Fiscal & Governance Reform – Page 24 – Public Policy Institute of California

Governor’s May Revision Continues Cautious Approach

Governor Brown released his revised 2015–16 budget last week. It includes $8 billion more in new spending than his January proposal but continues his cautious approach to taking on new spending commitments. The new funding proposals are the result of setting modest expectations for future revenue growth. Because actual growth from the improving state economy has far exceeded forecasts, the administration has significant additional funds available.

Only about two-thirds of the $8 billion increase comes from the General Fund. The other third stems from increased special funds and revenues from bonds.

General Fund. General Fund revenues are estimated to increase by about $6.3 billion—$4 billion to reflect the major influx of tax receipts collected since January 2015 and $2.3 billion next year. Almost all of that—$5.8 billion—must be spent on K–12 education and community colleges. This leaves little room for spending in other areas.
Cap-and-Trade Funds. The May Revision proposes to more than double spending of cap-and-trade revenues, going from $1 billion in the January budget to $2.2 billion today. Under the state’s greenhouse gas reduction program, businesses pay fees for the right to emit carbon into the atmosphere. In 2015, producers of transportation fuels joined the program, significantly boosting revenues. As a consequence, revenues are expected to jump $1.2 billion above the level proposed in January. The additional funds would be spent for transportation, housing, energy, and natural resources programs—consistent with the long-term expenditure plan approved by the legislature in 2014.
Proposition 1 Bond Funds. The May Revision also significantly increases spending for water quality and conservation projects. Proposition 1, approved by voters in 2014, includes $7.5 billion in bond funds for a variety of water quality, flood protection, and storage programs. The budget proposes to dedicate $1.8 billion in bond funds over the next three years. This increase builds on $1.9 billion in spending (from a variety of funding sources) approved by the legislature in the spring of 2015.

The $8 billion growth in revenues and expenditures represents a 4.8% increase from January, and an 8.1% increase from the 2014–15 budget passed by the legislature last June. So how can this be considered cautious? The answer is that the administration uses modest assumptions about future growth in revenues—until there is solid evidence of additional available resources.

The pattern of projected revenues for 2014–15 reveals how this strategy works. The following chart illustrates how recent budget projections have grown as revenues have increased.

In January 2014, the administration estimated revenues of $106 billion—up 6% from 2013–14 anticipated revenues. The 2014 May Revision boosted that figure to $107 billion. Actual revenue collection was up significantly in the fall of 2014, which led to a January 2015 estimate increase to $109.7 billion. From January to April 2015, revenues exceeded expectations by $3.2 billion, bringing the most recent estimate of General Fund revenues to $112.9 billion. This is truly exceptional revenue growth. Compared to 6% growth projected in January 2014, the May Revision figure for 2014–15 translates into General Fund revenue gains of 12.8%.

Despite the projected gains for this year, the current May Revision continues to take a cautious approach to revenue estimates for the coming year. The administration’s initial revenue estimates for 2015–16 are quite modest—the May Revision anticipates 4.1% growth in General Fund revenues. This low growth estimate limits the amount of new spending that can be added to the base budget. At the same time, the large increase in current-year revenues gives the governor flexibility to boost support for education and other critical areas. In this way, Governor Brown can significantly increase spending today while maintaining a cautious approach to the future.

Chart Source: California Department of Finance, 2015-16 May Revision.

Video: Alternatives to Incarceration

Under continuing pressure to reduce its prison and jail populations, California is expanding alternatives that hold offenders accountable, are cost-effective, and do not harm public safety. At a Sacramento event last week, PPIC researcher Brandon Martin summarized a new PPIC report about the potential impact of this expansion. His presentation was followed by panel discussion in which state and local corrections officials talked about their own experience and provided examples of success.

Jeremy Verinsky, undersheriff of Santa Cruz County, said his department has long had a work release program— having offenders clean up graffiti in county parks, for example. The county has increasingly paired work release with home detention and electronic monitoring since corrections realignment began in 2011. Offenders in Santa Cruz are required to be involved in programs based on their needs and risk factors, Verinksy said.

