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New Year, New Cuts

Can California's government ever be repaired?

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California started this year off with a blast, as the state's so-called trigger cuts went into effect Jan. 1.

School budgets face the biggest challenges. The CSU and UC systems will shoulder cuts of $100 million each—on top of a combined $650 million from last year—and K–12 students could see a shorter school year as per-pupil spending falls $13. Cuts to schools and social programs could go even deeper yet in the next fiscal year. Gov. Jerry Brown will present his new budget proposal on Jan. 10. Brown still has a $13 billion budget gap to cover next year.

"We'll have an opportunity in November for the people to vote additional revenue, almost $7 billion, or not," Brown said at a recent press conference. "If they vote the revenue, then our taxes will be extended for a few years; if they don't, we'll have even bigger cuts."

Brown's proposal is one of a half dozen that aim to raise revenues for the state by taxing the wealthy, taxing oil companies or changing the property tax. If Brown's initiative is passed by voters, sales tax would be raised by a half cent; individuals making more than $250,000 a year would see a 1 percent income tax hike; those making over $300,000 would pay another half percent; and people making over $500,000 would see their income taxes rise to 11.3 percent.

Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, points out that any tax initiative could be a hard sell right now.

"There really isn't a desire for higher taxes," Vosburgh said. "We are one of the highest tax states, and we have the second highest unemployment."

New taxes might patch a budget gap, but they don't get at the heart of California's problems. Brown's taxes would expire in 2017, and state legislators would continue to work on the budget with limited flexibility—think education spending minimums passed by voters and court-mandated prison overhaul.

One of the more interesting proposals has come from the bipartisan Think Long Committee, a group of California political veterans including former governors Gray Davis and Arnold Schwarzenegger, Silicon Valley magnates like Google's Eric Schmidt, and Condoleezza Rice. Their manifesto has been a year in the making, bankrolled by billionaire Nicolas Berggruen, who's promised to personally fund an initiative to the tune of $20 million.

In a report called "The Blueprint to Renew California," the committee suggests initiative reform, education reform and, especially, tax reform. The group also hopes to facilitate qualification for ballot measures by lowering the number of required signatures and allowing for electronic signatures. In short, the 23-page document has something for every interest group to love and hate.

The plan promises to raise $10 billion a year in additional revenue while cutting income taxes across the board. Schools would benefit with a promised $2.5 billion for the CSU and UC systems. Proponents say that changing the tax structure away from an income-tax-dependent model will eliminate boom-and-bust cycles.

Yet the plan to place an initiative on the November ballot looks to be postponed until 2014, if it isn't dead already, primarily because it relies on a new sales tax on services, in addition to the exiting sales tax on products. Critics have been quick to note that despite the income tax cuts, the proposed sales tax amounts to a higher tax on the poor and an overall lower rate for the rich.

Because it eschews short-term fixes, the plan bears a striking resemblance to Repair California's recently proposed constitutional convention, and, indeed, Think Long and Repair California share many of the same players.

Jeffrey Lustig, retired Sacramento State professor and author of Remaking California, says, "The problem with Think Long and others like them, for me, is that they're not addressing the fundamental crisis of the state's politics, which for me is the crisis of representation."

In his book, Lustig points out that only 30 percent of California voters go to the polls, where decisions that affect funding and spending are made. This is the peculiar paradox surrounding the Think Long process, where a group of unelected political insiders- and billionaires write propositions and the voters make them law, completely circumventing the elected Legislature. Voters will decide this fall whether to tax or cut services, but behind the initiative process lies what is perhaps the real question: why can't the Legislature do this?

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