THE LEONARD LETTER
A weekly electronic newsletter from
Bill Leonard, Member
State Board of Equalization
July 7, 2003

"After two years in Washington, I often long for the realism and sincerity of Hollywood." --Senator Fred Thompson, who has since left the U.S. Senate, in a speech to the Commonwealth Club of California

UNDER THE DOME

***Drilling the Drill***

Inside the Capitol it is known as a drill. Like drilling for an upcoming game, a drill is a series of exercises where the outcome is known but it is not the real game. Sunday night was the drill to kill the Assembly Republican budget. The majority Democrats were pressured by the minority Republicans and the press to consider the Republican proposal. So they chose Sunday night of the 4th of July weekend where there would be minimal press coverage and no outside influences to vote down the concept.

It is this constant series of drills that has made the press even more cynical than usual about the sincerity of the majority party to actually negotiate a budget package. In reality there are enough ideas for moderate cuts to allow for choices in how to balance the package without a tax increase. What is lacking is a willingness to reach an agreement. I am not saying it will be easy because most Democrats have an emotional investment in all of the current spending programs. But the willpower to negotiate successfully is a necessary prerequisite.

***Half-Cent May Be Half-Baked***

A new half-cent sales tax is being floated in the halls of the Capitol building as a way out of this budget mess. My healthy skepticism of tax increases extends to the revenue projections associated with them. Our Board's chief economist has given me information about the true impact of such a tax hike. Joe Fitz found that the half-cent increase in sales tax would result in California losing 24,000 jobs and a $273 million reduction in business investment in the state. Lawmakers would do well to consider this dynamic analysis when deciding whether this tax hike is best for the state.

***Selling Easier Tax Increases***

Voters should also be mindful of such economic projections as they are bombarded with requests to sign two new initiatives seeking to improve the budget process. The petitions have been approved for circulation by the Service Employees International Union and would allow the budget and tax increases to be approved by 55% of legislators, rather than the current 66.7% threshold. In the Assembly this would mean 44 votes out of 80 could increase any tax and 22 votes in the Senate. Currently there are 48 Democrats in the Assembly and 25 Democrats in the Senate.

This initiative will be sold to voters because it also includes requiring the Governor and Legislators to forfeit their salary, per diem and expense allowances for each day after June 15th without a budget. While such penalties sound appealing at first, reality sets in when you consider that there have been $65 billion in new taxes proposed this year. At a 55% threshold, those increases could have been approved and the budget passed weeks ago. The Governor and Legislators would be getting their paychecks, but you would be seeing less of yours. Perhaps it's not such a good deal after all.

***Fiddling While California Burns***

We are now six days into the new fiscal year without a budget. We have known about the budget crisis for a long time-at least since last year's budget was debated. What sort of things has the Legislature been discussing instead of the budget?

A.B. 329 (Parra, D-Bakersfield) This bill will create a new occupational specialty with license exams given by the state for "animal nutritionists." This bill passed the Assembly on May 19 and is now awaiting hearing in the Senate's Agriculture Committee.

A.B. 598 (Hancock, D-East Bay) This requires all modernized school buildings to have functioning drinking fountains. The bill begs the question: are local school officials and school boards incapable of thinking that kids might need drinking fountains? Yet, the bill passed the Assembly on a 79-0 vote and is now in the Senate.

S.B. 774 (Vanconcellos, D-San Jose) This bill will allow pharmacists to sell hypodermic needles and syringes to any person over 18 without a prescription. A similar bill was vetoed last year, but this proposal is back, having passed the Senate on a 21-11 vote.

A.B. 24 (Negrete-McLeod, D-Pomona) This bill requires all pools to be equipped with an approved vibration or motion sensing alarm system. Why must the government tell people the type of pool safety equipment they need? Passed the Assembly 62-13 and the Senate Judiciary Committee 9-2 on July 3rd.

