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HomeMy WebLinkAboutRPT 3 SEN MILLS SPEECH 03-03-80DATE: TO: FROM: SUBJECT: February 20, 1980 REPORTS Inter-Corn Dan Blankenship, City Administrator Ed Bushong, Finance Director SPEECH BY CALIFORNIA SENATOR JAMES R. MILLS Attached are copies of a speech delivered by Senator Mills in mid January at a meeting of public finance and budgeting officials. Perhaps the Council would be interested in learning why Senator Mills opposes Proposition 9. Ed Bushong Finance Director REMARKS BY SENATE PRESIDENT PRo TEM JAMES R, MILLS PRESENTED TO THE UNi'vER~t~Y OF"Sou¥1~RN CAL~'FoRNiA'SCHOOl'' OF PUBLIC ADMINISTRATIONtS sECOND A~'NUAi' puBl'~'~ SECTOR ECoNOMic FORECASTING CONFERENCE, FRIDAY, JANUARY ..].8~,' 1980 . ! APPRECIATE BEING INVITED TO SPEAK TODAY IN THE VERY NECESSARY ABSENCE OF KEN CORY, ] WANT TO TALK TODAY ABOUT MONEY AND TAXES --'AND SINCE EACH OF US HAS THE RESPONSIBILITY FOR SPENDING TAX MONEYj AND SPENDING IT WITH ~OMPASSIONj COMPREHENSION AND MOST OF ALL WITH GOOD RESULTS, -I- [ AM SUGGESTING THAT ALL OF US SPEND A LOT OF TIME BETWEEN NON AND JUNE ~RD TALKING ABOUT SOLUTIONS TO FISCAL PROBLEMS,,, PROBLEMS WHICH ! CAN DESCRIBE ONLY AS AWESOME, THE REVENUE SLASHING FERVOR IS GROWING, AND WE'RE RUNNING OUT OF 'TOURNIQUETS, I'M REMINDED OF IV~ARK TWAIN'S TALE ABOUT HIS VISIT TO A FRIEND IN NEW HAMPSHIRE, 'TWAIN WAS WALKING DOWN THE ROAD AND HE ASKED A FARriER, "How FAR TO HENDERSON'S PLACE?" -2- AND THE FARMER ANSWEREDj "ABOUT A MILE AND A HALF.# TWAIN WENT A LITTLE FARTHER DOWN THE ROAD AND MET ANOTHER FARMER, AND HE.AGAIN ASKEDj #How FAR TO HENDERSONtS'PLACE?~t THE SECOND FARMER ANSWEREDj HABOUT A MILE AND A HALF,H TWAIN WENT FARTHER~ MET ANOTHER FARMER, AND ASKEDj "How FAR TO HENDERSON'S PLACE?# AND THE FARMER ANSWERED, "ABouT A MILE AND--A HALF." "WELL, SAID TWAIN~ ~'THANK GOD 'I AM NOT LOSING GROUND~" UNFORTUNATELY I AM NoT AT ALL CERTAIN TODAY THAT WE CAN SAY -- LIKE TWAIN -- THAT WE ARE NOT LOSING GROUND IN OUR EFFORTS TO PROVIDE A FUNCTIONAL GOVERNMENT AND THE LEVEL OF BASIC SERVICES WHICH THIS STATEtS POPULATION HAS COME TO ENJOY AND EXPECT, - 'CALIFORNIA IS MIRED INA SOCIAL UPHEAVAL OF SUCH PROPORTION THAT OTHER PROBLEMS PALE IN ITS PRESENCE. ' ]N .m~Ff~A~N OFf.WARD JARViS~THE TAXPAYERS OF CALIFORNIA WERE SEDUCED INTO OPENING AN ARTERY OF THE BODY POLITIC WITH ONE VISIT TO THE POLLS, ENGENDERING A SERIES OF TAX CUTS WHICH TAKEN CUMULATIVELY ARE IRRESPONSIBLE. WITH THE PASSAGE TWO YEARS AGO OF PROPOSITION I3, THE