That won't be fun at all. As we noted last Sunday, business as
usual will not suffice to meet the challenges California faces in
the year ahead. So as the year opens, we once again offer some ideas
that seem worth discussing in the year ahead.
Once again, please note that at this point these are ideas worth
discussing, nothing more. Maybe they're good ideas. Maybe not. We
still reserve the right to decide some of them are not practicable
or sensible. But California needs to consider some notions that
might have seemed unthinkable a year ago.
The ideas we offer are a way to start the discussion about such
possibilities. There will be more to come in the weeks ahead. We
look forward to hearing your ideas, too. This is, after all, a
discussion about the future of your state.
Reconsider Proposition 13
For a brief instant in 2003, California was on the verge of
talking seriously about the effects of Proposition 13.
Multibillionaire investor Warren Buffett, who was advising Arnold
Schwarzenegger on state finances during the recall campaign, mused
in public about the disparity between the tax bills on his houses in
Nebraska and California.
Schwarzenegger's political advisers promptly and predictably got
a case of the willies, and the topic was banned from the public
realm.
That's too bad. California needs to come to grips with the
effects of the 1978 initiative that limits the growth of property
taxes, sooner rather than later.
Like all tax policies, Proposition 13 creates winners and losers.
The winners are older, longtime homeowners and their heirs and
owners of commercial property. The losers are younger, newcomers and
first-time home buyers.
California isn't ever likely to dump Proposition 13, but 2004
would be a great time to move toward one change in particular, a
split property tax roll that differentiates between residential and
commercial property.
First, though, the state's politicians have to be willing to talk
about the subject. That almost happened last year. The year 2004 is
the time to break the taboo.
A bigger Legislature
Californians complain endlessly about their Legislature, but
they usually overlook its biggest flaw: It's too small.
Although California is the most populous state and easily the
most complex society and economy on the face of the globe, the state
has one of the smallest legislatures in the country: only 80 members
in the Assembly and 40 members in the Senate. The result is more
human distance between citizens and lawmakers than in any other
state.
Each member of the Assembly represents about 450,000 people,
almost nine times the average in other states; each senator
represents about 900,000 people, seven times more than the national
average for upper houses and larger than U.S House districts.
California pays many penalties for having such a small
Legislature. The Legislature doesn't have the diversity and range of
talent and knowledge that it should have in such a big, complex
state. Having large districts raises the cost of campaigning,
increasing the power of special-interest contributors. A small
Legislature makes it more difficult for individuals to get the
attention of their representatives.
Increasing the size of the Legislature would address many of
these problems. Raising the number of lawmakers to 300, perhaps in a
unicameral body, wouldn't give California the largest lawmaking
branch, but it would bring lawmakers somewhat closer to the people.
If some of the added members were elected using proportional
representation, the problems of redistricting and uncompetitive
elections would also be solved, making the state Capitol more
responsive to the voters.
Change state pension plans
At the same time that traditional defined benefit pensions
are disappearing in the private sector, state and local governments
are making expensive pension promises to public employees whose
costs won't be fully evident to taxpayers for years to come.
There is only one surefire way to assure public pension
transparency and accountability: Bar public agencies from offering
defined benefit pensions.
A defined benefit is a binding promise made today to pay a
particular benefit tomorrow. The problem is that the politicians
making the promises won't be around tomorrow to pay the bills. The
taxpayers will.
Over the past several years, state and local governments, under
pressure from the public employee unions that provide dollars and
workers for politicians' campaigns, have handed out lavish pension
benefits. These will impose large and growing burdens on future
budgets and taxpayers: earlier retirement with full pensions;
calculation of pensions on last-year income; improved benefits
funded with pension fund "surpluses."
To protect future taxpayers, the law needs to change to require
that all future retirement benefits for public workers be paid in
defined contribution plans -- like the 401(k) plans that have become
the primary retirement saving vehicle for private sector workers. In
those plans, the public contribution for each worker would be
transparent, and the full benefit would be paid in the present, not
promised as a mortgage on the future.
Modify 'three strikes'
Even as crime rates have fallen, California's prison
population has grown from 115,000 just 10 years ago to a little more
than 160,000 today. More than half those inmates have been
incarcerated for nonviolent offenses, drug-related and property
crimes mostly.
Approximately 6,500 inmates are 55 or older; some 1,200 are over
65. Because they are more likely to suffer serious health problems,
older inmates are more expensive to house. When paroled, they also
represent a significantly lower crime risk. A minuscule 1.4 percent
of inmates paroled after age 55 are sent back to prison because they
commit new crimes. That compares to a re-offense rate of more than
50 percent for 18-to 29-year olds.
With prison guards costing close to $100,000 annually apiece and
a mushrooming corrections budget that threatens funding for higher
education, roads, mental health and other vital services, California
can no longer afford to lock up felons who pose no serious threat to
public safety. The "three strikes" law does not have to be repealed,
but it does need to be modified to allow nonviolent and elderly
inmates to earn parole faster.
Water like the old days
If the state is to have any role in building additional
reservoirs (several are in the planning stages), model the funding
after the State Water Project.
Hatched during the glory years of infrastructure development, the
water project first identified the customers, who agreed to pay the
cost to develop and deliver the water. The state came up with the
funds (by selling bonds), and the customers paid the money back over
favorable terms (50 years).
This is very different from the pure-pork form of modern water
financing. Recent state bonds have been high on subsidies in the
form of grants to local water districts for their projects and low
on loans.
No water legislation deserves a drop of ink or a legislative vote
until customers have stepped forward to pay the full price of new
reservoir water.
