Brown, CFT cut deal for November

Higher income tax on rich, lower sales tax
By

Now there are two.

Gov. Jerry Brown is halfway to having only one tax initiative on the November ballot, now that a coalition led by the California Federation of Teachers has agreed to merge its proposed tax with Brown’s in a deal that will raise more money from the wealthiest 1 percent for a longer period – with a portion of the extra money likely going to  the state’s community colleges and universities.

The agreement, announced Wednesday, leaves civil rights attorney Molly Munger’s $10 billion income tax initiative, devoted primarily  to early childhood education and K-12 schools, as the remaining potential competitor on the ballot. A spokesman for Munger’s Our Children, Our Future initiative insisted that the effort to collect signatures to qualify for the ballot would continue, but there will be renewed pressure on her and her ally, the state PTA, to halt the campaign or on Brown to reach an accommodation with them. Key business groups – the California Chamber of Commerce and the Business Roundtable – have already come out in opposition to Our Children, Our Future, while not yet endorsing Brown’s plan. (Business will wait to see if the Legislature passes pension reform, its top priority.)

In grafting the CFT and the Courage Campaign’s Millionaire’s Tax of 2012 onto Brown’s Schools & Local Public Safety Act, the text of the governor’s initiative will remain the same; only four numbers will change. Brown agreed to:

  • Halve the sales tax increase from ½ to ¼ percent, reducing a regressive tax on the poor and middle class. It will run four years, starting Jan. 1;
  • Leave  the income tax increase on joint filers earning $500,000 at 1 percent, but raise the tax on joint filers earning $600,000 by 2 percentage points instead of 1.5 percentage points, and the tax on millionaires by 3 percentage points instead of 2 percentage points;
  • Extend the income tax to seven years, instead of only five years.

Brown had projected that his tax would raise as much as $6.9 billion per year, but the Legislative Analyst said that might be as much as $2 billion too high; the Department of Finance is saying the new initiative could raise between $7.1 billion and $9 billion, an additional $2 billion.

The CFT’s initiative had promised that 40 percent of its tax would be divided equally among community colleges, CSU, and UC, with 20 percent committed to K-12 schools and the rest toward social services and public safety. There’s no explicit commitment to higher education in the governor’s initiative, which would divert a portion of revenues from the sales tax and vehicle license fees to pay for public safety and some social services now the responsibility of counties and local communities. The rest would shore up the General Fund. But the CFT is expected to press for additional money for higher ed through the budget process – and call in its UOMEs.

It will take a massive effort to collect more than 1 million signatures by early May to qualify the revised initiative  for the November ballot. For insurance, Brown will also continue collecting signatures for his current initiative, in case the new one comes up short.

CFT’s initiative had outpolled the governor’s initiative, with 63 percent support vs 58 percent, in a Field Poll last month; Munger’s got slightly under 50 percent. But the CFT, the smaller of the two teachers unions, didn’t have a lot of money to wage a protracted campaign, especially if business interests were to throw money to defeat it. It also didn’t want to be blamed if a confused electorate defeated all of the competing initiatives.

But Brown, too, had reason to compromise. In a Public Policy Institute of California poll this month, the governor’s initiative drew only 52 percent support, down from 68 and 62 percent support in two earlier polls.

Recently, there was an escalation of words between Brown and the CFT after the governor called for the union and Munger to abandon their initiatives.

“It’s not going to happen,” CFT President Joshua Pechthalt said at a news conference last week. He vowed that the union was poised to spend another $1 million for its signature drive.

Earlier this year, Brown had paid a personal visit to Pechthalt’s home in Los Angeles to try to persuade the union to give up. He told the Sacramento Bee editorial board that he lingered to help Pechthalt’s 12-year-old daughter with a school assignment.

In the long run, it worked – a reminder to Brown how important it is to do your homework – or at least someone else’s.

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12 Comments

  1. I still cannot support this. What will be the impact on voluntary philanthropy if this tax is supported? I would expect a “way out” by the millionaires. There have been excellent blogs on this site from those who have analyzed the backfiring of increased taxes in other states. I am so far from the million dollar income bracket that I feel I can be objective! I know many people who are in the upper categories, and to be honest, so many are entirely self-made, they employ others, they give to many causes. Many also put their children in private schools … so they don’t “cost” the taxpayer anything for their children’s education. As a Brit, I know what happened over there when excessive taxation was imposed to deal with the closed shop unions – and it wasn’t what the crafters of the legislation thought would happen!
    Is there accountability? No!
    Is there reform of a top heavy, unwieldy education system? No!
    Is there any offer to present all the findings since State testing in 1998 to offer “what works” to schools so that programs for success can be crafted? There isn’t a “simple model” – far from it. But I am sure that some of the Silicon Valley entrepreneurs who are looking at the additional tax burden would have no difficulty taking the data and emerging with trends, patterns, correlations …
    In the land use activist community we ask: “Who’s afraid of an EIR?”
    Why so afraid of CALPADS Mr. Brown?
     
     

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  2. The Molly Munger/PTA initiative, “Our Children, Our Future”, is still the only one that funnels money directly to school sites and mandates parent and community input re how the money should be spent.   It is based on a reasonable and fair sliding scale income tax for everyone.

    The money will be placed in a separate trust fund that can only be spent as authorized by the provisions of the Act. The Governor and Legislature are prohibited from using the money.  It cannot be used to increase current teacher salaries, but can be used to hire additional teachers, i.e., P.E.  and staff, i.e., school nurses and to support programs that have been lost, i.e., the arts.

