Mon, Sep 20, 2010 -- 9:00 AM
Mon, Sep 20, 2010 -- 9:00 AM
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Proposition 22 seeks to prohibit the state of California from borrowing or taking funds used for transportation, redevelopment or local government projects and services. It's intended to prevent state politicians from raiding local funds. But critics say the measure would hurt schools, health care and other state services.
Host: Michael Krasny
- Chris McKenzie, executive director of the League of California Cities and a Prop. 22 supporter
- Mark Leno, California state senator representing District 3 and an opponent of Prop. 22
Read a transcript of the program below.
00:00:10 MICHAEL KRASNY
From KQED, public radio in San Francisco, I'm Michael Krasny. Coming up on forum this morning we'll continue our ongoing election coverage with debate on California State Proposition 22 which would end the practice of appropriating local government funds and prevent the state government from transferring specially designated transportation or property tax revenue from local government to the state's general fund. We'll hear from both sides on the proposition and we'll hear from you, our listeners. Forum is next with you calls, emails, and online questions and comments after this.
00:00:59 MICHAEL KRASNY
From KQED public radio in San Francisco, I'm Michael Krasny, good morning and welcome to this morning's forum program. Revenue from public coffers intended for local government has been used to fix the state's budget deficit at an economic downturn time when local services have experienced severe cutbacks and losses of revenue. Proposition 22 would end the practice and prevent the state from transferring borrowing or shifting to the state's general fund any specially designated transportation money including the use of fuel taxes to pay for transportation bonds or any property tax money including redevelopment agency funds.
00:01:32 MICHAEL KRASNY (CONTINUED)
And in this morning's opening forum hour, we want to continue our ongoing election coverage with focus on Proposition 22 which will be on the California November 22nd ballot. Joining us in the studio is Chris McKenzie, executive director of The League of California Cities who supports Prop 22 and good morning.
00:01:45 CHRIS MCKENZIE
00:01:46 MICHAEL KRASNY
And with us also is Mark Leno, who is a senator of the California State Senate representing District 3 which includes Marin County and parts of Sonoma and San Francisco counties and he's opposed to Prop 22 and good morning.
00:01:56 MARK LENO
Good morning, Michael.
00:01:57 MICHAEL KRASNY
Welcome to both of you and, uh, as we generally do, we begin with the pro side. So Chris McKenzie, uh, let's find out why we need Prop 22. This is supposed to be a firewall of -- against vital services of a, a local sort being raided upon, I guess, as you would see it.
00:02:13 CHRIS MCKENZIE
That's right, Michael. Uh, Prop 22 is designed to close up some remaining loop holes that allow the state to take funds that are dedicated to local government, dedicated for transportation services by the voters and to keep the state from shifting them to, uh, carry out and fund the state's general fund budget. Uh, local governments like the state have endured now years of losses of revenue, but in addition to the loss from the -- the economic downturn, uh, cities for example are losing about a billion dollars a year on an ongoing basis in local property taxes that have been permanently shifted to the state.
00:02:50 CHRIS MCKENZIE (CONTINUED)
And the state in recent years has been taking this, this last fiscal year, $5 billion dollars in local and, and, uh, local funds and transit funds to fund the state budget. So Prop 22 is intended to prevent that practice.
00:03:05 MICHAEL KRASNY
Chris, we still don't have a state budget. We've gone over the record. Uh, if anybody's looking at this on an Almanac or something but local services suffer because the state can't pass a budget and the argument, I suppose, is at least those local funds, they're being borrowed, they'll be paid back presumably and we can have a budget.
00:03:22 CHRIS MCKENZIE
Well, the -- for example, last year, the state borrowed, uh, almost $2 billion dollars in property taxes and when it's scheduled to pay them back three years down the road, no one expects the state fiscal condition to be any better. So it's very hard to understand as a -- how the taxpayer's are well served by the state taking funds out of local government budgets, uh, whether it borrows them or steals them. Last, last year it almost stole a billion dollars of the local government's share of the gas tax.
00:03:51 CHRIS MCKENZIE (CONTINUED)
Money that's used to maintain traffic signals and fill potholes, remove snow in the mountainous areas of our state, uh, and this, this state apparently thinks that whatever it funds at the state level is almost always more important than what goes on at local government.
00:04:08 MICHAEL KRASNY
Well, those who are opposed to Prop 22, and we'll hear from Senator Leno in a moment, say that it's good because, uh, to oppose it that is, because redevelopment money or redevelopment funding would, uh, essentially not be touched and that's a good thing.
00:04:22 CHRIS MCKENZIE
Yeah, we've heard that argument and let me put it into perspective. Over the current and the previous fiscal year the, uh, legislature and governor agreed to take $2.1 billion dollars of redevelopment funds. Now what redevelopment funds are, are infrastructure investment dollars. Uh, Cal State Chico has said that $2.1 billion dollar raid, it's an outright raid, it's not a loan, they just took it -- uh, we don't believe it's constitutional but Prop 22 will make that clearer in the future that it's not.
00:04:51 CHRIS MCKENZIE (CONTINUED)
That raid is going sacrifice 198, 000 full and part-time construction jobs by people who taxes to the state of California. In fact, the state of California has now sacrifices much more tax revenue through the loss of those jobs then local government's have because the state has an income tax. They have a much bigger sales tax. So they've basically shot themselves in the foot by diverting this redevelopment money which is used to eliminate blight, to build streets, to build roads, to build gutters, to build sewers and water systems.
00:05:25 CHRIS MCKENZIE (CONTINUED)
To build fire stations; things really critical -- critical infrastructure investments in our cities.
00:05:33 MICHAEL KRASNY
And you see Proposition 22 as being not only critical to the infrastructure but also, uh, social services, libraries, healthcare, police, fire, etc.
00:05:41 CHRIS MCKENZIE
Well, listen, uh, Prop 22 protects the roughly $2 billion dollars of the property taxes that the legislature can still borrow. That money goes to pay for libraries; it goes to pay for recreation systems. Most importantly, it goes to pay for public safety, uh, because about 60 percent of the average city budget goes to pay for public safety. Now when the legislature did this last year they did create a, a system where local governments could borrow against the state's promise to repay.
