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Tax Fax : September 2003

THE BUDGET ACCOUNTABILITY ACT INITIATIVE There is little doubt that the Budget Accountability Act Initiative will be on the March 2004 ballot. The proponents for the Measure have collected over one million signatures against a 600,000-signature requirement for qualification. The Act is a constitutional amendment that would lower the legislative threshold for passing a budget from a supermajority (66.6%) to 55%, and in addition, cause the governor and legislators to forfeit pay and living expenses for every day they exceed the state’s June 15th budget deadline. The Act exempts property taxes, but would lower the number of votes needed to raise sales, tobacco, gasoline, income and other taxes. The measure would make it easier for the Legislature to pass a budget and in the course of doing so raise taxes. Opponents to the measure have termed the Act the “Blank Check Initiative.” If the “Blank Check Initiative” succeeds, the tax and spenders of the majority party of the legislature will be able to pass every tax increase they desire without a single Republican vote. The Taxpayers League Board voted to oppose the Budget Accountability Act at its August 21st Board Meeting, and will join the coalition, Californians Against Higher Taxes/No on the Blank Check Initiative who will fight the change to the State’s Constitution. If this Act qualifies for the March ballot it is anticipated it will encounter a legal challenge. It emulates Proposition 24, the Legislator’s Compensation, Reapportionment Act of 2000, which proposed to take control of redistricting of political election boundaries after each 10-year census from the Legislature, and give the responsibility to the Supreme Court. Proposition 24 also reduced Legislator’s salaries from $100,000 per year to $70,000 and their per diem from $122 per day to $75. Based on having two sections of an Initiative dedicated to two different issues, the California Supreme Court ruled Proposition 24 was unconstitutional as it violated the “single-subject” provision of the State Constitution, and would not permit the Act to go on the ballot. MEASURE A - THE TRANSPORTATION SALES TAX OF 1988 Measure A, which in 1988 added a half-cent tariff as part of the County’s present 7.5% sales tax, was aimed at supplementing county, cities, and the transportation agency’s funding for transportation projects. It is due to expire at the beginning of 2009. Local officials intend to ask voters to extend Measure A, hopefully in a ballot Measure in November of 2004, well before the 2009 expiration date. The Association’s Board, consistent with its original position to support Measure A in 1988, voted to support the new Measure, trusting voters will recognize the importance of continuing improvement and expansion of transportation capabilities, and will extend the tax. However, the League’s support carries the caveat that the tariff be no more than a half-cent, and that other terms involving distribution of the money not be altered. The tax accounts for about 20 percent of the money spent in Sacramento for transportation related projects, and the flow of such money is essential to assure local matching funds are available to obtain federal funds for major projects. Executive Director Carl Burton is the League representative in the Transportation Authority, which project transportation needs of the future. SPLIT ROLL, SB 17 AND ACA 16, ATTACK PROPOSITION 13 The California Taxpayers Association has pointed to these proposals in the Senate and Assembly as precursors to attempts to require commercial property to be assessed at current value more frequently than residences. With regard to Senate’s SB 17, Daniel Weintraub of The Sacramento Bee wrote that the bill is likely to become a vehicle to split the property tax roll by altering change-of-ownership rules to trigger more frequent assessments of commercial property. ACA 16 takes almost the same tack to split the roll. It requires businesses to be reassessed to current market value when more than half the company changes ownership. The California Taxpayers Association also states that backers of these actions contend that the change-of-ownership definition for business property reassessment to current market value, without altering the Proposition 13 tax rate of 2 percent, can be done by majority votes of the Assembly and Senate, and increase property tax revenue by $3 million or more a year. Opponents say that this is an end-run around Proposition 13, and that owners of commercial property are paying taxes based on assessments closer to market value than other property. SACRAMENTO CITY COUNCIL CONSIDERS USING PUBLIC MONEY FOR THEIR CAMPAIGNS In 1998 - 1999 a City of Sacramento Campaign Finance Committee developed recommendations on campaign financing limits for City Council and Mayoral electoral races, use of public money to partially fund the campaigns, and not to submit the plan to a public vote. The Associationimmediately sent the City a letter opposing the use of public money for political campaigns, and opposing the recommendation not to submit the use of public money to a vote. In December 1999 the City put off any decision on the Committee recommendations, instructing its staff to write a campaign fund limits law and a discussion on public financing. In May 2000, staff took a first cut at limits and recommended against public financing. We wrote and expressed pleasure