 10 percent less spending than a decade ago.
How Did We Get Here?
To understand how we got to this point, we need to look at a half-dozen key political factors.
The first is gerrymandering.
The once-a-decade process of drawing political maps based on the new census has grown increasingly partisan and polarized. To some extent it has always been thus, but in recent decades it’s become essentially an incumbent protection effort of crafting districts are either safe Democrat or safe Republican.
In that political context, general elections are seldom competitive and have become increasingly devalued. The key electoral contest in most districts is now the party primary; because primaries attract the most loyal partisan voters, they become contests over who is the most liberal Democrat or the most conservative Republican.
The result has been growing ideological polarization in Sacramento as moderates and centrists have become endangered species.
A second important development came in 1990, when voters approved term limits for state office holders, a change that has had big unintended consequences.
Term limits didn’t get rid of career politicians — it just changed the arc of their careers. Instead of spending 20 or more years in the Assembly or state Senate, many elected officials began to position themselves for the next office the instant they arrived in Sacramento, knowing they would term out in six years in the Assembly and eight in the senate, but without the political need to be accountable for the long-term impacts of their actions.
After moving from one legislative house to the other, they then begin to position themselves for statewide office.
Exhibit A is Bill Lockyer, the state treasurer and exactly the kind of career politician term limits was supposed to thwart.
Lockyer had already served 17 years in the Legislature when term limits passed; since then he’s termed out in the Senate then jumped from being attorney general to treasurer. He’s now served 36 years in Sacramento, more than half of it under term limits.
Another unintended consequence was to remove institutional memory from the Legislature, making lobbyists, not legislators, the repositories of public policy expertise. That lobbyists also happen to be extremely helpful in raising campaign contributions adds an overlay of soft corruption to the process.
A third important factor began with the passage of Proposition 13, the 1978 property tax cut.
In addition to its delivery of property tax relief and stabilization of annual tax increases, the measure had several other important effects.
Then-Gov. Jerry Brown and the Democrat-dominated Legislature, who had campaigned fiercely against Prop. 13, were legally charged to implement it. In doing so they took two actions that set the stage for what has followed.
First they totally realigned — “tangled” would be a more accurate verb — the relationship between state and local governments by shifting control of remaining property tax revenue to Sacramento.
In so doing they transformed California’s political landscape, moving power and responsibility for health, welfare and schools from city councils, boards of supervisors and school boards to the Legislature.
They also used more than $5 billion of state surplus money to “bail out” local governments from the impact of Prop. 13. That is to say, the state enabled local governments to maintain levels of spending and services they were then engaged in. To one extent or another, the state has been doing the same thing every year since.
Prop. 13 also ushered in a three-decade era of ballot-box budgeting.
The list of initiative measures passed by state voters that locked in spending is long — from approval of “three strikes” measures and bonds that expanded the prisons budget to Proposition 98, which set a floor on education funding, and many other measures setting aside money for programs from mental health benefits to medical care for poor kids.
Many of these initiatives were worthy programs. But taken together they hamstrung elected policymakers, taking more and more dollars, and thus power, out of the hands of the Legislature and governor, and setting up a Byzantine budget process that defies understanding.
Another key element shaping the mess in Sacramento is California’s boom-and-bust taxation system, which results in huge annual shifts in tax collections.
When economic times are good, money pours in and there’s no incentive — in fact, term limits creates a perverse disincentive — for long-term financial planning; the dollars get spent as fast as they come in.
During the dot-com boom, for example, general fund spending increased 35 percent in just two years, from fiscal 1998 to fiscal 2000; when the boom crashed, spending was flat for a couple of years, but then the real estate bonanza was on, and spending again skyrocketed — more than 25 percent in the two-year period from fiscal 2004 to ‘06.
This was the period when California’s public pensions exploded, after Gov. Davis negotiated a sweetheart deal with the powerful state corrections officers lobby. It was an unprecedented expansion of pension benefits that mushroomed to public employees across the state and has led today to an unfunded pension and health care liability of at least $60 billion.
As they say in Louisiana, laissez les bons temps rouler.