00:06:12 CHRIS MCKENZIE (CONTINUED)
But unfortunately, fortunately and unfortunately, by doing so they've created a much deeper state debt in doing it. Uh, they incurred $275 million dollars in additional interest costs by creating that system. While that did protect, uh, funding in a (STAMMERS) a number of communities, it's created long-term fiscal problems for the state.
00:06:33 MICHAEL KRASNY
Again, Chris McKenzie with us in studio, is executive director of the League of California Cities. He supports Prop 22. Mark Leno is opposed to it. Uh, he's in the California State Senate representing District 3, Marin and parts of Sonoma and San Francisco counties. And Mark Leno, I guess, to a large extent, uh, the opposition that this is ballot box budgeting, isn't it?
00:06:54 MARK LENO
It's much more than that Michael, but I just want to step back from the situation a little bit so that your listeners can get a, a better perspective of our situation here. I think everyone understands that the state is all tied up in knots. And as a result the legislative processes become ever more dysfunctional. And we can trace this historically. We can go back to Prop 13 in 1978 which made it much more difficult for local governments to be able to raise the money that they need to be able to function at the local level.
00:07:27 MARK LENO (CONTINUED)
Put it in the hands of the state and things got much more complex from thereon. Uh, things got even worse. Arnold Schwarzenegger's very first day in office when he cut by two-thirds, a 50-year-old vehicle license fee; again, money that never came to the state, stayed with cities and counties to pay for libraries and parks, for police and fire protection, to keep streets swept clean. But when he did that, we didn't stiff the cities and counties -- we, the state, backfilled that money with general fund money.
00:08:04 MARK LENO (CONTINUED)
At the time, it was costing about $4 billion general fund dollars a year to keep cities and counties whole, and we did that. It's now grown to about $6 billion dollar annually. So that made the situation even worse and cut into our general funds significantly which then impacted education funding, health care funding, our social safety net. So Prop 22 solves absolutely nothing. What it does do is tightens the knot even further by putting constitutional protections specifically for a couple of special interests.
00:08:43 MARK LENO (CONTINUED)
That is the city's redevelopment agencies, transportation funding. Now it's interesting. Now it was interesting to note that a few months back, mayors of the largest cities of California came together to speak in support of Prop 22, of course. Mayors have one single responsibility and that's to their city. Conspicuously absent at that press conference was Mayor Newsome and why was Mayor Newsome not there, because his perspective, unlike all the other mayors, and his responsibility is slightly larger than just cities because he also has a county to look out for because of San Francisco's unique situation of being city and county.
00:09:25 MARK LENO (CONTINUED)
So the broader your responsibility, the less likely you are to support Prop 22 and the more likely you are to oppose it and if you're looking out for the state's well being as do interests such as the teacher's and the nurses and the fire fighters, you're going to oppose this greatly because, again, this solves nothing, tightens the knots even greater, and it really exacerbates our current problems even more.
00:09:55 MICHAEL KRASNY
Doesn't it also though at least allow revenue that is earmarked for the cities and that's why the mayors, who I guess you're suggesting maybe special interest, who represent special interests, but the mayors are concerned about their funds being depleted and their coffers being taken. I mean, when you give the historical background you point out, I think what many of us realized, that we need fundamental fiscal reform in this state, that it's vital.
00:10:17 MARK LENO
(OVERLAPPING) But -- and this goes--
00:10:17 MICHAEL KRASNY
(OVERLAPPING) But as long as we don't have it--
00:10:18 MARK LENO
00:10:19 MICHAEL KRASNY
--then why take from Peter to pay Paul, which is really what this is all about, stopping Peter from paying Paul.
00:10:25 MARK LENO
Well, when we got into this vehicle license fee conundrum back in 2003, end of 2003, by 2004 cities and counties rightfully got very nervous that their money, uh, was not going to be there for them because the governor just cut it off though we did come to the (STAMMERS) the defense of cities and counties by backfilling with general fund money. But they wanted it tied down even more. So some peace was found through Prop 1A in 2004.
00:10:55 MARK LENO (CONTINUED)
And we all came together to agree that these monies should be locked with these cities and counties. But there was an allowance that two times every ten years when the state found itself in very severe fiscal situations, that they could borrow but would have to pay back with interest, the first time before they could make use of the second time. And that was agreed upon solution all stakeholders were involved in, Prop 1A. But now unilaterally, the cities in redevelopment have gone off in their own direction with Prop 22.
00:11:34 MARK LENO (CONTINUED)
Now interestingly, the right political spectrum has come together in a very uncommon if (STAMMERS) not unique situation, collaboration, uh, and the left in opposing Prop 22. One of my most conservative far right-wing Republican counties from Orange County, Chris Norby, has written an op ad which I have here which says "No On 22. Reject the redevelopment power grab.” So you've got the California Teachers Association, the California Nurses Association, the California Professional Fire Fighters, all opposing Prop 22 along with the National Tax Limitation Committee and the Silicon Valley Tax Payers Association.
00:12:15 MARK LENO (CONTINUED)
So these are forces who rarely, if ever, come together to oppose something but they do because they know this is bad pubic policy. Not only is it very bad public policy, it will set a precedent for other special interests to rush to the ballot, to try to amend the constitution, to get their pot share protected by the constitution. But again, we should be working together and, and Chris and I do often times. Uh, so we're almost a little embarrassed for them that they gone off in this direction because it does set a precedent that would--
00:12:50 MICHAEL KRASNY
(OVERLAPPING) Well, you are calling it ballot box budgeting. You're saying it handcuffs you.
00:12:53 MARK LENO
It certainly does. It certainly does.
00:12:55 MICHAEL KRASNY
And what about that, Chris McKenzie.
00:12:57 CHRIS MCKENZIE
You know, it, its -- I think it's an interesting, uh, point that Mark's making, his historical point I think is a good one. Prior to Prop 13, most voters knew which revenues were local revenues and which ones were state revenues. There was a, a doctrine called the 'Separation of Sources' doctrine, in fact, that was really abrogated in some ways by prop 13. We believe, and I appreciate Mark being concerned about being embarrassed for us, we're very proud that we're trying to reinstate that 'Separation of Sources' (STAMMERS) doctrine by this particular measure so voters can be assured that they pay to fund their city services are going to pay for their city services.