“We aren’t putting people out on a monitor so they can stay home and play Xbox all day,” he said.

Carol Paris of the Sacramento County Probation Department says her department has expanded its use of adult day reporting centers, which provide resources for offenders. Asked how her department handles probation violations, she said the strategy is to engage early. Intake officers visit prisons to meet with inmates before their release to talk about specific needs and housing issues. Offenders are also transported directly from custody to the probation office for assessment—an effort “to counteract those days of the person being released at one o’clock in the morning,” she said.

Robin Harrington, chief deputy warden of the Female Offenders Programs and Services/Special Housing Mission at the California Department of Corrections and Rehabilitation, described the department’s alternative custody programs. Eligible offenders can apply to serve their sentences—supervised and electronically monitored—at home, in a private alternative custody program, or in a training and employment program.

Automatic Voter Registration Is No Panacea

This commentary was published on Tuesday, May 5, 2015, in the Sacramento Bee.

California voter turnout has reached record lows. Only 18 percent of 24 million eligible adults cast ballots in the June 2014 primary and only 31 percent last November. As a result, state lawmakers and good government groups are searching for new ways to increase participation in elections.

One proposal that is gaining traction—and was discussed at a recent Public Policy Institute of California event with Secretary of State Alex Padilla and other officials—is to import an automatic voter registration system from Oregon.

There’s no question that such a system would swell California’s voter rolls. But would it significantly increase turnout? That’s much less clear.

(continue reading at sacbee.com)

Local School Funding & the Exclusive Electorate

State funding for K-12 public education has been rising, but 70 percent of public school parents say it is “not enough” in our April PPIC Survey. Are California voters likely to heed these parents’ calls and support local ballot measures for school funding?

It doesn’t look likely. To begin with, likely voters are much less likely (54%) than public school parents to say that the state’s funding for their local schools is not enough. More important, in our recent poll likely voters and public school parents have starkly different views about specific ways to increase funding—local bonds and local parcel taxes—for their local public schools. Specifically:

When it comes to local school bonds, 75 percent of public school parents would vote yes if their local school district had a bond measure on the ballot to pay for school construction projects. But only 53 percent of likely voters would do so—lower than the 55 percent required to pass a local school bond.
As for funding schools through local parcel taxes, 61 percent of public school parents would vote yes. But just 49 percent of likely voters would. A two-thirds majority yes vote is needed to pass a local parcel tax for schools.
What about lowering the majority needed to pass local parcel taxes—from two-thirds to 55 percent? This tax reform is rated as a good idea by 57 percent of public school parents. Only 44 percent of likely voters agree—less than the majority required to make this change.

The poll’s findings reflect the fact that California’s “exclusive electorate” controls the fate of ballot measures for local school funding. Today, many public school parents are nonvoters. And most likely voters are not public school parents. According to a PPIC report, likely voters are disproportionately white and tend to be homeowners, older, college graduates, and affluent.

Latinos, renters, and the younger, less educated, and less affluent are strong supporters of local bonds and local parcel taxes for local schools. They also favor lowering the vote threshold for passing local taxes. But these groups are outnumbered among those who cast ballots in elections.

It’s not impossible to pass local bonds and parcel taxes for school funding. CaliforniaCityFinance.com reported last December that eight in 10 local bonds and 6 in 10 local parcel taxes for local public schools have passed since 2001. But funding advocates have to carefully pick and choose the timing and location of these local school funding measures in deference to the higher vote thresholds required and the propensities of California’s exclusive electorate. A PPIC study concludes that the overall fiscal impact of parcel taxes has been fairly limited statewide.

School funding proponents want a state bond measure on the November 2016 ballot. The presidential election will attract the largest and most diverse electorate. It would take a simple majority vote to pass a state school bond. Our poll finds that 55 percent of likely voters and 77 percent of public school parents would vote yes on a state bond for school construction projects.

