Nearly 60 percent of voters in 2014 approved Prop. 47, which recategorized certain low-level drug and property offenses from felonies to misdemeanors, in an attempt to ease prison overpopulation. 

Since then, many have attempted to link criminal justice reforms like Prop. 47 with a spike in crime in 2015 and 2016. There was even a failed ballot proposal earlier this year that would have rolled back some reforms.

The PPIC found that the two-year rearrest rate for those released after serving sentences for Prop. 47 offenses was almost two points lower than individuals released before the reforms. Meanwhile, the two-year reconviction rate was more than 3 percent lower.

However, the study cautioned that “it is too early to know” how effective Prop. 47’s redirection of funding toward treatment for offenders was.

The study found that much of the purported increase in violent crime post-Prop. 47 was the result of methodological factors, such as police departments in years prior under-reporting violent crimes or the FBI expanding the definition of sexual crimes. Meanwhile, upticks in violence were already starting in 2013 and early 2014, before reforms were enacted.

With property crime, however, the study concluded that Prop. 47 was in part to blame. “It may have contributed to a rise in larceny thefts, which increased by roughly 9 percent (about 135 more thefts per 100,000 residents) compared to other states,” the report read.

Finally, while several thousand inmates were released as a direct result of Prop. 47, the PPIC concluded its effect was more apparent in a shift by law enforcement from arresting potential offenders to citing and releasing them.

In fact, only 13 percent of Californians say it’s not a problem, while 57 percent say it’s a big problem, according to a poll released Thursday night by the Public Policy Institute of California. 

Just below half of Californians think affordability is the biggest issue facing California’s higher-education systems, while only 15 percent think quality is the top problem. 

“With many Californians saying that affordability is the most important problem facing public higher education, there is overwhelming support for free community college and for expanding student scholarships,” said Mark Baldassare, PPIC president and CEO.

Paying for it?

Both the Cal State and the University of California systems are considering tuition increases. And while that is sure to be unpopular, Californians don’t seem to like the alternatives: 74 percent oppose increasing student fees, 50 percent oppose higher taxes, and 50 percent oppose increasing tuition for out-of-state students.

But despite opposing higher taxes, strong majorities of Californians support increased government funding to make college more affordable — 73 percent of adults think community college should be free, while 82 percent of adults want the government to pay for more scholarships and grants for students attending four-year institutions. 

School bond

To fund new construction projects, 65 percent of Californians support a bond measure for higher-education facilities. That outpaces November’s results, when 55 percent of voters approved a $9-billion construction bond for K-12 and community colleges. 

But in recent years, a variety of criminal-justice reforms have been pushing the pendulum back in the other direction, albeit in a relatively quiet way. In 2014, California voters approved Proposition 47, which reduced some crimes from felonies to misdemeanors. Furthermore, Gov. Jerry Brown succeeded in implementing his “realignment” plan that moved many state prisoners to county jails.

Crime has gone up in major California cities since then and it’s not clear how much those measures contributed to the problem. But it doesn’t appear the recent uptick has slowed the push for reform.

In the Nov. 8 general election, voters rejected an effort to repeal the death penalty and, by a close margin, appear to have approved a measure designed to speed up executions. Nevertheless, voters also approved Proposition 57 by a wide margin. As the Legislative Analyst’s Office explains, the measure will “increase the number of inmates eligible for parole consideration” and make “changes to state law to require that youths have a hearing in juvenile court before they can be transferred to adult court.” The marijuana-legalization measure voters also approved would enable judges to expunge some people’s marijuana convictions.

The ballot box isn’t the only place where reform is moving forward. When the Legislature reconvenes in December, some legislators will almost certainly introduce bills that would reform the state’s system of “money bail.” It’s part of a nationwide reform movement headed by groups such as the American Civil Liberties Union.

Many are unfamiliar with the system by which criminal defendants post a bond that allows them to avoid jail time as their case winds its way through the system. A judge will set a bail amount that reflects the severity of the alleged crime and the defendant’s perceived flight risk. The defendant can post the full amount, which would be forfeited if he or she doesn’t show up at the appointed court date. Those who lack the resources also can go to a bail bonds company and pay a nonrefundable percentage (commonly 10 percent) of the bail. The bail bondsman posts the full amount and assumes liability to assure the defendant shows up for trial.

The bail bonds industry argues the system works well as it is designed. “When it comes to guaranteeing appearance at court, surety bail outperforms every form of public sector pretrial release and own recognizance release as well,” according to the American Bail Coalition. The group, supported by bail-bonds companies, argues the current system also offers a cost-effective approach that costs the courts nothing for to supervise 2 million released defendants each year. Bail defenders also point to the taxes paid by the bail industry – and cite studies showing cost savings to counties.

But critics of the system, including the chief justice of the California Supreme Court, have raised some concerns. “Over time the discussion about bail (has become): Does it really serve its purpose of keeping people safe? Because if you’re wealthy and you commit a heinous crime, you can make bail,” said Chief Justice Tani Cantil-Sakauye, in a March 2016 editorial board meeting with the Sacramento Bee. The problem, as the Bee and others have raised, is that poor people often don’t have the financial wherewithal to post bail. That forces them to stay in jail while wealthier people get to go home on their own recognizance and await trial. The chief justice has created a task force to review the issue.