A.B. 231 (Steinberg, D-Sacramento) This bill removes the requirement that food stamp applicants provide fingerprints and identification photos. The author argues that many people who need the assistance are not applying because of this barrier. I agree with the opponents who marvel at the fraud possible when identification is no longer required. The bill passed the Assembly 43-30 and the Senate Committee on Health and Human Services on an 8-3 vote.

ISSUE FOCUS

***Prisoners Can Be Saved***

Over the last 40 years, the percent of California's budget spent in the Department of Corrections has nearly doubled. Some liberals are asserting that imprisoning too many people is one cause of the current budget crisis. Most Californians disagree with that logic; they want everyone who deserves to be in prison to stay there for as long as possible. More than that, though, we do not want released prisoners to commit more crimes.

Several years ago, with that goal in mind, Prison Fellowship and the Texas Department of Criminal Justice started a program to try to close that revolving door. Prison Fellowship's InnerChange Freedom Initiative, or IFI, was recently the subject of a study by Byron Johnson of the University of Pennsylvania. Prof. Johnson tracked 177 IFI participants for two years after their release from prison. Not all of the 177 subject had completed IFI's program, but those who did were about half as likely to be arrested in the two years following release than the control group: 17.3 percent for IFI versus 35 percent for the control group. According to commentator Charles Colson, "The difference in the percentage of those being re-incarcerated was even more pronounced: only 8 percent for graduates of IFI, as opposed to 20.3 percent for those who never participated."

In announcing his conclusions, Dr. Johnson identified five spiritual transformation themes that the he said were the causes of the reduction in recidivism: 1) "I'm not who I used to be," 2) spiritual growth, 3) God versus the prison code, 4) a positive outlook on life, and 5) the need to give back to society. I encourage the California Department of Corrections to look to these themes to rehabilitate prisoners and prevent recidivism.

MISCELLANY

***Sales Tax Reports***

For the budget year 2001-02, all state and local sales and use taxes produced $34,394,464,000 for California. That is a 2.7 percent decrease from the prior year. Part of that decrease is attributable to the ¼ cent reduction in sales tax that kicked in for the first half of the year because the state had a surplus-not that long ago, but it seems so far away.

***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/.

13. Circumlocution (n.)-- The use of unnecessarily wordy and indirect language. The Republican position on the budget has not been filled with circumlocution; they have been very clear and direct in their demand for no tax hikes.

14. Circumnavigate (tr. v.)-- To go around; circumvent. Successful resolution of this year's budget crisis may require circumnavigating the Assembly and Governor; Senators Burton and Brulte may just have to write the budget themselves.

15. Deciduous (adj.)-- Falling off or shed at a specific season or stage of growth. Would it not be useful if we have a deciduous budget process where state programs simply go away when they have outlived their usefulness?

BOE AND LEGISLATIVE DATES

July 9 --- BoE meets in Sacramento.

July 11 --- Last day for policy committees to meet and report bills from opposite house.

July 18 --- Legislature's summer recess begins upon adjournment only if Budget Bill is passed.

August 6 --- BoE meets in Sacramento.

August 18 --- Legislature reconvenes.

NOTABLE DATES/ HISTORY

July 7, 1846 --- The United States annexes California

July 7, 1863 --- First U.S. military draft (exemptions cost $100)

July 7, 1930 --- Construction begins on Hoover Dam

July 8, 1889 --- Wall Street Journal begins publication

July 8, 1969 --- U.S. begins troop withdrawal from Vietnam

July 9, 1776 --- Declaration of Independence read aloud to George Washington's troops in New York

July 10, 1832 --- President Andrew Jackson vetoes legislation to re-charter the 2nd Bank of the U.S.

July 11, 1798 --- U.S. Marine Corps created by act of Congress

July 11, 1804 --- Vice President Aaron Burr kills Alexander Hamilton in duel

July 12, 1933 --- Congress passes first minimum wage law (33 cents an hour)

July 12, 1984 --- Geraldine Ferraro becomes first woman major-party Vice Presidential candidate

July 13, 1865 --- Horace Greeley advises his readers to "Go west young man."

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