 I'm a welcome club to a program that's being co-sponsored by the Commonwealth Club itself along with the new America Foundation And we are delighted that you are all here with us today And we promise to have an exciting and stimulating and educational program for you My name is Noel Perry and I founded next 10 about eight years ago right after we had the The dot-com crash along with the state for the first time going 15 million dollars into debt And also what you probably remember to be the electricity crisis So I have five sons and right around that time of venture capitalist working in many different areas, but particularly with companies like LeapFrog Toys and also First best organic baby food and some other kinds of companies But anyway, I was inspired to start next 10 which is the next 10 years of California because I was concerned about the future of the state And with five sons, I care about what happens here. I was born and raised in Rhode Island, but I've come to Totally love California and what it offers us And I still even though the Californians help some people believe that We're somewhat tarnished because of what's been going on with the budget I believe deeply in the future of the state and the fact that we are the Road to innovation and we are the leaders of the future in many different areas so Here we are today And we're going to do the California budget challenge the California budget challenge is a non-partisan tool that over 300,000 Californians have have used and for example for the last year Made presentations to over a hundred groups similar to use using the clicker technology that you're going to use today So we're really excited to be able to play a small role in helping to educate Californians Today marks the update of the May revise for the California budget challenge as you know the way the budget in January the Governor comes out with a budget that gets revised in May and so after it's revised based on new revenue projections and other kinds of factors It's a different situation. So we have to update our challenge And so we took this opportunity with the update of the challenge to invite all of you here today And these wonderful free experts who have taken time on their busy schedule to be with us today I want to say that This we have a gentleman by the name of Tim Gage He's the director of finance he works with us to he's our expert to help revise his questions We've also had Mike Janess to why he used to work for former Governor Schwarzenegger. It's his director of finance So we are advised by good people on this and our goal is always to make sure that it's non-partisan approach But today we just this is hard off the press We've just recently revised this you are the first group to have this experience and so just so you doubt we we want to improve The challenge and so you may have actually suggestions for changes that can make this better. So we're totally open to that today One other thing regarding California You know over the last eight years We've been struggling with the budget it has taken a toll on the state and one of my firmest and deepest beliefs is that The next few months California can get the budget challenge resolved so that we can move beyond this and start to to to work on Work on improving K-12 education higher ed our prisons, you know our safety that It really has been an opportunity cost to focusing year after year on the budget Where we haven't been able to the legislature The focus has not been able to deal with these other issues. So I'm hoping myself and probably I'm going by many of you that we do Get this result So a few housekeeping things if you just turn off your cell phones, I'd have a great the bathrooms are in the back There lunch is going to be served at noon. We'd have a great lunch. What do we have? sandwiches and also We've entered all of you, you know the budget But we have a raffle that we've put all of you into And so at noon, right when we finish we're gonna know who the winner is of the raffle the raffle is A what is it Sarah to go to the restaurant right up here which restaurant? Yeah, it's a great restaurant. I've done this So at this point I'd like to introduce our our panelists We are truly honored to have all of them here. We have John Myers. I was John said we need this morning and I thought he couldn't because it's something happening in Sacramento, but he said that he couldn't stay Afternoon, he has to be with the senators and I said, oh, thank God you can be here Thank you KQED actually in 2003 when we got started with next 10 He spent more than 50 years as a reporter anchor and editor of both TV and radio news in addition to his duties as Sacramento bureau chief at KQED and the California report John's reporting work Has been featured on a wide variety of national news outlets including national public radio NBC news hour with Jim Laird and beyond in 2004 John began a daily news blog capital notes Which today is the longest-running news blog of its kind reporting on California politics And it really is a fabulous blog and you know next tense in the in the business of educated Californians, I think John's been doing that for many years too Then we have Dan Schnerke we're honored to have for years Dan has been leading political and media strategist in California whose record includes work on four presidential and three preliminary campaigns in addition to his position at USC Where he works to motivate students to become active in the world of politics and encourage the political officials to participate in the daily life of USC Dan is a Instructor at UC at UC Berkeley's Institute of Governmental Studies and finally now last police the man of the hour Jim mayor Jim is from California forward and California forward in his bipartisan public interest effort to bolster democracy and improve the performance of government in California Previously Jim was the founding executive director of the new California network and before that was executive director of the little Hoover Commission an independent and bipartisan State panel that reduce state programs and policies for efficiency and effectiveness Okay before I turn it over to our panelists I wanted to Have a little brief instruction on the clickers. Everybody has a clicker, right? That's your voting instrument Okay, so we're gonna have a little We're gonna do one question here as a warm-up In the first question, I'm going to invite the The audience to to the answer this question that's going to be up on that screen up here in the last 50 years How many times has the California State budget been balanced? Number one zero number 219 number 339 number 450 and so it is kind of a trick question Question already Okay, so so you have So if you go for one you first push one very complicated go for two push two and you can vote a million times But it's only going to take the last one that's registered before we actually do it So in other words when we get into the challenge if you want to answer the question right away You can answer it and then that'll be if you don't have to do anything else. So Sonali It's here today. I'd also like to introduce Sarah from next 10 and Marsha was Marsha Well, Marsha's here too. She's out there registrations. Those are the three staff from next 10 who are putting this on for us today With me. So anyway, so let's vote They watch that it's going to be say five four three two one And I have to answer before it becomes zero Yeah Wow So the answer actually is 50 my law it has to be balanced. I like answer number one You're the real smart Yeah, so we got a good group here and so Let me see without further ado Anything else here? I don't think so without further ado. We're going to start it out with John who's going to sign in at 35,000 feet and Give us an update where we're at the other thing We asked the three panelists to see if they could come up with some questions for us to put up on the screen and each Of them has come up with a few questions So so they're going to have each one is going to have eight minutes to do their questions and to explain And educate us about the budget so John, please. Thank you Thanks for having me. Appreciate it Thanks for all of you coming out. That's that's impressive. That is Four more people than I could get in my neighbor, but sometimes we're talking about the budget They usually push me the other way when they see me coming out You know, I was going to say that you're getting sandwiches for lunch and your real test to figure out How much of the sandwich you want to eat how much I think you're willing to live without How much you want to borrow from your neighbor So I thought I'd tell you a little bit about where things stand at the Capitol now We drove down this morning and Shockingly yes, there's no budget to surprise We are In a story that I did this morning for for us for radio I said that really, you know, we are where we have been I think it's January because we're stuck over that mighty t-word is in taxes And we've got you know parties pretty start to scream about that We're actually now with every year we seem to develop a new phrase a new way of looking at it So now we're talking about bridges This is the governor's Cratology now, so yeah, he wants a bridge a tax bridge Because you may remember he wanted a special election on taxes when he took office in January He actually wanted that election on June 7th, so we're now two days past and he would have voted but shockingly you did Because he could not get agreement in the legislature to call that election primarily because Republicans did not want to call an election on taxes debate Why that was later So now we have gone too far to have an election up or down on taxes before the fiscal year starts on July 1st So now the governor wants what he's calling a bridge tax decision Which would effectively be the legislature conditionally approving 8 to 11 billion dollars in taxes subject to later ratification by the voters he gets more more complicated The governor's staff has taken even going on Twitter and put it up links to a YouTube video of bridge over troubled water Meanwhile, of course, you know where the other party says it's a bridge to nowhere Got a love But that's where we are now and you've got you've got the minority party the capital is still believing that this is not the Way to go as a matter of fact, I think actually it's more complicated now because now they believe they would be pillory We're actually voting for the taxes themselves and not the election on taxes so on and on we go I think next week will be particularly interesting because June 15th has never meant anything to California It has been in the Constitution for a while as the constitutional deadline for legislature to send a budget to governor That's never mattered until this year this year. Thanks to all of you passing prop 25. Maybe you didn't vote for it But the voters passing prop 25 they do not get paid if they do not pass a budget by June 15th There were some discussions whether wiggle room around that the controller the guy the right check effectively ended that He said sorry and I can't pay and it's not retroactive. So they do not get the money back Whether that produces any kind of squirming or wiggling had one Republican assembly member talking about Taking out money off his credit cards to pay his mortgage, which that sounds like it's not very good Whether that produces any movement in the capital So I came with a couple of random questions that I thought might Present some of what I think is interesting about the budget because as you will find you already know this The California State budget I think is one of the most complicated processes I've ever covered as a reporter and when I check in with people who cover state houses around the country people who come I'm from Washington. We want the most complicated fiscal Practices in the country simply because we the voters have gone in so many