Capitol Alert

The latest on California politics and government

January 11, 2012
Number of Californians with million-dollar incomes up sharply

The number of Californians reporting incomes of more than $1 million increased sharply last year, as did their share of the income stream, a new report from the Franchise Tax Board reveals.

The new data will fuel the political debate over whether high-income Californians should pay higher taxes.

There were 10,000 taxpayers in the million-dollar income club during the 2009 tax year -- just one-third of one percent of all returns -- but that number jumped 27 percent to more than 13,000 for 2010, based on tax returns filed in 2011.

The income millionaires reported adjusted gross incomes of $22.4 billion in 2009, an average of $2.2 million each. In 2010, the total jumped 30.2 percent to $29.1 billion, with the average remaining virtually unchanged.

January 11, 2012
Oakland developer Phil Tagami among lottery board appointees

Phil Tagami, the Oakland developer who made headlines by defending his building with a shotgun during Occupy protests last year, has been appointed to the California Lottery Commission, one of three commission appointments Gov. Jerry Brown announced this afternoon.

Brown's recasting of the three-member commission comes a month after his appointment of a new lottery director, former business consultant Robert O'Neill. The lottery does about $3 billion in game sales annually and provides about $1 billion to California schools.

Like Brown, the appointees all are Democrats. Brown and Tagami, 46, know each other from Oakland, where Brown was mayor, and Tagami is a political supporter of his.

The Bay Area News Group reported in November that Tagami guarded his Rotunda Building in Oakland with a shotgun when Occupy protesters tried to force their way in.

"They took a few steps forward, and I racked the shotgun and they left," the newspaper quoted Tagami as saying. "It's sort of the universal 'Don't come any farther' sign."

Also appointed to the commission were Nathaniel Kirtman III, 40, senior vice president of publicity for NBC Universal, and John Smolin, 43, a Los Angeles County firefighter.

Brown was under some pressure to make the appointments. The terms of two of the previous three commissioners expired in November, though they continued to serve. A third commissioner stepped down in December.

The appointments require Senate confirmation and pay a $100 per diem.

January 11, 2012
Long shot Fred Karger taking presidential campaign to Michigan

bp fred karger.JPGAfter logging an estimated 500 events and more than 200 days in the Granite State, California Republican Fred Karger has survived the first contest of his presidential campaign.

"I made it," Karger said today. "I'm still standing!"

Karger, who has made headlines for being the only openly gay candidate in the GOP presidential race, came in eighth place in last night's New Hampshire primary, with current counts showing he won 485 votes.

A last-minute surge in the final tally allowed him to meet his goal of edging out Michele Bachmann, the Minnesota congresswoman who dropped out of the race after the Iowa caucuses.

"A lot of people like to vote for someone who has a shot at winning," he said of the results. "But I'm very proud of the votes I got."

Karger plans to return to his home in Southern California for a few days before heading back to the trail to begin campaigning for his next contest -- Michigan's Feb. 28 primary.

"I never intended to be on 50 state ballots because we're a lean, mean machine here, and so I wanted to compete in states where I have a chance," he said.

The pro-choice, pro-gay-marriage candidate is hoping the whittling of the field will allow him to finally secure a spot in a national debate in the coming weeks. While he faces long odds to make it to the White House, the former political consultant to President Ronald Reagan says that as long as there's a race for president, he'll be in it.

"I will not continue forward if it's a done deal," he said of the prospect of former Massachusetts Gov. Mitt Romney clinching the nomination. "But if Ron Paul continues or (Jon) Huntsman or (Newt) Gingrich catches fire and there is a two- or three- or four-person race, I am going to be nipping at their heels."

Editor's note. This post was updated to reflect final results putting Karger in eighth place, ahead of Bachmann. An earlier tally had him trailing Bachmann by several votes.

PHOTO CREDIT: Fred Karger. Bryan Patrick / Sacramento Bee file, 2010.

January 11, 2012
Dan Logue on the move again as re-election plans change

ha_dan_logueII.JPGCampaign musical chairs caused by the state's new political maps have put Assemblyman Dan Logue on the move again.