at the recommendation against public financing, and for the third time expressed opposition to any recommendation made to use public money in political campaigns without a vote. In November 2000, the City approved an Ordinance limiting campaign contributions for City Council and Mayoral candidates. Public financing was discussed, but was left unresolved. Again, the League registered its objection to public financing. In April 2002 the Committee presented another plan for public financing, and recommended it be put to a vote on the November ballot, and that the money, about $200,000, come from a source other than the General Fund. However, as the Taxpayers League had Measure T on the November ballot to reduce the City Utility User Tax, the City Council directed staff to bring back the public financing item after the November election, in order to assess the City’s financial condition. They also instructed the staff to propose a mechanism that would trigger public financing of campaigns. On June 5th of this year, staff presented its recommendation for triggering public financing during budget hearings. If the triggers are met, the Council would consider appropriating funding to a Public Financing Fund as part of their budget deliberations. The discussion is to take place on September 9th. Although the League has not seen the detail, we assume the City has abandoned any consideration of putting public financing to the vote as staff had already been instructed to begin preparing for election of Council Members in March 2004, and to plan on having about $300,000 in public money to partially fund campaigns. You can bet the League will be at that September 9th City Council meeting. LIVING WAGE The so-called “Living Wage”, in the form of a City of Sacramento Ordinance, is rearing its ugly head again. It’s one of those terrible “sounds right” efforts that invariably is put into place by elected officials, or by external efforts in the form of Propositions or local Measures, and then blows up in the face of those believing they had done the “right thing”. Californians seem to want everything they can get from government, but only if it is virtually without cost to themselves. The Sacramento Bee August 9th article, “Living wage favored in new poll” demonstrated the dichotomy. It asserted that a Field Poll showed Californians “strongly back the idea of boosting the earnings of lower-paid workers on government-financed projects”, and within two sentences wrote, “Support dropped substantially, however, when people were asked if they would be willing to pay an extra $40 to $50 in taxes per household every year to finance the living wage.” The key words in those two sentences are “government financed projects” which in real terms means “subsidized by the taxpayers.” And when put in the terms of “are you willing to pay by agreeing to raise your taxes?” the enthusiasm quickly wanes. Let’s take a good look at what The Living Wage really involves. The concept is that contractors who receive public funds for services will be required to pay wages above the minimum. Ordinances that implement the Living Wage cover contracts to private firms that provide services to the public and to a city government. In addition, they cover licensees of city property that perform propriety interests of the city government, and those businesses and individuals that receive subsidies that enhance economic development. In simple terms anything touched by city money or gratuities. It requires that both permanent and temporary employee’s be paid a minimum of $10 per hour if health benefits are provided, or $12.84 per hour if they are not. It also requires written agreements between an Employer and Labor Organization regarding representation of employees; dispute requiring binding arbitration, and a myriad of other things like contracting out city services that result in displacement of city employees, seniority rights when reducing employees, automatic retention rights for displaced employees, etc. City employees and union employees are exempt, which will raise an equity issue in labor negotiations. Opponents argue that more than three-fourths of the nation’s labor economists believe the Living Wage is an ineffective and inefficient way to help the working poor. They point out that the total cost to the City and employers is $8.7 million per year, and another $5 million to the City if they apply Living Wage to their own employees. If one looks at Living Wage dispassionately, it is not just about wages. It has a definite union stance as is demonstrated above. Its backers are the Sacramento Central Labor Council, and a national social equity group called ACORN, the Association of Community Organizions for Reform. This was pointed out by the Sacramento Metropolitan Chamber of Commerce, in an article by Dave Butler, its Senior Vice President, titled “Living Wage?”, which appeared in the May 2003 issue of Inside the City. The Chamber opposes Living Wage, and also pointed out that the California Federation of Labor supports Living Wage Ordinances because it “reverses the tide of privatization.” More than two years ago, the first two groups approached Councilman Dave Jones, who, evidently on their behalf, introduced the Living Wage Ordinance to the City Council. Dave Butler wrote that The Metro Chamber, working with the Sacramento County Office of Human Assistance and Area Congregations, developed a program, Direct Contact, as a counter to Living Wage. Direct