MORE RECENT APPROVAL'BY VOTERS OF ~ROPOSITION 4, AND THE DISTINCT POSSIBILITY OF PASSAGE OF JAWS II -- WHICH WOULD HALVE PRESENT STATE INCOME TAX RATES -- / - 5 -' THIS STATE FACES THE PROSPECT OF A LOSS OF REVENUE APPROACHING $I~ BiLLiON DURING THE VERY FIRST YEAR, BEGINNING JULY ], 'I'HAT REVENUE LOSS WILL THEN GROW, STEADILY AND SU~STANTiALLY, EACH AND EVERY YEAR THEREAFTER, GOVERNOR BROWN'S BUDGET FOR FISCAL YEAR 1950-8I, WHICH HE SUBMITTED LAST WEEK TO THE LEGISLATURE, TOTALLED $24 BILLIONJ THAT SHOULD GIVE A LITTLE PERSPECTIVE OF THE PROBLEM'S MAGNITUDE. Itow DID WE EVER GET INTO THIS MESS? -6- SOME SAY IT WAS THE FAULT OF GOVERNMENT FOR REFUSING TO HEED THE CRY EOR TAX REFORM, THAT MAKES AS MUCH SENSE AS BLAMING THE WHOLE THING ON HOWARD JARVIS, HE WAS JUST THE TRAVELLING SALESMAN, . l~ 'THERE IS ANY FAULT'TO BE PLACED~ IT MUST BE LAID. AT'THE FEET OF THOSE WHOj FOR REASONS KNOWN ONLY TO THEMSELVESj HAVE REFUSED TO CONFRONT AND CRITICIZE THESE UNREASONABLE ASSAULTS UPON GOVERNMENTS WHO HAVE REFUSED TO ARGUE AGAINST THEIR PASSAGE WITH LOGIC AND PERSUASIONS -7- Wl~O HAVE OPTED FOR SILENCE AND PROFESSIONAL SAFETY RATHER THAN FACE THE DANGER OF OPPOSING MR. JARVIS~ RECKLESSNESS, WELL~ ! FOR ONE AM NOT GOING TO SHRINK FROM THAT CHALLENGEj AND IF THAT R~SULTS IN MY BECOMING UNPOPULAR~ THEN SO BE IT, LOOKING BACK~ ! REMEMBER THREE YEARS OF AGONIZING -~.. W]THIN,~THE STATE LEGISLATURE ABOUT MEANINGFUL~ SIGNIFICANT ' TAX REFORM,. WE KNEW THE NEED EXISTED~ THE MAIN PROBLEM WAS ONE OF II)ENTIFYING THE MEANS OF THAT REFORM~ AND THEN .~ IMPLEMENTING THAT REFORM, SUCH A PLAN WAS CONTAINED IN FORMER SENATOR PETER ~EHR~S SB I, A BILL UPON WHICH LAWMAKERS SPENT A LOT OF TIME AND MADE MANY P~RSONAL CONCESSIONS. THAT BILL WAS AN' EXERCISE IN HUMAN COOPERATIONj AND WOULD HAVE -- I AM CERTAIN -- RESULTED IN TAX REFORM OF CONSIDERABLE EQUITY. IT SURFACED TOO LATE FOR MR, JARVIS AND HIS HORDE OF SIGNATURE GATHERERSj HOWEVER~ AND THE JARVIS-GANN INITIATIVE NON VOTER APPROVAL. -9- [N RETROSPECT, IT NOW SEEMS THAT WE MAY HAVE MISREAD THE INTENT OF THE VOTER: PERHAPS IT WAS NOT TAX REFORM, BUT SMALLER GOVERNMENT, THAT WAS BEING DEMANDED.. SMALLER GOVERNMENT IS ONE THING AND CERTAINLY WE ALL WOULD LIKE TO SEE THATj BUT CONSTRAINING FISCAL FLEXIBILITY TO DEAL WITH THE PROBLEMS BEFORE GOVERNMENT, EVEN SMALLER GOVERNMENT, OR EVEN LESS GOVERNMENTj IS QUITE DIFFERENT AND THAT IS THE RESULT OF HOWARD JARVIS'S ONGOING CAMPAIGN. S~'~LLER GOVERNMENT IS WHAT WE ARE HEADED FOR, BUT IT IS THE PEOPLE WHO ARE