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Daniel Weintraub

California Insider

A Weblog by
Sacramento Bee Columnist Daniel Weintraub

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« March 2005 | | May 2005 »
April 30, 2005

Ballot watch

The week's developments on the direct democracy front, from the Sacramento Bee.

Posted by dweintraub at 7:38 AM

April 28, 2005

One day to go

Another big day over at the Franchise Tax Board: $800 million through the door from personal income tax returns. That means that with one business day left in April, collections are about $200 million ahead of projections for the month. We now know there won't be a shortfall. And it looks as if there won't be a huge windfall, either. But they might still end up with a bit of a bump.

Posted by dweintraub at 3:33 PM

Lockyer won't run for governor

Atty. Gen. Bill Lockyer says he'll run for state treasurer next year rather than governor, as he had planned. An AP story is here.

Posted by dweintraub at 1:03 PM

Spend more wisely

Do you believe that we can improve the quality of California’s K through 12th grade public schools by using the money we now spend more wisely, or are we going to have to spend more money to improve the quality of K through 12th grade public schools?

All adults
Spend more wisely 59%
Spend more money 31%
Both.................. 7%
Don’t know........... 3%

Source: Public Policy Institute of California

My column on the poll.

Posted by dweintraub at 8:30 AM

April 27, 2005

Riordan quits

Breaking news: Dick Riordan has resigned as Gov. Arnold Schwarzenegger's education secretary, effective June 30, according to the governor's office.

Posted by dweintraub at 4:39 PM

They found the money

The Franchise Tax Board reports that they opened returns with checks totalling about $1.1 billion today, probably just one of a few billion-dollar days in the history of the state. That puts the monthly number for April back in the neighborhood to meet or exceed projections, depending on how much the last two days of the week produce. The governor's green eye-shades are probably breathing a bit easier this afternoon.

Posted by dweintraub at 3:18 PM

April 26, 2005

April PIT revenue soft so far

Probably not cause for panic, but with just three more business days left in April, personal income tax collections aren’t quite measuring up to projections. It is always possible that there’s some money left in the pipeline that will suddenly appear between now and Friday, but as of today, the collections for the biggest month of the year appear to be below what the Department of Finance was projecting, and significantly lower than what was expected by the more optimistic Legislative Analyst’s Office.

So far, personal income tax collected by the Franchise Tax Board for the month totals $5.4 billion, minus $1.6 billion in refunds. That net of about $3.8 billion compares to the month’s projection of about $5.5 billion. Last year, the final three days of the month brought in just under $1 billion. In 2003, the take was about $700 million. So the collections through the end of this week would have to be unusually high for the month’s total to come in on target, let alone match the legislative analyst’s projection, which was about $500 million higher.

(None of these numbers, by the way, reflects income tax withholding from paychecks, which is recorded separately.)

Posted by dweintraub at 3:14 PM

Why market pricing would help solar

Another reason for progressives to support time-of-use metering of electricity: Cal energy economist Severin Borenstein has a working paper out that shows how solar power is undervalued when the electricity it saves is priced at a flat rate averaged throughout a 24-hour day. Most solar is generated at peak hours, when electricity is at a premium. When the cost avoided is averaged with the price of electricity in the middle of the night, solar doesn't get the credit it deserves. The abstract is here, with a link to the full paper.

Note: This item originally referred to the value of real-time metering. After reading the full paper, I realized that Borenstein was saying that time-of-use metering by itself would go most of the way to valuing solar energy correctly.

Posted by dweintraub at 1:36 PM

Senate Dems on schools

Senate leader Don Perata and several of his members today unveiled the caucus' package of education reform bills, with a focus on local control and a chance for greater local funding. The bills would cut some strings on current state funding, create a pilot project to send money directly to school sites instead of through district administrators, allow local districts more freedom to choose their own textbooks and let local voters pass parcel tax increases with 55 percent of the vote rather than the current two-thirds majority. Also included are measures designed to send more money to schools with high numbers of hard-to-teach kids. Press release with a link to the bill summaries is here.

