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Last updateTue, 18 Sep 2018 1pm

Sporting starred and striped jackets and Make America Great Again hats, the California Republicans who gathered on election night in the U.S. Grant Hotel in downtown San Diego were in a remarkably chipper mood.

They cheered when the results came in from Florida, showing the GOP candidate apparently won the narrow race for governor. They lustily booed and jeered when the face of San Francisco Democratic Rep. Nancy Pelosi, the likely next speaker of the House, appeared on the monitor.

If the assembled party activists were disappointed by the fact that, closer to home, they had lost their bid for every statewide office in the state, most seemed to take it in stride. Certainly, no one seemed particularly surprised.

Just as the polls predicted, John Cox, California’s Republican candidate for governor, lost the job to Democratic Lt. Gov. Gavin Newsom. In fact, none of the five Republicans vying for statewide office this year won their races. In the contests for the two remaining statewide offices and the U.S. Senate, a Republican candidate didn’t even make it onto the general election ballot. That leaves GOP voters without a single statewide representative for the third election cycle running.

Adding insult to injury, the only right-of-center candidate to mount a realistic statewide campaign was former Insurance Commissioner Steve Poizner, who got as far as he did after ditching the Republican brand entirely and running as a political independent.

With votes still being counted, Democrats also were within striking distance of reclaiming supermajorities in both the state Assembly and the Senate.

Maybe most painful of all was the fate of Proposition 6. This was the effort to repeal a recent increase in the gas tax—or, at the very least, to tap into the California voters’ historic dislike of higher taxes and expensive commutes, and convince them to once again vote Republican. The measure failed, and Republicans were quick to blame the defeat of Prop 6 on Attorney General Xavier Becerra, a Democrat whose office was responsible for writing the text describing the measure on the ballot.

“A lot of people are going to wake up tomorrow very angry because they were tricked,” said San Diego Republican Party Chairman Tony Krvaric. He pointed to polling that showed voters approved of repealing the gas tax, but not Proposition 6. (An alternative explanation offered by Public Policy Institute of California president Mark Baldassare: Voters approve of the low gas taxes in concept, but worried about the specific consequences of repeal).

“We won on the issue,” insisted Carl DeMaio, who chaired the “Yes on 6” campaign. The lesson he took from the election wasn’t that the message itself was flawed, but that the party simply needs to fight harder.

“Every single election, every single race, we are going to make the fraudulently stolen gas-tax-repeal initiative a main issue in regular elections, and, yes, I predict, a couple recall elections very soon,” he said to the crowd. DeMaio has vowed to recall Becerra, as well as Democratic state Sens. Anthony Portantino and Richard Roth. He then led the crowd in a cheer: “We will fight!”

It was a cheer of defiance in the face of the declining fortunes for the GOP. That, of course, is not a new story. Earlier this year, Republican registration among California voters dipped below those of political independents, making the party of Ronald Reagan the state’s third-most-popular political affiliation, behind Democrat and “no thanks.”

But as national Republicans secured their grip on the U.S. Senate while surrendering control of the House, for California Republicans, the 2018 midterms feel like a new low.

It’s been more than 130 years since Californians replaced a Democratic governor with another Democratic governor. And while Gov. Jerry Brown was a fiscal conservative by Sacramento standards, Newsom can be considered the stuff of Republican nightmares: a San Francisco progressive who supports single-payer healthcare, picks Twitter fights with the president and has flirted with the idea of reforming Proposition 13, the property-tax-capping ballot measure that helped give birth to the modern conservative movement and the Reagan revolution.

“This will be the third time that higher taxes have won as an argument at the ballot in California,” said Bill Whalen, a former speechwriter for Gov. Arnold Schwarzenegger and a fellow at Stanford’s Hoover Institution. In 2012, voters approved Proposition 30’s “millionaire’s tax” and then voted to extend it again four years later.

The fact that the average California voter elected not just to stick it to millionaires this time, but agreed to pay higher taxes at the pump, might suggest that “taxes are not the third rail” of California politics that they once were, he said.

“I think Republicans forgot that it’s not 1978 anymore,” added Jack Pitney, a political science professor at Claremont McKenna College, referring to the year that voters approved Prop 13 by a nearly 30-point margin. “That was a different time and a different electorate.”