times And there's so many things that we have to sort out. So the first question I had is up here Which is I'd like you to tell me what you think the size of the budget problem is For the fiscal year beginning July 1st Is it two billion? Eight billion is it ten billion or what's the problem? Use your jeopardy And so let's see what you said it is Ten million dollars seems to be the winner with I love the what's the problem again, you're the fun people Well, it's not terribly a trick question, but it's it's sort of a trick question The ten million dollar number might be technically right, but that's not the answer I would suggest the answer I suggest is eight billion Why eight billion is eight billion is the size of the tax package the governor needs on the ballot and they get the taxes So the ten billion has been the deficit problem They've come up with an additional two billion dollars of solutions, but the eight billion is the immovable object So you're right either way But I would vote for eight billion because if you can't get the eight billion you can't get the deal right now You can't balance the budget so everybody's kind of right well two and three What's that? Yeah, exactly right you guys are on the move so my second question to you was That the governor's plan to put tax extensions on ballot It wasn't really blocked for months for what we used to block budget for or budgets got stuck in Used to need a two-thirds to pass a budget. We don't need that anymore again pop 25 It wasn't even stuck because of approving taxes, which is a two-thirds problem It was in fact stuck because we could not agree on putting something on the ballot so my question is California requires a two-thirds vote of each chamber to place a measure on the ballot Are we unusual in that respect one? No Everybody does it to 17 other states have this requirement three only two states have this requirement for nobody is as screwed up as us What do you think how unusual are we when it comes to the legislature placing a measure on the ballot how hard it is Two states require 46 17 states 34% Here you're both still stuck in the two and three the answer is to 17 states require that We're actually not the hardest state nine states require a three-fifth vote Of the legislature to get something I mean, oh Yeah, not a three-fifth. Thank you. I just did the math in real life. That's the wrong answer No, they require A higher threshold We are not completely unusual but 17 states in the country have a simple majority vote of the legislature to get something on the ballot A constitutional amendment on the ballot in which case we were one of those states. We would have done we've been done with this by now Number three was my question. This is one. I love as a reporter. This is what I get all the time We talk about education funding People say what happened to the lottery? I Voted for the lottery. I thought the lottery was going to take care of it My question to you is how much money does the California lottery provide schools? none Two cents of every dollar spent 20 cents of every dollar spent 60 cents of every dollar spent on schools Yes, on the K through 14 part of the budget, which is what the lottery is dedicated to provide its profits survey says you are a smart group of people 59% picked the right answer two cents of every dollar But it is amazing how many people do not know the answer to that question It's only two cents of every dollar. It may seem like a lot of money But we spend upwards of 50 billion dollars now on public education The lottery is not that successful. The lottery is actually more successful than it was a few years ago But it will never get to that point To catch up to really do what I think the voters thought they were doing when they approved that my last one if I have time Do I have time for my life? Ah, yes, you should give me the nod So the governor's we know wants a special election of taxes. We can talk about whether that's a good idea I would submit it was a political calculation. He didn't have to go to the voters. He could have just got the legislature to do it How many special elections have there been in the last well first of all There have been five special elections in the last 40 years in California How many governors have failed to convince voters to approve their pet special election proposals? nine 12 all but one well 12 would be wrong because there were five Now give me one How successful have governors been in other words or how you know, that's the gist of hope we're talking about here What's the governor's likelihood of success when he takes it to the ballot? You're so smart. I need to come up something harder only one governor has achieved this goal Pete Wilson 1993 sales tax dedicated public safety Ronald Reagan failed in 1973 Jerry Brown failed in 1979 with the proposal of a bussing Arnold Schwarzenegger famously failed in 2005 with his measures and in 2009 everybody failed with the legislature the governor getting Taken to cleaners on that one And I think that shows how difficult the governor's path that he had put up forward here is going to be Once you get it through the legislature the voters become very skeptical and in the tax realm So I've given the hook Speaking of someone who worked with Mr. Wilson I was briefly before I get started what I'll do is add on to what John was saying about how difficult it is for a governor They pass a special election budget. I was going to listen to communications director in 1993 when the house and sales tax passed Three important things to know about that number one is a sales tax extension supported by Both Republican governor and the Democratic Assembly speaker Willie Brown Second that the money that would come from that sales tax increase was dedicated specifically to police and fire protection So voters might have been skeptical to go into the general fund had that answer Third the day of the special election the largest forest fires in the history of Broca that fire made a big difference. I think I had spent the last 18 years denying that I sent those fires But we need rest Like John, I want to thank the folks at X10 and Commonwealth Club for putting this program together Know promise to you somewhat ambitiously and exciting stimulating conversation on the state budget and Now that we've passed through the economy the silence of John Myers I should probably tell you that while I think it will be educational and informative very helpful Exciting and stimulating is probably a little bit of a high bar for us to set for today's Today's exercise. I've been in the Commonwealth Club before talk about campaign finance reform And what I've learned is that if you string those three words together enough times You can take even the most highly caffeinated audience I've been through the past talk about the district And so I'm very happy to be here today Gonna be different today, yeah, there's a There's no that in politics actually. It's all that is our own. That's why There's an adage in politics Everybody wants to go to heaven. Nobody wants to die And when it comes to pass in a state budget, I think you can see pretty clearly Exactly how at that adage When we pull at even the USC college LA times pole and when the other Was recommended polls in California public policy to California in the field Institute pole not surprisingly know the one majority of Californians think we should have a balanced budget Imagine that where you get the troubles exactly how to do it We asked voters whether they would be wanted to see a budget passed solely to spending cuts solely through tax increases or through a combination of spending cuts and tax increases a Very very small number said the budget should be balanced entirely by tax increases less than 10% somewhat larger minority Roughly the mid to high 30 percentiles said that they believe the budget should be passed by all spending cuts and The majority said that they should the budget should be our budget deficit should be solved through a combination of Tax increases and spending cuts now from maybe not 35,000 feet, but 33,000 feet That sounds a fairly responsible electorate But let's take a bit deeper So what to those people and said all right you think the budget should be balanced at least partially due spending cuts And all we began to ask is what areas of state spending they would like to see Okay, so all education. No Higher education not a chance Healthcare transportation public safety environmental protection. No The exceptions not surprisingly our prisons welfare and Cellular phones away from state employees I As politically enjoyed his years obviously moved in that direction But obviously that's a relatively small amount of savings. So then we move on and ask them about okay A lot of you believe most of you believe that the budget deficit on me solve them is harshly to tax increases Well, let's talk about what taxes you'd like to see rates sales taxes. No The other license fee Income tax Who will you raise tax side? well tobacco gamblers oil companies And wealthy people so in other words what we see after digging deeper into this question of the Californians who want to balance the budget through a combination of spending cuts and tax increases They want to balance the budget through tax increases on people other than themselves And why does the spending cut on programs that do not affect them? So as you go to me This is the real value and I give Nolan his team just such a huge amount of credit for putting together the budget challenge Anyone in this room who in the second hour of our program is willing to impose additional taxes on themselves Or support cuts for programs that you were loved and benefits from you will have my undating respect And know that in the only the best possible way You are abnormal I Normal sort of majority They wish to go a special Really work either How about you meet commendable no and hopelessly hopelessly hopelessly outnumbered And what we can hopefully talk about a little bit later are the political considerations of play here Governor Brown has in fact proposed a budget that is made up of some spending cuts and tax increases and not surprisingly Both parties have rejected the aspect of the budget plan leads to appetizer to them They do it because of ideology. They do it because of the way the districts. They were Districts they write in were drawn They do it because they know the only way that remember the California state legislature can lose a reelection campaign Is to a more liberal Democrat or more conservative Republican and competitive primary? So the only way to lose the seat in the California legislature is to compromise They do it because they have an actual set of incentives ideological and political California voters they make these decisions because of a lack of tools available to them And that's why I commend the next head budget challenge for giving me some California the two of the figures out here cells All right To close the rest of the budget deficit you favor or oppose holding a special election In which voters who decide whether to renew increase Income tax sales tax and vehicle license fees that recently expired now these questions This one and the other one I've listed our questions that we posed in the USC college early time budget And so what we'll be interested into seeing how you guys compare to the left to the left is a hole One you favor a special election to your vote 60 72% favor 28% votes as you can see in a statewide poll. It's a little bit closer 60 to 35 Could twist on this which we won't have a chance to pull you guys out Although we might talk about later is when we asked those voters whether they wanted a special election or not a very large Plurality something wanted special election in order to vote against the numbers So it's not really clear why they would like to take place except they don't spend enough time in high school gymnasium Second question to