Posted by dweintraub at 1:21 PM

April 25, 2005

Rose: remap reform could win

The Rose Institute at Claremont McKenna College has released a poll suggesting that voters are more likely to support redistricting reform than a lot of insiders believe. Also: they have Schwarzenegger's approval rating at 47 percent.

Sorry about the bad links. We might have jumped the gun a bit. They're supposed to be up any minute.

Posted by dweintraub at 3:20 PM

Work comp costs plummet

Insurance Commissioner John Garamendi, in a conference call with reporters today, said he had some “very disturbing” news: the latest figures show that the cost of claims as a percentage of premiums collected by workers' comp insurers had dropped to 45 percent. In other words, for every dollar they collected in premiums in 2004, they paid out 45 cents in claims. That’s a drop from 60 percent the year before and 89 percent in 2002.

Now, given that lawmakers and two governor have passed a number of bills since 2003 aimed at reducing the cost of those very claims, and Garamendi supported those bills, his reaction might seem strange.

But what he meant is that he thinks the insurance companies are making too much money, and the nonprofit State Fund is recovering too quickly from its financial problems. Instead, Garamendi says, they should be cutting rates to business.

Also, the commish says he is concerned that the insurers may be using the new law to deny too many claims, or low-balling their payments to injured workers.

Is this a rare case of a bill passed by the Legislature actually achieving more than its intended goal?

Posted by dweintraub at 2:45 PM

Connecting the dots

Gov. Schwarzenegger today again mentioned his support for incentive pay for teachers in schools serving a high number of disadvantaged kids – and again showed how politically tone deaf he is on the education issue. Schwarzenegger has rightly portrayed the teachers unions as part of the problem in the public schools. And for that – and his budget policies – he has been painted as anti-teacher by his opponents. But here is an issue that is pro-teacher and, more importantly, pro kid. Not only pro-kid but pro-poor-kid. And he just can’t seem to get himself to connect the dots.

Everyone knows that our poorest kids tend to clump in schools that depend too much on inexperienced teachers, many of whom are still trying to find their way in the profession. We have good, experienced teachers who would teach in these schools if they were rewarded financially for their trouble – just as in every other profession, where the toughest-to-fill jobs normally earn higher pay. So who or what is standing in the way of the students who need better teachers getting those teachers?

The teachers unions.

The unions refuse in almost all cases to negotiate contracts that allow one teacher to be paid more than another for any reason other than seniority and academic credentials. You can’t pay a math teacher more than an English teacher, and you can’t pay a teacher who works with hard-to-teach kids in the inner city more than a teacher who works with well-prepared middle-class kids in suburbia. The only notable exception to this is incentive pay for bilingual teachers, interestingly enough.

This looks like the tip of an enormous issue with the potential to expose the terrible bargain the Democrats in the Legislature have made with the teachers unions, to the detriment of the people they claim to represent. Schwarzenegger has taken the side of poor kids by advocating incentive pay. And he has taken on the teachers unions in general. What he hasn’t done is use the example of poor kids to explain to nonpolicy wonks exactly how the unions can be a destructive force in education.

Democrats and the CTA must be thanking their stars that he hasn’t figured this out. If he ever does, their unholy alliance might stop being such a huge advantage and instead become a massive political burden.

Posted by dweintraub at 12:36 PM

April 23, 2005

Ballot watch

Here is the weekly ballot initiative watch from the Bee's Capitol bureau.

Posted by dweintraub at 10:48 PM

April 22, 2005

State board of ed

This is good news: The gov has appointed Yvonne Chan to the state Board of Education. Chan is the second charter school operator Schwarzenegger has named to the board. She is the principal of the Vaughn Next Century Learning Center, which was the first public school in the nation to be converted to a charter school, in 1993, and has since grown to serve 1,700 preschool through middle school students. Schwarzenegger earlier appointed Johnathan Williams, co-director of the Accelerated School in Los Angeles. Both schools serve high-poverty populations.