Contact would connect lower-income workers, via employers, with undersubscribed federal and state programs that support work and increase workers’ net earnings. These programs include earned income tax credit, health insurance, transportation assistance, food assistance and job training. He also wrote that The Sacramento Bee’s columnist Mark Paul supports the Metro Chamber’s position, and in a March 9 op-ed piece Paul wrote that the “economic multiplier” effect used by experts to predict the net economic benefit of public policy decisions does not support a mandated living wage for low-income workers since it results in a net loss of dollars in the local economy. The Associationhas opposed the Living Wage concept from the outset, and believes that if the City wants to foster a Living Wage Ordinance, it should follow the lead of its author, Councilman Dave Jones, and submit the concept to the voters. VEHICLE LICENSE FEE (VLF) - THE CAR TAX The most discussed aspect of the 2003-2004 budget is the Car Tax, its effect on the car owning individual in the state, and the use of the estimated $4 billion in taxes to be collected in the next year. The budget calls for the tax to increase from its present rate of 0.65% to 2% in October. The State Legislative Analyst’s Office writes that as a component of VLF reductions enacted in 1998, law provides that the state “backfill” (and thus make local governments whole) the difference between the lower VLF rate and the 2% rate, unless the state has “insufficient moneys” with which to make such payments. In June, the Department of Finance made a determination that the state had insufficient moneys to make such payments to local governments and as a result the backfill ended, and the VLF will return to the 2 percent level in October. During the 90-day period between when the General Fund backfill ended and the VLF rate will increase, local governments will only receive revenues based on the 0.65 % VLF rate with no General Fund backfill. The loss in government revenue due to the lag time between the elimination of the backfill, and the increase in the VLF, is approximately $825 million. The budget calls for these revenues to be repaid by the state by August 2006. Currently, approximately one-quarter of the VLF revenue is restricted to funding “realignment” programs and three-quarters is sent to local governments as general-purpose moneys. Under the budget plan, the percentage of these revenues restricted to realignment programs will increase during 2003-2004 such that the realignment programs will be held harmless. As a result of this shift, city and county budgets will bear the entire $825 million loss. THE DOWNTOWN ARENA - AGAIN! The Associationoffice received a call from the Sacramento News and Review (SN&R), subject - the Downtown Arena. Reporter Jeff Kearns was looking for the League’s position, and he was told that we will oppose the Arena if there is any attempt to use public money in its financing. Jeff wrote an excellent, well researched, major article about the background of the Arena, and the current status of the City of Sacramento’s mores in the August 28, 2003 issue. We recommend all Members of the League either get a copy of the paper, or call it up on the SN&R website www.newsreview.com. The article begins on page 24, and is titled: “They play, you pay.” The cap asks: “Why is it taking so long to produce a feasibility study for the new Kings arena? Because the city is trying to figure out how to stick the public with most of the bill. And the Maloofs remain tight-lipped millionaires.” MEMBERSHIP RECRUITMENT Our Members constitute the League’s strength, and we need our Members to recruit others to enlarge our base. Taxpayers are about to be assailed as never before for additional money from every level of government in the form of fees, assessments, rates, and taxes. Locally, the Taxpayers League is the only recognized and organized defender of the County and its Cities’ taxpayers capable of putting up a viable defense. Over our 42 years, we have successfully defeated many attempts to raise taxes, rates and fees in the County of Sacramento. Such battles are expensive. And those we are engaged in now, and new attacks to be faced, are frightful. Members must remember that the League is composed of dedicated volunteers who battle not only on Member’s behalf, but also on behalf of people who virtually cannot help themselves forestall the onslaught. To be successful we need Members to strengthen the League by recruiting friends and associates as League Members, and to donate money to the General or Defense Fund if possible. LETTERS TO THE ASSOCIATION We seek “Letters to the League” from Members concerning projects and issues on which we are working, along with recommendations on those we should look at. Letters may be edited and republished in any format, primarily in the interest of available space. Send letters, faxes, or e-mail to the Sacramento Taxpayers Association. Our e-mail is info@sactax.org; our telephone and fax number is (916) 921-5991; and our address is: Sacramento Taxpayers Association 1832 Tribute Road Sacramento, CA 95815 PROP. 50 SHOULDN’T SUPPORT THE STATE BUDGET Proposition 50, passed last November, cost $3.44 billion, and is the largest water bond in California state history. It also was the first time a water bond issue was placed on the ballot by using the petition process. All previous water bonds had been placed on the ballot by the