    No more than 1% of money raised by the The Molly Munger/ PTA “Our Children, Our Future” initiative will go towards administrative costs –  mandated.  The initiative will raise $10 billion for schools per year for twelve years.  Every child in the state will benefit. The money goes into a trust and does not pass through Sacramento.  Parent, teacher, community input re how money will be spent at each school site is mandated as well.   At this point in time, CA would need to spend an additional $60,000 a year, per classroom, just to catch up to the national average — that is a fact.  CA has the highest ratios of students to teachers, students to counselors, students to administrator in the country — that is a fact. We are shortchanging all of our kids and have been for many years. PTA, the largest volunteer organization lobbying for children, supports “Our Children, Our Future”.  PTA has been in the trenches advocating for kids — for free — for 115 years –  my vote goes with them.  ourchildrenourfuture2012.com

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  3. What a welcome compromise! This places the new revenues into the general fund where they not only begin to address the structural deficit in the state budget, thus reducing the push to cut even further into education and essential social services, but also provide a source of funding for the recent realignment of some services to the local level. (as is required from last year’s budget). Let’s all get behind this plan and begin to get California back to leading the nation in education at all levels – pre-K to Graduate school.

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  4. In some states, it would be reasonable to debate whether funding for education is critically important.  In California, there is no room for doubt: a too-tight belt is manifestly part of the problem.
     
    California falls short of the rest of the nation in education funding per child.  As a youthful state, we have more students per taxpayer than other states. Our legislature commits a smaller portion of taxes toward education than other states do. But even more importantly, California’s labor market for college educated employees is unlike most of the rest of the nation. This is an expensive place to run a knowledge-sector organization, like a school.
     
    The net effect of this disconnect is enormous. In real resources, California invests on the order of 30% less per student than the rest of the country. It is not a small difference. What does that mean?  Different districts and schools cope in different ways, but broadly it means that California classrooms pack in more students per teacher than those in other states. Schools in California operate largely without counselors or nurses, depending on principals, teachers and parents to fill the void. Principals in California, meanwhile, have dramatically less staff to support them than those in other states.  Fewer adults in the school means less opportunity to interact constructively with parents. If you are in doubt of the damage this does to our future, ask a teacher.
     
    Other states aren’t like this. California is an outlier. For a visual take on this, see http://ed100.org/californiaskimps
     
    Sue Moore argues that the solution is philanthropy, but let’s be clear: There is no prospect at all for filling a gap of this size by passing the plate. Extraordinarily wealthy school communities can raise as much as 10% of their budget through donations. Low-wealth communities cannot come close.
     
    The competing initiatives (particularly the PTA’s) offer some bubble-gum and chicken wire options to protect kids from the worst of the harm, at least for a while. But California’s system is badly broken. In a normal state, a crisis of this magnitude would drive an empowered legislature and the governor together to negotiate a meaningful solution. They would have the power to forge a compromise across a broad range of issues and opportunities. It is disappointing that the ideas of the Think Long Committee have not been more broadly discussed.  Our conversations about policy change have become foolishly narrow.

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  5. Sorry, I meant philanthropy across other organizations as well. But, I am concerned that increased taxation will reduce the voluntary contributions that tend to get to the kids. I don’t see more money going to students through the Brown/CFT scenario. In the school district in which I used to teach, increased funds were constantly sent to the lower SES schools, but improved student performance didn’t result. Meantime, the low SES students on the bus program to the school at which I taught had their services reduced, yet still achieved at a higher level than their peers in their neighborhood schools.
    When I started teaching in the US I couldn’t believe how many adults were employed in the schools, yet the schools themselves were much inferior in terms of facilities (science labs, language labs, greenhouses) than the UK. There was an administrator, an office and a computer for every conceivable program! First there should be a commitment to determine what works – and that doesn’t necessarily mean more money – and work to that end. There is so much distrust that I don’t see this tax proposal as attractive. I think people with favour Munger’s – flawed as that is!
     

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  6. @Sue, since philanthropy is generally tax deductible, I am not certain why you think it would go down with a slightly higher tax rate. Indeed, counterintuitively, a higher tax rate decreases the marginal cost of giving money away.
     
    Indeed, people in the highest tax brackets rarely make their money via flat salary, which means that they usually have year to year income variations > 3% anyway. Tax rates are less important than the general health of the economy and even some amount of chance in determining their final take-home income.

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  7. @Deb: what if parent, teacher, and community consensus was that the school needed another administrator?

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  8. Hi el – I think I am concerned about “perception” as well. If “X” is taxed at a higher rate, will “X” then feel duty is done and not give more to 501(c)3 options, and they carry some tax breaks. I know that those who have bought their home at the higher prices, are really feeling the cost of property taxes + bonds, etc. Unfortunately, a lot of very costly Props for school bonds are not really looking great to the discerning public, and those are locked in for decades in some places.

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  9. George Skelton from the LA Times did a column this morning on the Governor’s proposal, and it’s well worth reading.
    http://www.latimes.com/news/local/la-me-cap-brown-20120315,0,2153.column
     

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  10. John:
     
    Overall, a pretty good analysis.
     
    One point though needs to be made. At no time was the issue of CFT being “blamed if a confused electorate defeated all of the competing initiatives” a part of the discussion. In fact, CFT polling indicated a small majority of likely voters preferred to have multiple initiatives on the ballot and more considered it no obstacle to their making a decision.

    CFT and its coalition partners wanted an initiative that was more progressive and less regressive. Done and done. The Governor wanted the major architecture of his initiative to remain in place. Done.

    At one time politics was seen as a venue where constructive compromise was the better way to move public policy forward. I appears that the progressive side of the political equation still sees this as true.

    CFT looks forward to moving ahead with the Governor and other major education and public service stakeholders to work for the initiative to restore California, its schools, social, and other public services.

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