California gubernatorial candidates Jerry Brown and Meg Whitman held their first televised debate yesterday evening. Although it was covered by 130 journalists serving media outlets as far away as Germany and China, it didn’t really matter much. Not, at least, in terms of the state’s economic meltdown and budget crisis. California’s real problems run deeper than either candidate wants to admit.
It’s no secret that Proposition 13, which slashed property taxes 30 years ago, has put the state and its leaders in an ever-tightening fiscal straightjacket. This didn’t make much difference in the ’90s and ’00s when the tech and housing booms fueled growth. But now that the party’s over, lawmakers have found that their hands are tied. For one thing, polls show that most voters staunchly oppose tax increases. And regardless, state laws that mandate a two-thirds majority to pass both a budget and tax increases make it essentially impossible to raise new revenue.
One response to the predicament would be to cut services, as a set of budget reform initiatives on the ballot in May, 2009, would have done. But they were trounced at the polls. Surveys showed that the same voters who didn’t want tax increases also didn’t want cuts to parks, education, health care, or just about everything else that the state provides. The problem, as former Republican Finance Director Cliff Allenby put it, is that “Californians want high levels of services for their middle levels of taxes.”
So what should Republican Whitman and Democrat Brown do? A start would be to chide voters for their unreasonable expectations. (Of course, I know that’s not the best way to win a political campaign). To his credit, Brown, who served as California’s governor from 1975 to 1983, at least showed a flash of courage when he refused to tell the debate audience, students at UC Davis, that he would roll back the funding cuts to higher education. “Not my first year, not with a $19 billion deficit,” he said. “We have to get real here.” (Whitman, a former CEO of eBay, talked up a lame plan to cut $1 billion from welfare and put it in higher ed instead of towards the shortfall).
But Brown also made it seem like raising new revenue would be almost as simple as forcing the rich pay their fair share. A more progressive income tax would certainly help matters more than Whitman’s billions in proposed tax cuts, but even if two-thirds of voters approved it, California would still be a mess. The state’s revenue system has already evolved “from one with several legs to utter dependence on personal income taxes, nearly all of which were paid by those in upper income brackets,” writes Sacramento Bee columnist Dan Walters in Remaking California: Reclaiming the Public Good. This “has left the state vulnerable to even mild economic swings because those high-income taxpayers largely derived their taxable incomes from volatile stocks and other capital markets.” Lenny Goldberg, director of the California Tax Reform Association, suggests instead that California reform its commercial property tax code, which favors entrenched interests and stifles innovation.
The best solution to California’s woes might be the most drastic: Scrapping the entire state constitution and writing a new one from scratch, as a bipartisan coalition of reformers, Repair California, tried to do earlier this year before the effort fizzled. “Political analysts say the proponents have had a tough time keeping voters focussed on their complicated prescriptions for California’s ills,” the LA Times explained. Maybe that’s where Brown and Whitman should speak up. It would have been nice, at least, to hear them weigh in on Proposition 25, which would eliminate the two-thirds requirement to pass a budget. Sure, it’s by far California’s most boring ballot measure this year. But it’s also its most important. And there, also, is the problem.