Critics say the bail situation also encourages poor people to accept plea bargains, given that months in jail — and our court system moves very slowly — could cause their lives to collapse. If they are in jail rather than working, they lose their apartments and their possessions. Their kids are often taken by Child Protective Services. It’s a problem not just for the poor people who are affected, but also for the state’s perpetually overcrowded jail system. More than 60 percent of people in California jails have not yet been sentenced for any crime.

As the nonpartisan Public Policy Institute of California reports: “From 2000 to 2009 (the latest comprehensive data available for felony cases), California’s large urban counties relied on pretrial detention to a much greater extent than did large urban counties elsewhere in the United States. … Part of the difference in detention rates may be attributed to California’s higher bail amounts. The median bail amount in California ($50,000) is more than five times the median amount in the rest of the nation (less than $10,000). Research has demonstrated that pretrial release rates generally decline as bail amounts increase.”

In July, some Democratic state legislators held discussions in Oakland on the matter. San Francisco District Attorney George Gascón said that “at least 29 jurisdictions have developed ‘risk-assessment’ models, which allow court and pretrial staff to use data and other evidence to determine whether a person should be released,” according to a news report. That’s a likely model for coming proposals: shifting toward a system based more on judicial risk assessments than on the ability to post a bond. Assemblyman Rob Bonta, D-Oakland, announced his intent to introduce legislation when the Legislature is back in session.

The U.S. Justice Department also has weighed in on behalf of bail reform in a Georgia case. The department argues that “bail practices that incarcerate indigent individuals before trial solely because of their inability to pay for their release” violate the 14th Amendment of the U.S. Constitution. However, a U.S. district judge rejected a similar argument in a Sacramento County case.

“The state’s interest in ensuring criminal defendants appear for trial dates is a legitimate one, and detaining individuals before their arraignment is rationally related to that legitimate interest,” U.S. District Judge Troy Nunley wrote last month in the case. As the San Francisco Chronicle reported, “Nunley refused, at least for now, to dismiss a claim that the bail system is unfairly punitive.” Nunley is an appointee of President Barack Obama.

Other similar cases are moving forward across the country, including in San Francisco. There, Public Defender Jeff Adachi commissioned a study finding that black inmates are more likely to be kept in jail awaiting trial than their white inmates facing similar charges. Clearly, this issue will be heating up in the coming years, with a new Republican administration throwing more uncertainty into the situation, given the role the Obama Justice Department has played in the matter.

Critics also note the current system isn’t cost free, and that some states have moved to a risk-assessment system. “Risk assessment detention not only stems some of the unjustified inequalities on the impoverished but it also has proven to save the state money and actually prevent further crime by trying to keep the accused employed and out of trouble,” argues my R Street Institute colleague, Arthur Rizer, director of criminal justice policy. The current system, he adds, ends up “bloating our already bloated jails.”

Not all reformers look to eliminate money bail. Various compromises could emerge, including measures that eliminate bail for certain cases, or efforts to create easier ways for poor defendants to afford bonds. This is an emerging reform movement, so we’ve yet to see the kind of compromises that might emerge in the California Legislature. 

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

Rules on driverless cars tick off industry

Good morning and Happy Halloween. Today’s newsletter is totally free of news about Hillary Clinton’s emails. Instead, we begin with innovation and regulation — nothing more California than that. 

Hopes that California would emerge as the global center for what eventually could be a multitrillion-dollar industry — self-driving vehicles — have taken a step back.

New proposed rules unveiled this month by the state’s Department of Motor Vehicles drew sharp complaints from the leading companies in the field — Google, General Motors, Ford, Volkswagen and Honda — as being far too onerous and certain to slow innovation. They are among 18 firms with licenses to test autonomous vehicles in California.

A nascent industry group — The Self-Driving Coalition for Safer Streets, whose members include Lyft, Uber Technologies and Volvo — released a statement that the rules “could greatly delay the benefits that self-driving vehicles can bring to safety and mobility for individuals.”

CalWatchdog has more. 

In other news:

• Bad news for Republicans: “More than 2.5 million Californians already have voted by mail, and Republican returns statewide are down about 1.4 percent from 2012, according to Political Data Inc., the voter data firm used by both Republicans and Democrats in California. Democrats, meanwhile, were exceeding their 2012 turnout at this point by two-tenths of a percent,” reports Politico.

• More bad news for Republicans: “Perhaps the starkest view of the party’s problems comes from a poll last week by the nonpartisan Public Policy Institute of California. In short, the Republican brand has become radioactive. Of the state’s likely voters, 72 percent have an unfavorable opinion of the GOP. That’s eight points higher than two years ago, 14 points worse than four years ago and a massive 21 points above the party’s unfavorable rating six years ago. And then there’s this: 50 percent of registered Republicans have an unfavorable opinion of their party.” The Los Angeles Times has more.