For sure, California has changed a lot over the last 30 years. But even as the state has become more ethnically and racially diverse, the profile of the typical Republican voter has stayed relatively static: relatively white, old and affluent. Fortunately for the state GOP, this is the same demographic niche that most predictably turns out to vote. But in the absence of a message that might begin to convince Democrats and independents to switch parties, that may only postpone the inevitable. According to the Public Policy Institute of California, millennial voters are more likely than their elders to identify themselves as liberals, favor single-payer healthcare, and oppose the president. 

“This is a failing franchise,” said Whalen. He argued that the state party has two fundamental problems: “message and messengers.”

Cox put the blame for whatever messaging shortcomings his own campaign experienced on the press, at least in part.

“I wanted to have a dialogue and a discussion about what we needed to do to get rid of that money in politics,” he said. “At some point in time, the message has got to get out, and it’s got to be the media.”

But according to Whalen, the party put itself at a disadvantage when the most-prominent state Republican on this year’s ballot, Cox, was relatively unknown to most California voters prior to the final months of the campaign. Those further down on the ballot were—and likely still are—largely anonymous to all but the most politically engaged. With the exception of Steven Bailey, the retired El Dorado County judge who ran for attorney general, none of the party’s statewide candidates had experience in elected office.

“You’re counting on rookie quarterbacks to lead you to the Super Bowl,” said Whalen.

But even where experienced Republican political leaders do exist in California—city, county and congressional representatives increasingly concentrated in the exurbs and rural stretches away from the state’s populated coasts—it’s tough to convince an all-star player to join a team with such a lousy track record. A Republican hasn’t won statewide since 2006. And one of those candidates was Arnold Schwarzenegger, the rare “international movie star willing to run for office,” said Pitney. “But that bracket seems empty right now.”

In the lead up to the June primary election, state party insiders at least thought they’d finally settled on an appealing message.

“I’m telling every candidate: When you run for office, you should come out … with, ‘Repeal the gas tax,’ and, ‘Oppose the sanctuary state,’” Krvaric told CALmatters earlier this year.

But as late as of this spring, the majority of Californians said they support state policies to protect undocumented immigrants.

Manuel Pastor, a sociology professor at the University of Southern California and the author of State of Resistance: What California’s Dizzying Descent and Remarkable Resurgence Mean for America’s Future, says that the state already tried that political line in the 1990s. In 1994, state voters passed Prop 187, a ballot measure that would have stripped undocumented immigrants of state services had it not been struck down by the courts.

“That was when we should have been paying attention to how to restructure our economy instead of turning inward and blaming other people for the problems that we had,” he said. While the nation as a whole may now be having its own “Prop 187 moment,” brought on in part by national demographic trends that mirror California’s a few decades back, voters here have “wisened up from that experience,” he said.

As for the gas-tax message, which Cox made one of the cornerstones of his campaign, the election results speak for themselves. The gap between the preferences of the state party’s base and those of the average voter seem increasingly impossible to bridge. And yet that is precisely the task before any Republican candidate who hopes to compete statewide.

Cox faced his own version of this challenge with his on-again, off-again relationship with the president over the last year. In 2016, Cox, famously, did not vote for Trump, instead casting his ballot for the libertarian Gary Johnson. But in a lead-up to the June primary, Cox noticeably warmed to the commander-in-chief, touting their biographical similarities and their mutual support for a southern border wall. It was the president’s endorsement that helped Cox secure a place on the general-election ballot.

But once Cox found himself competing for a wider electoral audience, he began doing his best to distance himself from Trump’s more-controversial policies and tweets, but without offending the president’s many supporters. “I’m not running for president,” he has said, employing a defense popular among Republicans across the state, and country.

The state party won’t have an easy time distancing itself from Washington, D.C., anytime soon, even if it wanted to, said Graeme Boushey, a political science professor at the UC Irvine.

“With a national GOP that has itself moved toward more-extreme politics, it’s hard for the state GOP to escape that shadow,” he said. Politics are increasingly nationalized, he continued. Many voters don’t know who represents them in Sacramento, or even in Congress, but they do know who the president is, and to which party he belongs.

Given the president’s political instinct to appeal to his base (a base that increasingly does not look like California) and not the electorate as a whole, that puts the state GOP in a bind, he said. “If that’s going to be the argument that the party has for the next 10 years, I don’t know that the Republican party nationally, and certainly not in California, can sustain that.”

Once again shutout from statewide office, some of the California candidates said they hope to instead to advance conservative policy in California through ballot measures.