close the rest of the budget deficit you favor or oppose passing the bill Legislature to renew increases in the income tax sales tax and vehicle license fees that recently expired one favor two of those 85% yes Our poll results statewide What Governor Brown will call you is the first concentric circle Also call you a rare bird Very quickly, and I apologize here is also guys in question. It's not out there You're instead of clicking and asking if you just the old fashioned way raise your hands Over the last several years Has California's general fund budget? increased or decreased How many people in the room believe the killer over the last I believe the question is the last Three years three years Okay, yeah, we do it When you say the California state budget is bigger than it was three years ago smaller was three years ago Or is it state about the same bigger smaller state the same This room says thirty three percent bigger forty one percent smaller 16 same that is smarter than the overall electorate not surprising because in fact over the last two years California's budget had shrunk Getting back to the point to motivate the California budget talent that most voters even while meeting voters You want to do the right things don't have the tools of your disposal in order to do so the bill things together Thank you very much Everybody and things know we're bringing everybody together and all your great work I'm gonna want to begin with the one of the answers in John's first question Which is what's the problem right because if you wage into this conversation or battle about budgets What problem you're trying to solve will obviously have a lot to do with whether you're satisfied with the ultimate answer and It's revealed and explained and explored a little bit in the presentation so far that if you're looking narrowly at the decision that lawmakers We're trying to make in the capital right now This is about reaching a budget that they can pass and that by law whether by reality or not is supposed to be balanced Right and so in within the realm of that you get the choices that have been explored here You know you can either increase the revenues or decrease your expenditures or a combination of both and so it's a game of mathematics And within a capital it's it's not just a game of dollars. It's a game of control and so Overshadowing any conversation about how much to cut or how much to raise revenue is whether or not you need a simple majority to make those decisions or whether it's better to come By consensus reflected by a supermajority and you are all smart enough is demonstrated by your answers to know How that breaks out in terms of blue and red But if you were to step back a little bit from the you know This one hand of seven cards study and say what are the rules of the game under which we'll play in this poker game To see if we can't come up with with better answers on a more systemic level And that's something that we started a lot at California forward when we first launched a couple of years ago We looked at the rules of that of that budget game and we said what's the problem with the budget process? How come we can't come up with better answers? And there's some very sophisticated analysis involving lots of experts and and a variety of analysis, but I can I can distill those down to three fundamental challenges that we've had in California increasingly over the last generation This isn't new to this recession at all. The first is That we have a habit of spending money we don't have and this isn't an argument for big government or small government Once you get people in a room you actually have to understand that you can't Systematically, systemically on a sustainable basis spend money you don't have but in California We continue to do that the budget may have shrunk over the last three years But there is at one time in the last ten years with the state of California spent did not Excuse me in each of the last ten years California has spent more than its revenue So even in the good years even when expenditures were growing by double digits We were spending more than was coming in the door Right, so that's the first problem. The second problem is is that government isn't immune to the business cycle And it's particularly not immune in California where we have a very dynamic economy and a very progressive tax structure We tax the rich more than we tax the middle class or or which means our volatile We have our revenue is not just volatile. It's the most volatile state general funder in the system in the nation Now you can do things to the tax structure to make it more stable Or you can do what most people who have volatile revenues do which is to manage your money in your good times Save it and invest and have it for your bad times and we have Hitted out by the discussion to the first problem. We haven't done that very well in California at all So a second systemic solution we need is we need to capture money in good times and The third is that we are there is any part of this discussion None of these two big pie charts behind me say here's where the money's going here's what we're getting out of it And here's our commitment to spend this money better next year than we spent it last year. Now, that's a very simple Principle of good fiscal management. It's one followed by many government agencies. This again This isn't something that's unique to humans to households or unique to private sector But our budget process does not include performance measures It doesn't include or incorporate analysis of whether the programs are working or how we would divide that big slice of the pie That's going to K-12 actually And so we've worked on these and we've got some solutions to that and some of them have been in place and some of them are more Scooby-Doo the legislature, but I want to now turn to it step back even a little bit farther from the rules of this poker game And say what are the really what's really happening with these chips? What are we really doing with this and At the end of it when you look at the state's fiscal system, we again have three fundamental problems that we want to think about The first is is that the vast majority of Californians have lost trust that our elected leaders in the state are Spending their money well, and this is not a D thing or an art thing 50% of Democrats according to the Democrats own Don't trust state leaders with their money Overall 65% of California's don't trust them naturally Republicans don't trust them as much as Democrats But 72% of decline to state voters don't trust state leaders with your money. So this is a big issue You know what do you do to fix that but think about yourself just as active involved citizens If there's not enough confidence the government's going to spend our money well That's a fundamental fiscal problem The second biggest problem is that most of those poker chips are they're playing with somebody else's money And I don't this isn't a tea party issue of their spending You know they're dealing with my money or your money This is this pie chart right here and look at the one here that says health and human services K-12 education Virtually all of that money is spent in communities. It's not spent by state agencies It's not spent by Sacramento It's spent by the city and county of Sacramento the cities the cities in San Mateo County and Santa Clara County to do K-12 education community college education to do the health the safety net how works job training those kinds of programs, but yet the trade-offs that are getting big what's getting high centered by this gridlock and all the rules is really money that Ultimately is spent at the local level and once upon a time in California's history more of those trade-offs were made at a local level And finally the third big problem is is that they actually spend those monies that money With the desire of having an important outcome And so the outcomes matter and in fact the outcome not only matter in terms of are we improving the well-being of our Communities, but it impacts future budgets the reason why that prison budget has grown from four billion dollars to ten billion dollars over the last decade is a combination of criminal justice policy and Failures in the educational and health and human services system. We graduate our failures in government to more expensive least effective solution And so the long-term structural answer is yes, we can't spend more money We're gonna have to do this kind of trade-off we need to change these rules of the road So people actually have better and smarter choices to be making in the budget process But we also need to rethink and restructure the relationship between the state local government Especially around the fiscal system so that we can re-empower community governments to have ownership of the programs that they're delivering To be responsible to you as voters and taxpayers and citizens and clients and customers for the results of that system And then so that they can start having the conversation across governments that are necessary to deliver better results To quick examples high school dropout rates right 30% or even the Department of Education of High schoolers don't graduate in a normal timeframe from a normal school They may come back and get something else later on But anything that we would call a high school dropout when I was in high school You know three out of ten of us wouldn't have been there at our graduating class Right, that's a huge problem. That's a huge problem in a state like California Now what does it take to reduce high school dropouts? We actually know we've got very effective programs throughout the state The schools alone can't do it The schools can't do it without effective children's mental health programs without effective drug and alcohol treatment programs Without ways to intervene and struggle with families early when they know it with effective programs that actually solve the problem We know the solution it involves more than school It involves top probation officers private sector non-profit faith-based community We got to get to a place where those solutions aren't one-off examples that we're giving awards to But they are the industry standard for a government and deliver the quality of services for their active lives That's the real And that's where I think the governor lots of people are headed with a real idea With that we've got a couple of them One joke for the laugh Completely failed miserably on the standards I extinguished all the smart-out It's a good question Who do you trust most and decide how schools need to be spent? The governor and the legislature, the state superintendent of schools and the board of education And only this audience probably any of those who that is The superintendent of the school board of the local school district We're the principal of your school Where would you put the most trust? Make a shared responsibility ultimately But where would you put the most trust? So when you saw that big slice in that pie That we're debating how to spend that percentage Actually, do you guys understand the implications of that? So do you want to go to the next one? We're the 2% We've got the level It's like a snap It's just class, you don't get to vote up these things The state budget for next year is about $10 billion out of balance Not the $8 billion solution that John accurately identified But the balance is $10 The balancing budget may require cuts in schools Help social services and prisons How much would you be willing to pay in higher taxes to balance the budget? This isn't going to get you his un-dying respect and support But it may get you at least some of his respect and support I'm not saying what you would cut But what's your willingness to pay? This is a classic economic question But not the table Just general fund How much are you willing to get those guys in Sacramento To close the $10 billion