00:13:40 CHRIS MCKENZIE (CONTINUED)
That when they pay their gas tax, that it's going to go to take care of transportation. Uh, a piece of information that might be very interesting to the listeners, uh, cities and counties maintain 81 percent of the lane miles in our state, yet historically have gotten about one-third of the share of the gas tax. Yet last year, uh, Senator Leno and his colleagues in the senate voted to take that billion dollars, that one-third of the share and to use it to fund the state budget rather than to take care of local streets and roads including traffic signals and the other kind of expenses that are so vital to help people get to work and get their kids to school.
00:14:17 CHRIS MCKENZIE (CONTINUED)
So the voters decided over the last 30 years where these revenues should go and it's the legislature and the governor that have been ignoring the will of the voters. The voters in some cases have said certain money should be used for certain purposes; we're simply trying to clarify that. They've done it actually since 1952 with redevelopment in the 70s with transit and transportation; again in the 90s, and yet the legislature keeps finding ways to take that money and use it for purposes the voters did not approve.
00:14:49 MICHAEL KRASNY
Well, speaking of the legislature and I -- we'll get Mark Leno's response to what you just said in a moment, but, uh, there was a legislative analysis, uh, by the legislative analyst, uh, which is pretty much bipartisan and he said the net effect of Prop 22's restriction on the use of fuel tax money would be an increase in general fund costs by about a billion a year and that's for the next couple of decades. This is again, legislative analyst, also, uh, points out that constraints on borrowing or shifting property tax and redevelopment revenues could actually add further to the loss of money to the general fund. Costs could be one to several billion dollars. And you would say what?
00:15:23 CHRIS MCKENZIE
Sure, and, and I think the point for the listeners to understand here, the voters to understand is that if the legislature can't take money from local government, it's going to have to find a way to balance it's budget with state revenues, not with local revenues. So what the legislature did earlier this year is they really created this problem by, by eliminating the sales tax on gasoline and raising the gasoline excise tax and then including a provision to shift money from the gasoline excise tax fund to the general. So now the problem that's being complained about is one the legislature created itself.
00:16:02 MICHAEL KRASNY
Let me go back to Senator Leno. I mean, two things here; I think ignoring the will of the voters was the first serious thing that, uh, uh, Chris McKenzie pointed out. But the second thing is, uh, that we're -- these balance that we've -- maybe we should be balancing these with state revenues to begin with and now with these local revenues.
00:16:19 MARK LENO
Well, again, I think as Chris gets into the finer and finer details of this, I can imagine some of your listener’s eyes are beginning to glaze over, but that's the whole point of this--
00:16:31 MICHAEL KRASNY
Getting people to glaze over.
00:16:32 MARK LENO
No, (LAUGH) , that we need some reform, Michael. This does not take us in any direction closer to that reform. We've got Prop 13 which raised the threshold for the legislature to be able to raise any kind of revenue as it cut-back on property taxes. Then the governor in the midst of, uh, what was it that year, I think it was about a, a, an $18 billion dollar deficit, it puts in place a tax cut which made the deficit only that much deeper.
00:17:05 MICHAEL KRASNY
All this is fait accompli though, right? We are where we are and we don't seem to be able to get out of this morass to even fund the budget--
00:17:09 MARK LENO
(OVERLAPPING) Now Prop 22 -- and Prop 22 does nothing to address that but just takes care of a couple of entities problems at the great detriment to everybody else. Why do teacher -- why does the California Teachers Association oppose this? Why, why are the California Professional Fire Fighters opposed to this? Because they know that there's going to be less general fund money to support our schools. And in fact, with regard to the redevelopment agencies, constitutional protections per Prop 22, will see schools getting less money as roofs continue to deteriorate.
00:17:50 MARK LENO (CONTINUED)
And we see kids sitting in rooms with leaks dripping on their desks, so Costo's can get built in their district with public dollars because they will be used in the competition to get big boxes into certain districts over others and that's how redevelopment monies are being used currently.
00:18:07 MICHAEL KRASNY
And you're also saying that the state, uh, essentially diverts, say gas taxes, uh, that people pay at the pump for things like road repairs and transportation -- for, for infrastructure improvements and that that would not necessarily be enhanced if you were handcuffed with this Prop 22.
00:18:23 MARK LENO
Michael, we'll go around in a circle, uh, endlessly because the problem is, is we need more money for state operations. Why should we be pitting infrastructure improvements, uh, against children's education or our social safety net which is going to continue to get into tatters because we have no money to take care of our aged, our blind and disabled. What we need is to come together, not to unilaterally go off in our own direction. Make sure we get our protections into the constitution. And there's something unique about Prop 22 we've never, ever seen before.
00:19:02 MARK LENO (CONTINUED)
Back in 1988, voters agreed that we should make sure that there's a basic funding level for educational purposes and that was Prop 98. But Prop 98 has an allowance within it that should the legislature in an uncommon fashion agree by a two-thirds majority vote, a super majority vote, to suspend it, Prop 98 because of the severity of a particular year's situation, there is that allowance.
00:19:30 MICHAEL KRASNY
No allowance in 22.
00:19:31 MARK LENO
None whatsoever. It is written into stone, into the constitution, can never be touched, even if 98 percent of the legislature said, you know, this year we need to be able to have some flexibility. But we keep tightening everything until finally we're completely hamstrung.
00:19:50 MICHAEL KRASNY
Let me ask Chris McKenzie--
00:19:51 MARK LENO
(OVERLAPPING) That will only frustrate the voters even more because we the legislature will not be able to do our job.
00:19:55 MICHAEL KRASNY
Address that if you would, Chris McKenzie.
00:19:56 CHRIS MCKENZIE
I'd be happy to. You know, we need to remember that, uh, the legislature under Prop 22 retains complete control over the allocation of the gas tax, for example. It's really, uh, incorrect to say that it locks down the gas tax, because they can change the shares of the gas tax at any time. The, uh, the other funds, the property tax funds, listen, public safety is the responsibility largely of local government. 81 percent or more of Californians live in cities.
