California revenues suffer some of the most pronounced volatility of any state in the nation. Permanent reform to the California tax code should be designed to reduce the volatility that produces binge-purge revenue swings and crisis budgeting that negatively impacts schools and essential services. While California struggles to emerge from the most profound recession since the Great Depression, tax reform should prioritize those changes that are most fundamental to improving the state’s tax climate relative to other states.
California lost the bid for the last round of Race to the Top funding to competing states for one simple reason: we could not communicate a clear vision for education reform in the state. Disjoined efforts on both a state and local level made California uncompetitive in the eyes of federal education officials. Over two-thirds of the entrepreneurs in Silicon Valley are from somewhere outside of the United States. California needs to start investing in home-grown entrepreneurship. This is significant need for students to be prepared in an educational environment relevant to the innovation economy. Students must be given adequate tools for success in emerging business market, and businesses should be rewarded for investing in the next generation of employees. To prepare our children to successfully compete in the 21st century economy, we need modern tools to educate and empower them. California’s current education funding mechanism is outdated and in need of rebooting – both in delivery of funds and determination of funding. Continuing with our current education system is like pouring water into a broken pitcher. Simply pouring in more money, time and resources without fixing the flaws in the system will not solve the problems causing that are causing California’s students to fall behind. What we need are real solutions that can be implemented today.The goals of education reform are simple:1. Each student is given the tools and knowledge they need to succeed in college and/or career, and prepared to meet the challenges of a global marketplace.2. Each educator is supported professionally and held accountable for successes in the classroom.3. Each school and school district is given the flexibility they need to meet the unique needs of their students.4. Each community is dynamically connected to its school to help create climates of creativity and innovation.
California has the highest population of recent immigrant families in the nation. While many are citizens by virtue of the naturalization process or by birth, many others are not. The federal government has failed to discharge its responsibilities, which has thrust complex and costly burdens onto policy makers and taxpayers of California. While gridlock continues to paralyze Washington on this issue, the challenges in California grow ever more formidable and intractable. These challenges touch on educational, health and human service, public safety, and legal issues that are not easily addressed solely at the state level. California needs to assert itself and be at the forefront of working with Washington to devise immigration reform proposals that deal with the real world impacts produced by decades of neglect.
The public is increasingly frustrated with the lack of efficiency, transparency, and effectiveness of the state legislature. The unseemly appearance of extravagant gifts, manipulation of the process, and secretive deal making are deeply corrosive to the public trust. If legislators are to lead on the difficult issues of budget reform, education and job creation, the public’s confidence must be restored by ensuring that the public right to a fair and transparent process that is not dominated by special interests. Without significant government reform many of the other reforms needed in the state almost certainly will not happen as the current process is designed to protect the status quo and special interests, not average working Californians.
Regulatory and Judicial Reform
California has created one of the most cumbersome and complex regulatory and judicial environments in the nation. Projects that should take months to review and permit often are delayed for years by project opponents who exploit the current system. These delays and the uncertainty they produce dramatically inflate the cost of projects and increase the incentive for companies to invest elsewhere. Although governors, legislators and judges face the electorate and are accountable for their decisions, regulators operating within the state’s bureaucracy are not. That is why it is so important that the rules governing regulators include rights and protections that ensure the regulatory process is objective, science-based, economically sound, and accountable. Regulations need to be designed in a manner that takes into account the cumulative impacts of multiple regulatory bodies in order to eliminate conflicts and contradictions that produce a catch-22 for the law abiding public. Furthermore, the judicial system needs to crack down on the type of frivolous litigation that ties up the courts and penalizes those who are doing all they can to play by the rules.
Budget and Spending Reform
Despite years of posturing and multiple initiatives, the legislature continues to spend every penny it gets its hands on without setting aside sufficient monies to fund a rainy day reserve. Cities, counties and school districts have long operated under an enforced discipline that reduces the boom-bust budgeting that plagues the state. Both Governors Schwarzenegger and Brown have repeatedly shifted revenues to Sacramento and responsibilities to locals. The net effect has been the same, to blur the lines of responsibility while increasing burdens on local government. Therefore, we need to better definition and separation of state versus local responsibilities and attendant revenues to ensure that the government that is closest to the people and best suited to address a public need is empowered to do so without interference from Sacramento. Despite repeated assurances that there exist no more places to cut or trim, state agencies continue to find themselves unable to account for how tens-of-millions of dollars are spent when asked hard questions by the State Auditor. Additionally, many departments routinely run significantly over budget on an annual basis without accountability. The state needs to establish stronger and more independent auditing functions that monitor all major areas of state spending with a specific mission to uncover inefficiencies, abuse and corruption while proposing and promoting best practices. Both Republican and Democrat governors and legislatures have used the proverbial smoke-and-mirrors to proclaim their budgets to be “honest” when in fact they were wildly out of balance. We therefore need to take actions that eliminate the use of gimmickry and enforce sound budgeting principles by clarifying the constitutional role of the Controller to withhold legislative pay if the budget that is passed spends more than the revenues the state receives.