gap? So there's a good bell curve there And some of you will see you're willing to give At least a couple of good nights at the restaurant Okay, let's go to the next question This is narrowing down a little bit But it's along the same lines Last budget Some school districts are considering closing the schools a week early That's free What's the most you'd be willing to pay in higher taxes To keep schools from closing up? Last question was Give it to the state Let them balance the general fund And it'll keep everything from being cut We're just talking about the schools in San Francisco Pulling all the way through June next year How much more are you willing to pay? Wow That's the last question Most of our schools are out of school now I guess Okay, the state's high school drop-off rate Is estimated to be 30% What's the most amount of money you would be willing to pay In higher taxes If you were confident the money would result in a 5% decline In the drop-off rate That bell curve a little bit more I would tell you It'd be fun to discuss this So anything that has ideas is we move along And maybe this is a product of where we are In San Francisco In your own relationship with SF Unified But the trend that we've backed from the dialogues And others we've been doing around is that The more you can focus people on results That you can confidence And that they can see where the money's spent Generally speaking, people are willing to invest more And certainly that's true In rather hints of the state for sure So something to ponder and think about That these are the broader long-term questions Around the state's fiscal challenges Alright, let's thank Jim Let's get into the California Budget Challenge Which you've all come here for And you're so excited about it Let's get it going And any of you who are really good at it The redistricting commission puts mats out tomorrow You might want to think about running Because we can use you in a second Definitely So just a basic review here Remember, we started out the year With a $26.6 billion budget deficit And then the governor's January budget proposal Remember what he said he wanted to do Which we've been talking about And our panelists have talked about Standing temporary tax increases Shifting responsibility from some services To counties' cutting spending To nearly every area of the budget And we know that there was about $11 billion cut back in March And then we have the May revise Which is what we're here today to talk about We had the $6.6 billion in unexpected Revenue gains And then so, you know We've heard different numbers For what the budget deficit is John spoke about $8 billion So we're talking about $9.6 billion deficit Remaining after the March debit budget cuts And we look at it as $10.8 billion To achieve a $1.2 billion reserve Let's not worry about the actual specifics here But we are going to start out with A $10.4 budget, $10.2 budget deficit So again, the California budget challenge It's not partisan, it's not online This was just updated June 9 Starting point start, we're going to start With a $10.5 billion budget deficit Remember that this California budget challenge Goes for five years, so this is five years out Can I make one point that I think is That people don't understand And the doctor and the legislature Have not done a good job showing you this Maybe for their own reasons In the slide a moment ago where it said The $6.6 billion in forecasted revenue gains Is the unexpected windfall we've talked about That number is not inaccurate But it also is in a budget that includes The governor's tax extensions If you roll the governor's tax extensions Out of his budget, which is $8 to $10 billion You would not be ahead of where we were We would be cutting more, does that make sense So with all these people that you talked about And said, we don't raise taxes We have $6.6 billion extra Well that's assuming that the governor's $8 to $10 billion tax extensions Go on the book You don't have those You don't have a $6.6 windfall You're actually under projection So it's a context that is missing The political debate Thank you for that clarification Before you take your decisions Okay, so go ahead, Sonali Okay, first question K to 12, so just so you know So we're going to go through the challenge And you're welcome to ask questions Any clarifying questions I'm inviting our panelists To come up with any thoughts Or anecdotal information that they have That clarifies this I'm going to moderate this And there's probably going to be a lot of questions Right now I'm looking at a time check And we've got about five minutes of 11 So we have good time We have an hour to do this And so please don't get upset If I cut you off It's not because I don't want to speak I just want to want you to speak When we go to meet the time deadline Plus we're going to have time later to speak And we're going to do our raffle At the end here too Okay, so how much should California spend K to 12 education The first question The first answer will always be no change So here we have this change K to 12 for pupil spending 2016 will be about $11,500 Which is 13% Below the projected national average Reflecting action on the budget In March Number two, reduce the deficit $4,000,000 And hold growth And total funding below The required Prop 98 growth rate This would be 18% Leave us 18% Below the projected national average Number three, add $2,000,000 To the deficit And use this funding To reduce the amount of school district funding Deferred in the following year This will increase for pupil spending By $40 $40 is 13% Below the projected national average And then add $4,000,000 To the deficit And increase for pupil spending By $650 Which will leave us 8% Below the projected national average So do we have any questions? Come out If you said for every dollar You spent like pre-school education You'd say $4 down the road So is there any aspect that you've done That for every dollar You spend in the future For all of the awards Some fellow in the prisons Yeah, that's a great question And the answer is no That would be too complicated For what we're doing here The other thing to keep in mind Is unlike the federal government The state is required to balance On an annual basis So depending on your ideology You might see additional funding And preventive services And saving money down the line On the other side of the aisle You might see tax cuts That's causing rapid growth In the future years But you can't figure that Into the year in your bucket I would just note that there is A national website now That explicitly has done the math And links dollars spent in education Or at least graduation rates And college education rates And how that affects crime Public safety and other kinds Of financial issues And I think the other Tremendously hard part about schools And this is a broader discussion And this unfortunately Makes this a tough choice here Is that you can look at Per pupil number But it doesn't quite get you To where the money is going I mean there's a great big Discussion about how much control The legislature has over where They have to spend it Versus loosening those restrictions How much goes into the classroom How much goes here How much goes there I mean and you'll never get That dissolved in one thing But I think you know Once you start to appeal In education funding You start asking a lot Really complicated tough questions About the dollars Sir? Quick question Numbers one and three Have a difference of two and a half Billions dollars in funding But no difference in the percentage Or the actual average So there's something funny in the numbers I can say that the third choice Is the governor's main revision The money is being used to pay That budget's overall Whereas the first choice is not The first choice is for no change So the third choice reflects The governor's main revision budget So that's why you don't So the difference is The use extra money with the money Goes into the overalls To pay the overall As opposed to Yeah the January budget Said that some of the money We owe you schools And we'll get to you later And now May says Well we got a little bit more money We actually won't push you off That funding issue Right Okay one more question Then we're going to move on please Registering a recession Will continue to identify Equated recognition As the economy improves Over time Well the antlin What I have seen From the legislative antlin's office Which is the really I wrap myself in a blanket That we are not part of They don't want to predispend me The economy is improving But slightly over the next Five years So whether someone And then we get into a debate About the taxes impact The recovery or not I think the bottom line here Is that you should assume The economy will recover slowly You should not assume the economy Will fill in the money That we have lost on the natural I mean Yeah exactly I mean no one even figured out The taxes that we've had In the last two years What in fact they've had On the economy You're pulling apart These models of static And dynamic forecasting And it makes my head burn But I mean The general consensus is There are not any projections Over the next five years For the state budget With and without these taxes Sly growth Sly growth is not enough to solve All of the cuts that have happened Over the last five years That's a general answer Okay so we're going to go on We're going to vote now I saw a couple questions Sorry I couldn't get to you But why don't we go down this And all of you will put this up That's a toughie What would you like to do I know everybody here Care to go on education Okay we are going to add $4 billion to the deficit Because we have You have all 37% of you Have decided to add to the deficit Because you want to bring Some more resources to education So Sarah is going to be Running our deficit So we've gone from a $10.5 billion deficit Up to a $14.5 billion deficit Okay community colleges What level of funding and fees Should community colleges have Number one, no change Community college funding in 2016 Will be about $6,000 Per student and fees $36 per unit Two, reduce the deficit By $400 million and increase fees From $36 to $62 per unit For a debt reduction And funding $100 million Three, add $400 million to the deficit And use this funding To reduce the amount Of community college District funding Deferred into the following year Leave fees of $36 per unit And finally number four Add $400 million to the deficit To increase funding to schools And return fees to $26 per unit I will tell you that again The legislative analyst office They still tell us Even with the fee increases In community colleges We still have some of the lowest fees In the country for community college It's not to say that We should raise them as a result But the context is We're still below What a lot of the states Around the country are charging For community college That's an important point Not a lot of people Want to talk to community colleges Out there Don't see any Oh, there we go That's a question As a point of clarification You have a legal requirement For a balanced budget And we're talking about a deficit Running a deficit here Those two things Are contradictory terms My understanding is That what you're talking about Is borrowing basically The difference If you don't have a tax increase Our particular problem is We are rated in the B's By Moody's at the moment A minus A minus? Well, we're the low We're still low We're really low It's a weird rating system So what you're doing Is a positive That we can continue to borrow To balance the budget When you answer these questions And it seems to me That the likelihood Of being able to continue to borrow Is a major, major Political and economic question Greek, Greece can't Right, I think your point is well taken Keep in mind People who are choosing To add to the deficit Maybe have a solution On how to reduce the deficit