GOING TO SUFFERj BECAUSE THE MAJOR CUTBACKS WILL HAVE TO COME FROM THOSE AREAS WHERE MAJOR SPENDING NOW OCCURS -- HEALTHj WELFARE AND EDUCATION, THE PEOPLE SERVICES, , WHATEVER THE INTENT~ PROPOSITION I3 DID PASS, AND WE'ARE LEARNING TO LIVE WITH IT, ~ERHAPS IT WAS THE HUGE SURPLUS THAT THE STATE HAD ACCUMULATED THAT ULTIMATELY BECAME THE RATIONALE FOR VOTERS' EMBRACE OF JARVIS' PLAN, ? PERHAPS IT WAS THE INABILITY OF THE STATE TO DETERMINE THE AMOUNT OF THAT SURPLUS, PERHAPS iT WAS THE ARRIVAL IN VOTERS' MAILBOXES OF PROPERTY TAX ASSESSMENTS JUST A FEW SHORT DAYS BEFORE THAT FATEFUL Ig78 ELECTION, mORE LIKELY, IT WAS A COMBINATION OF THESE FACTORS, AND OTHERS~ THAT LED TO THE EVENI'UAL ADOPTION OF PROPOSITION THOSE SAME FACTORS ARE STILL AT WORK, AND THE RESULT IS MUCH LESS TAX MONEY TO WORK WITH AT A TIME WHEN DEMANDS AND NEEDS OF CALIFORNIA RESIDENTS FOR PUBLIC INTERVENTION CONTINUE TO BE SUBSTANTIAL, BOTH COLLECTIVELY AND INDIVIDUALLY,' ~L~NY OF THE INSTITUTIONAL PROBLEMS THAT CONTRIBUTED TO THIS UNFORTUNATE SITUATION.HAVE BEEN OVERCOME. ~IITH THE PASSAGE LAST YEAR OF SENATE BILL I65, WHICH ! AUTHORED AND WHICH ~REATED THE COMMISSION ON STATE FINANCE, THE STATE WILL NOW BE ABLE TO SET A SINGLE SET OF REVENUE, EXPENDITURE, AND SURPLUS ESTIMATES. THE COMMISSION HAS AS ITS MEMBERS ASSEmbLY SPEAKER LEO T. MCCARTHY; SENATE MINORITY LEADER WILLIAM CAMPBELL; ASSEMBLY MINORITY LEADER CAROL HALLETT$ MR:. CORY, THE CONTROLLER, ACTING FINANCE DIRECTOR MARY ANN GRAVES$ MYSELF, AS SENATE LEADER, AND THE COMMISSION CHAIRMAN, JESSE UNRUH, THE STATE TREASURER. - I3- WITH THIS SINGLE SET OF STATE FISCAL ESTIMATESj THE POSSIBILITY OF POLITICAL MANIPULATION OF THESE FIGURES HAS BEEN ELIMINATED, THIS IS A MATTER OF IMPORTANCE, ~F WE DON'T HAVE AN ACCURATE IDEA OF CASH ON HAND, IT IS VERY DIFFICULT TO PRESENT RATIONAL ARGUMENTS AGAINST THE REPRESENTATIONS OF HOWARD JARVIS, OTHER TAX RELIEF MEASURES WERE ENACTED DURING THE PAST YEAR, EACH OF WHICH HAS THE EFFECT OF DIMINISHING OVERALL THE TOTAL AMOUNT OF TAX REVENUES THAT CAN BE COLLECTED BY THE STATE. ~ I~ '- PERSONAL INCOME TAXESj FOR EXAMPLE, ARE NOW BEING INDEXED TO ALLOW FOR THE EFFECTS OF INFLATION, lIND THE EXEMPTIONS OF BUSINESS INVENTORY FROM PROPERTY TAXES ALSO FINALLY WAS SIGNED INTO LAW, BOTH OF THESE ISSUES-- VERY CONTROVERSIAL -- ARE EVIDENCE THAT RESPONSIBLE REFORM OF THE STATE'S TAX LAWS IS OCCURRING AT A RESPONSIBLE PACE, AFTER PASSAGE. OF PROPOSITION I3j LOCAL GOVERNMENT LOOKED TO THE STATE LEGISLATURE FOR BAILOUT MONEYS