Logue told The Bee earlier this year that he had moved to a home he owns in Penn Valley both to be eligible to run in the newly drawn 1st Assembly District and to improve his commute to the Capitol. Staying put in his current Linda residence would have left him to run against fellow GOP Assemblyman Jim Nielsen.

But Nielsen announced Tuesday that he will pass on running for re-election in the lower house, instead waiting to run for the 4th Senate District, which will be up for grabs in a special election if Richvale Republican Doug LaMalfa wins election to Congress in November.

"Rather than forcing the taxpayers to spend millions on another special election to fill his (Assembly) seat if he is elected to the Senate, he has chosen to forgo his election this year," Nielsen spokesman David Reade said of the Gerber Republican's plans.

That decision opened the door for Logue to change course and run in the 3rd Assembly District, which includes a large chunk of territory he currently represents.

State law requires that candidates be registered to vote in the district they seek to represent, so Logue will have to move yet again ahead of his 2012 campaign. But finding somewhere to live in the new district shouldn't be a problem, said Logue, who will have to re-register to vote at the new address before formally filing his candidacy papers.

"I have 10 houses in the 3rd Assembly District, so I am just going to pick one of the houses that I already own and we will be residing there," Logue said.

Logue hasn't ruled out running for the state Senate if LaMalfa's seat opens up, meaning a Nielsen vs. Logue matchup could still be in the cards for next year.

"It's presumptuous to believe that that seat's available," he said, "If the seat does become available, I would definitely take a hard look at it."

California redistricting means many lawmakers might move
As Rep. Wally Herger signals retirement, Sen. Doug LaMalfa is poised to move up

PHOTO CREDIT: Assemblyman Dan Logue, R-Linda, confers with colleague Tom Berryhill, R-Modesto, on the Assembly floor onFeb. 8, 2010. Hector Amezcua, Sacramento Bee.

January 11, 2012
Jerry Brown's budget plan criticized at Martin Luther King event

A year ago, Gov. Jerry Brown said at an annual breakfast celebrating Dr. Martin Luther King Jr. that education funding was a civil rights issue, defending his budget plan in the first days of his new administration.

This year, Brown didn't attend. The Democratic governor has a new budget proposal now, and lawmakers at breakfast this morning said it would hurt children, the sick and the poor.

"The members of the California Legislative Black Caucus are aware of how our communities are hurting, and we're doing all we can to prevent the budget from being balanced on the backs of those who can least afford it," said Sen. Curren Price, the Inglewood Democrat and chairman of the black caucus, which put on the event. "We're joining with (Senate) President Pro Tem (Darrell) Steinberg and others in asking the governor to hold off on his proposed budget cuts that are going to hurt schools, the sick and the working poor until the budget initiative is voted on."

If approved by voters in November, the initiative would raise the state sales tax and income taxes on California's highest-earners. But Brown wants the Legislature to enact spending cuts by March, a measure legislative Democrats have dismissed.

"Why would we make cuts that are going to harm people and harm the economy in March when in fact in May there's a ... probability that the deficit number is going to be less?" Steinberg said when Brown proposed his budget last week.

Steinberg invoked King's legacy in his remarks this morning, at the downtown Holiday Inn.

"The politics, the difficulties, the struggles, the bills, the differences, sometimes the partisanship, the elections - they are all about the larger purpose that Dr. King spoke so eloquently about," Steinberg said. "How do we make sure as Californians that every kid has a chance, that the words about equal opportunity and good education are not just words, but are reflected in our public policies? How do we make sure we don't do any more damage to the poor and the needy and those who have suffered more than others because of the difficult budget cuts and decisions we've had to make over the last number of years?"

Brown has said the cuts are necessary in California's poor financial state.

Among the crowd at breakfast was Mervyn Dymally, lieutenant governor when Brown was governor before. Dymally, a former congressman, assemblyman and state senator, was honored in a video tribute, for which Brown recorded a message.

Brown, who had a sometimes strained relationship with Dymally, called him a friend and "one of the legends of California political history."

The 73-year-old governor added, "I'm very glad that he's upholding the finest traditions of us older folk who still cling to power."

January 11, 2012
California slips to No. 9 in worldwide economic rankings

California, long considered to have the world's eighth-largest economy, has slipped to ninth place, according to the Palo Alto-based Center for the Continuing Study of the California Economy.

