The U.S. Census Bureau’s most recent statistics on poverty find that California has the highest rate of poverty in the nation. That study tracks with a new Truth in Accounting report that ranks California near the bottom – 43rd in the nation – for its finances. California earned a grade of F becasue of its “staggering debt burden of $255.1 billion.” California Policy Center has calculated total state and local debt at about $1.3 trillion, which puts the total per-taxpayer burden above $100,000.
WHAT THIS MEANS FOR LOCAL ELECTED OFFICIALS
Debt is related to poverty. According to Truth in Accounting: “Bov. Brown needs to come up with this money [to pay ff the debt] through increased taxes, or slash promised benefits to teachers, police officers, firefighters, and other public servants.” In California, the courts have greatly limited public employee pension funds’ ability to reduce benefits, even going forward. That means California local elected officials can expect increased pressure for new taxes and fees at every level of government and cutbacks in promised services.
WHAT WE’RE DOING
CLEO recommends understanding that California’s worst-in-the-nation poverty is driven by high taxes, government debt, and a sprawling regulatory environment. CLEO members should be on the lookout for outside consultants offering to “educate” or “poll” your constituents in advance of political campaigns to raise taxes or add municipal debt. Click here to view a model resolution to curb this practice.
FACTS ABOUT THE NEW REPORTS
1 – Worst-in-the-nation poverty. Using the Census Bureau’s “Supplemental Poverty Measure,” which accounts for public assistance payments and the state’s sky-high housing costs, California’s poverty rate is a shocking 20.4 percent, well above the national average of 13.9 percent.
2 – California poverty is driven by its high cost of living – and that is driven by high taxes and regulation. Despite lawmakers’ oft-stated concern about rising income inequality, they spent the recently concluded legislative session imposing taxes, fees and new regulations that will drive up the costs of everything from transportation to housing. In other words, they’ve been creating the poverty and inequality they say they’re working to solve. The governor this year signed a large increase in the gasoline tax, averaging 12 cents more per gallon. He also signed an extension of the state’s cap-and-trade system, which imposes new costs on manufacturers and refiners to force them to reduce their carbon emissions. The program’s extension is predicted to add as much as 63 cents on a gallon of gasoline by 2021, according to the well-respected Legislative Analyst’s Office. These are “regressive” taxes that fall most heavily on the poor.
3 – In turn, California’s high taxes are driven by the state’s powerful government unions. California’s troubled financial situation – mainly the unfunded debts the state has accumulated to pay for pension and medical care promises made to government employees – imposes an additional burden on residents: higher taxes and an eroded quality of public services, as local governments struggle to balance their budgets.
4 – The biggest poverty problem involves housing costs. Even the State Legislature has recognized the degree to which soaring housing costs have become a statewide “crisis.” Yet the housing package that passed in the waning hours of the most recent leislative session is likely to exacerbate the “cost of living” problem. One measure (Senate Bill 2) increases fees on many real-estate transactions. Another will put a $3 billion housing bond on the November 2018 ballot. If voters approve, Senate Bill 3 will create additional pressure on the state budget. The one measure that seeks to streamline the approval process for housing projects (Senate Bill 35), also includes a union-backed prevailing-wage requirement that could add significantly to the cost of building these projects.
5 – One action you can take to battle pressure for tax hikes and bond sales: View our model Stanson resolution. In the 1976 case Stanson vs. Mott, the California Supreme Court prohibited using public money in political campaigns: “A fundamental precept of this nation’s democratic electoral process is that the government may not ‘take sides’ in an election contest or bestow an unfair advantage on one of several factions.” CLEO’s model Stanson resolution requires that municipal governments reveal all public spending aimed at creating public support for higher taxes and debt spending.
ABOUT CALIFORNIA LOCAL ELECTED OFFICIALS (CLEO)
CLEO is a nonpartisan organization of California’s local elected officials working for all Californians by advancing personal and economic freedom. We achieve that by focusing on our three pillars: transparency, sustainability and prosperity. CLEO is a project of the California Policy Center.
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