CITIES, COUNTIES AND SPECIAL DISTRICTS WERE FACING THE LOSS OF DEBILITATING AMOUNTS FROM BUDGETS, - I5- WITH THE SURPLUS THAT HAD ACCUMULATED, THE STATE WAS ABLE TO HELP SMOOTH THE WAY FOR THESE LOCAL ENTITIES, SOON~ THAT WILL NOT BE POSSIBLE~ EVEN WITHOUT ADDITIONAL TAX CUTS~ THE STATE SURPLUS WILL BE WHITTLED DOWN TO $II2 MILLION BY THE END OF I980-8I, WHEN WE CONSIDER THAT $q,8 BILLION WAS DIVIDED UP LAST YEAR AFTER PROPOSITION I3, WE MUST REALIZE THAT THIS "SOLUTION"' TO THE PROBLEM WILL NOT BE AVAILABLE TO US FOR VERY MUCH LONGER, THE DECLINING GENERAL FUND SURPLUS HAS ENSURED ALREADY THAT FUNDS TO LOCAL JURISDICTIONS NEXT YEAR WILL BE CUT BY $267,6 MILLION, SOHE SUGGEST THAT THE STATE SHOULDN'T HAVE AIDED LOCAL GOVERNMENTj THAT LOCAL GOVERNMENTS SHOULD HAVE HAD TO STRUGGLE AND THE PUBLIC SHOULD HAVE FELT DIRECTLY THE CONSEQUENCES OF ~ROPOSITION [3, THAT, 1N MY JUDGMENT, WOULD HAVE BEEN IRRESPONSIBLE, L0¢AL 6OVERNMENTS PLAY IMPORTANT ROLES IN CALIFORNIA AN{) SHOULD BE GIVEN A REASONABLE TINE TO ADJUST TO SUCH SWEEPING CHANGES, THE UNCERTAINTY OF THE YEARS AHEAD IS CREATING HAVOC IN THE CIRCLE OF PROFESSIONAL MANAGERS LIKE YOURSELVES, TOO, BECAUSE THE OPPORTUNITY FOR PRUDENT PLANNING HAS BEEN DENIED, - I7- EARLY IN I979, IT BEGAN TO APPEAR THAT THERE WOULD BE A SECOND ONE-YEAR BAILOUT BILL~ ONE THAT WOULD TRANSFER PROPERTY TAX REVENUES TO CITIES, COUNTIES AND SPECIAL DISTRICTS TO HAKE UP FOR THEIR SHORTFALL, WITH THE PROPERTY TAX REVENUES LOST TO SCHOOLS THEN BEING MADE UP BY THE LEGISLATURE, THIS PLAN WOULD HAVE! GIVEN SCHOOL DISTRICTS AND OTHER LOCAL COVERNHENT ENTITIES A STRUCTURE IN WHICH PLANNING COULD OCCUR, THUS, FISCAL PLANNERS WOULD KNOW IN ADVANCE THAT THEIR DESTINIES WOULD NOT BE SUBJECT TO THE WHIMS OF THE LEGISLATURE .EACH YEAR, - I8- HOWEVER, A MORE SUBSTANTIAL PIECE OF LEGISLATION EVENTUALLY WOULD EMERGE FROM THE LEGISLATURE, AN "ONGOING" BAILOUT BILL THAT WILL ALLOW LOCAL ENTITIES TO ~EPEND UPON ANNUAL STATE ASSISTANCE IN THEIR FINANCING OPERATIONS, THE BILL AS IT ULTIMATELY WAS WRITTEN HAD THE VERY STRONG SUPPORT OF CITIES, COUNTIES, SPECIAL DISTRIC~AND SCHOOL DISTRICTS, THERE IS A FACTOR IN THE BILL -- AB 8 -- THAT ~ETRACTS SLIGHTLY FROM THE SENSE OF FISCAL SECURITY THAT IT GIVES, - I9- THIS FACTOR IS THE "DEFLATOR,°' WHICH REQUIRES THAT THE LOCAL RECIPIENTS WILL ABSORB THE SHORTFALL IF STATE REVENUE RESOURCES FALL BELOW A PREDETERMINED LEVEL,, FOR FISCAL IgS0-SI, THIS AMOUNT IS $20,6 BILLION, DURING THE NEGOTIATIONS ON THIS BILL, THE LEGISLATURE WENT ALL OUT