Budget can't find a friend

Whenever confronted with Gov. Arnold Schwarzenegger's political views, conservative Republicans could always fall back on one thing about the Democrat-dealing governor: Well, at least he's a fiscal conservative.

Today, Republicans had almost nothing good to say about the governor's budget. It "doesn't go far enough," increases "spending too much, borrows too much and relies on too many shaky assumptions to be received favorably today," and continues to "push California further and further off track, with more borrowing, more spending and more gimmicks."

Of course, Democrats don't like it either. Senate leader Don Perata (pictured with Assembly Speaker Fabian Nunez) said cuts to the poor and disabled puts "the most vulnerable Californians ... in the free-fire zone."

Once again, Schwarzenegger is exactly where he wants to be, in the middle: "I have an obligation, which is I promised the people of California that I will bring down the structural deficit to zero, and that we will be fiscally responsible."

What about the nonpartisans? The Legislative Analyst's Office has just released its budget interpretation, calling the governor's numbers unrealistic. The report:

"The administration has attempted to address a $2 billion decline in the state’s fiscal outlook. Due to several overly optimistic assumptions, however, the May Revision overstates its reserve by about $1.7 billion — leaving an estimated reserve of $529 million. Even this reserve level would be subject to considerable risks and pressures. As a result, the Legislature will face a significant challenge to develop a 2007-08 budget that realistically reflects revenues and spending while maintaining a prudent reserve."

(Photo: Rich Pedroncelli/AP)

Ad campaign: More money for schools

The Education Coalition - which includes the biggest school-related unions and associations in California - has launched a statewide media campaign with a clear, unsurprising message: public schools need more money. The radio and TV campaign comes after a 1,700-page study that found California schools need at least $23 billion to meet basic standards.

One part of the study recommended $1.5 trillion in new funding. But even the smaller number might seem scary to policymakers. There is concern that elected officials will instead focus on other reforms in the report, like how the state needs more teacher training for English learners, more power for principals to fire teachers and better "collection of student-specific data." The ad campaign keeps the focus on increasing funding for schools, not just bureaucratic reforms. The script:

Teacher:  State leaders asked Stanford University to conduct 20 studies of California public schools.

Parent:  There's progress, but much remains to be done. Compared to other states our schools lack resources.

Teacher:  Continuing to improve our schools will take big changes but that can’t happen without more help.

Parent:  California school funding is inadequate – the studies say we need forty percent more.

Teacher:  It's time for the governor and the Legislature to invest in our children's future, and give our kids the schools they deserve.

"It really is embarrassing that in a state as wealthy as California, our schools are so severely under-funded, especially when compared to other states with fewer resources," Kathy Kinley, president of the California School Boards Association, said in a statement. "These studies validate the reality that we need more resources and flexibility in our schools, and if we don’t act now, our students will continue to suffer."

The education establishment is focusing on money, without mentioning reforms in the ads. The Stanford report, however, said both are needed: "Finally we cannot emphasize enough that asking the question, 'How much money will it cost to achieve state goals for students?' is meaningless without also asking, 'How can we develop a system that makes better use of whatever resources are available?' ... The message of the entire collection of studies is that serious fundamental change will be needed if California is to provide a high quality school system."

The advertising buy is relatively modest: about $500,000 for radio and TV spots in Spanish, English and four Asian languages on 60 stations in 21 communities from Medford, Ore. (which covers far Northern California) to El Centro. The real value of the campaign is to send a signal to lawmakers in Sacramento.

Listen to the spots or read transcripts here.

The taxman smoketh

For the first time since California voters approved use of medical marijuana more than a decade ago, the state Board of Equalization is telling the estimated 150 to 200 medical marijuana retailers in California to pay sales tax on pot, the Bee reports.

The board decided that medical marijuana was not exempt from sales taxes because it was not dispensed by a pharmacist or approved by the Food and Drug Administration as a medication.

California GOP pledges against tax increases

Forty-six California lawmakers, all Republican, have signed a pledge promising to vote against any tax increases this year. The pledge is a nationwide project of Americans for Tax Reform, the conservative group run by activist Grover Norquist, who was in California today promoting the efforts.