• Non-Republican news: “Businesses in California were given state tax breaks worth about $2.67 billion over the past two decades, with more than half the money going to two sectors of the economy – those trading in war and circus.” The Orange County Register has more. 

• If voters legalize recreational pot, how will that work with federal laws? The Los Angeles Times answers that question. 

Legislature:

• Gone till December. 

Gov. Brown:

• In San Francisco at a breakfast benefit of the Willie L. Brown, Jr. Institute on Politics and Public Service.

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New follower: @barbsolish

Phil Isenberg wants to end California’s water wars. The member of the Delta Stewardship Council and its past chair wants to connect the cost of water more closely to its users.

According to a report by the California Economic Summit, he points out that the cost of water is about $30 billion a year for the state. And it breaks down to 4 percent from federal spending, 12 percent from state spending and 84 percent from water users.

    Yearly Water Spending in California by Source (2008-2011) in $ billions

Result

The result, Isenberg said:

“Well for one thing, because this is directly contrary to popular perception and most of the recommendations of interest groups who come to Sacramento — or at least the ones who talk to us. … Most of the water decisions about what to build and who pays are made locally in California — and grumpy ratepayers pay the majority of the cost.”

He noted that only $1 billion of that $30 billion the state spends on water comes from bond funds. Yet California spent about $25 billion on five voter-approved statewide water bonds since 2000.

The state hasn’t derived a drop of water storage from these bonds to lessen the impacts of the current combined drought and man-made water shortage; 54 percent of that funding went for open-space acquisitions.  Another 14 percent went for restoring wetlands.  None went for water storage, as shown by the graph below, from p. 47 of the recent study, “Paying for Water in California,” by the Public Policy Institute of California.

.

.

Because these were statewide bonds, there was no link required between the funding and any water services provided as there is in local water projects under Proposition 218.

Local taxes

The problem leads the PPIC study to the following analysis:

“The flip side of the cost challenge is shrinking revenue alternatives. A series of constitutional reforms adopted by the state’s voters, starting with the landmark Proposition 13 (1978) and followed by Proposition 218 (1996) and Proposition 26 (2010), have made it increasingly difficult for local water agencies to raise funds from local ratepayers, and they have also set up higher hurdles for new local and state taxes to support this sector.”

The PPIC report concluded the tax reforms approved by voters for the local level are “impeding efficient and equitable funding of California’s water system.

Isenberg concurred. “Some provisions like Prop 218 are just nutty, but they serve another goal of the public, which is to reduce costs for themselves,” he said. 

In the California Economic Summit summary, “He believes any changes to Prop. 218 will have to show they’ll provide something the public wants just as much: ‘A regular supply of cheap water.’”

The specific reforms sought by the PPIC include:

• Provides that reviewing courts must uphold a public agency’s determination of a need for a tax or rate hike over the objections of any citizen initiative or petition to the Public Utilities Commission or water board;
• Allows “service fees” that don’t service those paying the fee;
• Specially carves out water projects from the two-thirds vote requirement of Proposition 13 so that only a majority vote would be required. In other words, there would be no Proposition 13 for water projects.

The PPIC also wants to use “regulatory fees,” which are limited under Prop. 26 as a source of funding for water projects. This would provide an incentive for government agencies to declare benign environmental substances as toxic as a way to end-run voter review of taxes for water projects.

For example, PPIC proposes a regulatory fee on the agricultural and residential use of fertilizer, which they say contains nitrates that contaminate water. There have been a number of previous attempts to justify taxing fertilizer to fund water projects in California, including the non-existent “blue baby syndrome.”  This has compelled agricultural researchers to find ways to escape such taxes by genetically modifying crops to take nitrogen out of the air, as sugar cane does, rather than from the ground.

Tax wars

However, ending California’s water wars might only spark tax wars.

If Prop. 26 were gutted to remove the provision requiring a tax or regulatory fee to benefit those who are taxed, it might undo a recent water rate court decision.  Last month a Sacramento judge ruled, based on Prop. 26, that the water rates of the Metropolitan Water District of Southern California would overcharge the San Diego County Water Authority by $2 billion over 45 years. Without Prop. 26, the court may have had to rule differently.

Finally, any attempt to change Prop. 13 would be met with string resistance from anti-tax groups, such as the Howard Jarvis Taxpayers Association. Such groups contend that any weakening of Prop. 13 might lead to gutting the whole proposition, leading to much higher property taxes for homeowners.

By Wayne Lusvardi

Do we care whether there is a consensus about what to do with the so-called natural resources of the Sacramento Delta among scientists and interest group “stakeholders” in California?  The Public Policy Institute of California thinks so with a new study funded by the Bechtel Corporation, the largest construction and engineering company in the U.S., “Stress Relief: Prescriptions for a Healthier Delta Ecosystem.”

But what good is a general agreement among “stakeholders” and scientists who all stand to benefit in some way from re-engineering the “ecosystem” of the Sacramento Delta?  This persuasion technique is called an appeal to authority, and is considered a logical fallacy.