00:20:26 CHRIS MCKENZIE (CONTINUED)
And if there is some kind of a public safety need or a, a disaster we (STAMMERS) need to have the funding to spend on those disasters. We have a great mutual aid system in our state where we pool resources at a moment's notice. Unfortunately, I think the kind of emergency that the Senator's referring to is, is really the kind of emergency, it's a political emergency. It's where they simply can't agree on anything whether it's raising taxes or cutting spending. What they can agree on is to treat local government's as the rainy day fund for state government which is what they've been doing on a regular basis.
00:21:03 CHRIS MCKENZIE (CONTINUED)
And as far as the, the coalitions that have come together to support this, we have the police chiefs and the fire chiefs and the rank and file police officers and groups like the Howard Jarvis Tax Payers Group supporting Prop 22. So, we'll see broad support and we do have very broad support from over 500 groups across our state saying enough is enough. It's time to erect a real firewall and for the legislature and the governor to be accountable for spending state money, not spending local money.
00:21:35 MICHAEL KRASNY
Mark Leno. Again, its sort of like church and state, I think is what he's saying. Let's keep these separate; let's keep theses revenues separate. But you're saying it, it's, it suggests this doesn't allow the state the flexibility.
00:21:43 CHRIS MCKENZIE
(OVERLAPPING) --blocking it down--
00:21:48 MARK LENO
How about, how about the concept, Michael, that we're all in this together? It's not us against them, it's not our dollars, your dollars. And again, Chris and I agree that going back to 1978, Prop 13, things got very skewered and made life much more difficult for everybody. But I would much rather focus all of the energies that are going into supporting Prop 22 and opposing it, all the money that will go into trying, Chris, to make sure the voter is supported, we're going to do what we can to make sure voters understand that this is going to, in real terms, hurt the general fund...
00:22:26 MARK LENO (CONTINUED)
...as the non-partisan, independent LAO's already pointed out to you and as you've shared with, uh, the folks today. It's going to impact the general fund and because of that impact, there will be less money for our kids education, there will be less money for our social safety net, there will be less money for fire protection -- that's why the fire fighters are opposed to it at the state level. We should be coming together to begin to untie these knots that have been placed every year. This just takes us further down the road of dysfunction that we've come along since 1978.
00:22:58 MICHAEL KRASNY
Coming right up on a break but when Chris McKenzie says this is just using the cities and counties for a rainy day fund, you say what?
00:23:06 MARK LENO
We need some flexibility. There's very little left at this point. We're the only state in the entire country that requires an unimaginable two-thirds majority to pass the budget, to pass the tax. That means the minority rules, there's dysfunction. This is not the answer.
00:23:22 MICHAEL KRASNY
Well, I'm going to open up our phone lines and invite you, our listeners, to join in this conversation which means you can register your opinion or you can ask any questions which are on your mind. We're talking about Prop 22 which seems to prohibit the state of California from borrowing or taking funds. You can join us now toll-free: (866) 733-6786, that's our toll-free number and feel free to join the program. (866) 733-6786. You can also send an email to us, forum@KQED.org or post a question or comment on our website. By going to KQED.org slash forum and clicking on the segment. This is forum. I'm Michael Krasny.
00:23:59 MICHAEL KRASNY (CONTINUED)
This is Forum. I'm Michael Krasny. We're discussing, debating this hour, Proposition 22. It's on the November 2nd, California ballot. The proposition essentially seeks to prohibit the state of California from borrowing or taking funds and I want to make clear what we're talking about here -- funds that would normally be used for transportation, redevelopment or local government projects and services, and those in favor say it will prevent state politicians from raiding local funds and those opposed say the measure would hurt schools, healthcare, and other state services.
00:24:27 MICHAEL KRASNY (CONTINUED)
With us in studio is Chris McKenzie who is executive director of the League of California Cities, supporting Prop 22. And Senator Mark Leno, who is opposed to it, who represents in the California State Senate, District 3 including Marin County, parts of Sonoma and San Francisco counties. And let's go right to you, our callers. From Novato, right in, uh, Senator Leno's district, Pat, you're our first caller, good morning.
Yes. Uh, good morning. Uh, my name is Pat Eckland and I'm a council member in the city of (STAMMERS) Novato and, um, over the last two years, it's fell. We have laid off, um, over, uh, 33 people because of the lack of, uh, revenue and the state keeps taking our revenue. My question is, is that we have to live within our means and when is the state going to stop taking money from local governments, causing us to either have to raise taxes, fees, or cut services and people in the city of Novato.
00:25:26 PAT (CONTINUED)
And my question is directed to Mark Leno because Proposition 22 is intended to save, um, the cities from continually being raided by the state government. So, Mark, um, I was wondering if you can address when the state's going to stop taking our local revenue to balance your budget.
00:25:47 MARK LENO
Hello, Pat Eckland. Pat and I are old buddies. I have great respect for the councilwoman, does a good job up in Novato. But you can see the frame of the question is, uh, it's a set-up. Uh, we came to the city's rescue in 2004 when Arnold Schwarzenegger cut what is now $6 billion dollars of vehicle license fee funds. And if we, the state, hadn't come to the cities and counties rescue, they would have had their vehicle license fee revenue stream depleted by two-thirds.
00:26:24 MARK LENO (CONTINUED)
They would have had to live with that because if we were being intellectually honest back then, Arnold Schwarzenegger wanted to make sure the average car owner wasn't paying $300 dollars a year but only $100, then cities and counties who were the recipients of those VLF dollars would have had to live with that. But their residents would have benefitted by about $200 dollars annually.
00:26:44 MICHAEL KRASNY
There's a kind of emotionality behind a caller like Pat, though, who's saying we have to balance our budget, you can't balance your budget so why take from us when you can't do the work--
00:26:53 MARK LENO
(OVERLAPPING) Well, let me just finish this line of thinking, Michael. So we came to the cities and counties rescue and bailed them out to sustain a tax cut that Arnold Schwarzenegger could not afford. Now again, if everyone is being honest at the time, they either would have said, governor, we're not going to let you do this. Cities and counties all would have come together; the whole state would have risen up and said, no, governor, stop this, we can't afford this. It's going to destroy cities and counties.