Voters “don’t want anything with an ‘R’ next to its name,” said Konstantinos Roditis, the candidate for controller who had the “R” next to his name. “If we want to make change in California that people want, the best way, I believe, is to do it through the initiative process.”

Both he and the candidate for treasurer, Greg Conlon, discussed the possibility of putting a state proposition on the ballot aimed at reducing California’s public-sector pension liability as soon as 2020.

“Our positions are not really Republican; they’re really bipartisan, because the people want it,” said Roditis. “Democrats in Sacramento don’t want it.”

In the short term, the California Republican Party’s greatest hopes for broader political relevance may lie with the governor-elect. Many Republicans believe that Californians will tire of Democratic rule if and when Newsom begins to push through the many ambitious and expensive policies he’s promised on the campaign trail.

The lesson of the last few elections is that Californians have a modest appetite for certain taxes, said Jack Citrin, a UC Berkeley political scientist who has written about the politics of the California tax revolt. “It doesn’t mean that Californians are ready to embrace all kinds of higher taxes,” he said. “I would bet you that if you put Proposition 13 on the ballot as it applies to homeowners, it would pass again easily.”

A recession, and the budget crunch that would likely follow, could result in a similar political backlash. “You can’t sit around and wait for the revolution,” said Whalen. “But I would not get too far down the road with grim prophecies. Things can change quickly in politics.”

Think back to 1974. In the midterm elections after the Watergate hearings and the resignation of President Richard Nixon, the state Republican Party lost five seats in a once-in-a-generation electoral pummeling. But six years later, Ronald Reagan, another Californian, ran for president and won.

“This Republican Party will be back in this state,” Cox said, “and our path to success is going to be based upon delivering the quality of life that people need so desperately.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

The two men competing to be the next governor of California met earlier this week for their first (and, alas, probably only) one-on-one debate.

If you didn’t see it, that’s because the showdown—which was structured more as a spirited conversation than your standard dueling-podiums-style debate—was on the radio, hosted by political reporter Scott Shafer, out of the San Francisco-based station KQED.

And if you didn’t hear it, that’s because it was on a Monday. At 10 a.m. On a federal holiday.

It’s a low-profile treatment for what may be the sole in-person exchange of ideas between the two candidates vying to become the next leader of the fifth-largest economy on Earth. But then again, few voters will have a difficult time distinguishing Lt. Gov. Gavin Newsom, a liberal Democrat and former mayor of San Francisco, from John Cox, a conservative Republican with the backing of President Trump.

On housing, both candidates agreed that a shortage of production was to blame, but they offered very different solutions. Newsom argued that local governments often exert too much influence blocking production: “There’s a certain point where the state of California needs to intervene.” Cox disagreed, arguing that the focus needs to be on reducing the cost of adding new units by cutting state environmental regulations.

The debate over housing quickly turned feisty as Newsom pointed to his proposed solutions, including boosting the state’s low-income housing tax credit and allowing local governments to skim property-tax revenue for affordable housing. He then said that Cox offers only ”an illusory strategy where he criticizes and identifies problems” but offers no substantive fixes.

Cox countered that all of Newsom’s solutions rely on “more government.”

Despite Cox’s best efforts to keep the conversation focused on bread-and-butter economic issues and his history of “fighting against the establishment,” Shafer asked about his views on gay marriage. In 2007, Cox said that allowing same-sex couples to marry would “open the floodgates to polygamy and bestiality.”

“I’ve evolved on those issues … just like Barack Obama,” said Cox.

When asked about gun control, the candidate criticized the shift in the conversation toward “guns and all of these social issues,” arguing that he is not running for governor to change state law on those topics, but is instead focused on affordability.

Cox was happy to talk about Proposition 6, the ballot measure that would repeal the recent increase in the state gas tax and other driver fees, which he has made a crux of his campaign. Cox argued that the state’s Democratic leadership “didn’t want to do the tough job” of eliminating wasteful spending and cutting environmental regulations, so it instead raised taxes and fees. He insisted that under his leadership, the state would be able to fund necessary road repairs without the new revenue.

“We’re going to use the money efficiently and cut good deals with contractors,” he said.

Newsom once again called that plan “illusory.”

“His plan is to make things worse,” said Newsom. “You can eliminate every single position at Caltrans (the state transportation agency) … and still struggle to find the money.”