As we move forward In other words We're going to get into All those possibilities For tax increases And also just to Something new In this iteration Of the California budget challenge Which we're trying out With all of you Is a cap That's being discussed With Sacramento And I know that Governor Brown And Republicans are negotiating About a cap But we have a cap here And that cap is going to be The last question here And it's going to be interesting To see how you will I will say one of the most Fascinating, fundamental Philosophical, ideological Fights at the Capitol Is do you decide What you want to spend And find the money To afford it Or do you take the money That you think is coming in And then decide How to divvy that up Those are two different World views there And I think it gets to Kind of what you're talking about About do you look for More money Where do you say Hey, this is all I got We have that fight Every year You're in here Out about how you view that Exactly Okay, go ahead Okay, two comments One of my own My own is Whatever happened To the traditional method What do we have to accomplish What will it cost How are we going to pay for it Joe's millions Which goes almost What I just said Yeah I've heard your opinion Sorry That's what you said That's great And then in Joe's millions Solving which has been Repeating for years Is spend less Bring in more good now Democratic legislator For Kyle Walton He's not a member of the Legislature Sorry Alright, thank you Next comment So I think This is such a great effort And I want to kind of Appreciate it so much And give me a planning Field In the early planning Field The AB32 And SB375 Since we went to meeting Where there's methods Like this Where you can see The impact of your choices On outcomes And this to me One of the problems With traditional budgeting Is it's not great For outcomes So no one can see What the long-term effects Of these sorts of choices are So Community colleges, for example Are completing And some people say It comes in the state And we probably can't see Any of those outcomes From the choices Right, I think Jim Jim, I think Jim That's your area Jim Clearly The practice that We've been advocating for And if you were interested You could look at SB15 And you could also take that Element of that discussion And embedded in Senator Smitty It's changed Because I guess What do we want to accomplish How well are we getting there And how do we use The resources we've got Now that we need additional Money to get there So you can have both sides Of these These aren't polar opposite Points of view If you take it to A P-A-V-O discussion You'll be able to see The ballots tonight Exactly right All right, so we are Going to have a vote now On community colleges So, Sonali, do you please Five second timer And we'll see Whether we're going to be Increasing the deficit Reducing it Or keeping it the same Okay, you elected 2045% of you elected To reduce the deficit By 400 million And keep in mind Remember, when you're Up in Sacramento If you want to do taxes You need to have Two-thirds of the legislature So when we get into taxes We're going to be able To have the opportunity I'm not saying you're Going to do it To increase taxes With less than two-thirds Of the tax redevelopment You're going to change The way in which You finance Local economic development Number one, no change Keep redevelopment funding As is Number two, end the use Of local property taxes For redevelopment Thereby providing Local schools With more than one billion Three, end the use Of local property taxes For redevelopment Thereby providing Local schools With more than one billion And allow voters At the local level To approve school bonds With a 55% Of local To fund local economic development Instead of the Two-thirds that's required And four, modify redevelopment To reduce abuses Or retain the use of Local property taxes To fund local economic development I've had to become An expert in redevelopment This year, which is the thing And I will tell you That what I find fascinating Is that there are So many different variations Of redevelopment across California There are 400 local redevelopment Agencies. They operate largely Autonomously without Really any kind of oversight They calculate their debt there Their debt load differently They calculate their Priorities differently. They do, however, Have to spend money According to a couple Of rules that aren't up here. They have to put some money Toward affordable housing Projects. And they do, in a Lot of cases, share Some money with schools now. But if they do, Do they share enough? Does the affordable housing Park work correctly? And are they Over-extending themselves? And as the governor Has made the case In this era where Tax dollars are scarce Is this the best use Of the tax dollars as we have? I will say what's fascinating Is that the reason We have the system we do Is that the voters Put this in place in 1962 With a ballot measure To create what's called Tax increment financing Which means that You take these property taxes And you dedicate them Toward these local communities And so now you've got these I mean the incentive For every community Is to have a redevelopment See because any growth In the property tax They keep It doesn't go to the formula That's everywhere else So it's fun. And so that you know So this question No matter how you answer this question It will not affect The general fund budget Because these are funds That are going to go To the local schools. Which is interesting Because it's different Than the governor's proposal In that sense Because the governor's Proposal to take them Well it's the same So this is All of our numbers Are being touched out by Five years. So in year one It would affect the general fund By $1.25 a year Five years. So the governor Wants a one year fix For the general fund Then he would push it out To the local communities Which may or may not be legal By the way. You like it? You think it's useful? Okay. Dollars to education And change to 51% Go back to number three Let's make sure everybody Knows what you all decided To have 51% Number three Any use of local property taxes For redevelopment By providing schools With only $1 million And then you want to Mute the 55% change. Okay. Thank you. Let's go on to the next question Which has to do I think with UC and CSU The economic engine In California, right? UC and CSU What level of support Should the state provide For UC and CSU? No change. Remember the budget We use funding For UC and CSU By $500 million each That's what was done in March. Number two Reduce the deficit Of $1 billion And cut funding To UC and CSU By an additional $500 million each. Three Reduce the deficit Of $1 billion And cut funding To UC and CSU By additional $500 million each But increase tuition By 32% To make up The losses of the Universities. And finally Number four Add $1 billion To the deficit And increase funding To UC and CSU By $1 million each To enable them to Roll back Roll back the cuts May and March So UC and CSU Tremendously wonderful Educational institution Which is The light of the world Really So any comments? Go ahead. How much tuition Is possible? How much Does anybody know What tuition is And UC Today, anybody know? We know It's gone up 33% That's how we know The year Previous day $10,000 For UC Yeah How much for CSU? $6,000? Yeah Yeah Okay So it's gone up 67% For UC It's over 70% For UC $6,000 Okay, that's A great part Just to complicate Things even further Beyond what we can cover Today The Regents Are now debating Proposal That allow Different UC campuses To charge different Tuition levels Once you go to Santa Cruz For a lot less money Then We're going to sort of Mix and match this approach Thank you, yeah Go ahead How are these compared To the rest of the states In the country? Okay I know the answer to that You've told me many of Our panelists Want to answer before You have five kids You might know So My understanding Is that The UC system In other words If you compare it The best The best state universities In America California's Fees Are still Relatively lower Just like John said About community colleges Than other schools Such as Michigan And I'll stand corrected As somebody knows this But I remember Steve Levy Whenever a leading state Economist Would say that So one of the Interesting things That has happened In budget cycles In UC Is there has been a push To get more out-of-state students Because out-of-state students Pay a higher tuition And if you're a region Of the UC You solve part of your problem By jacking up the costs Of those costs Which of course Then presents problems For that guarantee About the top Ten percent of students In California They guarantee The UC spot Somewhere in the UC system Again We started out I wasn't here But when we started The UC system I guess It was great When that went right When it started So it's all relative To where it came from Of course there's that Interesting thing Where we continue to use The term fees We're really calling tuition You know, we're so Averse to saying That we charge tuition Even though For God's sakes The tuition All the way in the back I want to say that The UC master plan States the goal Of the school Is to be free And it should be By state law That nobody Varies from that Purpose Okay, thank you For that Sarah, do you know How much it would cost The general fund To eliminate all fees Along with the No tuition to make it Absolutely free To attend the UC or CSU school That's the entire population We'll talk about it In our Background tomorrow Okay You know, the old saying About the state of California Is that it's three jobs Or to Educate, Medicate, And incarcerate We haven't gotten Medicaid yet We haven't gotten to Health and Human Services But there is a tremendous Ongoing fight And people who Want to show you statistics About how the funding Levels change Between corrections And higher education And Governor Schwarzenegger actually Tried to link it to Where everybody told He was silly to do it But, you know There is an ongoing Discussion about Where our tax dollars Over the years have gone And our priorities About where we're Spending themselves Okay, we're going to do One last question here Go ahead Sir, I said How many of you That do you think Is there a school Funding by voting now? Great question I don't know the answers To that We can work on that Do you know, Sarah? Well, still the I think it's Supposed to a 20% You know, what's going to Actually happen Especially to The government by the region There's really no way to say But it is a Significant cut To the assistance And the CSUs Have already gotten To the place Where some of these Budget cuts They have actually Delayed admission For people who They were already planning To take Because I Teach for a time In the CSU campus Sometimes And of course Quickly the other thing To consider Is what you Implement those cuts In areas other than The size of the student body What you end up doing Is reducing faculty And class offerings So my students Tell Whether they want you Or not End up staying Five years in walkers Simply because The classes aren't Available to them They want And of course Every year You keep up the Subsidy in the Crossroads We're funding Because We've got to get going I absolutely agree With what Nendo said I'd like to add that As you see Where it takes fewer students Who pushes them To call a state As they take fewer students Who pushes them Who is near the colleges So they now Have a larger number Of students Running To a smaller age And as community Colleges Take fewer students That pushes them To prisons And that goes back To how much And on that note Why don't we Go here See what direction We're going to go With USC Are we going to Reduce the fees Or increase the fees Or leave it the same Okay We're going to add $1 billion to the deficit We are now Currently at a $15.1 million deficit Tremendous Commitment