00:27:20 MARK LENO (CONTINUED)
But instead, there were very few voices who spoke up, I was among them, and we bailed out cities and counties out of general fund. But suddenly we had now $6 billion fewer dollars. If we had those $6 billion, we wouldn't be here today, Michael. There'd be no need for Prop 22. We could all co-exist. But this is the bigger picture here again. This, this whole notion of, I'm quoting the Governor now, “starving the beast of government, that's what we should be doing.”
00:27:53 MARK LENO (CONTINUED)
Well, we're seeing what happens now. You cut here, you cut there, you cut revenue streams. There's no money to pay for the basics. Of course, parents want to see sufficient funds for their kids' education. Of course, we want to see sufficient funds so cities can pay for their operations. But you can't have it all and that's what's going on here.
00:28:15 MICHAEL KRASNY
Now Chris McKenzie wants in here. Go ahead.
00:28:17 CHRIS MCKENZIE
I think, I think it's really important to keep in mind that at the time the VLF reduction occurred there was already a mechanism in place that provided that if it didn't raise enough money that there would be -- the gap would be filled by the state. But that occurred at the time of the recall. It was Gray Davis who actually triggered the increase in the VLF. He then got recalled by the voters; the Governor as his first act, cut the VLF. That was the issue that was in play.
00:28:46 CHRIS MCKENZIE (CONTINUED)
Never, never threatening the commitment to fund local governments. There's a lot of good reason to debate whether that VLF cut was a (STAMMERS) was a wise cut. But, uh, I don't think we ever felt like the legislature came running to our, to our rescue in that--
00:29:01 MICHAEL KRASNY
Oh, so I don't think there was opposition because the recall had just happened and there was a lot of goodwill towards Schwarzenegger at the time--
00:29:08 CHRIS MCKENZIE
00:29:07 MICHAEL KRASNY
--and he was able to move, uh, forward in ways that Davis could not. But--
00:29:12 MARK LENO
(OVERLAPPING) Could, could I correct that little bit of history there because that VLF actually happened in 1998 at the height of the dot com boom. We had surplus state revenues on, on, on that--
00:29:21 MICHAEL KRASNY
(OVERLAPPING) We were flush then.
00:29:22 MARK LENO
We were flush and the, and the -- and Chris is right, there was a provision in that 1998 trailer bill that said as long as there is sufficient general funds, will this tax cut stay in place? Well, when I got there in 2003, we were staring at a $37 billion dollar deficit. No one could argue we had $4 or $5 billion dollars sufficient funds to continue that tax break. So the tax break should have ended right there and then.
00:29:47 MARK LENO (CONTINUED)
Gray Davis did the right thing and acknowledged that we did not have sufficient general funds. But it was used politically as a weapon against him. Arnold Schwarzenegger for (STAMMERS) political expediency, campaigned on keeping that tax cut in place. Gray Davis just restored it as it -- to where, where it had been traditionally for 50 years. But again, those vehicle license fees dollars, and this is why it's germane to this conversation, never came to the state. They stayed with cities and counties to provide for all the services that Pat Eckland is now saying, state, keep your hands off of our money. But it’s the general fund money that's backfilling all that VLF money that was taken away by Arnold Schwarzenegger.
00:30:29 MICHAEL KRASNY
I, I want to get to some more calls. But I want to give you a sense of, uh, what's coming in on the web comments.
00:30:34 MARK LENO
00:30:35 MICHAEL KRASNY
Uh, Michael from Sacramento says, “So who is working to repeal, reform, fix Prop 13 and 34, horrible years. How long does a lack of political willpower to do the right thing and blame it all on Prop 13's mistake become the excuse to explain continuing stupidity, (STAMMERS) sloth and myopia?” Paul writes, “Michael, the Senator's argument is incoherent because he hasn't made an argument. All he's claimed is that everybody's against the proposition without showing why it's bad. Stop the looting.”
00:30:58 MICHAEL KRASNY (CONTINUED)
Mike in Mountain View says, “Local voters frequently vote to tax themselves to address specific local issues. How can the state morally take these locally approved taxes designed to address specific local needs to balance the state budget? If I need money to pay my expenses, I can't take it from my neighbor. Why should the state be able to engage in such tactics?” Again, I think you've explained yourself actually more coherently than that listener seemed to -- but there's a lot of emotion around this. People feel their services are being cut back because the state can't do the job.
00:31:26 MARK LENO
And again, there are those, not enough of us, who have spoken up and said we do need to reform Prop 13. We're not talking about touching the residential side but there are many billions of dollars annually that the state is not collecting because corporate property owners are using Prop 13 to their own advantage. So we see Disneyland paying the same property tax rate for the past 35 years, 40 years now because of their benefitting from Prop 13, but that was not the intent of Prop 13. So there are billions of dollars that we're not collecting--
00:32:02 MICHAEL KRASNY
(OVERLAPPING) I've asked for years why does Prop 13 not necessarily, I mean, why can't we divide between places like Disney and private property because we haven't done that and there's no reason why we shouldn't do that.
00:32:13 MARK LENO
We should be reassessing--
00:32:14 MICHAEL KRASNY
(OVERLAPPING) So you need -- so it's the two-thirds vote that you need again, right? Yeah.
00:32:17 MARK LENO
00:32:17 MICHAEL KRASNY
I'm sorry. Let me, let me go to, uh, Chris (STAMMERS) Chris McKenzie because I want to get to more callers on as well.
00:32:21 CHRIS MCKENZIE
(OVERLAPPING) You know, one of the more interesting thing unintentional aspects of Prop 13 and I think we're -- we've all been frustrated by it, is the fact that it gave the power to the legislature to reallocate the property tax. Beginning in the early 90s, the state did that to benefit its own general fund. It created a shell game kind of mechanism through which it, it moved -- it reduced its funding obligation to schools by shifting money from cities, counties, and special districts, uh, to schools; not really benefitting schools in the, in the, the process.