The only GOP lawmaker who didn't sign the pledge was Assemblyman Roger Niello of Sacramento, who generally opposes pledges. Gov. Arnold Schwarzenegger has not signed the ATR pledge either, but he has consistently said he would resist tax increases.

Republicans have identified 10 relatively minor tax increases - on car registration, alcohol, tobacco and real estate - circulating in the Legislature this year. But, significantly, state Sen. Tom McClintock (pictured above) believes Schwarzenegger's proposal to raise "fees" on hospitals, health plans and doctors should be considered a tax increase worthy of resistance by all 46 lawmakers.

"Anything that involves compulsion, that is forced, is a tax not a fee," McClintock said. Norquist (pictured), speaking at the same press conference this morning, said that "in 50 states people would love to argue that you can get more money and not call it a tax, but they would be wrong." Norquist's group doesn't oppose all tax increases, by the way. They generally stand aside if tax proposals are "revenue neutral;" it's OK to raise taxes on one group as long as taxes are decreased an equal amount on another.

Norquist was planning a barrage of interviews today on conservative radio to promote the tax pledge, and he is scheduled to participate in a "conference call town hall" with McClintock supporters on Tuesday.

It's possible the ATR tax pledge won't mean much this year. No significant tax increases have been proposed to balance the state budget, and the Schwarzenegger administration seems convinced their health-care fee increases can be approved by a simple majority in the Legislature - bypassing Republicans once again.

(Photos: Rich Pedroncelli/AP; Yuri Gripas/AP)

Tamalewood takes on Hollywood

Gov. Arnold Schwarzenegger appears to have lost interest, at least in public, in preventing California's film industry from moving to other states. And it's showing.

During his first two years in office, Schwarzenegger made a big fuss about "runaway productions" to other states and Canada. He appeared on movie sets, appointed some of his high-profile friends, such as Danny DeVito and Clint Eastwood, to the California Film Commission, and backed tax incentives (that went nowhere) to help Hollywood stay in California.

Now, he barely mentions the issue. According to the California Film Commission, since Schwarzenegger came into office there has been a steady decline in studio film production in California. The commission said between 2003 and 2005, about 25% of film productions were shot in the Golden State, but that has been projected to decline to 11% for 2006. In the L.A. area, feature film production has declined 37% since 1996. FilmLA Inc., the nonprofit film office, reported that feature productions during 2006 totaled 8,813 days, down from 9,518 days in 2005.

Where is some of the business going? "Tamalewood." The L.A. Times headed to New Mexico, where that state's "aggressive courtship is worrisome to Hollywood, because it comes at a time when the industry is frustrated with Sacramento's efforts to keep the state competitive in landing films and TV shows." Schwarzenegger own appointees are complaining:

"When a well-established company like Sony considers relocating or expanding into another area, that's very concerning," said California Film Commission Director Amy Lemisch. "It's a brick-and-mortar kind of business. The absence of financial incentives in California makes it easier for New Mexico and all other regions."

Part of the problem has been resistance in the California Senate, where lawmakers are far less enthusiastic about giving special perks to the film industry than their colleagues in the union-friendly Assembly.

Richard Verrier reports that Sony Pictures Imageworks is more than 100 job from Culver City to Albuquerque Studios. Star Waggons is opening an office in Albuquerque. In Rio Rancho, Lions Gate Entertainment is gearing up to build a $15 million production center on 20 acres provided by the city, and with the help of a pending $10-million loan from the state of New Mexico, Virrier writes.

Bay Area highest earning in California

Five Bay Area counties have the highest incomes in California, the Franchise Tax Board reported today. In total, California taxpayers filed 14.8 million returns in 2005, and reported about $1 trillion of adjusted gross income - an increase of 4.2% over 2004.

The median gross income in California was $63,587 for joint returns. For individuals, it was $34,128. State controller John Chiang said the income growth was "welcome news."

Marin County reported the highest median income for joint returns - $107,856, an increase of 8% from 2004. San Mateo County ranked second with $89,672, while Santa Clara County ranked third at $89,618. Contra Costa County ranked fourth with $83,605, and Alameda County came in fifth at $79,257.

Los Angeles County taxpayers filed 25.6% of all 2005 income tax returns in California. The county reported median incomes for joint returns of $54,583, ranking 32nd out of 58 counties.