TO STRETCH THE STATE TREASURY TO FINANCE THIS PACKAGE, BUT BECAUSE OF THE UNCERTAINTY OF OUR PRESENT FISCAL CIRCUMSTANCES, THE DEFLATOR FACTOR WAS INCLUDED AT THE INSISTENCE OF FISCALLY CONSERVATIVE LAWMAKERS, - 20 - PASSAGE OF JARVIS II PORTENDS SERIOUS PROBLEMS F~R LOCAL GOVERNMENT, LET ME CITE SOME DOLLAR FIGURES WHICH MAY GIVE yOU SOME INSIGHT AS TO THE DEPTH OF THE QUANDRY, PROPOSITION ~3 WILL CAUSE A LOSS THIS FISCAL YEAR OF ABOUT $8 BILLION, DUE TO PROPERTY' TAX REDUCTIONS, ANOTHER $2 BILLION WILL BE LOST BECAUSE OF THE PERSONAL INCOME INDEXING FACTOR, THE ELIMINATION OF PROPERTY TAXES ON INVENTORIES, AND THE APPLICATION OF RENTER RELIEF, - 2I - FINALLY, PASSAGE OF JARVIS II WOULD DRAIN THE TREASURY BY ANOTHER $5 BILLION -- A TOTAL REVENUE LOSS DURING THE VERY FIRST YEAR OF $I5 BILLION, THERE IS NO WAY ON THIS EARTH THAT THE STATE CAN CONTINUE TO PROVIDE THE LEVEL OF SERVICES THAT IT DOES, AND STILL PROVIDE BAIL-OUT FUNDS TO LOCAL GOVERNMENT FOR CONTINUATION OF SERVICES ON THAT LEVEL, IF JARVIS II PASSES, AS FURTHER EVIDENCE OF THE IMPACT ON LOCAL GOVERNMENT THAT THIS PROPOSAL WOULD HAVE, ALLOW ME TO POINT OUT THAT, OF THE STATE'S GENERAL FUND BUDGET OF $20,7 BILLION, ONLY $4,~ BILLION OF THAT AMOUNT IS FOR STATE OPERATIONS, - 22 - MOST OF THE BALANCE -- $IG.3 BILLION -- IE EARMARKED FOR LOCAL ASSISTANCE. JT IS FROM THIS AMOUNT THAT THE BRUNT OW FISCAL LOSS WOULD BE ABSORBED, AND THE LOSER IS LOCAL. GOVERNMENT. THIS PROBLEM IS COMPOUNDED BY AN $5 BILLION LOSS IN LOCAL REVENUES DUE TO PROPOSITION I3, ~ND, IT MUST BE REMEMBERED THAT "STATE OPERATIONS" INCLUDE FUNDING FOR RESOURCES PROTECTION, CONSUMER SERVICES, HEALTH, WELFARE, EDUCATION AND CORRECTIONS..."PEOPLE SERVICES.~ - 23 - THUS IT IS ENTIRELY POSSIBLE THAT THE SINCERE EFFORTS OF THE STATE TO HELP LOCAL GOVERNMENT CANNOT BE MAINTAINED OVER A LONGER PERIOD OF TIMEj AS IS PRESENTLY HOPED. JARVIS ISN'T THE ONLY WOULD-BE TAX SAVIOUR, EITHER. A GROUP IS CURRENTLY GATHERING SIGNATURES TO QUALIFY AN INITIATIVE TO ELIMINATE THE STATE TAX ON GASOLINE SALES, A SOURCE OF $850 MILLION ANNUALLY. THAT TRANSLATES INTO A $225 MILLION LOSS TO LOCAL GOVERNMENT, AS WELL AS A $I70 MILLION LOSS TO STATE AND LOCAL TRANSPORTATION. - 24 - THE SUCCESS OF EVERY UNREASONABLE TAX REDUCTION SEEMS TO GIVE BIRTH TO OTHERS, THE PATTERN IS BECOMING DISTURBINGLY APPARENT, 'tAX REFORM IS A NECESSARY AND PROPER OBJECTIVE FOR ALL OF US TO SEEK, BUT IN THE FACE OF BILLOWING FISCAL PROBLEMS ALL OVER THE NATION, THIS IS THE VERY WORST OF TIMES TO