00:32:53 CHRIS MCKENZIE (CONTINUED)
Prop 22 actually puts an end to the legislature's ability to borrow property taxes to meet its general fund obligations. So, so in a fairly significant way, it is a start down the road of reforming Prop 13.
00:33:06 MICHAEL KRASNY
And we'll go down the road to more of your calls. We'll bring a caller in from Millbrae. Marge, good morning.
Good morning. Um, I have a comment and then a two-part question. The comment is in our local cities, a small city like Millbrae, under 21,000 residents, we are trying to balance our budget and being forced to cut to downsize services. That takes away jobs, it takes away family's ability to pay for their homes, etc. The (STAMMERS) first part of my question is, I notice that in the conversation the, um, it was brought out that the California fire chiefs, uh, excuse me.
00:33:49 MARGE (CONTINUED)
The, um, the California Fire Chief's Association is supporting Prop 22, and yet there's a particular fire fighter's association against Prop 22 and please clarify that curious citing (STAMMERS) , and part B of my question is relative to the (STAMMERS) California teachers and nurses, um, who say that, uh, Prop 22 is making -- taking money from them and hindering their own abilities to provide services. In Millbrae, we wrote a check to the state for approximately $1.2 million dollars from our RDA money.
00:34:30 MARGE (CONTINUED)
And, uh, we don't know when we're going to get that back because everything seems to be very iffy. And why--
00:34:37 MICHAEL KRASNY
(OVERLAPPING) I'm sorry. What's RDA?
And my question to that part is why don't we allow the tax payer's money to stay in the localities and why can't Sacramento downsize and cutback the same as the cities are being forced to do? Thank you.
00:34:55 MICHAEL KRASNY
Okay, thank you. (STAMMERS) RDA is redevelopment, um, well, she's raising a couple, I think, salient, important questions here. Chris McKenzie, you want to address them then we'll go to Senator Leno?
00:35:04 CHRIS MCKENZIE
Sure. I can't for the life of me understand why the fire fighters are opposed to this measure because it protects important funding that pays for their salaries and their pensions and other benefits they receive at the municipal level. Uh, I can only presume that they're looking out for the interests of other of state government as opposed to, uh, what's going on at the local level. The fire chiefs, on the other hand, the leaders of the fire service at the local level, are strong supporters of Prop 22.
00:35:35 CHRIS MCKENZIE (CONTINUED)
Because they understand that if the state can keep borrowing or taking local funds that where they're not going to be able to respond to 911 calls as quickly; they're not going to be able to, uh, put out fires as quickly as needs to be done. That's why the police chiefs are supporting it; the rank and file police officers are supporting it. Uh, I do know that the fire fighters represent the state, uh, department of fire, uh, protection as well, so maybe that's what's motivating them. It hasn't been clear to me.
00:36:06 MICHAEL KRASNY
00:36:08 MARK LENO
Again, my heart goes out to (UNINTELLIGIBLE) . It goes out to every city. It goes out to every county and to the state. We're in an era where we've got folks like Grover Norquist making jokes such as he's not opposed to government, he just wants to see it reduced to a size where it can be drowned in the bathtub. And the same Grover Norquist puts before every legislature across the county in every state house a pledge asking them to sign, which says that they as a legislature, will never under any circumstances, even in times of emergency vote for a tax.
00:36:44 MICHAEL KRASNY
I suspect there are a lot of listeners who may not know that name. Grover Norquist is a economic advisor, Republican--
00:36:49 MARK LENO
(OVERLAPPING) He's an anti-tax crusader based in Washington D.C., made his multi-million fortune lobbying on K Street. So he's a anti-tax crusader, makes jokes about how we should just reduce government to a size where it can be drowned in the bathtub. So in this context, with our own governor talking about “starving the beast of government”, there are ever less funds for local, for cities, for counties, for special districts, for the state.
00:37:15 MARK LENO (CONTINUED)
Now you've got a two-thirds requirement for the legislature to raise any revenue. All you can do when you're balancing a budget, Michael, is, it's, it's arithmetic, third grade arithmetic. Either raise, add or subtract, and when you got your hands tied, when one is off the table, the addition's off the table because they've all signed pledges they'll never vote for a tax and you can't get to two-thirds without them, then it's just cut, cut, cut. Now, again, if--
00:37:43 MICHAEL KRASNY
(OVERLAPPING) Well, you got the lieutenant governor candidate to come around.
00:37:45 MARK LENO
(OVERLAPPING) If, if Prop 22 -- yeah, and he extorted out of us a constitutional amendment. That's a whole 'nother story, and that's why we shouldn't have a two-thirds, uh, requirement to (UNINTELLIGIBLE) budget.
00:37:54 MICHAEL KRASNY
(OVERLAPPING) You're not talking about Lewis (SOUNDS LIKE) in there, we're talking about Maldonado.
00:37:56 MARK LENO
Right, and that's -- and we're not talking about Prop 25 right now which would lower that threshold to pass the budget to a simple majority and let the majority rule. But this is the context in which we're, we're speaking and so it, as I see it, everyone's out for themselves. This is ours, this is -- don’t touch that. This isn't yours when we should be talking about untying all these knots and having a reasonable conversation about what services do we want to provide, yes, at the city level and at the county and at the state level, and how do we pay for them.
00:38:27 MARK LENO (CONTINUED)
Should Prop 22, it's just a fact of life. As the LAO, the legislative analyst has pointed out, it will be a billion dollar minimal hit on the general fund. There will be less money for education, there will be less money for county services which is why Mayor Newsome opposed Prop 22. Less money for county services opposed to city services which is our social safety net.
00:38:51 MICHAEL KRASNY
Alright, Chris McKenzie, you wanted to say something here. I want to go to more callers. Quickly, if you could.
00:38:54 CHRIS MCKENZIE
And, uh, I, I think it's really, really important that we remember that these funds are devoted to transportation, to local government including public safety services. And the idea of treating them as one big fund is now what the law envisions. Last year, the Senator voted to raid or to take a billion dollars of funds the voters said should go to maintain local streets and roads. He did it even though the law contains a borrowing provision. They ignored it and they decided they were going to steal it.