The sixth and final big factor in shaping California’s unique political calculus is the two-thirds vote requirements the state has both for passing a budget and for new taxes. The budget requirement has been in the Constitution since the New Deal; the tax restriction since Prop. 13.
California is one of three states — the other two are Arkansas and Rhode Island — requiring a two-thirds vote to pass a budget, and one of about a dozen that requires a super-majority for tax hikes. We are the only state that has it for both.
Back in the long-lost days when there was a political center in Sacramento, it was possible to find the middle ground required by a two-thirds vote. But in the polarized politics of 2010, there is no center, which effectively hands a veto over fiscal matters to the minority party.
All these factors came together in 2003 in a political tsunami that ended with the recall of Gray Davis. Gov. Schwarzenegger came in assuring us he would “blow up boxes” and be immune to these political pressures.
Alas, the structure was greater than the man. Arnold learned that playing a governor was a lot easier than governing, and his administration has fallen to the same forces as Davis.
Where Do We Go From Here?
Amid all this doom and gloom, however, there is a glimmer of hope. The state’s desperate situation has energized a number of efforts to push for reforms aimed at repairing our broken government.
The first of these is Proposition 11, which voters narrowly approved in November 2008. This would take the power of legislators to draw their own districts, a conflict of interest for the ages, and give it to an independent commission beginning with the census of 2010.
The importance of this reform cannot be overstated and it’s instructive to note that even before this panel gets off the ground, legislative leaders from both parties are preparing a separate measure to undo Proposition 11.
In June, voters will decide on Proposition 14, a constitutional amendment to create a series of open primaries. This would change the current partisan system so that a general election contest would be between the two highest vote getters in the primary, regardless of party.
Supporters, led by Sen. Abel Maldonado, R-Santa Maria, believe it will discourage ideological extremism and encourage moderation, as politicians appeal to voters in the center rather than right or left.
The November ballot will also most likely include one or more initiatives to dump the two-thirds requirement for budget votes and perhaps for taxes as well, plus possible measures to roll back pension benefits for newly hired public employees, as well as the aforementioned initiative to legalize and tax marijuana.
One major push for reform has come from a group called California Forward, which is backed by a collection of blue chip non-profit organizations including the Haas, Hewlett, Irvine and Packard foundations.
The ideologically diverse group tried and failed to qualify a ballot measure and is now working in the Legislature to reach agreement on a package of reform proposals, including two-year budgeting, performance management measures, a sunset review of government codes, a rainy-day reserve fund and a “pay-go” requirement for new legislation or initiatives to identify sources of funding or cuts.
The most radical and dramatic reform push was led by the corporate members of the Bay Area Council. They were pushing a plan to convene a state constitutional convention, the first since 1879. It’s worth noting that the state Constitution, which has been amended hundreds of times, is longer than that of India, and five times as long as the U.S. Constitution.
The proposal was to wipe the slate clean and to begin anew organizing the structure of governance in the state. Tellingly, the effort was abandoned when the very companies that are members of the council failed to provide sufficient funding for a campaign; apparently they felt that the status quo served their interests better.
Looking Ahead
All of this will make for an intriguing campaign season in 2010, which will feature a lively battle to replace Schwarzenegger.
The Democratic candidate will be Attorney General and former Gov. Brown while on the Republican side, two wealthy Silicon Valley success stories, Whitman and Steve Poizner, are wooing GOP voters.
That race has been shaped so far by Whitman’s extraordinary spending, which has already broken all records for a campaign for governor, more than two months before the primary.
Amid a treacherous political landscape, candidates will face some skepticism about whether California is in fact governable, and therefore whether it really matters who replaces Arnold.
Voters must hope that the severe political distress now afflicting Sacramento will set the stage for an important and future-oriented campaign to be fought over how the candidates define change in seeking the best ways and means of reforming state government.
As The Economist put it in its story on California, the ungovernable state:
“A good outcome is no longer possible,” it ominously said of our current budget woes. “One way or the other, Californians will have to begin discussing how to fix their broken state.”
Thank you very much for your kind attention.
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