Legislature. The voters of California were told by the California League of Women Voters, and the National Audubon Society, that a YES ON Proposition 50 would PROTECT CALIFORNIA’S FUTURE, saying in their ballot argument that “California’s future depends on investment in water supply and security, water quality and safe drinking water projects, and on protecting our rivers, lakes, bays and coastal waters from contamination. Proposition 50 provides the funds that local water districts need to serve California’s growing population.” Ted Costa of People’s Advocate pointed out in his November opposing ballot argument that the construction of dams and reservoirs in California is at a virtual standstill and has been for many years. Mr. Costa stated, “We are fast approaching a big water shortage crisis in California, the likes of which we have never seen before, and Proposition 50 provides virtually no money to alleviate that crisis.” Mr. Costa argued that California needs new dams on the American River at Auburn and on the upper San Joaquin River at Friant. We also need to build the Sites Reservoir in Colusa County, and the Los Banos Grande Reservoir in Merced County, said Mr. Costa. Both of these reservoirs will store an additional 6 million-acre feet of new water, providing drought protection, and also will accommodate the new construction of the last 30 years. Proposition 50 did nothing to start, or plan for completion, any of the projects listed above. Those who opposed Proposition 50 should have added that it was too easy to circumvent. The undoing began in January 2003, when Governor Gray Davis, looking for ways to close the state’s $38 billion budget deficit, cast a covetous eye toward voter-approved bonds. The circumvention worked. As the San Francisco Chronicle recently reported, “The budget finally adopted calls for spending $1.1 billion in Proposition 50 money on such items as paying state employees’ salaries previously borne by the general fund.” When the Sacramento Taxpayers Association opposed Proposition 50 last fall, we said it would actually cost the taxpayers $6.9 billion over 30 years, and we don’t believe that kind of expense is justified. We oppose using Proposition 50 money to pay current budget expenses in order to sweep California’s massive budget problem under the rug. Such use of water bond money is inexcusable. Carl Burton DUPLICATION AND OVERLAP OF CALIFORNIA GOVERNMENTAL FUNCTION NOTE: Extracted From Member Charles Smithers’ Letter to Arnold Schwarzenegger, Candidate for State Governor August 22, 2003 During 1969 - 70, the issue of duplication and overlap of governmental function was presented to Governor Ronald Reagan who was seeking an issue to put before the electorate during the fall campaign. He enthusiastically presented a brief outline of the issue to the California Chamber of Commerce. It received a warm response and a task force was formed including the California Taxpayers Association, representatives of business and industry, and the Governor’s Office. I was a California Taxpayers Association representative. Among those participating was Ronald A. Zumbrun appointed by Governor Reagan. It became apparent that the issue was too complex to address in a short time frame, and the welfare reform of the early 1970s then became the focus of the Administration’s attention. Mr. Zumbrun went on to serve Governor Reagan as Deputy Director-Legal Affairs for the California Department of Social Welfare responsible for the legal aspects of the highly successful welfare reform effort. In 1973 Mr. Zumbrun co-founded the Pacific Legal Foundation (PLF), serving as President and Chief Executive Officer until 1995. In essence, duplication and overlap in government seems overlooked entirely when considering cost saving possibilities that can result from functional consolidations. To begin, in addition to the State Government with its myriad of agencies, departments, boards and commissions, the State has 58 County Governments, over 400 Cities, 1200 School and Community College Districts, and over 4800 Special Districts. The latter include Air Pollution Control Districts, Sanitation Districts, Water Quality Control Districts, Joint Powers Agencies and a myriad of other governmental agencies all with separate boards and commissions. Independent districts have separate boards of directors, elected by district voters. Independent districts also include districts where appointed boards of directors serve for fixed terms. Cemetery districts are independent districts within this governance structure. Special districts’ governing boards vary with the size and nature of the district. Most districts have 5 member governing boards. Other boards range from 3 to 11 members. The Metropolitan Water District of Southern California has 37 board members. Dependent districts are governed by legislative bodies, either a city council, or county board of supervisors. All County Service Areas are dependent districts governed by county boards of supervisors. Dependent districts include the Yucca Valley Recreation and Park District, governed by the San Bernardino county Board of Supervisors, and the Oceanside Small Craft Harbor District, run by the Oceanside City Council. Enterprise districts render services run like a business enterprise. They provide services used by individual customers. For example, hospital districts charge room fees paid by patients, not other residents of the district. Virtually all water, waste, and