Meanwhile, the governor has stated that local voters should be deciding if they want more local school funding and that state voters should not be asked to pass state school bonds. This idea of local control resonates with Californians, who generally distrust the decisions made in Sacramento. But as our survey suggests, likely voters are unwilling to lower the local two-thirds threshold for passing local parcel taxes, leaving it easier to pass school funding measures at the state level than at the local one.

In other words, the state is likely to continue to play an oversized role in local school funding—until the California electorate reflects the will of the people who are relying on local public schools to improve their children’s futures.

Video: Californians and K-12 Education

The annual PPIC Statewide Survey: Californians and Education comes at a time when there are major policy changes underway in the state’s K–12 system. They include implementation of the Local Control Funding Formula, Common Core standards, and the Smarter Balanced standardized tests. The survey was released last week and presented at a briefing in Sacramento by research associate Lunna Lopes.

The survey offers a good look at public reaction to the changes and attitudes toward education more broadly. About three-quarters of adults said they knew nothing about the Local Control Funding Formula, which gives districts more flexibility in spending state funds and gives additional money to districts with more English language learners and lower-income students. When survey respondents were read a description of the funding formula, most favored the idea.

About 58% said they had heard about Common Core, the new set of English and math standards. But only 47% favored the idea and 31% opposed it. The poll also found a high level concern more generally about the quality of K–12 education and funding.

Video: The Future of Local Taxes

The parcel tax is unique to California, said economist Jon Sonstelie, because it is a revenue alternative that navigates the constraints of Proposition 13. Sonstelie, PPIC Bren Fellow and a professor at UC Santa Barbara, evaluated the tax in his new report Parcel Taxes as a Local Revenue Source in California and presented the results last week in Sacramento. He noted that between 2003 and 2012, cities, school districts, and local districts put 691 parcel tax proposals to fund services on the ballot, and 53 percent received the two-thirds vote required for passage. Most of these taxes were relatively small. The median was $60 for cities, $96 for school districts, and $68 for special districts.

Following the presentation, a panel discussed the future of local taxes in an era of increasing local authority. Patrick Murphy, PPIC research director, moderated the discussion. Participants included Michael Coleman, principal fiscal advisor to the League of California Cities; Robert Gutierrez, director of the California Tax Foundation; and Marianne O’Malley, managing principal analyst on state and local finance at the Legislative Analyst’s Office

The Importance of California’s Tax Ranking

California voters are often asked to make important tax and spending decisions at the ballot box, yet their mastery of basic fiscal facts is poor. PPIC’s surveys have consistently found a “knowledge gap” between what voters know and budget realities. In our January PPIC survey, just 8 percent of likely voters correctly named both K-12 public education and the personal income tax as the top state spending and top state revenue areas. The voters failed to grasp the state’s budget details even when the fiscal crisis took center stage and California grappled with massive deficits, spending cuts, and tax increases.

But survey respondents just passed another fiscal pop quiz with high marks. With the April 15 tax deadline approaching, seven in 10 likely voters in the March PPIC survey say that California currently ranks “near the top” (45%) or “above average” (26%) in state and local tax burden per capita compared to other states. Large majorities gave this response in earlier PPIC polls. In this area, the public’s perceptions are in line with fiscal reality.

California’s tax ranking varies depending on data and methods, but we are always on the high side in national studies of the 50 states. Recently, California ranked #4 in the Tax Foundation report and #15 in the Tax Policy Center report on state and local tax burdens. The reasons include our high cost of living and the public investments that we are making in our education system, environmental quality, and infrastructure.

What is most striking is the growing share of likely voters who say that California’s state and local tax burden is “near the top.” In the March PPIC poll nearly half (45%) express this view. The increasing number of voters who perceive the tax burden this way runs counter to other trends: the governor’s and legislature’s approval ratings are rising, more Californians say that the state is headed in the right direction, more say the economy is experiencing good times, and fewer say the state government is in a budget crisis.

