California Education Officials Violate Education Code Section 7054
During the course of California Gov. Jerry Brown’s campaign for Proposition 30, the estimated $6 billion income and sales tax hike on the November ballot, school officials throughout the state have been warning students through letters, emails, rallies, and word of mouth that the passage of this ballot measure is essential and necessary for the continuation of the California educational system as it currently stands. While school officials are allowed to voice their personal opinion on an issue outside of their professional role, they are not allowed to lobby students or their parents on ballot measures using educational funds, as they appear to be doing.
Under Education Code Section 7054(a), “no school district or community college district funds, services, supplies, or equipment shall be used for the purpose of urging the support or defeat of any ballot measure or candidate, including, but not limited to, any candidate for election to the governing board of the district.” Violation of this section results in at most one year imprisonment, or a fine of up to one thousand dollars, or both. Currently, there have not been any education officials formally charged despite the growing number of infractions.
One of the numerous examples of violations of this law comes from Deborah Bettencourt, superintendent of the Folsom Cordova Unified School District, who sent a letter to parents and district employees. In the letter she states, “if the governor’s Prop 30 doesn’t pass in November, we will again be faced with the reduction of the instructional year by up to six additional furlough days, a loss of learning time that will impact current students and their performance.”
Such scare tactics are not limited to K-12, as university officials have taken to lobbying prospective students. The California State University System has sent letters to potential applicants warning that because “enrollment capacity is tied to the amount of available state funding, the campuses will be able to admit more applicants if Prop 30 passes and fewer applicants if the proposition fails." See kids, if we don’t raise taxes, you might not get in to college. The letter continues, "the CSU budget would be less likely subject to cuts, and potentially could be increased in future years" if Prop 30 passes.
It’s bad enough that school officials, who should be focused on educating, are busy using scare tactics to influence the votes of their students, parents, faculty, and others, but it’s even more egregious when they are breaking the law in the process. California’s education officials should be more concerned with providing their current and future students with a quality education.
Gov. Jerry Brown's Ballot Measure Exacerbates California Tax Code's Flaws
California Governor Jerry Brown has been touring the Golden State for the past few months championing Proposition 30, his estimated $9 billion per year sales and income tax increase. The measure, if approved by voters on November 6th would increase the state sales tax, already the highest in the nation, 0.25% to 7.5% for four years, and raise the state income tax on those earning more than $250,000 annually – by no means a hefty salary in certain parts of the state – for seven years.
One of the more egregious aspects of Brown’s proposed measure is the retroactivity of the income tax increase, which would apply to all income earned after January 1, 2012. Brown’s effort to impose this retroactive tax hike makes it clear to businesses that if they want some semblance of certainty in tax planning, they must leave California. Campbell’s Soup, Comcast, and Samsung have been the latest to come to this realization; either shutting down facilities in-state or moving operations outside of California.
California residents already contend with one of the most progressive tax codes in the country. Not only does California have high marginal rates, those high rates kick in at relatively modest income levels. California’s middle class residents earning $48,000 a year, for example, pay a state tax rate of 9.3%. Millionaires in 47 other states don’t even pay that high of a marginal rate. However, one of the state tax code’s greatest flaws is it’s over-reliance on upper income households and the revenue volatility it creates, and that is a problem that Prop. 30 would further exacerbate.
As of 2010, the state relied upon 144,000 households, 1 percent of taxpayers, for 50 percent of total state income tax. If Proposition 30 passes, the top 10 percent of earners would be responsible for over 80% of the projected income generated - a fact that Gov. Brown and other advocates of the bill readily acknowledge. The state’s current overreliance on high income households results in drastic revenue swings throughout the business cycle, making budgeting all the more difficult. California’s reliance on volatile revenue sources has been on display with the diminishing price of Facebook’s shares since the company went public. At the peak of share costs, the Legislative Analyst’s Office predicted the shares cashed in by stockholders would account for 20% of the growth in California’s personal income this year: a figure that will fall short hundreds of millions of dollars of these early projections.
In a joint letter on the revenue impact of Prop. 30, Department of Finance Director Ana Matosantos and Legislative Analyst Mac Taylor stated, “estimates of the revenues to be raised by this initiative will change between now and the November 2012 election.” There’s a huge difference between the $6 billion and $9 billion dollars that Taylor and Matosantos estimate Brown’s tax hikes will generate. Even if Brown’s tax hikes are approved by voters, the budget would remain in the red due to chronic overspending by California’s legislators.