Likewise, Newsom seized the opportunity to turn the discussion of the state’s sanctuary policy, which limits local and state law-enforcement agencies’ cooperation with federal immigration authorities, into an opportunity to paint Cox as President Trump’s acolyte.

“He believes very passionately in building the wal. He believes in the elimination of sanctuary policy,” said Newsom. “Trump would have an advocate in Sacramento if he becomes the next governor.”

Cox ignored the reference to the president but said he would indeed push for a repeal of California’s sanctuary state law. “If somebody is here illegally, and they’re engaged in criminal activities, I think it’s up to public officials to kick them out,” he said.

Similarly, the two candidates also offered different views on the state’s recent criminal-justice reforms, including the recent elimination of cash bail.

“You’re replacing a private business with a lot more state workers,” said Cox, whereas Newsom called the new law “an extraordinary step forward and a civil-rights reform.”

While Newsom celebrated the state’s climate change policy, saying the state should play a “role not just nationally but internationally to lead,” Cox was more circumspect. He agreed that the planet was warming and that human activity “may very well” be partially to blame, but he questioned whether the benefit of dramatically cutting emissions across the state was worth the cost to electricity ratepayers and drivers.

The fact this year’s governor’s race will likely feature just one debate during the general election (there were a few before the June primary) is unusual by historical standards, but it likely represents the new normal. As the Los Angeles Times reported, no race for governor or U.S. Senate has featured more than one post-primary debate since 2012. That may be a consequence of the growing political polarization of the state.

“I think there’s a growing cynicism about the utility of debates, Cal State Sacramento political scientist Kimberly Nalder told the Times.

Cox’s strategy during the debate mirrored the one he has employed for months on the campaign trail. He has tried to saddle Newsom with responsibility for California’s high gas taxes, high poverty rate, housing costs and every other economic woe facing the state. As a social conservative who opposes abortion, Cox has largely steered clear of those issues.

“This campaign is about change versus status quo,” he said. “Gavin has been part of the political class that has led this state downward.”

There’s a poetic irony in the claim that Newsom should be held responsible for so many of the state’s problems, given he has occasionally griped that the post of lieutenant governor offers little in the way of actual responsibility. But as a Bay Area Democrat, Newsom certainly represents more of a continuation of current policy than Cox.

For his part, Newsom also took a familiar tact in the debate, arguing that Cox was “in lockstep with Trump and Trumpism.” To hear Newsom tell it, Cox is the president’s Midwestern alter ego: a millionaire outsider with no political experience and ideas that are both unrealistic and unacceptable to most Californians.

In short, Cox hopes the election will be a referendum on the current political direction of the state, while Newsom wants every voter to have President Trump at front of mind as they fill in their ballot.

According to a recent poll from the Public Policy Institute of California, Newsom’s strategy appears more likely to succeed—and not just because he’s a Democrat in a blue state. Among likely voters, 61 percent disapprove of the way the Trump is handling the job. Meanwhile, by a slim 50-47 margin, more voters than not believe that California is headed in the right direction.

As the front-runner in a blue state, Newsom could be seen to have little to gain from more frequent, visible debates. In the newest Target Book Insider Track Survey, which asks consultants, lobbyists and other political players in California politics from both sides of the aisle, 37 percent of respondents said Newsom shouldn’t bother with debates because there’s no upside for him—only the risk of a downside. But 63 percent said he should debate, either because it would be a needed endorsement of the American political process (30 percent), or politically smart (8 percent), or both (25 percent).

For more on John Cox and Gavin Newsom—including video interviews and an ability to create a side-by-side comparison of the issues—explore the CALmatters voter guide. CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

The biggest question hanging over the November election: Will Democrats be able to ride a blue wave of anti-Trump enthusiasm back into national political relevance?

We surveyed political insiders in California, and most of them are putting on life jackets.

All 45 respondents in the Insider Track Survey—including campaign consultants, party players, lobbyists, and labor and business-group reps who are California Target Book subscribers—predict Democrats here will gain at least one congressional seat. More than a quarter of respondents say they’ll gain five seats or more.

Nationwide, Democrats need to flip 23 seats to reclaim a majority in the House of Representatives. Some of the most competitive seats are in California

California Republicans have been hoping that Proposition 6—a ballot measure that would roll back a gas-tax increase passed last year by the Democratic-controlled Legislature—would insulate them from an otherwise unfavorable election environment.

