California: Time for a Major Change in Course

By Lewis K. Uhler and Jon Coupal

Governor Brown, California Attorney General Becerra, legislative and other government officials are fixated on battling the new administration in Washington with almost total disregard for California’s major problems and unmet needs. Failure to address these pressing problems threatens the viability of a state whose status is rapidly being transformed from “golden” to “tarnished.”

To help the political class refocus on the important, here is a list of the most exigent problems accompanied by modest solutions, as compiled by a couple of veteran taxpayer advocates who speak with, and hear from, thousands of California taxpayers.

• Roads & Highways – Just about any road trip one drives on in California confirms that we have gone from a world leader in highway capacity and quality to barely a third world contender. Major changes are in order. Our gasoline tax must be dedicated to roads and highways alone, not to other general fund uses like paying off state general obligation bonds, as is now the practice. Also, Senator John Moorlach’s demands to reform CALTRANS should be a top priority. California spends 4.7 times as much per mile of state highway than the national average, according to the Competitive Enterprise Institute, and a 2014 government report concluded the transportation agency was over-staffed by 3,500 positions. Additionally, we should end the practice of requiring “prevailing wages” on public works projects, which are estimated to add up to 20% on every road and other public improvement.

• Energy Costs – Gasoline formulation requirements, “Cap and Trade” and other responses to climate change must be revisited with demonstrable science and hard-headed realism to help low and middle income Californians who struggle with the costs of transportation and household energy. This is not climate change denial, but rather a recognition that it is patently unfair to burden the citizens of one state with the entirety of a global problem.

• Business Regulations and Lawsuit Abuse – Manufacturing restrictions, wage and salary rules, Worker’s Compensation standards, frivolous lawsuits and “sue and settle” standards have driven the aerospace and most other manufacturing industries out of California. Time for tort and regulatory reform to establish a business-friendly climate that will encourage refugees to return and lure others to relocate here. Note: The Nestle Corporation has just announced it is moving its U.S. headquarters from Glendale to Rosslyn, Virginia taking hundreds of high paying jobs with them.

• Land Development and Housing Costs – The mid ‘70s pioneering California Environmental Quality Act (SEQA) has created a nightmare for those seeking affordable, conveniently located housing, workplaces and shopping centers. It has been used as a weapon by environmentalists, competitors, “NIMBYs” and labor organizations to limit – and dramatically drive up the cost of homes, apartments and other needed facilities. Fortunately, despite the best efforts of some in Sacramento, Proposition 13 remains on the job protecting homeowners from runaway property taxes that could force them from their homes.

• Public Transit – Governor Brown’s “Bullet Train to Nowhere” is in a death spiral due to lack of public support, refusal of the federal government and the private sector to provide additional funds, and out of control costs due to mismanagement, malfeasance and insurmountable engineering hurdles. But fixed route/fixed rail transit remains part of the liberal social planners’ mantra. Other than in highly congested urban areas, public transit is unjustifiable in terms of both capital and operating costs. With the advent of Lyft, Uber, self-driving cars and even Elon Musk’s Hyperloop — that, within a few years, could move passengers at a faction of the cost of rail — private companies and entrepreneurs are offering answers to the mobility problem. This justifies placing renewed emphasis on fixing and expanding our highway system.

• Education Improvements and Cost Control – “School choice” is the answer to improving K-12 student learning results. The political clout of the California Teachers Association and other teacher unions has blocked progress. Properly framed ballot initiatives may be the only realistic avenue to reform as we must stop the automatic and mindless Proposition 98 commitment of nearly half of general fund revenues – regardless of need – to K-12 and community colleges.

• Public Employee Wages, Benefits and Pension Reforms – Public sector compensation costs for California, at both the state and local levels, are now clearly unsustainable. According to the Department of Labor, California state and local employees are the highest compensated in all 50 states. Pay, benefits and pensions of public employees have become disproportionate to their private sector counterparts who foot the bill. Adding to the approaching calamity is mismanagement – which has included criminal bribery – at CalPERS, the state’s largest public employee pension fund. Politically motivated investment strategies and fanciful predictions of return on those investments have left taxpayers on the hook for hundreds of billions of dollars in unfunded liability for current and future retirees. Consideration must be given to shuttering CalPERS and fairly allocating to each current employee their share of the retirement funds, arranging for the public employer to make up the difference for what has been promised to date, and move from “defined benefit” to “defined contribution” plans for all existing and future employees. Otherwise, this pension burden has the potential to grow so large that California will not be able to fund the most basic services and as residents flee to other states, the last one out will be asked to turn out the lights.

We call on our representatives to stop pursuing discretionary causes and pet projects and come to grips with these real problems facing all Californians.

Uhler is Founder and Chairman of the National Tax Limitation Committee  (NTLC) and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with both Ronald Reagan and Milton Friedman in California and across the country. Coupal is the President of the Howard Jarvis Taxpayers Association (HJTA). He is a recognized expert in California fiscal affairs and has argued numerous tax cases before the courts.