A consensus of experts and stakeholders won’t help justifying the legitimacy of whether it is fair to ask water ratepayers and farmers to pay for possibly less water from the Delta; or whether statewide taxpayers should pay for making the Delta more livable for popular fish at the expense of less popular fish.

“Everyone tries to make water flow to his mill” — Arab proverb

The PPIC surveyed 225 “delta-based interested parties,” “water export interests,” “fishing and recreation interests,” “upstream water agency interests,” and “Federal and state officials,” to determine if they agreed with scientists about what to do with the Delta’s native fish species.  This report is part of ongoing research that has generated five previous reports on the Delta “ecosystem,” which basically means where fish live.

It is interesting to note that the report describes 95 percent of the 700,000 acres of former tidal wetlands in the Delta as unnatural resources: below sea level “rock-rimmed agricultural islands” protected by levees.

The new PPIC study found there is a consensus among stakeholders and scientists when it came to “stressor impacts” in the Delta:

* Upstream water diversions (for farming and flood control);
* Urban and agricultural water discharges of pollutants;
* So-called invasive species;
* Harmful fish management practices;
* Harmful land alterations.

The experts and stakeholders agree these “stressors” should be reduced or eliminated.

However, scientists expressed that water discharges, bad fish management, and invasive species were more important than did the stakeholders.  And some stakeholders didn’t agree with scientists on the priority of actions to be taken.  Scientists wanted to control habitats, reduce water flow variability, and manage upstream flows into the Delta more than stakeholders did.  While stakeholders preferred to reduce discharges, engineer water diversions, and better manage farm harvests.  This doesn’t tell us much except that farmers would prioritize what they can manage and scientists would prioritize what farmers don’t manage.

A case of “Delta Stress”

The end of the PPIC report encourages building greater public support for a “healthier Delta ecosystem.”  The PPIC researchers use therapeutic language borrowed from the “health, lifestyle, and environmental” movement in California. But fixing the Delta is an issue of cultural values more than it is simplistically reducing what might humorously be called “Delta stress.”  The Delta ecosystem can operate:

* As a cold-water Delta for salmon;
* A warmer-water Delta for bass and catfish;
* An ocean water Delta for halibut, striper, perch or shellfish;
* As a combination of all three.

Calling a salmon-less or smelt-less Delta “unhealthy” is a cultural value judgment and political choice, not a purely scientific issue.

Consensus among experts and stakeholders isn’t going to generate greater legitimacy for fixing the Delta’s natural resources.  Consensus and legitimacy are not the same thing.

Scientists, farmers, fishermen, water agencies and government bureaucrats are not going to agree on priorities.  As the Los Angeles Times summarized the PPIC study: “[T]he consensus seems to be, let somebody else fix the Delta.”  There is nothing new in this finding.  The rule in California is everybody wants public goods but doesn’t want to pay for them.

Socializing — or spreading the costs — to a large number of taxpayers creates the perception that public goods are effectively free to those few who benefit the most from them.  That is often why stakeholders prefer government solutions to markets.  Markets impose the real costs on those who benefit the most from them (“user pays”).

Shhh! The Delta needs modernizing 

“Restoring the Delta” is a misnomer because bringing back sunken farmland and greater numbers of popular salmon fish during dry years isn’t necessarily going to provide a fix for the Delta.  Salmon thrive during wet years anyway.  And reverting the Delta back to an “inland sea” that nearly cuts the state in two parts during wet years is not a fix either. That is why the project to fix the Delta’s natural resources is accurately called “the Bay Delta Conservation Plan,” or “BDCP” for short. The natural resources of the Delta need to be “conserved,” not “restored.”

The Delta needs modernizing, although that word is not as appealing to the public. It is easier to sell “restoration” or “conservation” than modernization. Ever since the coming of monopolistic railroads to California, the state hasn’t seemed to like modernization. It has preferred an image of returning to some bucolic rural past, but without all the droughts and flood damage that came with that. Like it or not, the Delta needs modernizing to meet the co-equal goals of the BDCP of greater water reliability and enhanced fish habitat.

Voters and ratepayers would have to pay about $53 billion for the whole package of Delta improvements: tunnels, habitat re-creation, levee repairs, two new reservoirs and bond interest costs. Statewide taxpayers would pay for the Delta ecosystem and levee improvements; and farmers and Southern California ratepayers would pay for the proposed Delta Tunnels.

CA not short on water, but water conveyance legitimacy 

What is more important than a consensus of experts and stakeholders is whether statewide voters are going to vote for the $11 billion California Water Bond scheduled to be on the ballot next year. Also more important is whether Southern California water ratepayers are going to accept higher water rates to provide possibly less but more reliable water.  Water unreliability has been caused by court-ordered shutdowns of contracted water deliveries to increase popular fish species to the Delta at the expense of unpopular fish species.

The real issue for voters and water ratepayers isn’t a manufactured “consensus,” but whether the massive funding for the project is justifiably legitimate.  Legitimacy, not consensus or money, is more important in any war, even a protracted water war between Northern and Southern California.

