Some of Betty’s Perspectives
About California’s Fiscal Health:
California’s fiscal health is dependent on the state’s economic health. As our state continues to recover from the Great Recession, during which 1.3 million jobs were lost, we are witnessing an uneven recovery. We see robust recovery and growth in the San Francisco Bay Area and San Diego, while several counties still face double-digit unemployment. We see a recovery in which opportunities for those on the lower rungs of the economic ladder are limited. And in the areas of our state where there are strong job gains, the issue of income inequality is coming into sharper focus.
Our Golden State regained the 8th ranking among economies around the globe, in part due to the sustained weakness of European economies. However, amidst this growth, California also has the highest rate of poverty among the 50 states. The living standards and conditions of Californians and our families as well as the ability of California businesses to grow, succeed, and thrive can significantly affect the fiscal health of our state.
I hope to have the privilege as your next Controller to give voice and leadership to three priority areas that may improve our long-term fiscal health and economic outlook: comprehensive tax reform, preserving retirement security, and modeling responsible environmental stewardship.
About Comprehensive Tax Reform:
California’s tax system is unfair, outdated, and unsustainable.
California’s tax system needs to be examined closely and reformed to make it more fair, up to date, stable, and sustainable.
Many of the state’s tax laws were enacted decades ago to reflect a goods-based economy and not the current services-based economy. Additionally, the nature of income subject to tax has shifted from wages derived from work to compensation derived from stock market-related income and investments. The effects of Proposition 13 enacted by voters in June 1978 have resulted in property tax inequities and diminished authority for local governments.
Consequently, small base of Californians pay the overwhelming majority of income taxes; the sales tax base continues to shrink; and local jurisdictions are more reliant on state funding and special taxes and fees to fund infrastructure and other priorities. Moreover, recent temporary tax increases pursuant to voter approval of Proposition 30 in November 2012 have affected upper income earners and lower-income households disproportionately.
Prior tax reform efforts have either not been comprehensive (examining the entire tax system) or have been influenced by multi-billion dollar budget shortfalls. And while California’s economy is recovering, the recovery is not being felt evenly in all parts of the state and is doing little to improve the standard of living for low-wage workers. The small business sector has been ignored in such past efforts.
California’s Controller, the leading State tax official, can serve as a strong, independent voice for comprehensive tax reform, with reform proposals developed pursuant to the public convening of business and community leaders throughout the state who are committed to tax reform that is based on the principles of fairness, certainty, and expanded economic opportunity.
About Preserving Retirement Security:
California needs to work diligently to ensure public employee and teacher retirees as well as private sector workers can realize retirement security at the end of their careers.
Retirement security is becoming a major worry for Americans and Californians as the national and state economies slowly climb from the stock market meltdown and housing collapse defining the Great Recession that began in the latter half of 2007. Significant unfunded liabilities in the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) not only pose major strains on our state and local government budgets, but also on the economic security of retirees.
The CalPERS board, the CalSTRS board, the Legislature, the state, and local governments and schools districts as well as CalPERS and CalSTRS members all must be active participants of the array of solutions necessary to address preserving retirement security.
While some will quickly dismiss defined benefit plans as obsolete, eliminating defined benefit plans would significantly exacerbate the crisis of income inequality, potentially driving more of our retirees into poverty. Any changes to retirement benefits as well as contribution levels must be determined with all parties at the negotiating table.
There are some measures the CalPERS and CalSTRS boards, on which the Controller serves, as well as the Legislature, can undertake to better ensure retirement security. First, more active management of asset allocation can help with better identifying and addressing risks before huge investment losses occur. Second, we all must be vigilant in addressing the escalating costs of retiree health care and other cost pressures for retirees, such as housing. And third, in addition to lowering retiree costs, there must be focus on how to improve the earnings and labor market prospects for older workers preceding retirement.
While these challenges to preserving retirement security appear daunting, they require immediate attention and all parties convening to address them successfully.
About Modeling Responsible Environmental Stewardship:
As the need to address climate disruption increases in urgency, it is imperative that strategies be developed that have both the public and private sectors bearing the responsibilities and costs. By not doing so, the public sector and taxpayers will bear more of the costs to address climate disruption, thereby putting at risk, funding for other critical public services.
Addressing the crisis of climate disruption is the responsibility of both the public sector and the private sector. Every public official has the added responsibility of engaging the public more expansively about climate disruption so it becomes a public policy priority with broadbase support.
The State Lands Commission, on which the Controller serves, is in a unique position to model responsible environmental stewardship in several ways for others, with respect to its jurisdiction over State lands, waterways, and natural resources.
First, the Commission can lead by fostering and coordinating interagency collaboration on issues relating to activities on State lands. For example, with respect to the issue of hydraulic facturing (known as fracking), the Commission can coordinate a multi-agency approach to implement a moratorium on fracking and to address the effects of fracking relating to, among other things, groundwater quality, seismic risks and hazards, and energy and water supply.
Second, the Commission can model responsible stewardship by employing the highest energy efficiency standards, the most aggressive waste reduction goals, and strict water conservation and reuse policies on our State lands — focusing attention on the need to support the development of our green economic sector where new job creation will occur.
From crisis emerges opportunity, and the crisis of climate disruption if addressed with necessary urgency will bring opportunities for modeling strong environmental stewardship and creating green sector jobs.