The governor also appointed Kenneth Noonan to the board Thursday. Noonan is the superintendent of Oceanside Unified, a former leader of the bilingual education movement who became a convert to English immersion after seeing the policy at work after voters passed Proposition 227 in 1998.

Posted by dweintraub at 8:28 AM

April 20, 2005

10-4, baby.

Currently in California, it's illegal for an individual hourly employee and his or her employer to agree to a 10-hour, 4-day work week that does not include premium overtime pay. It can happen, but only by a union contract or a secret ballot approved by two-thirds of the affected workers in a firm. AB 640, by Assemblyman Van Tran, would have changed that, allowing any employee to request such a deal, while still prohibiting an employer from encouraging it. Seem reasonable enough? Nope. The measure died today in the Assembly Labor Committee. Thank God someone is protecting us from ourselves.

Posted by dweintraub at 4:59 PM

Hospital rates

I think this is good news. The unions, representing their members, want a seat at the table negotiating better prices from hospitals. Some will worry about ulterior motives. I say, anything that gets consumers better information and a way to negotiate with providers is a good thing.

Posted by dweintraub at 2:07 PM

Closing, er, securing the border

At a press conference on environmental issues today, Schwarzenegger was asked what he meant when he said yesterday that the United States should "close the border" with Mexico. Here is his answer, according to a transcript supplied by the governor's office:

"First of all, I was very happy that some of you took our corrections seriously. And the bottom line is I misspoke, and I'm sorry if that offended anyone. But it was a language problem, because I meant "securing our borders" rather than "closing our borders." Because, of course, we don't want to close the borders, because I think that we have a terrific relationship with Mexico. I have done myself four movies in Mexico. I love to go on vacation to Mexico. I think that we have a great trade agreement with Mexico, we are good friends. I did not mean "close," I meant "secure" our borders, that's what I mean."

Posted by dweintraub at 2:02 PM

Speaker: 'Perhaps I misspoke'


In a breakfast meeting with the Sacramento Bee's Capitol Bureau, Speaker Fabian Núñez said he didn't mean to suggest at a rally yesterday that he was prepared to hold up the budget until Gov. Schwarzenegger agrees to changes in the implementation of last year's workers comp deal. "Perhaps I misspoke," he said.

He added: "It's going to be a budget issue and there's no question we are going to put it on the table."

I will have more on the rest of his remarks in Thursday's column.

Here is a link to the Bee's early story and audio from the breakfast.

Posted by dweintraub at 10:58 AM

March revenues

The Department of Finance report on March revenues is here, on their website. The department reports that March revenues were $2.9 billion higher than projected and year-to-date revenues were $3.3 billion above projections. But the report cautions that most of the unexpected money came from the tax amnesty program that ended in March. A "responsible" budget, finance says, would allocate no more than 10 percent of that new money. Meanwhile, withholding from wages, estimated payments, sales taxes and corporate taxes (outside the amnesty revenue) were also at least slightly above projections, probably about in line with an earlier estimate by the Legislative Analyst's office that was more bullish on revenues than was the governor's budget.

Posted by dweintraub at 10:41 AM

April 19, 2005


This modest little bill by Sen. Joe Simitian just might open a huge can of worms in the years ahead. It would require local districts to report how much they are paying the teachers at each school. Doing that would reveal that most of the time, teachers at schools serving disadvantaged and immigrant kids are paid less, mainly because they tend to be less experienced. This might then lead to policies offering incentives for more experienced teachers to work in those schools, or lead some to argue that more experienced teachers are not necessarily better teachers. Which would then lead some to question why they are paid more. You get the idea.

Posted by dweintraub at 12:02 PM

April 17, 2005

Ballot measure update

Here is what happened on the initiative front last week -- from the Bee's Capitol bureau.

