THE LEONARD LETTER
A weekly electronic newsletter from
Bill Leonard, Member
State Board of Equalization
July 28, 2003

"Human beings, who are almost unique in their ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so." - Douglas Adams (1952-2001) English humorist and science fiction novelist in Last Chance to See

UNDER THE DOME

***Get Outta Here***

The Senate passed a "get out of town alive" budget Sunday night, and it is only a matter of days before the Assembly follows suit. Other than Senators Brulte and Burton, no other elected official has read the budget, so exact details are only trickling out and the full implications are not yet understood. I applaud Senator Brulte for saving the state from a mutli-billion dollar sales tax increase at a time when our weakened economy could not stand it. Despite that victory, there is little else to celebrate. This budget lacks any significant structural changes, so next year's budget will be as bad and probably worse than this one.

***Director of Finance Orders Cuts***

Late last week all state departments received what I believe is an unprecedented demand. The new budget requires all departments to implement a 16% cut from whatever budget level they were given. It is estimated this if this demand is achieved it will result in 16,000 layoffs from state agencies. This is another one of those across the board cuts that does not distinguish between priority state services and those programs we could all live without. It will take real executive leadership to impose this level of reductions.

***Thanks for the Memories***

I have had the privilege of serving the people of California in elected office for last 25 years and because of that I have had the honor to be part of some very special events. One of the most special was in 1988 when I had privilege of introducing President Ronald Reagan and Bob Hope at a rally at Chaffey College in Rancho Cucamonga. To have been on same stage with these two heroes of 20th century is a memory I will carry with me forever. Thank you, Bob Hope, for all you have done for America.

***Public Rooms Not Good For Private Meetings***

The press has made a big deal out of a supposedly secret meeting a group of Democrat legislators had last week to talk about ways to more easily increase spending and taxes. These legislators were not aware that their comments and salty language were being picked up by friend and foe alike through the Assembly sound system that links audio from the floor of the chambers and committee rooms in the capitol to offices all over downtown Sacramento. The comments and point of view expressed by the Democrat members are not really news; nothing that had not already been said publicly was said in the meeting. What is truly disappointing to me is that almost all of the legislators whose remarks were quoted were my pupils in a class I taught for freshman legislators at the training institute in the Legislative Office Building. One of the points I made-- and emphasized-- to the last four freshman classes of lawmakers is that they should always assume that microphones are turned on. Why they ignored my good advice is something I cannot explain.

***Recall Math***

With the recall date set, some critics of the process are worried about the amount of money the special election will cost taxpayers. Those costs have been estimated in the $30 million range. One cost that has not been widely discussed is a little know provision of law that allows a candidate who successful defends against a recall to be reimbursed by the state for his campaign costs. So the Governor can raise and spend millions and, if he is not recalled, then hand the taxpayers a bill for that same amount. He may very well find it politically expedient to pledge that he would not do so, but if he is kept in office, nothing requires him to keep his promise and nothing would protect taxpayers from that bill if he submits it.

***Press Raspberries & Kudos***

Last week the Los Angeles Times ran an article explaining how family therapists analyzed recent speeches about the budget by Senators Brulte and Burton. The article annoyed me for its blatant lack of political acumen. If the Senators delivered such heated remarks in their own families, there would be cause for concern, but to characterize the Senate floor in the same manner as a family's private living room is seriously off base. Speeches made on the Senate floor (or in the Assembly, or House of Representatives, or U.S. Senate, for that matter) are not conceived of nor delivered with the intent of persuading one's political opponents to change their minds. The purpose of floor speeches is to persuade the public and, ideally, encourage the public to engage. Senator Brulte knows where Senator Burton and his caucus stand on taxes, and vice versa. Their formal remarks on microphone and television will not do one thing to change each other's mind, and suggestions by therapists that a change in their manner or vocabulary could fix the budget is absurd. Would that the state budget were a family disagreement that could be ironed out by a licensed counselor. However, the budget is more complex than that and will not be agreed upon because two Senators change their words to soothe the other's ego.

While the Times was running afoul of good journalism, Orange County Register reporter Hanh Kim Quach deserves praise for writing a story based on asking the right questions. Quach noted that the state is going to spend 3.1% more this year in spite of the huge deficit. Quach writes, "The state spent $77.7 billion last year out of its general fund. This year, the most recent budget proposal from the Senate calls for $80.2 billion in spending, factoring in the borrowed money and one-time cash. Although no final budget deal has been reached, the borrowed money is a must, lawmakers insist. And lawmakers say they're cutting as much as they can stomach."