But a majority of the survey respondents threw cold water on that idea, too, with 53 percent forecasting that the repeal attempt will fail.

That take runs counter to a USC/Dornsife poll from last May, which found that 51 percent of registered voters favored repeal. Prop. 6 proponents face overwhelming financial opposition from the state’s business groups, labor unions, and organizations representing city and county governments, who argue that the state’s roads will suffer without the extra funding.

So what is the single biggest issue that will determine the outcome of the November elections in California? We asked the insiders, and the results weren’t even close: Instead of the gas tax, the vast majority said that the election in California will boil down to the actions, impulses, tweets and public=approval rating of one person more than 2,000 miles away: President Donald Trump.

CALmatters will be publishing survey results through the November election. Stay tuned.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

California Republicans say that drivers can have smoother roads, more reliable public transit—and lower taxes.

In November, voters will get the chance to repeal a recent increase in the state gas tax and assorted vehicle fees. That tax hike—an extra 12 cents per gallon of gasoline, 20 cents per gallon of diesel, and two new vehicle registration fees—was signed into state law last year, part of a Democratic-led transportation package that directs an extra $5 billion per year toward the state’s dilapidated roads and highways.

Making voters pay more at the pump is a tough political sell, but Democrats and other defenders of the law argue that our infrastructure is long overdue for an upgrade. The gas tax hadn’t been increased in more than 20 years, while the cost of highway construction has tripled. You can’t get something for nothing, they say.

Not so, say supporters of the repeal, Proposition 6. Chief among them is John Cox, the Republican running to be California’s next governor.

“The Democrats decided to do the easy thing in their view, and that is just keep sticking their hands in the pockets of Californians,” he said, “instead of doing the hard work, which would have been standing up to the donors, standing up to the special interests, and using our money effectively and wisely.”

California, he added, “spends multiples of what other states spend on a mile of road.” In trying to sell voters on Prop. 6, which would also require voter approval for all future driving-related tax hikes, supporters like Cox make the following arguments:

• California transportation spending is out of whack compared to most other states.

• Bloated transportation agencies, public sector unions and red tape are to blame for those higher costs.

• Political leaders could cut that wasteful spending—saving taxpayers billions and rendering higher taxes unnecessary—if only they had the will and the courage.

These add up to a potentially enticing argument. The question is: Should voters believe it?

Prop. 6 skeptics are right to say that repealing the new taxes and fees will necessarily mean cutting back on something. Supporters have so far been a little vague on what that something is. Wasteful spending or vital public services? It’s entirely in the eye of the taxpayer.


The Cost of a California Highway

When asked for evidence that California can’t manage its transportation budget, the Cox campaign points to a recent report published by the libertarian Reason Foundation. According to its findings, the state government spends more than $471,000 per mile of road that it maintains. That’s nearly triple the national average of about $178,000. By this measure, California has the eighth-most-expensive state road system in the country.

Given that our roads are in such rough shape, and California also has among the highest gas taxes in the country, one might reasonably wonder whether drivers and taxpayers here are getting a raw deal.

The California Department of Transportation (Caltrans) argues that the report inflates the state’s true costs by measuring each state’s highway system simply by totaling its length. According to Caltrans, California highways have an average width of more than 3.4 lanes, compared to a national average of 2.4, which makes the same length of highway more expensive to maintain. In effect, the report treats a two-lane highway in Oklahoma the same as an equally long stretch of California’s Interstate 405—all 14 lanes of it.

The Reason report is a rare effort to compare across state agencies—because it’s difficult to do. Different state agencies are responsible for different aspects of the highway system, subject to different rules, and operate in vastly different climates, terrains and economies.

“More than 40 percent of the nation’s freight is moved through California, which has three of the nation’s top five busiest ports in Los Angeles, Long Beach and Oakland,” a spokesperson for Caltrans said in an email. That extra wear and tear adds to the state’s overall maintenance tab.

Asked if the federal government compares transportation spending across states, Doug Hecox, spokesman for the Federal Highway Administration, said different methodologies will produce wildly different estimates.

“There are many ways to bake a cookie, and everyone has a different recipe,” he said. “Welcome to my personal hell.”


What Drives the Cost?

Baruch Feigenbaum, author of the Reason report, agrees there are many reasons California roads might cost more—some within the state’s control, and some not.

