Tuesday, March 20, 2012

California wants to build a High-Speed Rail. Let's talk about California.

OK. Three articles today. Lots of reading. Call it "The Case Against California." I'll keep my comments brief and let you come to the same conclusions to which I arrived.

The first article is the lead editorial from today's New York Times.  It talks about the states in general, but we can easily apply what is said here to California.  Indeed, it is the only general conclusion that we can come to regarding this state and its Governor's obsession with a project that reeks of the classic terms of corruption in government: Waste, Fraud and Abuse.

The States Get a Poor Report Card


The next article describes California's fiscal situation, which verges on the desperate and really asks the question, how can the Governor and the Democratic Legislature persist in their pursuit of high-speed rail in the face of these economic realities?

The most obvious answer we can think of is that this is exactly what they are thinking about.  That is, they are pushing for this project not because it's a good idea, or that California needs this train, but because of the billions of free dollars promised by the Department of Transportation, as well as the dollars that can be extracted from Prop. 1A bond funds.

There can be no other plausible explanation.

CA Fiscal Insanity: borrowing $21.6 billion to cover cash shortfalls


The final article, also from the New York Times, talks about the consequences of under-funded education.  This may be the single most significant, long reaching consequence of the pursuit of high-speed rail in California.  Even though the article talks about a study done in the New York City schools, the impact of insufficiently funded education is nationwide.

California once had the best school systems in the United States.  This covers education from kindergarten to graduate schools.  No more.  Public education has been under-funded for decades. Private education is affordable only by the rich.  Even public higher education is slowly driving away all those who are not sufficiently affluent or who fail to obtain scholarships.

The impact, like the rising oceans, will not be felt for a generation but when it does, no one will know whom to blame.  There is a positive direct correlation between education and economic productivity.  It has recently been demonstrated that this correlation is also causal; the better the education, the better the "natural resource" of people perform; the more educated they are, the more productive they are.  This has not only been demonstrated, it has been empirically quantified.

The point is that California is depriving its schools systems across the board of sufficient funding, even at a time when it digs into its borrowed treasury to pay for high-speed rail. 

To put it as simply as possible, we are turning out generations of students unfit for military service. That's pretty bad, never mind that they are therefore even more unfit for a productive professional life, and that is the backbone of any nation's economy. 

And yes, it is a zero-sum game; funds expended on HSR are not available for education. 

As they used to say in church, "The sins we commit two by two, we pay for one by one."

As the article points out, it is the willful neglect of human capital's education in California's budget processes, the most valuable resource any state has, that will have far reaching consequences for generations to come.

Panel Says Schools’ Failings Could Threaten Economy and National Security


March 19, 2012

The States Get a Poor Report Card
State governments have long been accused of backroom dealing, cozy relationships with moneyed lobbyists, and disconnection from ordinary citizens. A new study suggests those accusations barely scratch the surface.

The study, issued Monday by a consortium led by the Center for Public Integrity, a nonpartisan watchdog group, found that most states shy away from public scrutiny, fail to enact or enforce ethics laws, and allow corporations and the wealthy a dominant voice in elections and policy decisions. The study gave virtually every state a mediocre to poor grade on a wide range of government conduct, including ethics enforcement, transparency, auditing and campaign finance reform. No state got an A; five received B’s, and the rest grades of C, D or F.

For all the reform talk by many governors and state lawmakers, very little has really changed in most capitals over the decades. Budgeting is still done behind closed doors, and spending decisions are revealed to the public at the last minute. Ethics panels do not bother to meet, or never enforce the conflict-of-interest laws that are on the books. Lobbyists have free access to elected officials, plying them with gifts or big campaign contributions. Open-records acts are shot through with loopholes.

And yet all the Republican presidential candidates think it would be a good idea to hand some of Washington’s most important programs to state governments, which so often combine corruptibility with incompetence. In a speech on Monday, Mitt Romney said he would dump onto the states most federal anti-poverty programs, including Medicaid, food stamps and housing assistance, because states know best what their local needs are.

States, however, generally have a poor record of taking care of their neediest citizens, and could not be relied on to maintain lifeline programs like food stamps if Washington just wrote them checks and stopped paying attention. In many states, newspapers and broadcasters have cut their statehouse coverage, reducing scrutiny of government’s effectiveness and integrity.

The new study shows that several of the states doing the best anti-corruption work had to endure years of scandal to get there. The state with the best grade (B+) was New Jersey, which may be surprising considering its reputation for cronyism and payoffs. In 2005, however, after years of embarrassing scandals, the state passed some of the toughest ethics laws in the country. Lobbyist gifts are prohibited, state contractors cannot give to campaigns, ethics training is mandatory for state employees and an ethics board has real power to enforce the laws.

New Jersey still has problems, including lax financial disclosure laws and no ban on lawmakers’ holding two public jobs, but it is doing much better than New York, which got a D. There is little enforcement in Albany of campaign finance limits, and the final budget process is done in secret. Gov. Andrew Cuomo’s new ethics commission is filled with many loyal to him and the Legislature and is still untested.

At the bottom of the heap was Georgia, which came in last for not enforcing what ethics laws it has on the books. The study noted that 650 state employees accepted gifts from vendors in recent years, clearly violating ethics laws, but no one was punished. Seven other states also receiving F’s were hardly better.