ISSUE FOCUS

***Opportunities In Work Clothes***

States around the nation are facing budget crises this year. The leaders of some of those states, like California, are reacting with hand-wringing and lamentation about the unsolvable problems. Others see the troubles as Henry J. Kaiser did: as "opportunity in work clothes."

Iowa hired a consulting company to identify ways to cut spending without disrupting services. The consultant, Public Strategies Group, was paid a portion of the money its ideas saved the state, projected at $128 million right now. PSG will receive five percent of that and another five percent when the savings are documented. The first bucket of savings is to be realized by cutting local governments and removing the mandates and constraints placed on them by the state. The second batch of money will come from removing constraints on its own agencies in exchange for a 10% cut in general fund money. The final savings come from child welfare system reforms.

In Washington, Public Strategies helped the state start from scratch. Rather than beginning with last year's budget and asking for more money, they came up with a list of citizens' ten highest priorities from state government. That list included improved achievements by students, better health, enhanced natural resources, and a vital business climate. From there, a "purchasing plan" was devised based on getting the most bang for the public's buck. For example, the health purchasing plan was founded on the idea that prevention activities made more economic sense than providing Medicaid for working adults. Thus, spending on health clinics and food sanitization were priorities. After all 1,400 government services with thusly ranked, the Governor's budget simply drew the line where it ran out of money. The proposed budget funded $24 billion in activities and did not fund $2.4 billion of other activities. The process makes sense.

Massachusetts and Virginia are both exploring creative alternatives by combining government agencies and cabinet-level jobs to actually solve problems rather than simply continue to operate on established turf. Governor Mark Warner of Virginia is a former telecom executive who says, "You're going to have make the cuts anyway; you're going to have to make the hard choices anyway. Use this as an opportunity not just to balance your budget, but use this as an opportunity to take on some of those issues that you know in good times there won't be the political will to do." California has squandered the opportunity and continues to ignore the opportunity. That attitude will land us back in this crisis position year after year until we have a governor who is willing to step out as a leader and suggest some of these more creative responses to our fiscal situation.

However, assessors in some counties have taken it upon themselves to reassess those properties now that the real estate market is high. They are levying new bills based on higher market value. A property owner in Orange County has sued, saying that once the assessment was lowered, it can only be raised in accordance with the 2% maximum per year provision of Prop. 13. That lawsuit is on appeal right now, but until final judicial action is taken, county assessors can take the risk to raise property assessments under Prop. 8. If you have questions about your own property assessment and options for appeal, contact your county assessor (for listing, see http://www.boe.ca.gov/proptaxes/assessors.htm)

MISCELLANY

*** Did You Know?***

Most people pay their taxes using checks or even making electronic funds transfers, but there are many businesspeople who still prefer old fashioned cash. For the 12-month period of March 1, 2002 through February 28, 2003 the Board's cashier unit in Sacramento collected $11,581.11 in currency and coin.

***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/.

22. Euro (n.) --- the basic unit of currency among participating European Union countries: Gov. Davis wishes the California economy would emulate the recent financial performance of the Euro.

23. Evanescent (adj.) --- vanishing or likely to vanish like vapor: Budget agreements can be evanescent in Sacramento during June and July; believe nothing until it is voted but the Legislature, signed by the Governor, and delivered to be chaptered by the Secretary of State.

24. Expurgate (tr.v.) --- to remove erroneous, vulgar, obscene, or otherwise objectionable material before publication: It will be impossible to expurgate the final budget to please everyone; even those who vote for it will find some parts of it objectionable.

BOE AND LEGISLATIVE DATES

August 6 --- BoE meets in Sacramento.

August 18 --- Legislature reconvenes.

August 29 --- Last day for fiscal committee to meet and report out bills to the floor.

September 10 & 11 --- BoE meets in Culver City.

October 7 - Election Day for the Recall vote and the Opening Game of Major League Baseball League Championships

NOTABLE DATES/ HISTORY

July 28, 1900 --- The hamburger is created by Louis Lassing in CT

July 29, 1588 --- Attacking Spanish Armada is defeated and scattered by English defenders

July 29, 1914 --- First transcontinental phone link between New York City and San Francisco

July 30, 1619 --- Virginia's House of Burgesses formed, the first elective governing body in the U.S.

July 30, 1956 --- U.S. motto "In God We Trust" authorized

August 1, 1790 --- First U.S. Census reports population of 3,939,214

August 2, 1776 --- Formal signing of Declaration of Independence

August 2, 1909 --- First Lincoln head pennies are minted

August 3, 1492 --- Columbus sets sail from Palos, Spain for the "Indies"

August 3, 1977 --- Radio Shack issues press release announcing availability of the TRS-80 computer, within weeks, thousands were ordered

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