education Amongst the people In this room And they're going to be And we're going to Go on to healthcare now Well, yeah Let's do 27 47 I was just curious I'm trying to Write them down Let's see John can see What's there I want to justify my time At your room I'm writing something They're all very smart Sorry Okay All right Thank you, John Okay Now we're going to go To healthcare Should California scale back Or expand Healthcare coverage Provided through the Medi-Cal program Number one No change And keep in mind That In March There was a reduction Of $2.3 billion In this area Number two Reduce the deficit And reducing Medi-Cal benefits And eliminating Adult day healthcare Three Add $2.3 billion To the deficit And reverse The recent changes To Medi-Cal Healthy families And adult day Healthcare And four Finally established A single payer system Had to get a single Payer in here Of healthcare In California Were a single entity Such as a government Right organization Would collect all Healthcare fees And payments And would pay For all healthcare costs But We're going to find out There's no budget No budget impact Yeah Yeah, there's no Yeah, we have no budget Impact on that At this point But this is something Yeah, the other thing I should clarify here You know, you may ask Why are these How do these policy Questions get up here? They don't come out of thin air They have to be something That's being discussed Around the state That has to be something That's going to the legislature And it has to be A government that's Proposing it We don't pull things Out of thin air I would love to know, though For those of you who vote for If you don't get number four What would you do? Like rank choice voting Almost, but I mean Right Because There's a difference Called a single payer But we're going to see A single payer debate In the capital this year In a very interesting way Because the legislature Has sent that bill A Schwartznecker over the years And he sent it back And now You've got a democratic Government Who's going to get pushed In a very different way But anyway I digress Okay, so we're actually Going to be able to do Some of this If a lot of people vote for four We're going to I'm going to ask you to Not those people Who voted for four Who don't vote for four Who vote for something else But you don't have to do that now Okay, no questions Great, let's hit Vote on this right away Before anybody raises their hand That's like the speaker When they call vote We've got 1124 here We're moving along here We're in good shape, I think Okay, what do you What do you want to do? Alright, so now I'm going to ask All of the 61% of you Are going to ask you to vote For one, two, and three So can you have a re-vote here? Remember, you can't vote for four You've got to vote for one, two, and three You've got to re-vote Okay, we are not going to make Any budgetary decision So 44% no change Although there were 30% 37% of you in the room Who wanted to add that 2.3 billion to the deficit That rolled out Very good left one To the next one Human services, CalWorks, and childcare Should further reductions be made in CalWorks And childcare programs In order to close the budget deficit Number one, no change The budget already reflects The $1.8 billion reduction That was done in March Number two, reduce the deficit By $700 million by reducing grants Another 5% and limiting grants For children to 48 months Three, reduce the deficit By $400 million by further reducing funding For each slot in childcare And lowering the income Of which families are eligible Four, reduce the deficit $1.1 billion by further reducing funding For both CalWorks and childcare programs It's the addition of 2 and 3 You can say And 5 at $1.8 billion to the deficit And restore the reduction To pay the CalWorks and childcare programs In March Question What would the income floor be Number three? Reduce the deficit I actually don't know If that's the question Does any of our panelists know that? Sorry, do you know that? It changes from 75% to 70% of the state's median income So it's up for families For households from 37 and 69 And up to 35 and 18 a month Thank you Thank you, Sarah And in March 6600 children with new services Sir Do we have any notion Of how much the CalWorks And the childcare programs Affect income and therefore revenues I can't say that That is an interesting question I think the bigger point I was going to just make about CalWorks This gets back to actually even Medi-Cal as well Because the biggest challenges You've seen in the last couple of years When the bottom fell out of revenues The economy falters And the base reloads Started growing exponentially Of these programs And so here you are Faced with having less and less State's money And harder and harder decisions And more and more people Who need government assistance And becomes the challenge So much bigger CalWorks is one of those Politically supercharged fights Because I think it dates back To the national welfare reform Under the Clinton administration And then of course You get the anecdotal stories That boil blood About people taking their House cards And putting into casinos And using the money And it's not that that didn't Happen But it's an anecdote But CalWorks has largely done An effective program I think a lot of people Who independently look at it Have been effective But at the same time California As I understand the stats Am I coming from wrong Has had one of the more Generous formulas For allowing people to stay Through the system longer When it comes to children That's not to say that's wrong But when you compare us To other states They have been more and more About cutting off those child Benefits for parents Who don't work after X amount of time So the question becomes Do we think it is being Do we think the money Is being used the right way Or not We've already taken a lot Of cuts to CalWorks So that's the other reality Okay so let's go ahead And go down this Because we're going to be Moving along I'm going to move a little Bit quicker at this point But John, keep clarifying this Because you have been doing This for many years And you know a lot about What you're treating it It's useless truly In any other audience So we voted And okay We voted for no change Okay no effect on our What's our deficit right now 15.1 billion Okay human services Should further reductions Be made to IHSS For services for the Developmentally disabled No change And again the budget Reflects a 1.2 Billion dollar reduction In March To reduce the deficit 5.8 Domestic services For certain In-home health What is it? In-home Support services Clients and requiring Certification for IHSS services 3. Reduce the deficit 200 million By further reducing Services for the Developmentally disabled And by implementing Purchase of service standards 4. Reduce the deficit 700 million And make both cuts To IHSS and services For the developmentally disabled Again you can see that Two and three added together And five Add 1.2 billion to the deficit And restore the reduction To pay to these programs Sir? I'm having A bit of a problem Even with these questions Because they Are in relationship to What already exists And if you're talking about Performance-based budgeting We're not seeing that here I read a very interesting article Yesterday In the Stanford Lawyers Magazine Which proposed Cost-benefit analysis For the judicial And penal systems To have that be part Of the mix of how Financial decisions are made Here we have an array of choices But we have no idea How the performance is Or how the cost-benefit analysis Comes out between these You're suffering from the same deficit Of information that the people Are actually voting Yeah Around this So what you're looking for Is exactly the information They should have And that they don't have It's a perfectly rational Quantity of your money I mean I can see you Find values to these questions That it may be desirable to have This as a side So the values would be hypothetical Well, yeah But along with that would be good This program Or this general program Saves X amount of bucks Or costs X amount of bucks Or the cost-benefit over the next Five years is Such and such a figure And so what we're doing Is doing a relative voting system here Which doesn't deal with Okay, I think this is a good You're going to be here at lunchtime This is a good conversation at lunchtime For us because it's very important I'm just going to do one more And sure you get the last word We got to keep going here If you say that the Legislature does not have the information For a cost-benefit analysis Do you think that things at Seneca Do you think it's because they don't Really want to know That information because It's a lot easier to say We shouldn't cut this or we should have that Rather than have the information That would force them to do The gentleman's cost-benefit analysis Jim, go ahead There's a whole lot of really interesting Politics that underlie the resistance To actually have this information And on behalf of yours for more of lunch But there is concern on the part of some That the value of these programs That they've known would lose public support There's the support on the other side That it would make a case For additional spending and therefore Additional tax revenue So you can find A promise this is 10 seconds If you're not impacted by these programs And you don't know enough what they are Let me just give you the 10 second answer IHSS and Home Supportive Services Largely the money goes To paying for someone Who helps take care of people Provide things that they need They're often people who are in their family There's an argument among Philosophical political spectrums What these people do without a paycheck And you will get very passionate answers Left and right about this The single largest part of the increase In that budget is autism Is children who suffer from autism And the private care they get For private agencies which is all linked Back to the Lanterman Act of the 1960s And what we require So just to understand where this money Is because the title is sometimes Don't give you enough information If you haven't been affected by it And lastly again not to advocate Just to make your job more difficult The argument in favor of option number 5 The gaps 1 through 4 Is that if you reduce funding For in-home support services Many of these individuals And therefore the institutions Which costs you more money Okay last comment By Carmen in the back That is one of the big problems People don't see the cost Effective of what would happen With people that are on these services That receive them I receive them myself And I don't have the assistant In my home to be able to Get on my chair from my bed To be able to be a voice For my community I'm not a functional person And we want to be able to Keep those services in our community But what the government Is looking at is a number And not a human person And as myself which I Had to go to Sacramento Several times to testify On budget hearings They are when they see when it Actually is a person Their book changes Because when we're on a shoot Paper we're just a number And I would And I felt that whole She was talking about the political Calculations to opposing the Tech performance based budget You were asking about this woman's case Which is an entirely legitimate one Is a perfect example of the Government against it If you go to performance based budget Then you are more native driven And are less reliant On the individual's story with the Human base Not necessarily the outcomes That she's experiencing Great thank you Carmen Let's vote on What you would like to do With regard to human services Okay this is close Almost 32% vote To add 1.2 billion To the deficit to Resent those changes But no we're going to be at no change So we remain at 15.1 billion I'm going to move I'm going to start moving things along We're at 1135 If you look up on that list right there