Interestingly, the growing perception that California’s state and local tax burden is “near the top” is taking place in the years since the voters passed the Proposition 30 tax increases in November 2012.

Two groups known for their anti-tax sentiment—Republicans (50%) and conservatives (52%)—are predictably among the most likely to say that our state’s tax burden is near the top. Surprisingly, though, this view is widely held in more politically diverse circles—those annually earning $80,000 or more (58%), independent voters (52%), those living in households with children (51%), college graduates (49%), Latinos (48%), and homeowners (47%). About four in 10 Democrats (38%) and liberals (44%) also say that their state’s tax burden is near the top.

Importantly, the view that California is a national leader in high taxes has implications for fiscal preferences. Likely voters are closely divided on a Proposition 30 tax extension (48% favor, 45% oppose). But the majority (55%) of those who oppose a Proposition 30 tax extension say the state’s tax burden is near the top. Most likely voters say they want major (53%) or minor (31%) changes in the state and local tax system. The majority (52%) who want major changes also say that the state’s tax burden is near the top.

There are many reasons why tax proposals are a tough sell even in Blue California. They include high government distrust and little fiscal knowledge. We have identified a major force to be reckoned with as tax initiatives take shape for the 2016 ballot: a widely held perception that Californians are among the most burdened with state and local taxes in the nation. Tax proponents will have to convince voters that their plans will improve California’s ranking—as the state with the most promising future.

Testimony: Four Important Questions about Voting in California

PPIC research fellow Eric McGhee was invited to testify about voter turnout in California last week before a joint hearing of the Senate Committee on Elections and Constitutional Amendments and Assembly Committee on Elections and Redistricting. Here are his prepared remarks.

California’s voter turnout in 2014 hit record lows in both the primary and the general elections. I’d like to put that turnout in broader context, and give some thoughts on potential solutions. In doing so, I’m going to briefly answer four questions:

Who votes, and who doesn’t?
What does California’s turnout look like over time and compared to the rest of the country?
What are some of the reforms that have been tried in the past, and how well have they worked?
What are the other possible reforms out there that have yet to be tried in California?

Who votes and who doesn’t?

California’s electorate does not look like the state as a whole. Compared to non-voters, California’s voters are older, whiter, more educated, less likely to have recently moved, more likely to be homeowners, and more partisan. They are also wealthier, though most of the difference in income between voters and non-voters is a function of the more powerful effects of other factors such as age and education. And, PPIC research by Mark Baldassare has shown that non-voters have different opinions on important policy issues. In particular, they tend to be more supportive of a larger role for government.

These differences are very similar to what one would find in the rest of the country, but California’s profile on all of these dimensions is at one extreme. The state is relatively young, relatively mobile, with an especially large non-white population.

Beyond all these demographic and attitudinal issues looms citizenship. Citizenship is a much more important issue in California than in other states, given the large non-citizen population we have here. It particularly affects the Latino and Asian American communities. That said, it is becoming a less important issue over time, since virtually all the population growth in these communities is now among native-born citizens.

What does California’s turnout look like over time and compared to the rest of the country?

California’s turnout has dropped between 10 and 20 points in the last 30 years. It’s important to break this problem into two separate parts: the registration rate among those who are eligible to vote, and turnout among the registered population. Identifying which is the bigger problem will help us know which problem to target first.

Compared to other states, California’s registration rate has been slipping. By contrast, turnout among the registered has been consistently higher than in other states, and has been holding up better over time. These numbers are not yet available for 2014, and California’s turnout will likely be low relative to other states that year. But overall, California lags other states in registration, not turnout.

That’s not to say that turnout among the registered is without problems. It has been declining in absolute terms, at least outside of fall presidential elections. But if we are going to tackle one problem in particular, registration may be a good place to start. In addition to being a problem more specific to California, it may be more amenable to broad reform. It amounts to little more than an administrative hurdle, and as detailed below, it is certainly the easiest one to take permanently off the table through more sophisticated data management.

