Top Democratic donor  Tom Steyer considered for Cabinet position

Good morning. Have a good Tuesday! We start this morning with someone else’s story — but it’s a good story.

“Tom Steyer, the billionaire climate activist and possible candidate for California governor, was under consideration to become President Barack Obama’s first energy secretary, according to a hacked email exchange released Monday by WikiLeaks.”

“John Podesta, an Obama transition adviser and now chairman of Hillary Clinton’s presidential campaign, included Steyer’s name for the Cabinet post in September 2008 correspondence,” but Steyer was passed over.

“Emails from 2012, also disclosed by WikiLeaks, showed Podesta discussing a planned meeting between Steyer and former President Bill Clinton. Podesta wrote in the exchange that he would try to push Steyer to support the Clinton Foundation.”

“The praise heaped on Steyer, a major Democratic donor, by one of Clinton’s top advisers is being scrutinized for its political ramifications in California. Should Clinton win next month, she may look to Steyer for a Cabinet position, giving him direct White House policy experience and a formal title as he mulls a run for governor.”

The Sacramento Bee has more. 

In other news:

• “Climate change from human activity nearly doubled the area that burned in forest fires in the American West over the past 30 years, a major new scientific study has found, and larger, more intense fires are all but guaranteed in the years ahead,” writes The San Jose Mercury News. 

• “If Prop. 55 passes, the state budget will rely even more on California’s highest earners,” reports the Los Angeles Times. (Many budget experts think this is a troubling trend.)

• The always-zigging-when-others-are-zagging Congressman Dana Rohrabacher, R-Costa Mesa, called “GOP leaders ‘gutless’ for bailing on Trump.” The Orange County Register has more.

• “Over the past four decades, (actor Mike Farrell), who has wielded his celebrity to bring attention to social and political issues in Central America, the Middle East and Africa, has become a leading voice against the death penalty. This year, he is the author of a ballot measure that seeks to end capital punishment in California. For Farrell, the cause has taken precedence over others because at its root, he says, is the idea that some people are dispensable.” The Los Angeles Times has more.

Legislature:

• Gone ’til December. 

Gov. Brown: 

• No public events announced.

Tips: matt@calwatchdog

Follow us: @calwatchdog @mflemingterp

New follower: @RunGomez

The controller’s office in August published an audit of the account that collects tax revenue generated from both a temporary tax on annual incomes of $250,000 or more and a quarter-cent sales tax and then disperses the funds to K-12 school districts, charter schools and community college districts.

With the exception of a $59.7 million accounting error the Department of Finance made when transferring funds (but is set to be corrected in an upcoming adjustment), the program was deemed to have used and accounted for the revenue appropriately.  

Still awake? Here’s some background

The Education Protection Account was created to ensure the money is used as intended — meaning to make it so lawmakers couldn’t raid education funds for other purposes — when voters approved Prop 30 in 2012. The audit was one of several accountability provisions.

The audit noted that the $59.7 million error did not affect funding to schools because of another law (Prop 98), which guarantees a certain level of education funding. The Department of Finance told the Controller’s office the error did not hurt schools because the Prop 98 guarantee was met through other accounts.

The fact that the guarantee was met regardless of the error raises questions about the need for Prop 30. But a spokesman for the Department of Finance said Prop 30 has “provided a direct benefit to schools” since it provided additional revenue streams and increased the amount of the Prop 98 contribution.

And while $59.7 million is a lot of money, it’s only a fraction of how revenue much Prop 30 has generated. Since its inception in 2012, it’s estimated to have generated around $31.2 billion.  

Why is CalWatchdog telling me this?

In April, CalWatchdog discovered the Education Protection Account had not been audited, despite the fact that voters are set to consider a 12-year extension in November (it’s now called Prop 55, and the extension is coming two years early).

Prop 55 would only extend the income tax provision, while the sales tax provision will expire in two years.

Why audit this obscure account and not how the schools are spending the money?