You can see we're down to Criminal justice So we haven't even gotten to the revenue So I'm going to keep things moving But it doesn't mean you can't try to say something Because they may call on you Here we go Should corrections cost be reduced By transferring responsibility For certain inmates Or by modifying increased rights Number one no change 7 billion can reduce the prison population By transferring certain low level Inmates, parole violators Juvenile defenders Offenders to counties Along with funding This assumes the Extension of the increase In the vehicle license fee for funding Which we're going to address later Number three reduce the deficit 5 million by transferring inmates To prisons out of state Which we already do And number four reduce the deficit 300 million by modifying Three strikes law to limit new Three strikes qualifying convictions To serious or violent felonies This question clearly has got to Is influenced some by the Supreme Court To reduce the population Of California prisons I should point out that number two Transferring to the county is not only Is that an extent you know It's basically the governor's plan But it does depend in large part On borrowing money On bondage money to build more facilities The local facilities do not Have as the sheriff and LA And other places will tell you They do not have the capacity to do this Completely all in a short run So there is another cost to that Which you've got to borrow money To build jail heads Okay I'm going to take one question Go ahead Just a question on the structure Is it really exclusive? Yeah So this is what Sarah and I And Marsha we were talking about this The other day in the office So we're going to be working on that Good points What are you going to do about criminal justice Just a little anecdote here As you're voting When we did some polling I think maybe Dan you know about this But we asked people where does most Of money get spent In California K-12 education higher ed I don't know what it's supposed to be But so many people in California believe That the most amount of money is spent on prisons It's like in national polls People believe that our school rates Expenditures foreign aid Okay I think I tricked everybody Okay we're going to do a re-vote Everybody was listening to me talk about Whatever I was saying You guys are ready to vote Here we go Not to influence you but The majority voted for number four Okay 300 million dollars from the deficit And we're going to go back to the drawing board On this question See if we can get a number five here And add some of those The reason that poll number is so interesting Is because no other state allows the voters To have as much say about the budget process As we do The voters don't understand the budget process But they want to continue to vote On the ballot about the budget process This issue by the way is a good illustration Of some of the things we've been talking to About long term impacts And the long term performance impacts Because while people make Of a misunderstanding about the portion of the budget That's spent on corrections What is true is that our cost per inmate Are among the highest in the country And our cost per inmate are growing faster And our recidivism rate are for failure Of people coming back to successfully Re-enter our communities Is at 70% among the highest in the nation So this is one of these issues where If over time you want less money to go to prisons And more money to go to UC You're not going to do it in the next seven days But you can't do it in the next seven years And by the way if you decide To significantly reduce prison funding In any of these ways What you guarantee yourself Mr. and Madam legislator Is a very well funded campaign By the California Uppers and Guards Again against your Against your candidacy Now obviously none of you are going to switch Your policy beliefs on the basis Of whether or not you can keep your own job Or not In mind for a close call Great point by the panel We're going to go to pensions now Something that's very heavily discussed Should state employee pension benefits be reduced And our employees contribute more As the cost Recent bargaining agreements Provide for higher employee contributions And good enough as you may For that Reduce the debt to 300 million And negotiate even higher Employee contributions To pension benefits Reduce the debt to 300 million And negotiate even higher Employee contributions And reduce benefits for new employees Resulting in significant long term savings And finally number four reduce the debt To 300 million and negotiate even higher Employee contributions And shift new state employees To hybrid retirement plans Resulting in significant Long term savings This is Very important question being You will see this as a valid, I predict I mean there are initiatives out there Moving to do even more than this Much more bigger cutbacks To public employees Who were instituted Who came up with a plan that suggested a hybrid Pension plan Okay so I'm only going to take one Question and it's going to be somebody new And then I'm going to vote and it's going to be you Right there What I don't know on this one is To me what matters is the total compensation Of the employees And this doesn't seem to me about Are they well compensated Or are they not and I don't know What do you mean There are thousands Of studies on this that all Contradict each other But I think if John will correct me If I'm wrong the general consensus I've seen is that state employees If you factor in relative levels Of education level receive slightly Less pay Than their private sector counterparts But receive more But receive more investments The tremendous challenge is that you can Evaluate a cleric employee You can't How do you measure CHP How do you measure Cal Fire You don't really have those in the private sector I think in general There's two different things There's salary, there's pension And there's healthcare Salary maybe is not as debatable Pension is obviously It's a defined Contradictive benefit Which is different than the private sector And healthcare which is never really talked about We have a very generous healthcare system We pay virtually all the healthcare Of a retiree and their spouse Once they retire after being invested After a certain number of years And that is not, there's no funding Plan for that in general In California We're paying for retiree healthcare as we go That's a huge cost factor Is a million questions on this But we're going to go please We don't have the data I guess Is the answer to your question One second. Okay, 300 million From the deficit Congratulations For those of you who voted for Items two for Q4 In addition to the campaign being funded against You by the CCPOA You have now invited the wrath of the CSEA In the California teachers CSEA CSEA When I mentioned earlier The idea that people wanted to raise taxes On people other than themselves That impacted people other than themselves In addition to prisons In addition to welfare The other item for Californians Overwhelming in support of spending reductions Was the area of public employee pensions By peaceful Californians Are not public employees The only item that got greater support Than reduced spending for public employee Benefits Was the support for a spending cap But remember that was among voters Who opposed spending cuts In addition to welfare pensions Thank you very much Dan Good clarification Okay, now we're going to go to the spending cap Now that you've made specific changes To how programs are funded Would you like the cap Over all spending for the next five years Question? Yeah Did I already help? Yeah, we're not going to do that one That's okay Because it's high But it's a good one No change Do not cap spending Number two, cap spending for the next five years So that it grows no faster Than the rate of inflation Plus state population growth About three percent per year Number three, cap spending for the next five years So that it grows no faster Than the rate of personal income growth Plus state population growth About five to six percent per year Number four, cap spending Similar to the method Outmined in AC A4 And John, do you want to tell us What AC A4 is? Okay, then number five Cap spending, but wait until the state Has paid off debts incurring during The recession to impose the cap Another one that I spent time on lately Because I did a piece that actually aired this past week On Monday about spending caps We have a spending cap in California You may or may not know that It's called the GAN Limit In 1979, now it was modified In 1990, it was loosened Because we found that when we tried To spend money on infrastructure And schools in the late 80s We hit the cap, we couldn't spend the money We had to give all the money back to taxpayers Sort of kind of short-handed history About such as life So, but the debate Over spending caps continues The questions I think about spending caps Are if you put this in the state Constitution and it doesn't work What is the proper formula? Population, inflation, what grows faster What grows slower? AC A4, referred to in number four here Is a measure that's supposed to be on the ballot In February, that uses a very Comfortable formula that says any Revenue, because it's really not a cap to Revenue limit, any revenues above The historical average going To a rainy day reserve fund The problem is the voters rejected that In 2009 when it's linked to taxes But I don't know, go figure Is do you want to try to find some Long-term way to deal with Unexpected increases in revenue And or the general growth Of state spending? I will tell you That I think the Final analysis Voters continue to want to do this But how do you plan For what happens 10, 20, 30 years From now, especially if you put it in the Constitution, the current negotiations At the capitol are a temporary Spending cap that would go away Once the tax extensions go away Which is a demand of Republicans Okay, so we'll I think one of the things It's important for you to always ask If you're reading or thinking or talking to anybody About spending caps, is what are you going to do With the money above the cap, right? Because if it's a spending cap that says You've got to follow the revenue system Then we're going to take money above A rainy day fund so we don't have to Make these tough choices the next time Or we're going to pay off the budget related To this from 2003 Right, so if you're going to do that With the money then that's a fiscal tool That's different than wherever the line is We cut checks back to you That's a significantly different kind of Spending cap Which was the original cap And ACA4 is along this other model Which is you capture money above the revenue trend And you use it to pay off that And fill out the rainy day fund And put the state back on fiscal And fiscal spending To make your jobs even harder A spending cap, of course Is an absolute number of dollars Which means that there is growth In the number of students in our elementary schools And the number of recipients of anyone Supportive services, in other words If the population in California grows In any way, shape, or form It'll mean reductions in the kind of programs That we talked about in the last 45 minutes Okay, so this is a big question It has major multi-billion dollar Brandifications Go ahead and vote Oh, okay, so if you If you vote for Number two, the ramifications Are a reduction in the Deficit of 16.6 billion If you vote for Number three It's going to, the ramifications Of 3.4 billion Number four It's the same as number two 16, 17.6 billion And the last one There's no change No, just to clarify that is a One-year budget impact This is the impact in five years So in other words, if we vote for Something with a 16 million dollar Deficit reduction that will not magically eliminate No, it's over five years I just wanted to make sure everyone got it If you