By Wayne Lusvardi

A new public opinion poll reported 57 percent of all California “adults” would favor lowering the majority threshold required to pass “local school parcel taxes.”  But only property owners — not all “adult” residents — can vote for a parcel tax in California.  Thus, the findings of the Public Policy Institute of California poll are slanted in favor of making school parcel taxes easier to pass and are misleading.  

A parcel tax is a new tax that was created in California to get around the requirements of Proposition 13 for a two-thirds vote on property taxes.  Property taxes are based on the market value of a property.  Conversely, a parcel tax is a flat tax per parcel per year not based on property value. Property taxes are progressive because they tax wealthier property owners more.  Parcel taxes are regressive because they tax property owners with modest priced homes equally with those with expensive homes.

What the new PPIC poll asked California residents was whether they would vote to reduce the majority percentage required to pass a parcel tax for “local public schools” from two-thirds to 55 percent.

Here is the misleading question the PPIC poll asked:

“16. How about replacing the two-thirds vote requirement for voters to pass local parcel taxes for the local public schools?

“57 percent — good idea

“37 percent — bad idea

“6 percent — don’t know”

The PPIC poll failed to clarify that voting for vague “local public schools” includes voting to raise taxes on all property owners to fund teachers’ salaries and pensions and high administrative costs.

Biased PPIC poll inflates percent favoring parcel taxes

The PPIC poll numbers are inflated in favor of lowering the vote threshold for parcel taxes. The poll reported that 57 percent of all adults — but only 51 percent of “likely voters” — would vote for a reduction in the voting threshold for parcel taxes.  Thus, the proportion of actual voters favoring the tax is inflated by at least 6 percentage points. But again, it isn’t registered voters but all property owners — whether registered to vote or not — that can vote for a local parcel tax.

However, 68 percent of those responding to the PPIC poll inconsistently said they were registered voters and 32 percent said they were not.  It is more likely that homeowners who pay property taxes are registered voters and that unregistered voters are renters.  Thus, 32 percent of those responding to the poll would likely be those who would not have to directly pay for any parcel tax increase and would be ineligible to vote on it.

Those who respond to opinion polls are more likely to favor taxes as long as they don’t have to pay for them.  Therefore, the PPIC poll on Question 42 reported contradictory findings: only 51 percent said they were “likely voters,” but 32 percent also said they were not “registered voters.”

The sampling method used by the PPIC pollsters is also questionable.  The poll disproportionately measured the opinions of Democrats and moderate Republicans; 59 percent of Democrats considered themselves “strong Democrats.”  This is compared to only 47 percent of Republicans who described themselves “strong Republicans.”

In other words, the PPIC poll oversampled “strong Democrats” by 12 percentage points and oversampled moderate “Republicans” by 8 percent.  And Republicans who answered they “didn’t know” if they were “strong Republicans” or “not very strong” Republicans numbered 3 percentage points higher than Democrats.  The cumulative error is 23 percentage points in oversampling of Democrats over Republicans.

PPIC Poll Sample for Strength of Political Party Affiliation

Moreover, the total percentages in the PPIC poll regarding the question of political party strength don’t even add up to 100 percent, as shown above.

Ballots for parcel taxes can legally only go to property owners, regardless of whether they are registered to vote or not. Renters cannot vote on parcel taxes.  According to the U.S. Census Bureau, the percentage of renter occupied housing in California is 43.3 percent.  Thus, asking “adults” — 43.3 percent of whom are not property owners — is likely to overestimate those property owners who would be willing to vote on higher parcel taxes for local schools.

In sum, the PPIC polls is biased in favor of lowering the voting threshold for a vaguely described parcel tax for “local schools” due to the cumulative effect of the following:

* Oversampling of “adults,” rather than “likely voters,” by 8 percentage points;

* Oversampling of Democrats over Republicans by a cumulative 23 percentage points;

* Oversampling of non-registered voters who are less likely to be property owners by 32 percent age points

* Likely oversampling renters who cannot vote on school parcel taxes by 43.3 percentage points.

The question that was not asked

One wonders what poll respondents would have answered if they were asked if they would vote on a parcel tax for the unfunded portion of teacher’s pensions and health care benefits considering the combined effect on the value of their property of:

* Pending Assembly Constitutional Amendment 3 that would lower the voting threshold for police and firefighter pensions to 55 percent with inestimable costs per household per year;

* An estimated water rate increase of about $240 per year per household for the Bay Delta Conservation Plan;

* An estimated increase in household electricity bills, higher gasoline prices, and higher cost of all goods by $1,800 the first year, then rising to $2,800 by 2020, due to California’s Cap and Trade law;

* In Los Angeles County, the state-mandated storm water tax of $54 for a single family home and $20 per condominium unit per year.

* 15 percent higher water rates imposed by the Metropolitan Water District of Southern California, reflecting from about $104 to $178 added water bills per year per household;

* Estimated cost of $58 per year per household to pay for the proposed $11.1 billion state water bond on the ballot in 2014;

* Cumulative impact of all of the above would minimally be $1,982 to $3,032 per household per year, not considering increased parcel taxes for “local schools” and “police and firefighter” pensions.