Posted by dweintraub at 7:46 AM

April 14, 2005

Drug discount measure has enough sigs, sponsor says

The Alliance for a Better California has gathered enough signatures to qualify its prescription drug initiative for the ballot, the group's leaders are telling reporters this afternoon. The measure would use the state's clout as a major purchaser to negotiate drug discounts for seniors, the poor and the chronically ill. The industry, meanwhile, is gathering signatures for a second, rival initiative that is identical to the governor's proposal now pending in the Legislature. Looks as if we are headed for a ballot battle between the two.

Posted by dweintraub at 5:15 PM

Hedging his bets

Steve Westly, who can still run for one more term as controller, opens a committee to run for governor in 2006.

Posted by dweintraub at 6:54 AM

'Free' health care

California Medicine Man (John Ford) has some interesting thoughts on the role third-party payers play in driving up health care usage, and cost.

"Even nominal co-payments will discourage frivolous appointments. At one group I worked at, one of our managed care insurers unilaterally decided that their subscribers would have no co-payment for an office visit. They simply announced this on their television commercials without telling the medical groups. We were literally overwhelmed by patients requesting appointments (for largely ridiculous reasons). Utilization went way up."

Posted by dweintraub at 6:43 AM

April 13, 2005

Rally fatigue

If the "Thank you, Governor" rally held this morning on the steps of the Capitol was supposed to be a sign of strength by the Schwarzenegger forces, it utterly failed. A few dozen supporters of the governor, including his own employees and political aides, showed for the event held mid-morning outside the west entrance to the Capitol. Radio talk show host Eric Hogue was the emcee, and actor (and Democrat) Tom Arnold the star attraction. Sen. Tom McClintock also spoke. The theme was on-target: that Schwarzenegger, because of his agenda, is going to take some bruising hits from the government employee unions. But the event had a slight air of desperation, in part because of the tiny turnout, in part because of the cheezy jazz music and the fact that most of the people seemed to be either over 60 or under 6. Everyone else, presumably, was either working or in school. Which begs the question, why schedule a rally for 10:30 on a Wednesday morning? The worst moment came when Arnold (the actor, not the governor) was told that the governor was going to come out and make an appearance. After leading a long chant of "Arnold! Arnold" that was supposed to herald the governor's arrival, the actor was told that the gov was in fact en route to a press event across town and was not going to appear. The cheer ended and everyone went home. Very strange. The only consolation for Team Schwarzenegger was that the public employee unions that had vowed to muster a massive counter-demonstration only managed a tiny turnout themselves. Maybe everybody is just tiring of the show. Not entirely a bad thing.

Posted by dweintraub at 2:42 PM

This doesn't add up

There is something I don't understand about the threat of CalPERS President Rob Feckner and Treasurer Phil Angelides to file suit against insurance giant AIG to recover nearly $400 million the state's pension funds have lost since the company's stock plunged amid fraud allegations. AIG, of course, is a publicly held company. That's how the pension funds got their 21 million shares. But doesn't that mean the rest of the shares are owned by other members of the public? And didn't those other owners also lose money as the company's stock slid from $77 to $53? Now, if the pension funds win their suit, the other owners' shares would decline further as the company shelled out a settlement to the retirement systems. That's seems unfair. Why should some owners of the company who had nothing to do with the fraud have to reimburse other owners? Angelides and Co. are also talking about suing company executives and the auditors, which makes more sense. But suing the company itself to try to recover the $400 mil would just be taking money from some shareholders and giving it to others.

Posted by dweintraub at 7:22 AM

April 12, 2005

More help, please

A few weeks ago I solicited ideas for a piece I plan on the future of education in California. I was flooded by dozens of thoughtful responses from teachers, administrators, parents, students, analysts and academics. Each was unique, but I did find some common themes. And I wanted to review them here and ask for further feedback on those points. I appreciate the help. Let me know what you think of these ideas, and how you think they can be further refined. Feel free to add new ideas if you haven’t already sent them my way. Send your thoughts to

The themes so far:

--Junk the obsolete model of school in the fall, winter and spring and a long break in the summer. Replace it with a longer school year punctuated by shorter breaks.