What are some of the reforms that have been tried in the past, and how well have they worked?

In a report last year, I explored the effect on turnout and registration of two reforms to the registration process that California recently adopted to make the process easier. The first was online registration, which allows voters to conduct the entire registration process online without ever needing to mail in a paper form. The second is conditional registration, which allows voters to register and vote simultaneously in a single trip to the county registrar, and to do so after the official close of registration, up to and including Election Day. Online registration was used for the first time in the middle of the 2012 campaign season, so my analysis was about evaluating a reform that had already been implemented. Conditional registration, on the other hand, will probably not be implemented until 2017, so my analysis was about examining the effect of similar reforms in other states.

Online registration was wildly popular, accounting for over half the new registrants in the last month of the 2012 fall registration period. However, the results of the analysis of online registration suggested that the vast majority of these people likely would have registered to vote anyway. They probably got excited by the new system and registered earlier than they might have, but that didn’t significantly increase the total volume of registrations.

Conditional registration (often called “same day” or “Election Day” registration in other states) has been heavily used in the other states that have adopted it. There are often huge surges of use right before Election Day. As with online registration, however, almost all of these people would have registered anyway. The conditional registration system simply allowed them to register later. In terms of getting new voters to the polls, the policy has had more mixed results, with high-end estimates of an increase in turnout of about 4 percentage points.

The challenge for California is that even if all the users of conditional registration would have registered anyway, there will still be a lot of those people. That makes for a late surge in registrations that must be processed, and on a scale that other states have not faced. Elections are administered at the county level, and California has six of the 20 most populous counties in the country. Los Angeles County by itself is 40 percent larger than the largest state that has adopted a conditional registration system up to this point (Wisconsin). Thus, California will have to handle a significant portion of its conditional registrants through a small number of very large counties. The state needs to be prepared.

What are the other reforms that have yet to be tried?

Probably the biggest reform to registration that has not yet been tried in California is automatic registration. This is a system where voters who engage with government in some other capacity (usually by getting a drivers’ license at the DMV) and provide enough information to be registered are put on the voter rolls by default. They would then be given the option to remove themselves if they wanted but would otherwise remain registered.

Though automatic registration would be a big change, it is not quite as radical as it sounds. The state already tries to give residents the option to register at the DMV and other agencies (not always with perfect success), so automatic registration would just be a more insistent and systematic form of the same policy. Moreover, the drivers’ license and voter registration lists are on the verge of being linked already, thus easing many of the potential technical hurdles.

Would automatic registration solve California’s turnout problem? No, because low registration is about more than administrative hurdles. Many of the people who do not register are expressing a deeper disengagement from politics and public life. For example, North Dakota has no voter registration at all but falls far short of 100 percent turnout. Thus, automatic registration would need to be followed up with constant engagement to truly leverage the new system. What it would do is ensure that something closer to 100 percent of California citizens would be available for engagement without any further administrative steps along the way.

Automatic registration could also help the state deal with the surges of late registrants it will likely see under the conditional registration system. With voters added to the rolls throughout the year as they acquired or updated drivers’ licenses, there would be far fewer voters who would need to use the conditional registration system at the eleventh hour, making it more manageable for county registrars.

In the end, automatic registration is only one potential solution to voter turnout problems in California. Many others can and should be considered, and after all stakeholders have weighed in, an automatic registration itself may not prove to be the best fit for California. A bill proposing an automatic registration system has been introduced by Assemblywoman Lorena Gonzalez, so there will be a real opportunity to have a robust debate on the issue. That alone will be a healthy step forward for California.