IMPLEMENT THESE SCATTER-GUN "SOLUTIONS" TO PUBLIC DESIRE FOR LOWER TAXES, 25- EARLY IN DECEMBER, I BECAME THE FIRST DEMOCRATIC OFFICIAL TO STATE PUBLICLY MY OPPOSITION TO PASSAGE OF JARVIS II, AT THAT TIME, I SAID THAT PASSAGE OF THE INITIATIVE WOULD NOT SATISFY THE EGO-SERVING CAMPAIGN IN WHICH JARVIS HAS BEEN ENMESHED, AND THAT HE WOULD SOON THINK OF OTHER RADICAL MEASURES TO UNFURL BEFORE THE VOTER. HOWARD JARVIS LOVES PUBLICITY~ IF HE GETS THIS ONE PAST THE VOTERS, HE IS GOING TO PUT FORTH ONE, AND THEN ANOTHER~ AND EVENTUALLY WE COULD ENCOUNTER AN ERA WHERE NO TAXES EXIST. - 26 - WHILE SOME MIGHT SAY THAT WOULD BE A GOOD THING~ MOST OF US SHOULD REMEMBER OLIVER WENDELL HOLMES' DICTUM: "TAXES ARE WHAT WE PAY FOR A CIVILIZED SOCIETY." THERE IS A' QUESTION OF HOW MUCH CIVILIZATION WE SHOULD DISPENSE WITH. IT IS NOT A POPULAR ROLE~ THIS ONE OF TAKING ON THE CRUSADING TAX-SLASHER, BUT IT IS A JOB THAT MUST BE DONE, MY HOPE TODAY IS THAT ALL OF YOU WILL HELP CARRY THIS MESSAGE TO THE VOTERS, TRUE INFORMATION~ TRANSMITTED TO THE PUBLIC IN AN OBJECTIVE MANNER~ IS IMPERATIVE TO THE PERPETUATION O.F THE CALIFORNIA SOCIAL STRUCTURE, IT MAY BE TRUE THAT PROFESSIONAL POLITICIANS ARE THE LEAST EFFECTIVE SPOKESMEN AGAINST JARVIS AND HIS SCHEMES. EVERY TIME WE RISE TO SPEAK IN OPPOSITION~ JARVIS CLAIMS THAT WE ARE INTERESTED ONLY IN PROTECTING OUR OWN DOMAINS. ~UT THE CONCERN OF RESPONSIBLE OFFICE HOLDERS GOES MUCH, MUCH DEEPER, - 28 - IT IS OF VITAL IMPORTANCE THAT THE MESSAGE BE CARRIED BY A WIDE ASSORTMENT OF PEOPLE IN THE PRIVATE SECTOR -- PEOPLE WHO UNDERSTAND THE TREMENDOUS RAMIFICATIONS OF PASSAGE OF JARVIS II AND OTHER RADICAL MEASURES. You MAY HAVE NOTICED IN THE Los ANGELES TIMES YESTERDAY THAT THE RESIDENTS OF HIELSBOROUGH, NEAR SAN FRANCISCO, VOTED IN A SPECIAL ELECTION TO ASSESS THEMSELVES IN ORDER TO MAINTAIN MUNICIPAL SERVICES WHICH WERE DESTINED TO BE REDUCED BY THE IMPACT OF PROPOSITION I3. - 29 - THIS IS THE FIRST COMMUNITY TO TAKE ADVANTAGE OF A RECENTLY-PASSED LAW LIFTING THE PROHIBITION AGAINST GENERAL LAW CITIES FROM IMPOSING SUCH AN ADDITIONAL TAX, HILLSBOROUGH -- WHICH YOU MAY REMEMBER As THE HOME OF THE LATE BING CROSBY -- IS AN AFFLUENT TOW~, TO BE SURE, BUT IT PASSED THE SPECIAL TAX IN ORDER TO CONTINUE TO ASSERT LOCAL CONTROL. 30- MAYBE -- WITH LUCK AND LOTS OF HARD WORK BY ALL OF US -- REASONABLE VOTERS WILL DECIDE TO ACCEPT THE SHARE OF TAXATION NECESSARY TO MAINTAIN LEVELS OF ESSENTIAL SERVICES, TOO MUCH IS AT STAKE TO FAIL I'N THIS ENDEAVOR, THANK You. - 3I -