THE LEONARD LETTER
A weekly electronic newsletter from
Bill Leonard, Member
State Board of Equalization
August 11, 2003

"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man." -- George Bernard Shaw (1856-1950) in Man and Superman

UNDER THE DOME

***Recall Update***

In reviewing the incredible list of candidates for governor in the October 7th recall election I noticed that one of them shares my last name. Just in case anyone is wondering, I am not a candidate for governor. No matter what your position is on the recall itself you will be asked to vote on Governor Davis' possible replacement. With all of these candidates it will require more voter effort than usual to ferret out the candidate with whom you are most politically compatible.

I was shocked by Darrell Issa's withdrawal from the race last week. As the financial backer of the signature drive to put the recall on the ballot, he deserved, perhaps more than anyone, to be on the ballot. To me this signals that Issa sees Boxer's senate seat as a better alternative. Should a Republican win the governorship this fall, my expectation would be for that person to endorse Issa for the U.S. Senate.

This morning, the Secretary of State drew letters that will determine the order the candidates' names will appear on the ballot. The list-as-drawn will be the order for the first Assembly District. The order will be rotated for the remaining 79 Assembly Districts. Since there are more than 80 candidates, not everyone will be able to appear first on the ballot.

The Secretary of State will issue a certified list of the candidates to all county election offices by close of business on August 13.

***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.

***Some Journalists Are Getting It***

I commend Sacramento Bee columnist Daniel Weintraub for the superb job he has been doing this year placing the shiny glare of his spotlight on Davis and California's fiscal mess. His column last Sunday was a scathing assessment of the state's new spending plan. He points out two problems with the budget Davis signed last week. The first is that the accounting methods used to claim this budget is balanced makes Enron look responsible. Dan could have presented a laundry list of over-the-top accounting tricks but focused on the car tax for sheer awfulness because Davis is claiming the tripling of the car tax is really a cut. Why? Because the proceeds are going to be sent to the counties instead of the state using General Fund money for the same purpose. The budget also counts on $680 million from gaming that the tribes have no obligation to pay and uses economic forecasts that are rosier than even the administration's best guesses. And on and on…

The second of Weintraub's observations is that the budget relies on too many gimmicks that are of questionable legality. These are: The massive car tax hike without a vote of the people, delaying certain expenditures until the day after the end of the fiscal year and booking them as cuts. And the granddaddy - a bond sale of $10.7 billion to cover the deficit accumulated through June 30, even though the state constitution prohibits the legislature from borrowing more than $300,000 without a vote of the people. In the past, the courts have let this slide, but only for short-term cash flow problems. The larger point is that if any of these financial doings gets overturned in court, the entire budget deal explodes in our faces.

The bottom line is we still have a massive structural deficit that some governor and some legislature are going to have to fix some day.

INSIDE THE BOE

***What Was the Reason for the Conflict of Interest Law?***

One interesting happening at last week's hearing is that two companies in highly controversial cases ended up winning only because two of the most liberal members of the Board happened to own enough stock in the companies that they were not allowed to vote. The two BoE members' holdings were over the dollar threshold that under the law is considered a conflict of interest. Despite their investments, these two members would likely have voted against these companies resulting in a 2-3 loss instead of the 2-1 vote in the companies' favor. The great irony in this case is that the conflict of interest code that is intended to prevent elected officials from helping companies they own an interest in actually in this case prevented two elected officials from voting against the companies. I voted 'aye' along with my Republican colleague Claude Parrish because on the merits the companies did not owe the taxes.

***Charity Never Faileth***

The Chronicle of Philanthropy recently released its study of charitable giving in California. Taxpayers in the state gave between 7% and 7.9% of their discretionary income to charity, which is in the midrange of U.S. giving. Utah and Wyoming ranked the highest nationwide, with charitable giving in excess of 10%. California's top five counties for such giving were: Solano (12.4%), San Bernardino (9.5%), San Francisco (9.3%), Riverside (8.7%) and Sonoma (8.2%).

***Property Tax Growing Pains***

I have heard from many property owners who are stunned to have received notices of property tax increases recently. This year's property tax rolls were sent to county auditors/tax collectors around June 30. State law requires that your property's assessment is limited to the lesser of the Proposition 13 base year value or the current year's fair market value, also known as the Proposition 8 value. Prop. 8 allows property to be reassessed at a lower value if it has dropped in value from its Prop. 13 base. Under this rule, many properties were reassessed when the real estate market dropped.

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

***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/.

28. Fiduciary (adj.) --- of or relating to a holding of something in trust for another: Elected officials have fiduciary responsibilities to the voters who entrust them with running the government efficiently.

29. Filibuster (n.) --- a tactic to delay or obstruct legislation by making long speeches: At times, a lawmaker may believe the best means of carrying out his fiduciary responsibility is to engage in a filibuster to keep a bad bill from moving through the process.

30. Gamete (n.) --- a mature sexual reproductive cell having a single set of unpaired chromosomes: What do you get when you cross the gamete of an Assembly Republican with an Assembly Democrat's? We do not know its never been tried.

BOE AND LEGISLATIVE DATES

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.

NOTABLE DATES/ HISTORY

August 12, 1981 --- IBM introduces the PC and PS-DOS version 1.0

August 13, 1587 --- In Roanoke, VA, Manteo becomes first American Indian converted to Protestantism

August 14, 1846 --- Henry David Thoreau jailed for tax resistance

August 14, 1862 --- Lincoln receives first group of blacks to confer with a U.S. President

August 14, 1935 --- Social Security Act becomes law

August 15, 1620 --- Mayflower sets sail from Southampton with 102 Pilgrims

August 15, 1870 --- Transcontinental railway actually completed

August 16, 1863 --- Emancipation Proclamation signed

August 17, 1807 --- Robert Fulton's steamboat Clermont begins first trip up Hudson River

August 17, 1846 --- U.S. takes Los Angeles

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