--Acknowledge the obvious: not every kid is going to go to college, and provide some formal system of improved vocational training for those students who want to enter the trades.

--Group elementary school students into rotating, multi-age collections based on ability or performance in a given subject, test them often and then move them up when they master each segment of the material. Take advantage of emerging technology to give teachers more data and quick feedback about their students’ progress and needs.

--Allow the money (weighted to recognize special needs) to follow the student to the school site, so that schools in poor communities don’t get stuck with all the rookie teachers while the senior teachers flee to affluent neighborhoods. Limit the state’s role to setting standards and holding schools accountable but let the locals figure out the rest.

--Expand charter schools, online home schooling, niche schools, magnet schools, vouchers, anything that provides more choice and diversity and gets away from the traditional model that’s been in place for decades. Key word: decentralize.

--Set a countywide or statewide salary schedule for teachers.

--Provide intensive intervention and tutoring for primary grade students who are falling behind and for students entering high school.

Posted by dweintraub at 11:33 AM

April 11, 2005

Tax amnesty update

Controller Steve Westly says this morning that the tax amnesty that ended March 31 has brought in more than $430 million in new money to the state and $246 million in accelerated payments. Westly said another $2.8 billion in disputed claims prompted by the amnesty program are being evaluated and that as much as 60 percent of that money might eventually remain in the treasury. Westly said another 44,000 applications for amnesty have yet to be processed.

Posted by dweintraub at 11:45 AM

Hospital tech

The Sacramento Bee has a story this morning on new technology that allows nurses and other hospital professionals to communicate instantly, saving tons of time and frustration:

"Hospitals are embedded in chaos, and there's a lot of complexity," she said. "Patients change and their (treatments) change. We needed a technology to let nurses communicate effectively."

She said two in-house analyses showed that using the system saved UCD nurses, pharmacists and pharmacy techs up to three hours a day per person.

Instead of trying to track down colleagues, hunt for lab work or wait for a call to be returned, hospital staff can focus on patient care, Trask said.

Elizabeth Witchel agrees. She's the assistant nurse manager in the medical center's main in-patient surgical suite, a job she describes as "air traffic controller" for the operating room.

"There's a huge amount of communication that has to go on," said the 33-year operating room veteran.

For example, each of the 16 operating rooms is staffed by six doctors, nurses and aides, who perform about 45 surgeries every 24 hours. She estimates that using the communicators saves 15 to 30 minutes in room set-up time before each surgery. Those are crucial minutes when gunshot or other trauma patients are rushed in for treatment.

This communications technology by itself wouldn't make the difference between a hospital with five patients to the nurse and another with six. But is it appropriate to apply the same statewide standard to a hospital with this technology and another without it? And this is just the tip of the technology iceberg. As hospitals evolve, some will invest in these improvements while others do not. Yet they will all have to live within the same state requirements, set to the lowest common denominator.

Posted by dweintraub at 9:57 AM

Power play

Assembly Democrats are holding a hearing later today to focus attention on the possibility of electricity black-outs this summer, and to pin the blame in advance for any power shortages on the governor. The Dems say Schwarzenegger should have done more by now to get more plants built and to renegotiate the expensive contracts former Gov. Gray Davis signed under duress in 2001. The governor has been pushing a renewed conservation effort and expanded programs to spread electricity demand throughout the day to reduce peak needs, and he has put pressure on the utilities to contract for more reserve power. But the Democrats are right: if the lights go out this summer, Schwarzenegger will have responsibility and will take the political hit that goes with it.

Posted by dweintraub at 9:42 AM

April 8, 2005

Does failure breed failure?