Falling into the latter category: It’s more expensive to build and maintain roads in high-density urban areas, and California has some of the biggest in the country. The Sierra Nevada and a constantly eroding coastline require challenging and expensive engineering. And, yes, this is California, where wages and land values make everything cost more, transportation related or not.

“Obviously, it’s going to be more expensive to build a mile of roadway in California with labor than it is in Mississippi, regardless of some of the union issues,” said Feigenbaum.

But the high cost of labor is exacerbated by the higher levels of unionization in California, he said. Likewise, the state has tighter environmental regulations than most, which can saddle projects with delays and extra costs.

But where some see inefficiency, others see the preservation of the state’s most cherished values. And for every propeller of higher costs, there is a powerful constituency ready to defend it.

“One of the things that Californians love, that is part of our birthright, is our beautiful state with our beautiful environment,” said Russell Snyder, executive director of the California Asphalt Pavement Association, a trade group that represents road pavers and asphalt producers, and which opposes Prop. 6. “Environmental rules are easy to demonize, but they’re there for a reason.”

Other factors pushing up costs are less obvious, though no less fiercely guarded. In California, much of the major road work is done during off hours to limit the impact on commuters, said Margot Yapp, vice president at Nichols Consulting Engineers, a firm that works on transportation projects across the American West.

“Go travel in the summer in any other state, and construction—even on the interstate—happens in the daytime,” she said. But given the amount of congestion in California, shutting down highways at rush hour would spell certain gridlock and political backlash.

“As soon as you do pavings at night, every (cost) goes up—I would say, easily, by 30 percent,” said Yapp.

Feigenbaum, the Reason Foundation author, still insists Caltrans can cut costs. His suggestions: Caltrans should enter into more partnerships with private companies or take on some of the responsibilities now delegated to local and county organizations, reducing duplicative bureaucracies. In theory, he concluded, passing Proposition 6 would force the state to find those efficiencies.

But maybe only in theory.

“From a mathematical perspective, the state can do it, but from a political perspective, the state probably won’t,” he said.


Can We Cut the Fat?

Carl DeMaio begs to differ. This fall, the conservative talk-radio host—who chairs the political action committee pushing for the repeal—plans to file papers for a 2020 ballot measure, which he says would recoup the state’s budgetary losses from passing Prop 6 … without raising taxes.

The details have yet to be hashed out, but DeMaio proposes three savings: Dedicate all gas-tax revenue solely to road maintenance and improvement (right now, some goes to public-transportation projects and debt repayments); divert all car-sales-tax revenue to state transportation (now that money is treated like other sales tax and goes to general government expenses); and enact “efficiency reforms,” such as mandating that Caltrans employ more independent contractors.

But many state finance experts say finding savings is not that easy.

“It’s nonsense to the suggest that’s just money that’s laying there not being used,” said Michael Coleman, fiscal policy advisor to the League of California Cities, which opposes Prop 6. “If you’re going to be honest with the proposal, then you have to look at what the consequences of this are.”

A little more than half of sales-tax revenue from auto purchases goes to the state’s general fund, for example. If voters decide to divert that money to highway repairs, what could lawmakers cut to make up the difference?

Past ballot measures have placed spending requirements on K-12 education and budget reserves. Court orders and federal funding requirements put more restrictions on many health and social programs and corrections spending. Left on the chopping block are higher education, parks and recreation, public resources, and certain unprotected social welfare programs.

“You’re talking about a fairly small part of the budget,” said Coleman. “It’s remarkable how little discretion the Legislature actually has.”

The remaining sales-tax money that goes to cities and counties—a little less than half of the total haul—mostly goes toward local law enforcement and emergency services, jails, welfare payments and local transportation.

Those fighting against the new gas tax argue that because sales taxes on automobiles are levied on drivers, they should be spent solely on transportation.

As for the savings that DeMaio proposes to unearth by forcing state agencies to rely more on contractors, the state’s nonpartisan fiscal analyst is skeptical.

“When we’ve looked at the cost of contract versus state staff, we haven’t really been able to identify significant differences between the two,” said Paul Golaszewski, a transportation expert with the Legislative Analyst’s Office.

But DeMaio dismisses the idea that there isn’t at least $5 billion to be found somewhere in the state’s $139 billion general fund.

“I don’t think any voter out there is going to accept the notion that government is in prime efficient condition and can’t figure out how to do more with less,” he said.

