THE LEONARD LETTER
A weekly electronic newsletter from
Bill Leonard, Member
State Board of Equalization
October 6, 2003

ON THE TRAIL

***Voting On Tuesday****

Conservatives are still divided on how to vote in the second part of tomorrow’s election. (The first part is easy.) Both Tom McClintock and Arnold Schwarzenegger call themselves conservatives, and both speak to certain issues that resonate with conservative voters, but the questions about the depth of those principles and the ability to win give voters-- including me-- pause before casting their ballots. Recently, conservatives Assemblyman Ray Haynes and Bill Saracino each explained in writing why they are voting for Schwarzenegger. Saracino points out that Schwarzenegger believes that a marriage can only exist between a man and a woman. Bustamante does not. Schwarzenegger opposes any further restrictions on the 2nd Amendment. Bustamante does not. Sacacino wrote, in part, “Are Arnold's views on these issues completely and perfectly in line with mine or most conservatives? No, they’re not. Are they much better, almost infinitely better, then Bustamante’s? You do the math, it’s simpler than two plus two.” As usual, I found Saracino’s message to be very thoughtful and commend it to you. You can find it by going to www.CalNews.com and choosing the “columnists and editorials” option.

***Republican Possibilities****

Even though the Republican Party was never officially asked if the recall election was good for the party, the Republican party is now totally engaged in a high risk strategy hoping for high gain. If Davis is recalled tomorrow and Schwarzenegger is elected this double victory could expand the Republican Party's fortunes through the end of the decade and could exacerbate the deep divisions in the Democrat party. This is the high gain akin to the stunning victory of Governor Linda Lingle in Hawaii as the first Republican Governor there in decades.

However, if the results turn out differently then the high-risk strategy will yield equally high losses. The future of the Republican Party as a political force in California would be dealt a major blow and that wound could hurt President Bush's re-election campaign plan for California.

ISSUE FOCUS

***The Power of Government***

"Governors and legislators do not create recessions nor do they have the tools to end recessions.... Governors and legislators do have a role in creating the conditions for long term private sector job growth.” These are the observations of Stephen Levy, Director and Senior Economist of the Center for Continuing Study of the California Economy, in a recent memo addressing the “increased attention to the role of state government in promoting economic growth in California” brought on by the recall. They are important observations for Californians about to cast a very important ballot.

Levy notes that most of the soundbites we hear from candidates relate to short-term economic issues about which the sitting or future Governor can do nothing. He presents data demonstrating that California’s macro-economy mirrors the national trends. What the Governor and Legislature can act upon are long-term economic factors: public investment in education and infrastructure; public funding and policies helping local governments to create great places to live and work, and; regulations and tax systems. Levy says these three factors work together to influence a business’s decision about whether to locate in or stay in California. However, the challenge for policymakers is twofold: “The first dilemma is that not all businesses are attracted by the same factors. The second dilemma is that the three major roles for the state in supporting and attracting private investment sometimes point in different directions."

I share Mr. Levy’s view that the state government cannot do everything to fix the economy, but I would express in stronger terms than he does that the Governor and Legislature can make our economy much worse than it would otherwise be. Our workers’ comp rates are forcing small businesses to close their doors or go underground, neither of which helps foster a healthy economic climate. Senate Bill 2 now requires employers to provide health insurance to all employees, and there may well be fewer jobs in the state. While we cannot change the entire Legislature tomorrow, we can change the person who sits in the corner office and who has the power to sign and veto new laws. We need someone other than Governor Davis doing that so that California’s government can at least get out of the economy’s way.

To read Levy’s full memo, go to: www.ccsce.com/pdf/bseries4_stategovernment.pdf

***State Auditor: OES Not Preventing Terrorism ***

While the recall dominates the news, we need to be aware that the state is behind the curve in terrorism readiness, according a report from the state auditor that came out last month. The National Strategy for Homeland Security calls for states to develop their abilities to prevent attacks. The report praises California's Office of Emergency Services for developing plans to respond to attacks, but says California has yet to do any planning to prevent an attack as required by the Federal plan. According to the report, the head of the state’s Office of Homeland Security admitted this shortcoming and is also working on developing better training and coordination with other states.

Whoever is governor next month needs to report to the public how the state is dealing with the terrorist threat. While I applaud the work OES has done thus far, it is little consolation that the best we can do right now is clean up after the terrorists have struck. Why has this important issue fallen off the table in Governor Davis’s office?

***It Might Be Much Worse for Next Governor***

The Reason Foundation has forwarded me its latest budget analysis that contains a possible much-darker budget scenario. I find their list to be comprehensive. It notes that the 2003-04 budget already projects an end-of-year deficit of $10 billion for 2004-05, (minus the reserve of $2 billion which is where the Legislative Analyst comes up with its $8 billion figure). Here are some of the items that Reason believes could "fall off the table" and create a larger operating deficit (listed in the order of likelihood of occurrence):

MISCELLANY

***Three More Words to Know***

Each week, the Leonard Letter features a few of the words from a list of 100 words that some educators say every high school student should know. The full list may be viewed at http://www.houghtonmifflinbooks.com/booksellers/press_release/100words/.

52. Metamorphosis (n) --- A transformation; a marked change in appearance, character, condition, or function: Tomorrow’s recall election could cause a terrific metamorphosis in California politics.

53. Mitosis (n) --- The process in cell division by which the nucleus divides: While cell division is a predictable, scientific process, the political mitosis we have seen in California has been much more haphazard and the results are less foreseeable.

54. Moiety (n) --- A half, part, portion, or share: The philosophy of the welfare state is that the government can give a moiety to each resident by taking from those that produce more.

BOE AND LEGISLATIVE DATES

October 7 --- Special Statewide Election.

October 13 --- Columbus Day observed.

October 15 --- BoE meets in Sacramento.

November 15 --- Statement of the Vote --- The last day for the Secretary of State to prepare, certify, and file a statement of the Vote.

November 18 & 19 --- BoE meets in Sacramento.

NOTABLE DATES/ HISTORY

October 6, 1889 --- Thomas Edison shows his first motion picture

October 6, 1979 --- Pope John Paul II became the first pontiff to visit the White House

October 7, 1777 --- Americans beat Brits in 2nd Battle of Saratoga

October 8, 1775 --- Officers decide to bar slaves & free blacks from Continental Army

October 9, 1781 --- The last major battle of the American Revolutionary War in Yorktown, VA. The American forces, led by George Washington, defeated the British troops under Lord Cornwallis.

October 9, 1888 --- Public admitted to Washington Monument

October 9, 1974 --- Oskar Schindler died in Frankfurt, Germany. Schindler is credited with saving the lives of about 1,200 Jews during the Holocaust.

October 10, 1985 --- U.S. fighter jets force Egyptian plane carrying hijackers of Italian ship Achille Lauro to land in Italy, gunmen are placed in custody.

October 11, 1932 --- First political telecast (Democratic National Committee) at CBS, NYC

October 12, 1492 --- Columbus arrives in the Bahamas; the real Columbus Day

GENERAL TAX INFORMATION

For answers to your general tax questions, call the Board of Equalization information center. Customer service representatives are available to help you from 8:00 a.m. to 5:00 p.m. Pacific time, Monday through Friday (except state holidays).

Toll-free number: 800-400-7115

TDD service for the hearing impaired
TDD phones: 800-735-2929
Voice phones: 800-735-2922

HOW TO CONTACT ME

Bill Leonard
Board of Equalization
450 N Street, MIC: 78
Suite 2337
Sacramento, CA 95814
Telephone: (916) 445-2181
Fax: (916) 327-4003

 Email to: Bill.Leonard@boe.ca.gov