Video: PPIC Statewide Survey Briefing

As discussions continue in Sacramento about drought relief, funding for higher education and transportation projects, and an extension of Proposition 30 tax increases, PPIC surveyed public opinion on these and many other topics. At a briefing last week in the capital, PPIC researcher Jui Shrestha provided the survey findings. Among the key points:

Two-thirds of Californians say the regional water supply is a big problem, and two-thirds say people in their part of the state are not doing enough to respond to the drought.
While most adults say that spending money on the maintenance of California roads, highways, and bridges is very important, there is little support for increasing the gasoline tax or vehicle registration fees to do so.
Half of Californians favor extending the Proposition 30 tax increases, and about a third favor making them permanent.

The Special Election and the Top-Two Primary

Two Democrats are heading into a runoff in a big political fight for a seat in the state senate, representing the wealthy bedroom communities of the far eastern Bay Area. The contenders are Susan Bonilla, a Concord assemblymember, and Steve Glazer, the mayor of Orinda. The race was held under the rules of California’s new top-two primary, but the role of this new system in producing the outcome is more complicated than it might seem.

Four Democrats and one Republican were on the ballot for this 7th Senate District seat, which became vacant when Democrat Mark DeSaulnier successfully ran for the U.S. House of Representatives. The race boiled down to a pitched battle between the three best-known Democrats: Joan Buchannan, a former Alamo assemblymember; Bonilla; and Glazer. The fourth Democrat received far less attention and the lone Republican actually withdrew from the race and endorsed Glazer (though her name remained on the ballot). At the time of this writing, Glazer has finished first with 33 percent, followed by Bonilla with 25 percent, and Buchannan with 23.

A goal of the new top-two system is to encourage candidates to build centrist cross-party coalitions. All candidates were on the same ballot, and voters could choose any candidate they liked, regardless of party. The top two vote getters, also regardless of party, now advance to a runoff campaign. (Technically, this special election uses a variant of the top two, in which a runoff occurs only if none of the candidates receives at least 50% of the vote. But that did not end up being a factor in this race.)

Steve Glazer fits well in this new system. He has taken a more business-oriented perspective that has put him at odds with many in the party’s pro-union establishment. With the endorsement of the only Republican in the race, he has been empowered to draw Republican voters to his banner. Moreover, the 7th Senate district is in an area with politics only slightly left of center, with more Republican voters than is typical for the Bay Area. As if that weren’t enough, counts of vote-by-mail ballots just before Election Day suggested Republicans were turning out to vote in disproportionate numbers, making them even more critical to the outcome.

However, it is important to emphasize the precise way in which the top two impacts this race. The open ballot—with all candidates listed regardless of party—is not new to special elections such as this one. Special elections have long had an open ballot, so even before the reform the District 7 candidates would have been free to reach across party lines.

The key difference comes now that the first round is over. Under the old special election system, the top vote-getters within each party would advance to a runoff election. Under the new system, the top two candidates advance even if these candidates hail from the same party. Thus, the May match-up between Glazer and Bonilla would have been impossible before the top two.

The irony is that in this particular case, the same-party race has thrown an extra hurdle in the way of the more moderate candidate. Under the old system, Glazer would have advanced to a runoff against a Republican who is no longer in the race. Now he must fight another Democrat to secure his place in the legislature.

But that doesn’t mean the top two has necessarily hurt Glazer’s chances. The same candidates may not have made the same decisions under the old system. Michaela Hertle, the Republican, might not have withdrawn from the race and endorsed a Democrat, because as the only Republican, she would have been guaranteed a spot in the runoff. Glazer might not have run for fear that he would not finish a clear first among all the Democrats. Though one can never be certain about any particular race, there is evidence that the top two has discouraged candidates like Hertle—those who hail from the major party with fewer registrants in a district—and encouraged more candidates from within the district’s dominant party. So while the top two didn’t enable cross-party coalitions in this race, it may have altered the landscape in other ways.

At any rate, there is no doubt that the top two has changed the contest moving forward, since Glazer and Bonilla never would have faced each other in the runoff without it. The ultimate test of the system lies with the outcome of this same-party race, and the political leanings of the person who wins it.