Auditing this account is important because it verifies that lawmakers (or anyone else for that matter) weren’t dipping into Prop 30 funds. The audit could also catch something like a $59.7 million accounting error.

And other audits have been done. There’s actually plenty of audits of the different school districts, charter schools and community college districts located on the controller’s website.

Isn’t more education funding a good thing? Seems like a no-brainer.

The Prop 30 and Prop 55 debate has never really been about the need for more education funding. Instead, it has to do with the source of the funding. 

Many experts, including Moody’s, Standard & Poor’s and Gov. Jerry Brown’s budget, argue the state is too reliant upon income tax revenue from top earners, mainly because of its volatility.

In fact, nearly half of the state’s revenue comes from the top one percent of earners (approximately 150,000 individual tax filings). Critics of Prop 30 and Prop 55 say these measures only perpetuate the problem.

Also, Prop 30 was billed as a temporary tax. But if it Prop 55 passes, it would extend the program until 2030, which critics say is not “temporary.”

Of course, if voters down Prop 55 in November, the program will expire in 2018. There would certainly be a loss of revenue for schools (and healthcare), but Brown said he’s prepared to proceed either way.  

But when it comes to Proposition 55, ignorance of its contents is not likely to be a problem for voters. The California Teachers Association and its allies are likely to spend $100 million or more on saturation TV and social media ads depicting the measure as crucial to the future of California public education.

Prop. 55 would extend for 12 years the temporary tax hikes on single people earning more than $263,000 and couples earning more than $526,000 that voters approved in 2012 (then at slightly lower income thresholds) as part of Proposition 30. Instead of sunsetting at the end of 2018, the income tax increase would continue through 2030. The $7 billion or more this is expected to generate annually would be earmarked for education. The temporary sales tax hike that voters also approved in 2012 will lapse at the end of this year.

Revenue recession took toll on teachers

This month, the CTA wrote a $10 million check to the Yes on 55 campaign, which now has a $28 million warchest. The CTA and the smaller but still powerful California Federation of Teachers are likely to write several more checks that size to try to avoid the headaches that public school teachers faced from 2008 to 2012 during California’s long revenue recession.

While the “step” increases in pay that teachers typically receive in 15 of their first 20 years on the job were largely protected, strapped school districts didn’t grant additional across-the-board pay hikes that many provided during recent tech bubbles that pumped up capital gains revenue for the state. They also pushed for teachers to pay more toward their benefits and in some cases accept layoffs that extended beyond the newly hired to those with several years of experience.

As the Legislative Analyst’s Office graphic above shows, education spending has strongly rebounded since 2012, helped by a new boom in Silicon Valley and Proposition 30’s adoption that year. But the CTA and the CFT share Gov. Jerry Brown’s skepticism that the current good times can last. After first insisting that the temporary tax hikes must be allowed to expire because that’s what voters were promised, Brown has been far less vocal on the topic in the wake of new forecasts from his Department of Finance that state deficits are likely in coming years without retention of the income-tax hike.

Since state coffers are the main source of K-12 funding, Prop. 55’s approval is crucial to maintaining teachers’ pay and benefits. In most school districts, compensation eats up more than 80 percent of general fund budgets.

But Prop. 55’s route to passage may be rougher than Prop. 30’s in 2012. The Sacramento Bee editorial page has already said that support for extending the tax hikes should be explicitly linked to reforms in teacher tenure and to teacher unions’ support for state-subsidized childcare for poor families.

Some state lawmakers may also try to leverage their support for Prop. 55. Led by Assemblywoman Shirley Weber, D-San Diego, they are unhappy with how 2013’s Local Control Funding Formula has been implemented. The measure was supposed to pump billions of dollars in extra funding to districts with large numbers of English-language learners and foster children so they could provide help specifically for such students.

But three years in, education reform groups say that’s not happening, citing the absence of evidence of additional help for either category of student. Last year, Superintendent of Public Instruction Tom Torlakson said the local control dollars could be used broadly for general pay raises, overruling a lower-ranking official.