The robust salaries may sound like good news, but Daniel Weintraub says gloomy clouds are gathering on the horizon: "Even as California's economy continues to defy the downward pull of a slumping housing market, two new forecasts are projecting slower growth and higher unemployment in the months ahead. If they are right, the state's tax collections are likely to suffer as well, leaving the government short of what it needs to provide a full plate of services for another year."

California Tax Burden Bigger Than The Rest

Three California congressional districts appear in the Top 10 with the highest federal tax burdens in the country, according to a new survey by the Tax Foundation. California as a whole ranked 6th in the nation - with an average burden of $20,892 per household.

The report also found that California pays about 14% of the total federal tax burden even though we make up only 11% of the U.S. population. Los Angeles County alone pays approximately $68.2 billion in federal taxes, the report said, while neighboring Orange County pays around $27 billion, which is the fifth highest in the country. In addition:

"Manhattan averages about $1.66 billion in federal taxes per square mile, or $59 per square foot.The second closest federal tax bill is paid by San Francisco County, where the average burden per square mile is $221 million, or $7.93 per square foot."

The new report also sliced 2004 income tax data by congressional district, something that is rarely done. The San Francisco district of House Speaker Nancy Pelosi ranked 15th highest, with an estimated average federal tax burden per household of $33,467. The home district of House Minority Leader John Boehner of Ohio ranked 237th highest among the 435 districts, with an average federal tax burden of $14,079 per household.

1. Christopher Shays (R-CT) $58,943
2. Carolyn Maloney (D-NY) $56,199
3. Henry Waxman (D-Los Angeles, CA) $53,485
4. Anna Eshoo (D-Palo Alto, CA) $51,728
5. Nita Lowey (D-NY) $49,306
6. Mark Kirk (R-IL) $46,289
7. Rodney Frelinghuysen (R-NJ) $42,097
8. Jerrold Nadler (D-NY) $41,551
9. John Campbell (R-Newport Beach, CA) $40,013
10. Chris Van Hollen (D-MD) $37,551

Only one California congressional district ranked in the bottom 20. That belongs to Rep. Jim Costa (pictured), a Democrat from the Fresno area, where the average federal tax burden per household was $8,146, or 430th in the nation. Among the 20 highest-tax districts, 11 are represented by Republicans, while nine are represented by Democrats, the report found. Four of the top five are represented by Democrats.

(Photo:  Rudy Gutierrez/AP; Roger Hornback/AP)

Need $250 million? No problem.

It's amazing what can happen in the Legislature when lawmakers are really motivated. On the eve of a Cesar Chavez birthday holiday and a one-week spring break, the Assembly quietly and quickly sanctioned a $250 million insurance policy in the event Los Angeles is awarded the privilege and financial burden of hosting the Olympics in 2016.

Approved with a 65-0 vote, the legislation by Assembly Speaker Fabian Nunez (D-Los Angeles) would make California liable for any debt related to the games. Backers of the legislation promised the Olympics would more than pay for itself. Here's the fine print from the bill, AB 300:

"(d) No additional state funds shall be deposited into the Olympic Games Trust Fund once the Director of Finance determines that the account has achieved, or is reasonably expected to otherwise accrue, a sufficient balance to provide adequate security, acceptable to the site selection organization, to demonstrate the state's ability to fulfill its obligations under a games support contract, or any other agreement, to indemnify and insure up to two hundred fifty million dollars ($250,000,000) of any net financial deficit and general liability resulting from the conduct of the games."

Make sense? In other words, Chicago has guaranteed $500 million for the 2016 games and California needs to act quickly before an IOCC meeting April 14 where a U.S. city will be recommended. "You may ask, why are we moving so quickly? There is a one-word answer: Chicago. Our only American competition for the 2016 games," said Assemblywoman Karen Bass (D-Los Angeles), who spoke in support of the bill.

Unlike Mayor Antonio Villaraigosa (pictured), not everyone is enthusiastic about the Los Angeles Olympics. Assemblyman Todd Spitzer (R-Orange) did not vote for the bill because he said criminals released early from the overcrowded Los Angeles County jail would make the area dangerous.

He told Times reporter Nancy Vogel that criminals might more easily attack foreign Olympic tourists because they would know the tourists would not return to the U.S. to testify against them. "I don't think L.A. is a safe place for the Olympics to do business," Spitzer said. [Emph. added.] "We're incurring a tremendous amount of liability from injuries and assaults and robberies."