The report shows that most statehouses can barely be trusted to maintain the rudiments of good government. Without deep reforms, they certainly should not be asked to handle more federal programs on which millions rely.

CA Fiscal Insanity: borrowing $21.6 billion to cover cash shortfalls
March 19, 2012 
By Bob Williams 

Insanity is the one word to describe the news that California is planning to borrow $21.6 billion to cover cash shortfalls that might leave the state without enough money to pay its bills. The legislature’s failure to take action on solving the state’s budget deficit is the reason why California is now the leader in fiscal irresponsibility.

But this isn’t just the legislatures fault; the Governor has continued to delay effective budget action and repeatedly kicked this massive problem down the road.  Each day no solution is found increases the amount that needs to be cut or the amount of tax increase.

State Controller John Chiang said that, as of February 28, state spending is running $2.5 billion above budget for eight months of the current fiscal year and revenue is $2.5 billion below forecast. Also in February, the Controller reported a $62.1 billion unfunded liability for retiree health care benefits. That is in addition to the $398 billion unfunded liability for pensions, according to State Budget Solutions.

Meanwhile the Legislature’s budget analyst declared that revenue for the remainder of this fiscal year and all of next is likely to be $6.5 billion short of Governor Jerry Brown’s forecast even with his proposed tax increase and including a $2 billion windfall in taxes from Facebook’s big stock sale.

Gov. Brown in January proposed a budget to close a $9.2 billion deficit, but the nonpartisan Legislative Analyst’s Office has suggested that Brown’s estimates are overly optimistic and that the deficit is likely much higher than that figure.  The Governor’s “balanced budget” relies on a $6 billion tax increase being placed on the fall ballot and approved by voters.
All of this led to the combined current-year cash deficit standing at $21.6 billion.  California ended last fiscal year with a cash deficit of $8.2 billion. Those cash deficits are being covered with $15.2 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.

In January, the California Public Employees Retirement System agreed to allow the state to delay making a $527 million payment until April to cover state employees’ benefits. But this is only a short-term band-aid and come April, money will be owed.

The problems continued when the legislature, rather than adopting a balanced budget, passed legislation in February to let the state borrow $865 million from internal accounts to help the state advert a cash shortfall that might leave the state without enough money to pay its bills.  In addition, the controller has delayed making more than $1 billion in payments to public colleges, counties and health programs for the poor. Meanwhile, state tax collections for this February were $1.2 billion, or 22 percent, below last February’s collections.

The Legislature plans to produce a budget by June 15 that is “balanced” with the assumption that voters approve new taxes, with automatic “triggers” that would slash spending further, particularly school spending, if the tax hikes are not approved by the voters.

The Day of Reckoning is now.  The Governor and lawmakers must stop using gimmicks and take action now to adopt a balanced budget.  State Budget Solutions urges Gov. Brown and all of the legislators to create real budget solutions that are based on outcome and performance-based budget measures.  California can no longer afford to wait for their government to get its head out of the sand and start acting on their behalf.

(Bob Williams, President of State Budget Solutions, is a former state legislator, gubernatorial candidate and auditor with the General Accountability Office. Originally posted on Fox & Hounds.)

March 19, 2012

Panel Says Schools’ Failings Could Threaten Economy and National Security
WASHINGTON (AP) — The nation’s security and economic prosperity are at risk if schools do not improve, warns a report by a panel led by former Secretary of State Condoleezza Rice and Joel I. Klein, a former chancellor of New York City’s school system.

“The dominant power of the 21st century will depend on human capital,” the report said. “The failure to produce that capital will undermine American security.”

The report said that the State Department and intelligence agencies face critical shortages in the number of foreign-language speakers and that fields like science, defense and aerospace are at risk because a shortage of skilled workers is likely to worsen as baby boomers retire.

According to the panel, 75 percent of young adults do not qualify to serve in the military because they are physically unfit or have criminal records or inadequate levels of education. It said 30 percent of high school graduates do not do well enough on an aptitude test to serve.

The 30-member committee was organized by the Council on Foreign Relations, a New York-based research and policy organization.

Ms. Rice and Mr. Klein said in interviews that they were encouraged by efforts to improve schools, like the adoption by most states of new learning targets, known as the Common Core, in reading and math, as well as the Obama administration’s Race to the Top competition, in which states compete for federal money in exchange for developing a system of teacher evaluations.

Mr. Klein said he hoped the findings would prompt discussion. “I don’t think people have really thought about the national security implications and the inability to have people who speak the requisite languages who can staff a volunteer military,” he said.

The panel made three main recommendations:

¶ Common Core standards should be adopted and expanded to include science, technology and foreign languages.
¶ Students, especially those in poor schools, should have more choices in where they go to school.
¶ Governors, working with the federal government, should develop a national security readiness audit, to judge whether schools are meeting targets.

Not all panel members agreed with all the report’s findings. A dissent by Carole Artigiani, founder of Global Kids, said that a proposed national audit would only raise the stakes for standardized tests, and that money would be better used to improve the neediest school districts. Stephen Walt, an international affairs professor at Harvard, and Randi Weingarten, president of the American Federation of Teachers, agreed.

Ms. Weingarten also said that parts of the report undermined schools, and that school choice options like vouchers and charters, which use public funds but are run by a third party, have not proved to be sustainable or to improve schools.

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