hospital districts are enterprise districts. Non-enterprise districts provide services that don’t lend themselves to fees. Activities such as fire protection and mosquito abatement benefit the entire community, not just individual citizens. No direct cost/benefit relationship exists in the services provided by a non-enterprise district. Consequently, non-enterprise districts generally cannot charge user fees for their services and rely overwhelmingly on property taxes for their operational expenses. Services usually provided by non-enterprise districts include fire protection, cemeteries, libraries, and police protection. Though non-enterprise districts rely primarily on non-fee revenue, certain services, such as a park district’s pool, can generate a small amount of revenue. Some governmental functions are assigned to the State, Cities or Counties, but virtually every function is performed in what has become a costly and confusing duplication and overlap of service. As an example, School Districts provide their own policing of schools and school grounds, sometimes using off-duty police. They have no jurisdiction elsewhere. Cities provide police services only in their jurisdiction. They cannot function in the County or on the freeway while driving to and from work. Similarly, Counties cannot function in the city or on the Freeway despite the use of city streets and state highways. And the State Highway Patrol protects the State Capitol and some State Buildings, and patrols the State Highway system, but has limited jurisdiction in city or county areas. Most special districts have police powers. Nearly all State agencies, such as the Departments of Forestry and Corrections have police powers. An example of the policing powers of various state employees is the following partial list of job classifications entitled to “safety membership” in the California Public Employees Retirement system and enhanced pay: Class Code Classification Department 8330 Aircraft Pilot Justice, Department of Justice 8997 Arson and Bomb Investigator Fire Marshal 9027 Assistant Chief, Food and Drug Section Health Services 8609 Chief, Bureau of Insurance, Insurance Fraudulent Claims, Department of Insurance 8610 Chief, Division of Consumer Affairs, Investigations, Department of Consumer Affairs 8988 Chief Firefighter/Security Guard, Veterans Affairs 9030 Chief, Food and Drug Health Services Section 8613 Chief, Investigation Services Health Services Bureau, Department of Health 1986 Chief Museum Security Officer, Museum of Science and Industry 8673 Deputy Division Chief, Alcoholic Beverage Control 8677 District Administrator, Alcoholic Beverage Control 8990 Firefighter/Security Guard Veterans Affairs 8966 Division Chief, Fire Marshal California State Fire Marshal 9090 Fire Service Training Fire Marshal Specialist III 9091 Fire Service Training Fire Marshal Supervisor 9028 Food and Drug Coordinator Health Services Program 9029 Food and Drug Administrator Health Services Regional 9042 Food and Drug Health Services Specialist II 9039 Food and Drug Health Services Specialist III 9036 Food and Drug Health Services Specialist IV 9043 Food and Drug Health Services Trainee 9007 Food Technology Health Services Specialist 1937 Hospital Peace Officer I Developmental Services, Mental Health, Consumer Affairs 1936 Hospital Peace Officer II Developmental Services, Mental Health, Consumer Affairs 1935 Hospital Peace Officer III Developmental Services, Mental Health 1992 Museum Security Officer Museum of Science and Industry 0891 Park Safety and Enforcement Supervisor, Parks and Recreation 0890 Park Safety and Enforcement Specialist, Parks and Recreation 8358 State Security Officer General Services 8999 Chief Arson and Bomb Investigator Fire Marshal 8989 Supervising Firefighter/Security Guard Veterans Affairs 1988 Supervising Museum Security Officer Museum of Science and Industry 8678 Supervising Special Investigator Alcoholic Beverage Control This is but a partial list found in CALIFORNIA CODES GOVERNMENT CODE SECTIONS 20390-20416 at http://www.leginfo.ca.gov/calaw.html - check “Government Code” search for “Safety Member”. Similarly, most State functions have their counterparts in local governments, in either Counties (58), Cities (479) Chartered cities 107 (84 in 1989), general law cities 371 (379 in 1989), and Special Districts, or all three. The State Controller’s “Special Districts Annual Report “ for the fiscal year ended June 30, 1996, the latest year available, provides comprehensive data on the financial transactions of the then 4,816 special districts in California Their overall expenditures totaled $15.9 billion that fiscal year. Electric and hospital districts are excluded. California also had 327 Unified School Districts, 566 Elementary School Districts, 93 High School Districts and 70 other Districts for a total of 1,056 in 2003 according the State Department of Education. Additionally, there were 72 community college districts with 108 colleges. Not only is the cost of duplication astronomical, but the bifurcation and duplication of function is undoubtedly confusing and inefficient. I do not profess to have the solution to this problem, but feel that it should be addressed. Other than the brief attention given of 1969-70, it has never to my knowledge been addressed, but is obvious to anyone observing bureaucracies at work. The above will be discussed at our September 11, 2003 meeting.

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