Last year, Schwarzenegger managed to paint a series of modest victories as resounding successes, and that perception of success built on itself, giving the public the impression that he was turning around the state. But the governor's last clear-cut victory was more than a year ago, when he brokered an overhaul of the state's troubled workers compensation system. Since then, he has stumbled badly on the budget, shelved his plan to overhaul state government, struggled to clean up the state prisons and now, tripped over himself while trying to get out of the gate with his four-point reform agenda. His only chance to claim victory in that period was when he positioned himself on the right side of about a dozen ballot measures, but even there, it's difficult to say how much of the result was due to his endorsements or oppostion. And in the same election, the Democrats cleaned his clock in candidate races. The question in the weeks ahead is whether voters will give Schwarzenegger credit for backing off on his controversial pension initiative or sense that his retreat signals that he is weak and ineffective, traits that are not likely to win him more support from the electorate.

Posted by dweintraub at 9:39 AM

April 7, 2005

Schwarzenegger drops pension plan

Gov. Schwarzenegger abandoned his pension reform initiative this morning and, joined by city, county and some law enforcement officials, vowed to negotiate a better plan by this summer and place it on the ballot no later than June of 2006. The governor's opponents welcomed the news as the first sign that their campaign against him is working, and urged him to drop the rest of his agenda and embrace their own. Rose Ann DeMoro, executive director of the California Nurses Assn. called on Schwarzenegger to embrace universal health care, increasing corporate taxes and public financing of political campaigns.

Jamie Court of the Foundation for Taxpayers and Consumer Rights, added this:

"Arnold showed the first sign of waving his white handkerchief today when he announced at a press conference he would not go forward in 2005 with his proposal to gut the pension protections of cops, firefighters, nurses and other public employees. With negotiations between the Gov and Dems going hot and heavy in the state house over redistricting plans, it seems like the house of cards that is Arnold's special election is about to fall down all around him. If legislative leaders play their cards right, it will be Arnold who looks like the Joker."

UPDATE: Treasurer -- and candidate for governor -- Phil Angelides chimes in:

"Today's news is a clear defeat for Governor Schwarzenegger and a victory for California. The Governor's pension privatization scheme now sits in its rightful place - the rejection pile of bad ideas.

"Over the past several months, Governor Schwarzenegger's aggressive pursuit of his Bush-like pension privatization plan has deeply divided Californians. Instead of attacking teachers, fire fighters and police officers who serve our children and our communities, the Governor should have spent his efforts doing what he promised to do - balance the budget in a way that protects education and moves California forward.

"The Governor should now throw his other bad ideas on the same rejection pile. He should abandon the rest of his ill-conceived special election proposals, put an end to his massive borrowing spree, and fulfill his pledge to fully fund education."

Posted by dweintraub at 12:08 PM

Competitive districts

Common Cause has released a study showing that the number of competitive districts in California jumped after 1990, when districts were drawn by the state Supreme Court, and then declined again after 2000, when boundaries were drawn by the Legislature. Defining a competitive district as one that produces a winner with less than 60 percent of the vote, Common Cause said more than 80 percent of legislative and congressional elections in the 1980s were uncompetitive. The number of competitive elections leaped by more than 50 percent after 1990, then dropped by 55 percent after 2000. The full report is here.

Posted by dweintraub at 11:19 AM

April 6, 2005

Gov gets a respite

Under fire from nearly everyone with a stake in state spending, Schwarzenegger got a rare pat on the back today from local government leaders, who presented him with a "Champion of Democracy" award. Of course, they are still happy because he backed their effort last year to wall off local property tax money from state budget writers -- in exchange for a last-of-its-kind shift of $2.6 billion to the state over two years. No word yet on whether they support his proposal to spread repayment of state debts to the locals over 15 years, or to prohibit defined pensions for future hires.

Posted by dweintraub at 3:09 PM

April 4, 2005

More on corporate tax

To put this corporate tax revenue story in more perspective, consider that the state expected to receive, net after refunds, $2.96 billion in bank and corp tax in all of March and April combined. So far, with three full weeks of April still to go, the two months have produced $4.65 billion. If the rest of April plays out like a typical April, at least another $1 billion should still be in the pipeline. Boggles the mind.