voted for two or four You would Move it to a surplus I mean, to June 9 Number two is the GAN limit, basically Number two is the old GAN limit In the 1979 population State of depletion Number three is the GAN limit The current one Can I ask a clarifying question Of the 16 billion dollars What you're saying is that By imposing the cap, you're enforcing A 16 billion dollar cut Unspecified in the budget Five years from now No new revenues, you're not By creating a cap, you're just automatically Stopping expenditures Which means you have to cut to get to that 16 million But we don't know what the cuts are It doesn't balance the budget It doesn't solve the budget, it just says You solve it with this It would lead to cuts in the programs That we haven't discussed yet Let's vote, Sonali On the budget cap I'm going to be very interested To see what you all vote here Okay No vote for the cap So that essentially means that we head into Our revenue situation With a 14.5 billion dollars And I have 1151 And we've got a number of taxes to do here So we're going to run right through these And sell with the income tax California Rays maintain a lower Income tax is number one, no change Number two, reduce the deficit 3.3 billion and reinstate the temporary 1.4% rate increase on all tax payers Number three, reduce the deficit 3.8 billion and raise Taxes on upper income families Okay, rich people by Reinstating the 10.11% Rackets number four at 3.3 Billions of deficit and cut income Taxes by 1.4% Okay, let's vote I'm not having any questions I'm going to be a dictator here Sonali, put that up, just be ready You'll always be putting it up as we roll through this We'll be in a well-funded campaign by the California Chamber of Commerce Okay, so we got an answer here Okay, we're going to pass the question Okay, Sonali, next question Next question has to do with sales tax Should California change the sales tax rate Or a base number one, no change Number two, reduce the deficit 5.7 billion and extend the 1% sales tax rate Beyond June 1000 June 2011 Number three, reduce the deficit by 2.9 billion Expand the base to certain services Like architectural services and accounting services And that kind of stuff Number four, expand the base to services But reduce the rate by 5.5% resulting in no change Or revenues in the filing Number five, if you want, how about add 2.2 billion to the deficit And reduce the state and the rate By 0.5% Let's vote, Sonali, put it up there When I write finish number five You can even have it up there We're going to increase the sales tax Lower the sales tax rate What are we going to do? I think we have a $10.7 deficit Okay, we're going to reduce the deficit By 5.7 billion 63% of you That's almost a 2.3 The campaign against is now being funded By the California Retailers Association Manifesters Association And the California Restaurant Association Okay, thank you again Corporate tax and corporation tax Which is one of the highest in the country Number two, reduce the deficit By 1.1 billion And increase the corporate tax rate To its prior peak of 9.6 billion Number 3, add 1.1 billion to the deficit And reduce the corporate tax rate To 8.1% Let's vote, Sonali, get it up there This is a big question Lotta gets in the whole question of business tax Of the business environment And how do you feel on that Okay, I know what the answer We're going to be here We're going to take 1.1 Billion for the deficit because We're going to increase the amount of Some people didn't vote Like it went to 99% Who are you, 1% of you? California Chamber of Commerce Just doubled their campaign against you California Manifesters Association Silicon Valley Leadership Group And Technology Network Post Okay, thank you again Tax expenditures And tax breaks Two, reduce the deficit And replace the mortgage interest deduction And tax credit equal to 5% of mortgage interest Number three, reduce the deficit 600 million and stop providing Tax breaks in enterprise zones Number four, reduce the deficit And prohibit multi-stake corporations For being able to choose which Method of assigning income To California that they want Number five, reduce the deficit And all you have it up there Are you going to vote for 1, 2, 3, 4, or 5? I bet you know where you're going to vote You see, am I going to am I right? Yup Yes, that was just barely Okay, let's go on to the next one What's our deficit? Our deficit is 1.3 billion California Realty The Realty Association See if the license fee No change, number two, reduce the deficit 1.7 billion and extend The DLF increased 0.5% for 5 years Number three, reduce the deficit To 4.6 billion and Reinstate the higher 1997 Fee level, which was 2% And finally number four, add 2.2 Billion to the deficit and eliminate The license fee altogether Zero rate perhaps and all that What do we have here? Our deficit is only 1.3 billion Okay, here we go here Okay, now we are 1.6 billion Every car dealer and gas station In your district is not handing out Flyers in Instagram And John and Ken, the talk show host In LA are organizing a recall Somebody got recall over the car tax Who was that? Alright, property tax Prop routines, number two Reduce the deficit, 2.2 billion And require annual reassessment Of non-residential property This is the split rule, remember In commercial businesses Number three, reduce the deficit 6.1 billion and require Annual reassessment of all property Commercial and residential An additional 10.5 billion Would go to the local government Number four, reduce the deficit 1.2 billion and allow access values Of all properties to increase 4% per year instead of 2% And finally add 1.5 billion To the deficit and reduce the Tax rate for all properties The power jar is rising Sorry Well, okay, 2.2 billion Okay, this is the split rule You're not going to tax Residences, you're going to tax Commercial properties Other taxes should California raise Collect other taxes to close the deficit Number one, no change Number two, reduce the deficit 1.5 billion and impose 2.5% oil separate steps Three, reduce the deficit 2.1 billion and impose the sales tax On internet sales where the retailer Has a business connection to California Four, reduce the deficit by 700 million And impose 5% for drain tax On alcohol beverages Number five, reduce the deficit 2.4 billion and make all three Of the changes above We're almost at the end here I want to know where you're going To put all this money back Okay, let me guess Let me guess Yes, number five, okay 2.4 billion, let's take 2.4 billion We are currently at 7.9 That's it We're going through everything Oh my God, so what's our results? We have a 7.9 billion dollar Surfer 22 billion dollars Okay, so What we're going to do here I'm going to wrap this up I'm really excited that We are in surplus But now of course When you raise these taxes The Prop 98 school funding guarantee Means that automatically Some of those dollars go to education So you could not take all those dollars back And fill in all the projects that you hated Because the cycle works And the money goes another way So I'm going to ask our panelists We're going to have a one minute wrap up here Okay, and then we're going to I'm going to choose the raffle winner And then we're going to have much So we're going to start off We're going to start from Jim and end with you, John Jim, go ahead Well, I want to thank you for your Experientially thoughtful questions and Comments through this It's obviously a group that's thinking very hard About what the implications to California are For the best for it And I was particularly impressed with The focus I'm On good fiscal decision making Good effective programs to get us what we want to be If you're more interested in that And you want to find a way of continuing that conversation Go let's teed up here I'd be crazy to grab some of the material out there From California floorwork Or go to CAFWD.org Get on to mailing those This is only going to change We can only make these kinds of impact That more Californians one way or another Get involved in conversations So congratulations to you Jim The questions The thought that you put into this exercise Is really impressive And very commendable And very very very rare In addition to the encouragement that Jim gave you I would encourage you to do something else Which is if your schedule should allow And Nolan, Sarah and their colleagues Are able to provide it for you I would encourage you to attend one of these programs In Eastern Contra Costa County In the northern central valley Or in southern Orange County Because what you will see then Is the dynamic that the state legislature faces What we've established beyond any reasonable doubt today Is that people in San Francisco Know what the representatives believe That the budget deficit should be eliminated Not entirely, but predominantly through tax increases The same exercise I'm guessing For other parts of the state Which show the exact opposite So with every single member of the California state Legislature comes to Sacramento And faithfully represents the wishes of their constituents And what we have is no budget So I commend you If you're interested in your enthusiasm What's important to remember as you walk To the vehicle forward in Sacramento Is that there are people across the ideological spectrum Who feel just as strong as you do And the next step In the process is to take The kind of decisions you've made today To figure out what you're willing to compromise away In order to reach a final product That might not get you everything you want But gets you a good percentage of it Thank you, Dan. Thanks for letting me be a part of this I just wanted to give you a reality check About a couple of things Some of you are probably going to feel the stress That we didn't spend as much time talking about taxes The reality is the polling shows you The taxes are not going to pass In no circumstances So you are faced with choices of cuts And I think you really went through those a lot But even if you look at your choices I was writing out the numbers here Most of what you have chosen Is reflective of the disagreement Among California Most of your choices would not have passed A threshold for a budget You need either a simple majority Just for cuts or a two-thirds for taxes The only two things that I know for sure would have passed Is you would have raised a couple of taxes And you want universal health care Everything else, a lot of your choices Even your cuts did not meet the 50% Plus one majority in the chamber Of the legislature And I think that even among a group Or a genius as other groups would be Still would flex the division Even inside this room about how you do it And how you get consensus on the majority of people So, but I again If you did a heck of a job If the legislature was this fast I would have a summer vacation Had one in ten years And it's not going to happen Alright, now before I We finally thank our panelists I want to Sarah, why don't you pull one out of here For the raffle Drum roll please And you have to be here to win Tell me in this room Do they get a seat in the assembly? Tax you pay on that meal Okay, now I'd like to Very warmly thank All of you for coming today You've been a great audience You are unique Californians And I appreciate the fact that you came here today As I said when I opened up my remarks I care deeply about California I know you all do too Let's keep our fingers crossed that That this year, over the next few months Some deal gets done That can put the budget beyond us That can give us a five-year reprieve So that we can focus on These big issues here in California Because there are big issues in California But there are wonderful opportunities too So on that note, let's also thank Our free panel Thank you all for all of you Again, I'm not sure what kind of food we have here But it's really good And I welcome and ask all of you To stay and would like to Thank you once again