Raising parcel taxes without pension reform

The California Legislative Analyst’s Office reported in 2012 that fully funding the California State Teachers’ Retirement System would gobble up an additional $3.9 billion per year for the next three decades, for a total of $117 billion.  There are 852,000 members of CalSTRS.  No widespread reform of teachers’ pensions has been initiated across the state as yet. Instead, the state Legislature and local school districts are proposing to get around Proposition 13 by funding the unmet pension gap with parcel taxes at a lower voting threshold.

This early PPIC opinion poll concerning the issue of raising taxes is meant to get voters to “hop on the bandwagon” of voting for taxes regardless of the evidence.  Informed voters should beware that they are likely to get run over by the school parcel tax bandwagon in California.

By Wayne Lusvardi

A recent California opinion poll selectively reports data only in favor of Gov. Brown’s tax increase proposal on the November 2012 ballot. Conversely, it ignores data indicating growing opposition to Brown’s package of income and sales tax increases.

The May 23 press release of the Public Policy Institute of California (PPIC) reported no change from April, whether voters would favor or oppose Brown’s budget and $15.7 billion tax increase proposal.  Here’s what PPIC press release reported:

Support For Brown Initiative Holds. A majority (56%) say they would vote yes on Brown’s tax initiative, with 38 percent saying they would vote no and 7 percent undecided.  This is similar to the results of the April survey in which 54 percent said they would vote yes (39% no, 6% undecided).

But question #34 in its May 2012 opinion poll reports that only 41 percent favor Brown’s tax plan and 50 percent oppose it.

That would reflect a 13 percent drop in favorability for Brown’s tax plan since April.

This also indicates a rise from 39 percent to 50 percent — or a total of 11 percent — of those who oppose Brown’s proposed tax increase.

Unsurprisingly, PPIC was negligent in not accurately reporting the decline in support for and increase in opposition to Brown’s tax measure.

Here’s the results of PPIC’s new poll excerpted verbatim from their website:

34. On another topic, Governor Brown recently released a revised budget plan for the next fiscal year to close the state’s projected $15.7 billion budget deficit. It includes spending cuts to Medi-Cal, welfare, childcare and other social service programs
and to courts and state employee compensation. It increases funding for K-12 public education. The proposal includes tax increases that would have to be approved by voters through an initiative on the November ballot. In general, do you favor or oppose the governor’s budget plan?

– 41% favor 
– 50% oppose
– 3% haven’t heard anything about the budget (volunteered)
– 6% don’t know 

The reported 41 percent who favor Brown’s tax and the 50 percent who oppose it is unlikely a mistake because all the numbers including “don’t know” add up to 100 percent. The growing — but unreported — opposition to Brown’s tax proposition is consistent with the public’s growing opposition to raising the state sales tax and cigarette tax — Prop 29.

Near supermajority oppose raising sales tax not reported

Part of Gov. Brown’s tax increase proposal includes a one-quarter percent (0.25 percent) increase in the base sales tax rate from 7.25 percent to 7.50 percent.  This proposed sales tax rate increase is being touted as “temporary.”  But California’s “temporary” two-year one percent sales tax increase expired on July 1, 2011.

The PPIC May 2012 poll press release inconsistently reports that the support for the proposed sales tax increase has dropped to 58 percent. But the actual reported results to the poll indicate that support for a sales tax rate increase was only 33 percent in May. Here is the actual PPIC opinion poll question and results excerpted from their website:

May 2012 PPIC Poll Result:

33. Do you favor or oppose raising the state sales tax?

– 33% favor
– 64% oppose
– 3% don’t know

The April 2012 PPIC poll reported 33 percent of voters were in favor and 52 percent opposed to raising the sales tax, even for K-12^th grade public schools (see question #33 in April poll).  Thus, there was an apparent 13 percent drop in those favoring an increase in the state sales tax rate from April to May 2012.

Additionally, there was a 12 percent increase in those opposed to a sale tax rate increase.

But once gain, the PPIC poll press release failed to report the drop of those in favor and the rise of those opposed to a sales tax rate increase.

Support for cigarette tax drops 14 points

PPIC also reported Proposition 29 — the cigarette tax — dropped 14 points from March to May. Support dropped from 67 percent to 53 percent.  The 14 percent drop is consistent with the 13 percent drop in support for Brown’s income tax and sales tax rate increases. PPIC reports the change in public opinion on the cigarette tax accurately.

Voter lack of trust extends to opinion polls

To sum up:

PPIC reports support for Gov. Brown’s proposed budget and tax package increase is holding steady at 56 percent in May 2012 compared to 54 percent in April 2012.  The actual PPIC poll results indicate support for Brown’s tax dropped to 41 percent, a 13 percent drop in May. Opposition to Brown’s tax package rose from 39 percent to 50 percent, an 11 percent unreported jump in May.