Posted by dweintraub at 3:01 PM

Congratulations, Tom!


What a way to return from a week off. My friend and colleague, Tom Philp, has just won the Pulitzer Prize for editorial writing, for his riveting series exploring the idea of breaching the Hetch Hetchy dam and restoring Yosemite Valley's "little brother," a magnificent canyon inundated after the dam was built in 1923.

The opening piece in the series read this way:

Here's the best-kept secret of Yosemite Valley: It has a twin.
This little brother, as the late naturalist John Muir called it, has a thundering waterfall named Wapama, a feathery cascade named Tueeulala and a towering peak called Kolana. Below Kolana, a valley snakes between granite walls for eight miles to reach a staircase of rock known as the Grand Canyon of the Tuolumne.

Yosemite's little brother has a name. It is called Hetch Hetchy, derived from the Indian name for its native meadow grasses. But despite its grandeur and its presence in a park that is a national treasure, few people know Hetch Hetchy exists and few visit it.
There is a reason for this remarkable obscurity. Hetch Hetchy is underwater.

Since 1923, a dam that supplies water to the San Francisco Bay Area has submerged the valley's roughly three square miles. An act of Congress in 1913 gave San Francisco control of the valley, a precious resource that belonged to the entire nation.

No wonder, then, that Hetch Hetchy is today the least visited natural feature in the 1,189-square-mile Yosemite National Park. In one survey of Yosemite's popular sites, Hetch Hetchy finished last, below "other." No other national park has such a centerpiece jewel that is locked away from the public, both by the ranger's key at 9 p.m. every day and by 300 feet of sparkling, clear Sierra water.

Yosemite serves nearly 4 million visitors a year. Someday soon it will run out of room for the public. When that day comes, the choice will be stark: Ration the chance to experience the glories of the Yosemite Valley or create, literally, more valley.

Such an expansion is possible if an idea once considered fanciful, even quixotic, gains legitimacy: Drain Hetch Hetchy - an enlarged hole at the dam's base would do the job - and let nature begin to reclaim this spectacular setting.

Read the whole thing here. And here is the page with links to the entire series.


Tom Philp reacts as he officially gets the news -- winner of the Pulitzer Prize for editorial writing.


Tom gets a hug from Mom.

Posted by dweintraub at 12:20 PM

Massive tax windfall

Huge budget news: the state last week suddenly received between $2.5 billion and $3 billion in unexpected tax receipts from corporations.

The working assumption is that the payments are an off-shoot of the tax amnesty that ended Thursday. The companies making the payments are not participating in the amnesty, admitting fault, but instead have outstanding claims disputing the state's interpretation of their tax liability. Under the old law, if they lost those claims, the companies would pay the tax they owed plus interest dating back to the time the tax was due. Under the amnesty law, a company that loses such a dispute must now pay the interest plus a 50 percent interest penalty. So apparently many such firms decided to pay up front rather than risk having to pay the surcharge later. Meanwhile, they are still disputing their cases.

The upshot is that there is somewhere near $3 billion in found money in the treasury. The best case scenario from the state's point of view is that the tax is indeed owed, and it stays in the treasury. The worst case scenario, again from a budget writer's point of view, is that the companies win their cases and the money goes back out. But this would probably happen over time, perhaps years, and the money would go out in chunks and not all at once.

In the short-term, it's at minimum a lucky break for Schwarzenegger and a major change to the state's budget politics. Even if the state gets to keep the windfall, it's probably mostly one-time money. If it's dedicated to ongoing programs, the state's problems only get worse in the out-years. But there are plenty of one-time obligations coming due that the money could be used for.

This is going to be the story of the budget for the next two weeks, at least until the receipts from the personal income tax start coming in around April 15.

Posted by dweintraub at 11:32 AM



At Crossroads, a panel of experts and the public debate the future of health care in California. We'd like you to join the conversation.

Daniel Weintraub


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