Brown is proving to be the ‘70s retread in practice that he is on paper. Prop. 30 represents a continuation of the decades old tax-and-spend policies that have caused residents and businesses to flee California in droves to escape the state’s onerous tax and regulatory burden. Chief Executive magazine’s annual survey of 650 corporate CEOs on the business climate in their states has ranked California the worst state for businesses for eight years in a row.
Raising taxes on California residents and businesses is not going to solve the state’s structural overspending problem. Only necessary spending restraint will cure what ails the Golden State. Without the reforms necessary to achieve that spending restraint, California’s economic situation will inevitably resemble that of Greece. Even if Brown’s tax hikes are approved by voters, state revenues will still be unable to keep pace with the state’s unsustainable spending directory. It increasingly seems that, like their counterparts in Illinois, California lawmakers are expecting the federal government to bail them out of their mess. Fortunately, Paul Ryan and other Republicans in Congress see this coming and have introduced legislation to prevent a taxpayer bailout of deadbeat states, which ATR supports.
County Governments Revolt Against Gov. Martin O'Malley
Throughout Maryland, county governments have begun to push back against the reckless fiscal policies of Governor Martin O’Malley. During Maryland’s first special session, this past summer, Marylanders saw their taxes once again increased and witnessed the state government passing the buck on teacher pension liabilities to the county governments. In addition, Gov. O’Malley has put into action a whole slew of new regulations on vehicles, rainwater run-off, and septic systems. With continuously diminishing authority over local government specific issues and even higher taxes, county officials are hoping to posture themselves in order to curb not only the authority of the governor, but also his wild fiscal irresponsibility with state funds.
According to a new Watchdog article, “Local governments have lost some $1.8 billion in state support since Fiscal Year 2010, affecting nearly every essential local service: roads and bridges; law enforcement; health departments; and jails.” If these state-financed projects are suffering, one must inquire where Maryland’s tax dollars are being directed. Clearly, Gov. O’Malley’s tax increases are not solving the problems faced by every Maryland resident.
If local resistance to Gov. O’Malley’s failed fiscal policies seems familiar, it is because it closely resembles Virginia Senate candidate Tim Kaine’s four year tenure as the Governor of Virginia. In his recent ad campaigns, Kaine claims that he did not raise taxes on Virginia residents. While no taxes were raised during his time as Virginia governor, the real reason behind that fact is because of continued Republican opposition to his annually proposed tax hikes. Every year, Gov. Kaine asked for $1 billion and each year he was denied.
The revolt of county governments in Maryland is a step forward in a state that each year takes many steps back. If they are successful, the county governments can hopefully curb the power of the Democrats in Annapolis and Gov. O’Malley, while also preventing more jobs and taxpayers from fleeing the state.
Teachers Union 1: Rahm 0
With the Chicago Teachers Union ending their seven school day strike earlier this week, the focus should now turn to the details of the new, tentatively, accepted deal: the CTU must vote to approve the deal on Oct. 2. Chicago Mayor Rahm Emanuel had a chance to truly reform the education system of Chicago and curb the over-indulgent greed of unions, beginning with the CTU. Instead, Mayor Emanuel is going to have to raise taxes to pay for the agreed upon demands of the CTU while trying to balance a city budget that is already $369 million in the red. The “concessions” given to the CTU can only be described as laughable. ATR's Josh Culling has an article in today's National Review on how Rahm failed to deliver reform even though the stars couldn’t have been more perfectly aligned:
Student achievement now accounts for 30 percent of teacher evaluations, but the State of Illinois already requires 25 percent. Teachers will receive raises of 3 percent, 2 percent, and 2 percent over the next three years, on top of automatic step-and-lane pay hikes that are already set in stone. And the school day will be longer, but teachers won’t be teaching any more hours; the city is required to hire hundreds more teachers to fill out the longer school days. All told, the deal will cost Chicago hundreds of millions of dollars in the coming years.
With the entire nation viewing the CTU in a negative light, Emanuel had the best opportunity as Mayor to make major changes to the way things are done in Chicago. Unfortunately for residents, their captain missed the potentially game winning shot.
Illinois Problems Forecast Effects of Pending Omaha Tobacco Tax Hike
The Omaha City Council is currently pushing for the passage of a new ordinance that would add an occupation tax of 35 cents per pack of cigarettes purchased within the city of Omaha, Nebraska: this increase will be in addition to the 64 cents in state taxes. The annual revenue generated from this proposed ordinance is estimated at $35 million over ten years, and will go towards funding the construction of the University of Nebraska Medical Center and Nebraska Medical Center campus.