(Photos: Damian Dovarganes / AP; Nick Ut / AP)

The $300,000 Public Servant

One of the many odd things about Gov. Arnold Schwarzenegger is his philosophy about government service. He refuses his state salary and frequently extols the virtues of giving back to California what California has given to him. He's a Kennedy, after all.

But the son-in-law of Sargent Shriver apparently doesn't believe this about the people around him. They are well compensated for their public service. In her first year as his chief of staff, Susan Kennedy (pictured below) received $323,500 in campaign and taxpayer money for assisting the governor. This perhaps is understandable: Schwarzenegger comes from a place where compensation is the best measure of success.

Recently, nearly 50 top Schwarzenegger aides received raises as high as 27%. The justification is always that the government needs to stay competitive with the private sector to attract well-qualified people. To some, this rings false for a couple of reasons.

The first is that $300,000 a year is competitive. In fact, many people in state service at the highest levels would be damn lucky to receive a private sector salary that lucrative. The second is that state officials often parlay their government service into high-paying jobs after they leave. It's the whole reason they are working for the state--to cash in later. They will, in fact, owe the state a debt of gratitude for their jobs in the real world. Many expected Kennedy to leave the Public Utilities Commission job for a well-paying gig in telecommunications--but she decided to serve the people over generating corporate profits.

And as the OC Register editorial board points out today: What about the realities of the market? Will Schwarzenegger reduce his staff salaries if his health-care plan fails to pass the Legislature? What about paying the bills? In fact, the state is not making a profit; it has a budget shortfall close to $1 billion. The Register:

"So now, expect a ratchet-up effect. You can bet that if state executives' salaries were raised higher than local salaries, county and city hall executives would complain they are underpaid by comparison. Such leap-frog logic has little relevance to real world value. But it's typical of the self-justification inside the public cocoon, insulated as it is from market realities like profit and loss. These huge pay raises are a bad idea made worse in the current market, considering the troubled condition of state finances."

(Photos: AP; Rich Pedroncelli / AP)

California's Pension Fund Under Political Pressure, Again

California's wealthy pension plan is being targeted once again for its possible investments in questionable countries - only a few months after Gov. Arnold Schwarzenegger and the Legislature forced public divestment in the genocidal regime in Sudan.

Now, two Republican lawmakers say CalPERS must divest any assets in companies that do business in Iran and other terrorist-sponsoring states. Legislation introduced by Assemblyman Joel Anderson (R-El Cajon) would ban CalPERS investment in Iran specifically, and another by Sen. Roy Ashburn (R-Bakersfield) would extend the prohibition to any terrorist state.

Anderson likens his divestment plan to Democratic efforts that helped topple the apartheid government in South Africa. With Iran, he says, "money is the mother’s milk of terrorism. Terrorists require money to pay for safe harbors, training, logistical support, false documentation, and of course weapons."  Anderson's bill is scheduled for its first hearing tomorrow in the Assembly Public Employees, Retirement and Social Security committee.

Missouri already requires divestment in two pension funds that that do business with Iran, Sudan, North Korea and Syria. It's unclear how many CalPERS investments have connections to Iran, if any, but U.S. companies already are prohibited from doing business there. Now, the State Department is threatening foreign companies, such as Shell Oil, about venturing into Iran. (President Mahmoud Ahmadinejad pictured.)

Meanwhile, state controller John Chiang  is questioning CalPER's $827 million investment in Chevron if the company participates in an auction today that will divide up the assets of Yukos, the bankrupt Russian oil company seized by the government. "I am concerned that Chevron ... may be exposing itself to litigation and divestment campaigns based on allegations of complicity in illegal and unethical activities by the Russian government," Chiang (pictured right) wrote recently to CalPERS.

The founder and chairman of Yukos, Mikhail Khodorkovsky, has been prosecuted and jailed for tax evasion and faces new charges for corruption and money laundering. But he contends that Western companies are "trying to curry favor with the Kremlim" by purchasing his dismembered company, and his investors have threatened billions of dollars in lawsuits against oil companies that purchase Yukos assets.

(Photos: Gustavo Ferrari / AP; AP)