PPIC accurately reports that those FAVORING a sales tax increase held steady at 33 percent from April to May 2012.  But PPIC failed to report that those voters OPPOSED to a sales tax rate increase rose from 52 percent to 64 percent from April to May 2012. This is nearly a supermajority — two thirds — of the voters opposed to a sales tax increase. This indicates a 12 percent increase of those OPPOSED to sales tax rate increase. Once again, PPIC fails to report this in their press release. The PPIC May 2012 press release does not specifically report the change of voters FAVORING or OPPOSING a sales tax increase.

PPIC April and May 2012 reported and actual poll results

The PPIC polls selectively reports data in support of tax increases and ignores data showing growing voter opposition to tax increases.  The actual data trend from April to May is consistent across the board: there is growing opposition to Brown’s tax increase package and the proposed cigarette tax hike — Prop 29 — from 11 percent to 14 percent.  This trend cuts across both those reporting support for a tax increase and those opposing a tax increase.  But PPIC selectively only focuses public attention on the data supporting tax increases.

The May PPIC poll indicated a growing “lack of trust of voters this election season.”  To this might be added a growing lack of voter trust of any opinion polls dealing with taxes.

By WAYNE LUSVARDI

You can’t eat California’s mild weather, but you can tax it.  That seems to be the consensus online opinion of the average Joe and Jane about a study released last week that concluded that California’s weather assets offset the many negative ratings about its business and tax policies.

The left-leaning Public Policy Institute of California (PPIC) completed the so-called impartial study,  “Business Climate Rankings and the California Economy,” funded by the Donald Bren Foundation and the David A. Coulter Family Foundation.  Bren is real estate developer of the Irvine Ranch in Orange County and Coulter is a private fund manager and PG&E Board member.

A summary of the study’s findings states:

California fares poorly on many national ranking of business climate, yet over the past 30 years the state’s economy has grown at roughly the same rate as the national average. This report examines this California puzzle, finding that factors beyond policy matter more for economic growth. California’s advantages — particularly its favorable climate and industry mix — offset its unfavorable rankings.

Cherry Picking an Index

The PPIC reviewed state rankings of economic productivity, taxes and costs, and other measures produced by 11 think tanks and organizations, as shown in the table below.

Conspicuously absent were state rankings from free-market think tanks such as the Pacific Research Institute (parent think tank of Calwatchdog.com), the Tax Foundation, the Milken Institute, the Cato Institute, the Kauffman Foundation or the Corporation for Enterprise Development, all of which rank California at or near the bottom in tax and business policy performance.

PPIC averaged all the rankings to produce an average rank for California of 31, or slightly less than average for all 50 states. The problem with this arithmetic is that it mixes rankings based on state productive capacity with rankings of taxes, costs and regulations. This is sort of like comparing a ripe apple and a rotten orange and coming up with a nectarine.

High Variance is a Red Flag

As any statistician will tell you, averages are prone to be misleading without also understanding the variance.  In the table below, the average ranking for California is 31, but the variance — the average distance of data values from the overall average — is 15, which is a red flag.

Statistician Howard Wainer in his book, Picturing the Uncertain World, explains how billionaire philanthropist Bill Gates got hoodwinked into investing $1.7 billion into a project for promoting smaller school class sizes based on not understanding that student test scores with a high statistical variance are misleading. Small class sizes are not statistically related to better student test scores.  Neither is PPIC’s economic ranking of 31 for California reliably related to its economic performance, which every Tom, Dick and Harry knows is doing poorly.

It would be a hard sell to tell the average middle class family in California that its natural weather advantages more than offset unfavorable business conditions.  With high gas prices, inflation in food prices, looming large increases in electricity rates to pay for green energy and a governor and Legislature that can only propose raising taxes to solve budget problems, such a study will surely fall on deaf ears.

Sure, California’s weather contributes to its huge agricultural, tourist and luxury real estate economies.  But coastal-oriented luxury real estate and tourism have curtailed any expansion of offshore oil drilling. And prolonged economic recessions are likely to severely affect tourism and coastal luxury home development leading to holes in state and local government budgets.

$42 Billion Tax on Air

The PPIC report fails to factor in the enormous cost to provide luxury public goods such as clean air for views of the ocean and mountains and tourism.

PPIC considers California’s mild climate a “non-policy” factor. But cleaning the air to enjoy the climate in California is anything but the result of “non-policy” factors. In 2001, for example, the cost to clean the air as a result of the California Energy Crisis came at a high price of $42 billion. The California Energy Crisis was about running out of clean air, not running out of electricity.

In the mid 1990’s, the U.S. Environmental Protection Agency mandated California to clean up its smoggy urban air basins or risk having federal highway and school funds cut off by 2001. According to the online chronology of air quality in California compiled by the California Air Resources Board (CARB), the first two-way catalytic converters came into use as part of the CARB’s Motor Vehicle Emission Control Program in 1975. But the improvement of air quality was modest at best and was not visually observable.

