Tag: California

No Balanced Budget, No Raise

Ben Goddard writes in The Hill about the new taxpayer revolt in California this week. The political establishment put together a package of initiatives that it thought would fix the budget process there – but the people weren’t buying it. The only thing they passed was the measure to ban salary increases for legislators if they didn’t balance the budget.

There are similar proposals floating around Capitol Hill. If bills were subject to a popular vote, it seems like such a thing would be likely to pass.

Energy Mismanagment

Try as they might, supporters of big government spending cannot make federal programs work very well. The Department of Energy, for example, has been plagued by mismanagement, cost overruns, and scandals for decades.

Today, the Washington Post reports on the poor performance of DoE’s environmental clean-up programs. As I reviewed in the linked essay, these enormously costly programs have been plagued by mismanagement for at least 25 years. Last week, Lou Dobbs lambasted DOE’s National Ignition Facility in California for its huge cost overruns (Hat Tip: Harrison Moar).

I summarize these costly projects and other DoE boondoggles here. With bipartisan support for increases to energy subsidies, we can expect a raft of bipartisan boondoggles developing over coming months and years.

The California Legislature Is Being Misled

The California Assembly Committee on Revenue and Taxation is holding hearings today on bill AB 279, the “Great Schools Tax Credit Act.” This bill is much like the scholarship donation tax credit program in Florida, which is a bi-partisan success that saves the state $1.49 for every $1 it reduces state revenue.

But you wouldn’t know that if you read the Committee’s remarkably flawed official Bill Analysis.

Among other things, the Bill Analysis glaringly misrepresents Adam Schaeffer’s ”Public Education Tax Credit” paper, incorrectly calls tax credited donations public funds, omits crucial findings from other states that favor credits, and engages in unsubstantiated speculation.

To address its failings, I penned the following letter which is being distributed to the committee today.

Dear California state legislators,

The official Bill Analysis of AB 279 suffers errors of fact and omission, misrepresents the findings of a paper published by my organization, and will mislead legislators unless these problems are corrected. To address these problems, I respectfully submit this letter.

The Bill Analysis characterizes a 2007 Cato Institute paper as arguing that “vouchers and tax credits deliver similar results” (page 7-8 of the Analysis). This is false. The paper in fact argues that:

Vouchers and tax credits are, however, very different mechanisms for delivering school choice and it is those differences that will be analyzed below. The analysis reveals that tax credits are inherently preferable to vouchers across at least five dimensions.

The above text appears on the same page as one cited in the Bill Analysis, so the author of that Analysis can reasonably be expected to have noticed the boldface section title on that page of the Cato Institute paper: “Why Tax Credits Are Preferable to Vouchers.” The dimensions on which tax credits are found to be preferable include program outcomes such as maximizing the diversity of educational options among which parents are able to choose, maximizing parental and community involvement in education, and creating incentives for long term program efficiency. This directly contradicts the characterization of our paper by the Bill Analysis.

The Bill Analysis goes on to claim that AB 279 appears to be “patterned after the Public Education Tax Credit Act model legislation developed by the Cato Institute’s Center for Educational Reform.” I would be pleased to claim credit for this if it were true, but since the PETC model legislation combines a scholarship donation credit (such as AB 279’s) with a direct credit for parents to use against their own children’s education, it does not appear that AB 279 was based on our model. It is worth noting that our organization’s name is the Center for Educational Freedom, not the Center for Educational Reform as it is referred to in the Bill Analysis.

Among the more surprising omissions in the Bill Analysis is that it fails to mention the only official government fiscal impact assessment of a scholarship tax credit program: a study released last December by Florida’s Office of Program Policy Analysis & Government Accountability. The OPPAGA study finds that Florida’s program, which is similar to AB 279, saves the state $1.49 for every dollar it reduces state revenue. This 49% annual return on investment represents a staggering windfall for the state treasury at a time when budgets are extremely tight. Not surprisingly, Florida’s legislature is currently considering legislation to expand the base of taxes to which the credits can be applied, to maximize the number of families who can benefit, and hence the state’s savings. This follows the Florida legislature’s increase of the program funding cap by 50% last year, with the support of one third of the state’s Democratic caucus, half of its black caucus, and its entire Hispanic caucus. The program is a bi-partisan success.

The AB 279 Bill Analysis is also confused in its assessment of the legal issues. It asserts that AB 279 “encourages the use of public funds for religious activities and education.” This claim is mistaken, and the Analysis unsurprisingly presents to no evidence to support it. Several court cases in Arizona and Illinois have addressed the question of whether non-refundable education tax credits represent the spending of government money, and all have found that they do not. The money donated to scholarship organizations never enters the state’s coffers, and so is not public money. The supreme court of Arizona, for example, has upheld that state’s scholarship donation tax credit program for specifically this reason, while recently striking down two voucher programs because they do use public funds in contravention of a state constitutional prohibition similar to that in California.

Finally, the Analysis is filled with unsubstantiated speculation about what might happen under scholarship donation tax credit programs, but presents little evidence from the most similar programs – those operating in Florida and Pennsylvania – on what is actually happening. Legislators would be wise to request testimony from people familiar with the actual operation of those programs and from families participating in them. Children’s futures are at stake.

Feds Pay Farmers to Till the Desert

No, this headline and story is not brought to you by The Onion.

The latest proof that there’s nothing more permanent than a temporary federal program:

As drought forces families in the West to shorten their showers and let their lawns turn brown, two Depression-era government programs have been paying some of the nation’s biggest farms hundreds of millions of dollars to grow water-thirsty crops in what was once desert.

My sympathy for this farmer lies somewhere between that which I have for Bernie Madoff and Ted Stevens:

Jim Hansen, a 69-year-old cotton grower in California’s Central Valley, said his family business would crumble if the government took away low-cost water and the nearly $1.7 million in crop payments he received in 2007 and 2008.

For more on the insanity that is federal farm policy and why the USDA needs to be downsized and/or done away with, click here.