He, John Cox, and the entire national Republican Party are counting on it. With many political pundits and data points projecting an electoral “blue wave” this November, opposition to the gas tax may be one of the GOP’s last breakwaters. In June, Democratic state Sen. Josh Newman was recalled from his north Orange County seat by a 16-point margin—a recall fueled by anger over his vote for the gas-tax bill. If voters turn out against Newman’s fellow Democrats in equal measure this fall, that could keep Democrats from flipping some of the most vulnerable GOP-held congressional seats in California, allowing Republicans to keep control of the House of Representatives.

“From a turnout and motivation perspective, this is a huge winner for Republicans,” said Jack Pandol, spokesperson for the National Republican Congressional Committee. “We’re going to make every Democrat in November own this tax.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

California’s resistance began before there was a resistance.

When Gov. Jerry Brown unveiled his final budget on Jan. 10, it bookended eight years of a progressive march to reduce greenhouse gases, expand health care, grant more rights to undocumented immigrants and raise the minimum wage to $15 an hour. Along the way, voters have assented by passing temporary taxes on the rich—not once, but twice. The top marginal income tax rate is now 13.3 percent, the highest state income tax rate in the country.

In short, policies that are now labeled acts of resistance to President Donald Trump were alive and ascendant in California long before Trump won the White House. But the contrasts have become much more stark.

Instead of cutting taxes, the Democratic governor and his party’s legislative leaders have passed a gas tax to help pay for aging infrastructure. Instead of trying to shift government out of the healthcare marketplace, California is looking for a way to fund single-payer health care, including coverage for undocumented immigrants. Instead of criminalizing pot, the state is looking forward to collecting taxes on marijuana sales.

In the months between now and the June deadline for a final budget, the governor and the Legislature will hammer out details. The focus this year: what to do with an expected surplus of $6.1 billion—and there are definitely differing opinions all around. Republicans say return it to California’s 40 million residents as a nice tax refund. The governor's priority is to fill up the state’s rainy-day fund. Democratic legislators mostly want to spend it.

“We have a very different approach,” said Assemblyman Phil Ting, D-San Francisco, who chairs the Assembly Budget Committee. “Our focus, the people who we think need tax relief, are the working Californians who are making less than $25,000. That’s where we want to spend our money, making sure they have money to pay rent, to pay for food.”

Rather than giving out “huge corporate tax breaks and a huge tax break for the wealthiest in this country,” Ting has a long list of how he would like to spend that extra money, including:

• Increasing the state’s Earned Income Tax Credit, which puts money into the hands of the working poor.

• Expanding Medi-Cal health care for poorer Californians to cover all remaining uninsured residents, mostly undocumented immigrants.

• Expanding early education for 4-year-olds through preschool and transitional kindergarten programs.

• Increasing college aid.

• Expanding mental and social services to reduce the number of criminals who go on to re-offend.

As supportive as Brown might be of these Democratic aspirations, his administration is urging legislative leaders to proceed with caution. The state’s tax structure is more vulnerable than ever to the stock market gains and losses of its wealthiest citizens, and the governor said California must prepare for the next economic downturn, because a mild recession could wipe away at least $20 billion a year in revenues.

He also warns of uncertainty from Washington, D.C.

“There are certain policies that are radical departures from the norm, and California will fight those, whether it’s immigration or offshore drilling,” Brown said. “We don’t know what will happen. I wouldn’t want to portray a California-Washington battle, although there are some key differences, and we’ll espouse our values.”

Since Brown was elected to begin his second stint as governor in November 2010, the state has climbed out of the recession and enjoyed economic prosperity. The unemployment rate, which topped 12 percent, now stands at 4.6 percent. Since his return, California has added 2.4 million jobs, and hourly wages are up $4.76 an hour. The state, which carried a $25 billion deficit in his first year back, has enjoyed billion-dollar surpluses in recent years, and the state now has a rainy-day fund.

The governor’s proposed $190 billion budget is dominated by spending on education (29 percent) and health care (32 percent). Health care spending has been growing particularly fast since the state embraced the Affordable Care Act, also known as Obamacare. The act not only grew the marketplace for private health plans; it allowed states to expand their Medicaid health insurance programs for the poor.