Blame it on Brazil.

With a fast-growing, $2.1 trillion economy, Brazil has slipped past California ($1.9 trillion) into eighth place, according to the center's calculations from the latest World Bank economic rankings.

California was once as high as seventh but was later surpassed by Italy, which remains No. 7, just ahead of Brazil and just behind No. 6 Great Britain.

The United States, of course, is first at $14.5 trillion, followed by China at $5.9 trillion, Japan at $5.5 trillion, Germany at $3.3 trillion and France at $2.6 trillion.

California is just ahead of India's $1.7 trillion. The Los Angeles area, with a $886 billion economy, would rank 16th in world, just behind Australia and just ahead of the Netherlands. The Sacramento area's economy, incidentally, would rank 59th, just behind Qatar and Kazakhstan.

By a wide margin, the economic think tank says, California's economy is the largest of any state, with Texas second at $1.2 trillion, based on data from the federal Bureau of Economic Analysis. They're followed by New York, Florida and Illinois.

However, Texas is catching up fast, with an economy growing half again as fast as California's. The Palo-Alto-based center notes that between 2000 and 2010, Texas had the nation's fourth-fastest growing economy at an average of 2.4 percent per year. California trailed at 1.8 percent. Wyoming's economy was growing the fastest at a 4 percent average, followed by North Dakota and Nevada.

When it comes to economic output per capita (2010), California is also trailing many other states at $51,470, but it's slightly higher than Texas' $48,617. Alaska is tops at $70,030, while California is 10th.

January 11, 2012
LAO: Brown's budget restores balance, but estimates questionable

Gov. Jerry Brown's budget would help California bring its spending in line with revenues over time, but it relies on volatile income and may contain welfare cuts that are "too severe," the state's top fiscal analyst said Wednesday in his first review.

The Democratic governor released a $92.6 billion general fund budget last week that includes health and welfare cuts while relying on voters to pass a $6.9 billion increase of income taxes on the wealthy and sales taxes. He also outlined an alternative path if the taxes fail that would reduce school program funding by $2.4 billion, about 5 percent.

Legislative Analyst Mac Taylor, in a press conference today, emphasized the wide divide between his tax projections and Brown's. Dating back to 2010-11, Brown is more optimistic by $3.9 billion. If that gap holds, Taylor noted, eventually lawmakers and the governor will have to find more revenues or cuts than Brown proposes.

They disagree mostly over how much Californians will receive in capital gains. The governor's Department of Finance believes taxpayers will reap $96 billion in 2012; the Analyst says it will only be $62 billion, a $34 billion difference. That translates into a $3 billion tax revenue swing.

"I think what we're concerned about is that the capital gains assumptions the administration is making is a little bit optimistic," Taylor said.

"At this time we're really not asking the Legislature to do anything in particular about it," he added. "It's a little bit more, I think, waving the cautionary yellow flag that there is in our view more downside risk to the administration's numbers."

Department of Finance Director Ana Matosantos responded in a statement, "As both we and the Analyst's office have indicated, revenue forecasting during this time of economic uncertainty is difficult ... While some have commented that our revenues are too low and others have said they are too high, we believe they are just right."

Taylor's report suggests that Brown's $1 billion cut in the welfare-to-work program may have some merit in emphasizing work. But he warned that scaling back aid as dramatically as Brown wants may be "too severe."

The governor's proposal drops aid to parents who fail to find jobs after 24 months, rather than the current 48 months. It also would restrict child care access to those making the equivalent of about $37,000 for a family of three, down from about $42,000.

The analyst also warned that because of the way school districts build their budgets, the governor and lawmakers need to be mindful that they may install program cuts this summer before voters have a chance to decide on taxes.

"This means schools in '12-'13 likely will implement most, if not all, of the reductions that many hope to avoid," he wrote. "Given this possibility, the Legislature needs to be very deliberate in structuring a workable trigger package."

Story has been updated with quotes from the Legislative Analyst's press conference and the Department of Finance. Child care income thresholds have been corrected to reflect state median income rather than federal poverty level calculations.