The total cost of the project is estimated at $370 million. The state of Nebraska has already agreed to provide $50 million towards the project, and Douglas County has also agreed to contribute a total of $5 million. Nebraska University President J.B. Milliken has gone on record stating “… we expect that the cancer center will be supported by some $200 million in private funds, plus $120 million in debt assumed by The Nebraska Medical Center.” With roughly $200 million in private funds supposedly earmarked for the project, Omaha City Council’s sudden insistence on new taxes certainly doesn’t jive with the legislature’s original intent.
The increase of cigarette taxes in Omaha will only further hurt retail owners in the city: consumers will look to avoid paying the additional tax increase by going outside the city for their cigarette purchases. We know this will happen considering retail owners in the state of Illinois are currently facing the same problem with the recent $1 cigarette tax increase:
William Adams, owner of Metro Speedy Mart in Metropolis, predicted the hit he would take when Illinois raised its tobacco tax… "I'd say roughly $11,000 or $12,000 a month in loss of sales...totally lost." Kim Overby is also making changes to her business plan. She’s the president of Cigarettes for Less in Paducah (Kentucky). "We've done advertising in Illinois, billboards, that kind of thing. We're looking for those opportunities again," she said. That's because about 80% of her business already comes from Illinois and because the taxes are lower in Kentucky she's hoping to capitalize even more.
Cigarette consumers in Illinois are more than willing to cross state lines to avoid higher taxes; Omaha should expect its smokers to act in similar fashion by taking a short drive to a neighboring city. The upshot, of course, is that revenues will likely fall short of the $35 million projection, leaving a hole in funding for the UNMC cancer center. This is consistent with what we have seen with targeted excise taxes in other states: Between 2003 and 2007, 57 state cigarette tax hikes went into effect. Only 16 of them met their initial revenue targets. In fact, New Jersey and Washington, D.C. recently saw a net revenue decline after a tax increase. Omaha should be wary of such an unstable source of revenue.
Fortunately for residents of Omaha, the cigarette tax increase has not gone into effect yet. A public hearing is being held on Tuesday September 25, 2012. Make sure your voice is heard and the 5 councilmen in favor of this new ordinance do not ignore your views on the matter.
To contact your councilman, click here for their respective information.
Bag Tax Causes Greater Mess for D.C.'s Fiscal Environment
Yesterday Patrick Gleason, Director of State Affairs at ATR, had a piece published in the National Review explaining a new study recently conducted by the Beacon Hill Institute that examines the economic damage done by D.C.'s bag tax since its implementation two years ago. From the new study finds that the D.C. bag tax will yield the following results by 2016:
"Employment losses will rise to 136 net local jobs from 101 in FY 2011, and aggregate real disposable income will fall further by $8.08 million from $5.8 million in FY 2011. Investment declines will increase to $1.58 million from $600 thousand in FY 2011."
To read the column and report in its entirety, click here.
T-SPLOST Does Not Receive the Green Light, Will Not Pass Go
Washington, D.C. - On July 31, 2012, Georgia residents overwhelmingly voted against the Transportation Special Purpose Local Option Sales Tax, more commonly known as T-SPLOST. The tax, which called for the creation of 12 special tax district regions, would have levied a 1 cent sales tax increase for 10 years.
Advocates for the special referendum, including Atlanta Mayor Kasim Reed, have argued that there needs to be a revote, and it is a process when it comes to accomplishing change such as this. Unfortunately for Mayor Reed and other T-SPLOST supporters, Gov. Nathan Deal, a Taxpayer Protection Pledge signer, declared he will not turn to voters again on transportation funding and said he does not support an increase in the gas tax or a hotel/motel tax to fund transportation projects.
The vote against T-SPLOST by Georgia residents not only demonstrated displeasure with the idea of increasing the sales tax, but also voter distrust of the government. In this case, Georgia residents seem to distrust how the appropriation of funds would be used by government officials within the state. The latest attempt at solving the transportation issue proved to be flawed because it would have had a negligible effect on congestion while raising billions of dollars in taxes.
If transportation is as great a priority as Georgia legislators claim it to be, then elected officials need to prioritize it in the budgeting process. Rather than spending all the money then hitting up taxpayers for more cash, Georgia officials need to be fiscally responsible with the money allotted within the budget in order to better serve its residents.