Wall Street Journal, 3/28/12.
by Allysia Finley
The fate of California Gov. Jerry Brown’s tax initiative depends on whether voters buy his sales pitch that the new revenues will benefit schools. They won’t — and the only chance Republicans have of defeating the Democrat-backed initiative is to explain why.
According to a new Los Angeles Times/USC poll, 64% of Californians, including three-quarters of independents, support the Democratic governor’s initiative to raise taxes on those earning more than $250,000. But that’s in part because the poll and the ballot initiative’s language frame the tax hike as a school-funding mechanism. The governor has also threatened to cut up to $5 billion from education if voters don’t approve the tax hikes.
But here’s the rub. About half of all new revenues will actually go to teachers’ pensions. As former Gov. Arnold Schwarzenegger’s pension advisor David Crane recently pointed out in the Sacramento Bee, the California State Teachers’ Retirement System is seeking an additional $4.5 billion annually from the state to help pay down its $60 billion unfunded liability. If the state doesn’t cough up the dough, local districts and teachers will have to increase their contributions. So any new revenues that flow to school districts will actually end up in the teachers’ retirement fund. The rest of the revenues raised by the tax hike, by the way, will go toward paying for state employees’ pensions and retiree health benefits, which this year cost taxpayers about $5 billion.
Republicans will need to explain this to voters, but they may get some help from liberal activist Molly Munger. The wealthy civil rights attorney is spearheading her own tax initiative, which would raise income tax rates across the board on a sliding scale. Her measure would also dedicate nearly 100% of new revenues to schools rather than splitting the money 50-50 between education and general fund programs. But because her tax increase is broad-based, only 32% of voters say they’d support it, according to the LA Times/USC poll.
Even so, Ms. Munger believes that getting “the truth out” about the governor’s initiative will boost her own measure’s prospects. “The governor’s out saying things like his is an education initiative, when it isn’t,” Ms. Munger recently told AP. To be sure, Ms. Munger’s initiative won’t solve the state’s structural budget problems any more than the governor’s will (to do that, lawmakers will have to reform employee benefits). However, she’ll be performing a public service by encouraging a healthy skepticism of the governor’s claims.