January 11, 2012
Moody's says California no longer has worst U.S. credit

We're No. 49!

After being stuck in the ratings basement since 2009, California's credit rating now ranks better than that of Illinois, according to Moody's Investors Service. Illinois was slapped with an A2 rating last week, worse than California's A1. Moody's penalized Illinois for unresolved pension liabilities and delayed payments.

"The downgrade of the state's long-term debt follows a legislative session in which the state took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays," Moody's wrote in its announcement. "Failure to address these challenges undermines near- to intermediate-term prospects for fiscal recovery."

California still ranks worst in the nation according to the two other major agencies, Standard & Poor's and Fitch Ratings. Though S&P kept California's rating at A- last year, it improved the state's outlook to "stable" from "negative" after the state enacted an on-time budget, cause enough for Gov. Jerry Brown to celebrate.

California starts this budget cycle facing a $9.2 billion deficit, $4.1 billion of which is because that June spending plan fell out of whack.

"It's not exactly cause to throw confetti from the top floor of our office here, but I think we can take heart from fact that California's credit standing in the market unquestionably has improved in the last year," said Tom Dresslar, spokesman for state Treasurer Bill Lockyer, of the climb out of the Moody's basement. "California cash borrowing notes received higher ratings last year, and all three of the major agencies have expressed more positive views about our credit worthiness."

January 11, 2012
AM Alert: Condoleezza Rice makes stop in Sacramento

Former U.S. Secretary of State Condoleezza Rice is in town tonight as part of the Sacramento Speakers Series.

Rice, of course, is now a Stanford University professor and a member of Think Long Committee for California, which -- among other things -- has proposed a ballot initiative to raise tax revenue.

To get a taste of what Rice might explore at her talk, click here to read her recent conversation with The Bee's David Siders. She told him, for instance, that the California Republican Party needs "better policies on immigration" in order to regain some of its voter registration losses in the state.

Her talk starts at 8 p.m. at the Community Center Theater, 1301 L St. Attendance will set you back. It requires buying prorated subscriptions for the remaining speakers in the series, priced at $155, $200, $260 and $280. Click here for more information.

Back at the Capitol, committees in both the Senate and the Assembly are considering bills that face a deadline Friday for moving fiscal measures to fiscal committees.

The Senate Governance and Finance Committee, for instance, is looking at Sen. Alex Padilla's Senate Bill 331, which would bar new tobacco retailers from locating within 600 feet of a public or private elementary or secondary school.

Click here to find the Senate committees' schedules, and click here for the agendas on the Assembly side.

PHOTO EXHIBIT: The nonprofit U.S. Pain Foundation is exhibiting photos today and Thursday at the Capitol in support of Assembly Bill 369, by Democratic Assemblyman Jared Huffman of San Rafael, which would bar health insurers from requiring a patient to try more than two pain medications before allowing him or her access to other doctor-prescribed medication. Look for the photos on the first floor near the elevators.

TRAFFICKING: Rep. Jackie Speier, D-Hillsborough, joins Facebook's former chief privacy officer, Chris Kelly, and others to highlight a ballot proposal that would increase criminal penalties for human trafficking and require anyone convicted of trafficking to register as a sex offender. The news conference, which coincides with National Human Trafficking Awareness Day, starts at 10 a.m. at Jewish Family and Children's Services of San Francisco, 2150 Post St.


Capitol Alert Staff

Jeremy White Jeremy B. White covers California politics and edits Capitol Alert's mobile Insider Edition. Twitter: @capitolalert

Amy Chance Amy Chance is political editor for The Sacramento Bee. Twitter: @Amy_Chance

Dan Smith Dan Smith is Capitol bureau chief for The Sacramento Bee.

Christopher Cadelago Christopher Cadelago covers California politics and health care. Twitter: @ccadelago

Micaela Massimino Micaela Massimino edits Capitol Alert.

Laurel Rosenhall Laurel Rosenhall covers the Legislature, the lobbying community and higher education. Twitter: @LaurelRosenhall

David Siders David Siders covers the Brown administration. Twitter: @davidsiders

Dan Walters Dan Walters is a columnist for The Sacramento Bee. Twitter: @WaltersBee

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