00:39:26 CHRIS MCKENZIE (CONTINUED)
That we say steal; it's, it means act illegally. Now fortunately, the assembly stopped them but it's exactly that kind of thinking that makes voters angry. The voters said it should be used for transportation.
00:39:40 MICHAEL KRASNY
Let's see what more of our voters and citizens have to say. We go to Alameda next. John, you're on Forum, good morning.
Good morning. First, a comment, uh, Senator Leno, you have, you have patronized your -- the listeners first by telling us that are eyes are glazing over when frankly we're getting really mad at you and I say this as a person who's really supported your efforts on gay marriage and a number of other issues. Then you patronize the councilmember from Novato. I think that's really (STAMMERS) obnoxious and you should stop doing that. Now, um, as Mr. McKenzie just said, Prop 22 is trying to put money back where it belongs.
00:40:18 JOHN (CONTINUED)
Because the legislature stole it and it seems to me that if you think about transit as the lifeline that it is for a lot of people who cannot afford to drive a car, whether or not they're getting taxed a lot of money for a vehicle license fee, that it's really important to maintain basic services. It's really important to not have the millions of dollars of cuts that we've had here in the city of Alameda because we've been shipping too much money to Sacramento.
00:40:46 JOHN (CONTINUED)
Because the legislature of which you're apart cannot figure out how to make things works. And it seems to me if this does drive a wedge in Prop 13, maybe it is necessary to, uh, put a stake through that heart because it's time to get that done. I, frankly, don't like the idea of tying the hands of the legislature as a principle but I get sick and tired of hearing the legislature stealing money that it has no right to steal in order to avoid raising taxes.
00:41:24 MICHAEL KRASNY
Comment from Senator Leno, please. Thank you for your call.
00:41:27 MARK LENO
If my tone has offended anybody, of course, I very sincerely apologize. That is not my intent. But, uh, it may be coming out of the great frustration that we in Sacramento experience when our choices are so deplorable. I have no joy or pleasure whatsoever in seeing transit money being used to balance our budget. These are desperate choices. It's either that or are we going to cut into in home support services even further or cut the, the, the state portion of, uh, those who are living on the very edge...
00:42:05 MARK LENO (CONTINUED)
...so that we see SSI payments and such that we match with federal dollars being cut from $650 a month to $590 for those who are, who are destitute. These are horrible choices we're left with because the pie keeps shrinking when the demands for social services and public transit and all the things I fight for in my time in public are being threatened. So (UNINTELLIGIBLE) --
00:42:28 MICHAEL KRASNY
(OVERLAPPING) Let me read some listeners comments again. Uh, here's a listener actually apropos what you just said, Mark Leno. It says “it sounds like Prop 22 attempts to settle a squabble among various levels of California government over who gets a bigger piece of a shrinking pie”, and he puts in parentheses "a tart? My question is what position affects the overall taxes we pay?” and that's a whole other subject for a discussion on Forum. But let me go to some more listeners here who write in.
00:42:51 MICHAEL KRASNY (CONTINUED)
John from Oakland says, “I can't tell local revenue from state revenue. It used to be that both the state and city set taxes to pay for the services they provided. Now taxes are essentially fixed at current rates since the two-thirds majority to raise them can never be got. So the logical place to put the decision of where to spend tax money is the legislature.” And Steve at Livermore says, “Mr. Leno's argument seems to be that the California budget process is a big mess and the answer is to take money from local government. What makes Mr. Leno think that taking money from local government fixes the problem?
00:43:18 MICHAEL KRASNY (CONTINUED)
...Rather I believe that taking money from local government only extends the problem to local government. Ask Mr. Leno and his colleagues to find a fix to the California state government rather than bringing down municipalities as well. Legislation during a time of growth is probably fun, but legislation during a time of fiscal difficulty requires hard choices and leadership. Let's see some leadership.” And Richard writes, “Redevelopment is misused. It's used to fun city council's pet projects and benefit favored developers. Santa Rosa develop -- redevelopment money was used to build a luxury hotel. That hotel pays no property taxes. Not even assessed.
00:43:50 MICHAEL KRASNY (CONTINUED)
...Santa Rosa redevelopment bought a building from AT&T and then agreed to sell it for 1.3 million less than it paid to a local developer. Santa Rosa spent 6 million of sewer and water rate payer funds in the redevelopment areas. Santa Rosa redevelopment lost 9.6 during the last fiscal years. It's a loser. Redevelopment is a moral hazard. Those who get grants from redevelopment may not be required to pay them back. Properties in redevelopment areas that do not get a cent of redevelopment funds are required to pay higher taxes to pay off redevelopment bonds.”
00:44:20 MICHAEL KRASNY (CONTINUED)
Now there's some, uh, some strong listener sentiments. Let's, uh, get another caller on. Casey from Burlingame, morning.
Yeah, I really agree with the, the, one of those emails you read, read there. It seems like the guy that's against, uh, Prop 22 just wants to make his job easy and not have to go to the taxpayers for more money or tell them that there isn't enough money to provide them the services that they seem to expect and to actually solve the problem, he just wants to paper it over with either borrowed or stolen money, however you want to categorize that.
00:44:54 MICHAEL KRASNY
Well, I thank you for your call. That'll stand as an opinion, Mark Leno, unless you want to respond.
00:44:59 MARK LENO
I would like to respond, certainly.
00:45:00 MICHAEL KRASNY
00:45:00 MARK LENO
Uh, again, all of these issues we're floating around today are all intertwined. Uh, the dots all connect. So this listener is suggesting that I want to borrow and steal; hardly. The majority party of which I am a member cannot decide the final details of the budget. The minority rules when a two-thirds thresholds is required to pass the budget or for revenue. So 40 senators, 25 democrats, 15 republicans, the magic number of two-thirds is 27, 14 vetoes with 26 wants.
00:45:37 MARK LENO (CONTINUED)
If the majority party could rule, we would have corporations paying their fair share so individual tax payers would not have to be burdened and nor would residential property owners.