The only way to achieve a dramatic improvement in air quality in the Los Angeles Basin to comply with the EPA was to mothball or modernize all the old polluting coastal fossil-fuel power plants in California.  But a problem arose: Who was going to pay for the stranded debt — the unpaid bonds or mortgages — on all those old, dirty power plants? The California Energy Crisis of the late 1990s and early 2000s was a financial crisis involving a game of political hot potato over who was going to pay off the old bonds more than it was a lack of electrons from a lack of building new power plants.

Was the proposed deregulated electricity market magically going to pay for the stranded debt as part of the more competitive price of electricity from so-called deregulation?  Were the stock and bond investors of the regulated monopoly electric utility companies, Edison, PG&E and SDG&E, going to suck it up and pay for it, which would have resulted in a bond-market default crisis?  Or were politicians going to ante up and pay for it, thus risking their political careers?  This was a political crisis as much as it was an energy or debt crisis.

Why Energy Deregulation Failed

The first policy attempted was electricity deregulation, which failed when implemented in 1996. Deregulation was an attempt to inject competition into the electric grid hoping for, say, a 20 percent or greater reduction in electricity bills.  A portion of this cost savings, maybe about 10 percent, would go toward paying off the bonds on the mothballed power plants and the other savings would go to utility customers.

Deregulation failed in the 2000-01 period not so much from Enron gaming the system, as widely believed by the media, but from the policies of the Democratic Party-run Legislature and the new governor, Gray Davis. The Legislature and governor pulled the plug on the deregulation for fear of it resulting in greater dependence on cheap imported electricity from the Republican states of Texas, Arizona and Utah. Democrats feared that further reliance on imported power to clean the air in California would lead to a hole in state and local taxes. Many California cities passed Utility User’s Tax ballot measures, charging from 5 percent to 10 percent higher taxes, to plug the loss of tax revenues from having to depend on imported power from other states.

Creating an Energy Pricing Bubble

The second policy attempted by Gov. Davis and the Democratic legislature was to intentionally create a pricing fever that would pay off the bonds on the old polluting power plants. Putting caps on the retail price of electricity induced a pricing fever, just as a doctor may induce a fever to cure a patient of infection.

In economics, a fever is called a bubble.

This shifted the burden of paying off the bonds on the old dirty power plants to the public utilities (Edison, PG&E, SDG&E), which effectively went bankrupt by intentional regulatory policy.  This was not “unplanned” or due to electricity market speculation.  This is what we experienced in the early 2000s as the “energy crisis” with rolling blackouts and defaulting monopoly energy companies.  This also failed because price caps never succeed in the long run and, if continued, would have created a panic in the bond market.

In 2011, We’re Running Out of Affordable Gas, Not Climate

New Gov. Arnold Schwarzenegger came into office in 2003 on a recall election largely called over the misnamed energy deregulation debacle. He folded the burden of the old corporate bonds of Edison, PG&E and SDG&E into a state-wide $42 billion general obligation bond issue to be paid off by higher priced long-term power contracts which were set to expire in 2012.

So the undisclosed price of eradicating the visual smog in California’s urban air basins was $42 billion, traffic fatalities due to blackouts and failed traffic signals and a number of institutions in debt due to unpaid utility bills.

In 2001, we were running out of clean sky, not energy per se.  In 2011, we are not running out of good climate but money to pay for gasoline, food and looming higher green energy prices that will kick in beginning in 2012.

The intent of AB 32, California’s Global Warming Solutions Act of 2006, is to capture the electricity rate monies from the payoff of the California Energy Crisis bonds starting in 2012, the year the state’s green power law kicks in.  This is most obviously not a non-policy factor.  It is a deliberate “climate change” policy.

California depends on imported electricity for about 30 percent of its energy needs. Replacing conventional power imported from out of state with green power, however, will not result in clear, clean air in California’s smoggy air basins because wind and solar power farms are located in remote deserts and mountain passes.  Neither will California’s cap and trade policy, imposed by AB 32, result in cleaner air because urban polluters will buy pollution credits from remote wind and solar farms that do not clean the air in cities and only replace out-of-state power plants.

Study is Exercise in Damage Control

So California does have a great climate. But it also has a declining economy for reasons that seem not fully explainable to public-policy analysts. And part of the reason is that the unacknowledged maintenance costs of being able to enjoy that climate in a highly technological society have been enormous and have contributed to suffocating the economy.

As California government bureaucrats are prone to say: “Everybody wants clean air, but nobody wants to pay for it.”  I might add that we’re now paying for it and will continue to do so under California’s climate-change laws.

There is no free lunch or free climate that generates sunshine which can always overcome bad public policy. Sound public policy needs to recognize the hierarchy of needs: people need to eat, drive to work and pay the rent or mortgage before they can enjoy the climate or are taxed.  The average person has a better grasp of this than public policy analysts.

The PPIC study on California’s economic “climate” is an exercise in image management and damage control often communicated by an unquestioning and mathematically illiterate newspaper press. What is apparently important is the control over public perceptions by elites who have vested interests in beach proximate real estate development and stock investments in California green energy industries.

Public policy researchers seem to cast a blind eye to the costs to maintain the advantages of California’s climate. But the average person in the street seems to be aware that, although the weather climate is superior, the business climate isn’t.