Reforming California

The stories about California (once the nation’s leader) in decline are endless, though it is still a wonderful place to live, work and raise a family, but there are also cogent ideas to reform our great state and some of the best—along with a reminder of the problems—come from this article in City Journal.

An excerpt.

“In the aftermath of the 2010 midterm elections, a piece of conventional political wisdom—“Where California goes today, the rest of the nation goes tomorrow”—sounds a lot like a threat. A state that has long been a standard-bearer for liberal ideas and policies is finally coming apart at the seams. On Election Day,California suffered from the country’s third-highest unemployment rate, the worst business climate, and a public-pension shortfall of more than $500 billion.

“Yet as the rest of the nation voted for smaller government and economic restraint, California moved decisively in the opposite direction. On a night when Republicans picked up six seats in the U.S. Senate, California gave ultraliberal senator Barbara Boxer a 10-point margin over an articulate conservative, Carly Fiorina. While Republicans acquired more than 60 seats in the House of Representatives—the biggest one-party swing in 72 years—not one of those seats came from California. And though other double-digit-unemployment states like Michigan, Nevada, South Carolina, and Florida used the midterms to bring reformist Republicans to their governors’ mansions, the Golden State elected Jerry Brown, the Democrat whose previous tenure as governor was the high-water mark for liberalism in the executive branch.

“California needs to develop an economic-policy agenda that can save it from irredeemable second-class status. But the state’s economic problems are inseparable from its considerable institutional and political problems. And fixing those will likely prove highly difficult under Governor Brown.

“To get a sense of the institutional problems, first understand that California is as polarized as the nation is as a whole. San Francisco is so left-leaning that the city’s name has become an adjective for liberalism. Orange County, by contrast, regularly boasts of being the most Republican municipality in the nation. Farmers in the state’s vast Central Valley tend to one-sixth of the irrigated land in the United States. Environmentalists in Los Angeles, meanwhile, mount regular bids to reduce water supplies to the valley in order to protect a local fish species. One-third of the U.S. Navy’s Pacific Fleet makes home port in San Diego. Up the coast in San Francisco, residents voted in 2005 to shut military recruiters out of high schools.

“California’s byzantine political structure is woefully unsuited to resolve all these tensions. This is a state with the world’s third-longest constitution. It has a legislature that, until November, required a two-thirds majority to pass annual budgets and that still needs a two-thirds majority to pass tax increases (though California remains one of the highest-taxed states in the country). The state has more than 300 unelected boards and commissions, which range from the picayune (the Speech-Language Pathology and Audiology and Hearing Aid Dispensers Board) to the oppressive (the California Coastal Commission, whose land-use policies were once denounced by Supreme Court Justice Antonin Scalia as “out-and-out extortion”).

“It’s also a state in love with the plebiscite, with a dozen popular initiatives or referenda on the ballot during most general elections. While initiatives dealing with hot-button social issues—illegal immigration, gay marriage, abortion, marijuana—grab the most headlines, proposals doing long-term economic damage go largely unnoticed. Particularly harmful are popularly approved mandatory spending requirements, such as the requirement that the state spend approximately 40 percent of its revenues each year on education. These measures leave as little as 15 percent of the budget to the discretion of the legislators in Sacramento. (And, like all popularly enacted policies, they can be altered or undone only by another round of citizen approval.) Thanks partly to these spending requirements, California’s budget deficit will widen to more than $25 billion over the next 18 months, the Legislative Analyst’s Office reports—a dizzying shortfall that must be closed, in accordance with the state’s balanced-budget requirement.

“The budget crisis is only the beginning of California’s economic difficulties. Regulation is a silent killer of California’s prosperity, and much of it is imposed by unknown, unelected bureaucrats operating within the bowels of state departments and agencies. The regulatory environment is so uninviting that a recent survey of more than 650 corporate executives ranked it the worst state in the nation in which to do business. Each year, “the total cost of regulation to the State of California is $492.994 billion,” which is “almost five times the State’s general fund budget, and almost a third of the State’s gross product,” wrote Sanjay Varshney and Dennis Tootelian of California State University at Sacramento in a 2009 study. “The cost of regulation results in an [annual] employment loss of 3.8 million jobs, which is a tenth of the State’s population.”

“California’s biggest long-term economic threat—implanted by an earlier generation of legislators in ways difficult to remove today—is its public-pension time bomb. For years, Governor Arnold Schwarzenegger’s doomsday projection for pension liabilities was a figure around $300 billion. It turns out that for once in his life, the governor was being too conservative. A study released by the Stanford Institute for Economic Policy Research in April 2009 put the total figure for California’s three largest public-pension funds—responsible for financing the retirement of 2.6 million government workers—at $535 billion, all of which, of course, will have to be paid somehow.

“To address the institutional problems at the core of California’s economic crisis, a cottage industry of policy entrepreneurs has sprung up, such as Repair California, a group formed by Bay Area business leaders in 2008 for the sole purpose of calling a statewide constitutional convention. The appeal was undeniable: If the state is ungovernable, why not alter its governing charter? But Repair California’s agenda embraced California’s unfortunate tendency to believe that ever-greater citizen participation can make its problems disappear. Under a mind-numbingly complex series of representation formulas intended to factor in assembly districts, counties, and Indian tribes, Repair California would have 465 citizens chosen for the convention through a process too incoherent to be explained in paragraph form (the organization itself relies on an illustrated chart). In a rare moment of political sobriety, voters withheld the support that would have been necessary for Repair California’s plan to qualify for the 2010 ballot.

“A far more useful reform would be reining in the excesses of direct democracy. On contentious social issues, referenda and initiatives may be beneficial, but on more technical aspects of government, oversimplified ballot language tends to obscure more than it clarifies. The most telling examples are those spending initiatives—often totaling billions of dollars at a time—that promise improvements in emotionally appealing areas like education, health care, and social welfare. Under current rules, these initiatives aren’t required to establish funding sources, so voters are essentially being asked if they’d like to feel socially virtuous free of charge. Mandating pay-as-you-go initiatives—that is, requiring initiatives that would spend money to propose offsetting spending cuts or tax increases—would at least require Californians to take responsibility for the sprawling debt increases that inevitably accompany such profligacy.”

About David H Lukenbill

I am a native of Sacramento, as are my wife and daughter. I am a consultant to nonprofit organizations, and have a Bachelor of Science degree in Organizational Behavior and a Master of Public Administration degree, both from the University of San Francisco. We live along the American River with two cats and all the wild critters we can feed. I am the founding president of the American River Parkway Preservation Society and currently serve as the CFO and Senior Policy Director. I also volunteer as the President of The Lampstand Foundation, a nonprofit organization I founded in 2003.
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