00:45:48 MICHAEL KRASNY
You're listening to Forum. We're talking to Senator Mark Leno and Chris McKenzie and this is a fundraising period for KQED Public Radio, for more information about how to support KQED simply go to KQED dot org. I'm Michael Krasny. Okay, we go to more of your calls. To Los Angeles, Ray, good morning.
Good morning. Um, I was just, uh, I hope you guys can hear me alright.
00:46:09 MICHAEL KRASNY
We can hear you.
Okay. I just relocated from Connecticut where my state income tax and my tax bracket was 5.4% and the state sales tax was 6%. I'm now in Los Angeles where my tax bracket, state income tax, is 9.83% and my, uh, sales tax is just about 10% and yet I have to drive on Beverly Boulevard and Wilshire Boulevard to work every day on roads that are completely messed (SOUNDS LIKE) and I'm told that the city of Los Angeles simply doesn't have the funds to fix these roads.
Now it would seem to me that this Proposition 22 is intended to fix specifically problems such as these. Why is it that we have the highest tax rates in the country and we can't seem to run this state efficiently?
00:47:00 MICHAEL KRASNY
Well, it would seem to me that Senator Leno has offered his, uh, analysis with respect to the two-thirds, uh, handcuffing on legislators. How do you see it Steve McKenzie?
00:47:10 CHRIS MCKENZIE
Well, Michael, in, in, in terms of, uh, the whole-
00:47:13 MICHAEL KRASNY
(OVERLAPPING) What's impeding progress in the state.
00:47:14 CHRIS MCKENZIE
(OVERLAPPING) The whole -- well, there are a lot of things impeding progress. I think the caller's made an excellent point about the low priority as a state we've generally been placing on infrastructure maintenance and improvement. And in fact, not only does maintaining our infrastructure and building new (STAMMERS) infrastructure create jobs, it creates tax revenue to fund a lot of the services that the senator's been talking about. Be -- and -- because it allows the economy to work much better.
00:47:41 CHRIS MCKENZIE (CONTINUED)
People can get to, to their jobs; they can get their kids to school; all of those things are important. You know, while the senator's been (STAMMERS) been pointing to the dysfunction in the tax system, and I certainly agree, there's a lot of improvements to be made, I think it's very interesting that no attention's being paid to the fact that the gridlock in our legislature, the deep partisan gridlock in our legislature, could be addressed by the new method that, uh, is underway now to redistrict the legislature...
00:48:11 CHRIS MCKENZIE (CONTINUED)
...but some people are trying to prevent that from happening. So I think that most pundits, most observers of the dysfunction in California state government believe we not only have to reform the tax system, we need to reform the process by which our legislators are selected so we can have some more competitive seats so we can hopefully reach consensus better than we can today.
00:48:36 MICHAEL KRASNY
Well, let me go to, uh, some more listener comments we're being flooded with. Um, this is certainly hit a nerve with listeners. Jim and Davis writes, “California already has a very decentralized funding system. For example, three out of every four dollars that come from the Federal Highways Administration for transportation projects, a majority of transportation's dollars are these, not the gas tax. Go to Cal Trans and are redirected to counties and cities; similarly federal dollars for mental health services are redistributed to cities and counties.
00:49:02 MICHAEL KRASNY (CONTINUED)
So state government gives out money; doesn't imply that the state is in opposition to local government.” And another listener Dave says, “One thing I haven't heard in the discussion so far is the larger question of equity in terms of governmental funding. One reason the state government is involved in educational funding is to help address wealth disparities throughout the state. If Prop 22 pulls money from the state pool reserving it for cities, wouldn't the wealthier cities in terms of property tax revenue benefit disproportionately? You want to answer that, Steve McKenzie?
00:49:29 CHRIS MCKENZIE
I'm not so sure the wealthy communities would benefit disproportionately because there's all kinds of factors that affect what share of the property tax for example a jurisdiction gets. Uh, a better off community won't necessarily get a greater benefit by the property tax protection provisions of Prop 22 because they may have a very, very low share of the property tax. This one of the distortions of our property tax system since Prop 13. You can't change the property tax rate. So, uh, those communities will have other revenue, some of which don't enjoy as much protection from Prop 22.
00:50:04 MICHAEL KRASNY
Another listener writes, “I would be more likely to support Prop 22 if I agreed the redevelopment funds were being used responsibly by cities, but they're not. They've being used to subsidize private business like the case of Santa Clara, the San Francisco 49ers. There's no blight in this area and the use of these funds will not be of use to most Santa Clarins. I agree with Leno, that 22 is a mere band-aid. True reform needs to be done instead.
00:50:25 MARK LENO
Michael, can I just jump in there for a moment?
00:50:26 MICHAEL KRASNY
(OVERLAPPING) Yeah, please.
00:50:27 MARK LENO
Uh, I just want to share some thoughts that my Republican colleague from Orange County who is in agreement with me in opposition to Prop 22, Chris Norby wrote in an op ed piece audit and so I'm just quoting from his piece very briefly. He says that, “redevelopment's share of property taxes continues to grow without voter approval. Fully 12 percent of (STAMMERS) local property taxes are now diverted into redevelopment schemes, a figure that has doubled since 1990. That's $6 billion dollars annually in funds diverted from counties, cities, and school districts, special districts, and fire districts and that, of course, Prop 22 would make this revenue shift permanent, pressuring tax increases to make up for the difference.”
00:51:06 MICHAEL KRASNY
Well, we began with Chris McKenzie. Mark Leno, you and your colleague from Orange County get the final word here. We are out of time. Thank you both for being here and for engaging in this, uh, civil and, uh, I might say, uh, important debate. Mark Leno, again, a Senator from District 3 including Marin County and parts of Sonoma and San Francisco Counties. Chris McKenzie is executive director of the League of California Cities. I thank you both and I think you our listeners. Uh, they're still friendly.
00:51:31 MICHAEL KRASNY (CONTINUED)
In fact, very amicable, I should say. Uh, I want to thank our senior editor, Dan Zoll; our producers are Kevin Guillory and Judy Campbell; our engineer is Danny Bringer (SP?) and our executive producer is Raul Ramirez. I'm Michael Krasny.