Because California is among 30 states that expanded Medicaid, the federal government is paying at least 90 percent of the cost for newly eligible enrollees. That has allowed California to draw billions in extra funding from the federal government to bolster Medi-Cal, the state’s version of the national Medicaid program. As a result, the number of people without health coverage in the state has dropped to a historic low: from 17.6 percent in the 1980s to 7.6 percent in 2016. Today, one in three Californians is covered by Medi-Cal.

Public schools too have greatly benefited since the recession, with much of the extra spending on schools going to improve teachers’ salaries.

However, if the federal government doesn’t reauthorize the Children’s Health Insurance Program for 1.3 million children, that could add more than $850 million in costs to the state over two years.

Worse, if Republicans in Washington slash Medicaid funding in 2018, the state could lose between $25 billion and $50 billion, said Chris Hoene, executive director of the California Budget and Policy Center, a progressive think tank in Sacramento.

“The reality is California could not afford the scale of the cuts the GOP has been proposing,” Hoene said. “That’s going to put state leaders in a position of deciding who gets state services and how do they fund that.”

Other factors are straining the budget. For example, pension costs for public workers continue to be one of the fastest-growing liabilities—driven by lower investment-rate assumptions, higher health care costs and longer life spans.

Voters, too, could turn on Brown and lawmakers. Early polling suggests Republicans have a decent shot at repealing a gas tax hike that went into effect late last year. Brown said at a press conference Wednesday that he believes a repeal initiative could be defeated.

The Legislature’s nonpartisan budget analyst is also urging lawmakers not to commit to too many new spending programs.

“As it crafts the 2018-19 budget and future budgets, we encourage the Legislature to consider all of the uncertainty faced by the budget in future years and continue its recent practice of building its reserve levels,” the analyst wrote.

On the flipside, Republicans are calling for a tax refund, if not an outright repeal of state income taxes. They argue that California’s high taxes chase residents out of state.

“This surplus is a direct result of Capitol Democrats overtaxing hard-working Californians,” said Assemblyman Matthew Harper, R-Huntington Beach. “Rather than expanding an ever-growing list of government programs, our leaders should figure out a way to return that money to the people who earned it in the first place.”

Assemblyman Vince Fong, R-Bakersfield, said he plans to introduce tax cuts aimed at helping families and small businesses stay in California.

“As we see all too often now, we are losing families and small businesses to neighboring states that have tax burdens much lower than California’s high-priced tax code,” Fong said on Twitter. “We have an opportunity to change that.”

Brown dismissed the refund idea, saying it would only prompt service cuts to public schools and universities later. “If you want to budget responsibly, you need big surpluses in years that are good,” he said.

Still, there’s a growing sentiment that California may have to respond to recent changes in the federal tax plan, specifically a $10,000 cap on state and local deductions that will hit millions of households.

According to the state Finance Department, the average deduction for state and local income taxes alone is nearly $16,000 per return, while state and local property taxes average less than $6,000 per return. Because a portion of those taxes will no longer be deductible, it acts as double taxation for California taxpayers.

Senate President Pro Tem Kevin de León, who is running for U.S. Senate, introduced legislation Thursday to shield Californians from bearing the costs of the tax overhaul. The bill, dubbed Protect California Taxpayers Act, would allow taxpayers to make charitable deductions to the state and receive a dollar-for-dollar tax credit on the full amount of their contribution. By having residents donate to the state government as a charitable contribution, the contribution remains deductible on federal taxes.

“The Republican tax plan gives corporations and hedge-fund managers a trillion-dollar tax cut and expects California taxpayers to foot the bill,” de León said in announcing his legislation. “We won’t allow California residents to be the casualty of this disastrous tax scheme.”

Brown was particularly vocal against the GOP tax proposal, calling it a “tax monstrosity,” but the governor expressed reservations about whether the state could sidestep federal law.

“It looks interesting,” Brown said. “But two questions: Can it work? If it does work, can the Internal Revenue Service issue a regulation and completely subvert it?”

De León responded that he was confident it would work, because similar charitable deductions have already been given out for education-based contributions.

For now, state Democrats are in agreement about a common threat.

Whether it’s federal tax changes or entitlement cuts, the leader of the Assembly, Anthony Rendon, D-Paramount, said he’s most concerned Republicans in Congress and the Trump administration will take another swipe at liberal California in 2018. “We’re worried about the next shoe to drop.”

CALmatters is a nonpartisan, nonprofit media venture explaining California policies and politics.

Published in Politics