CBP Infographic: Poverty Is a Problem We Can Address

September 17, 2014

Census Bureau data released yesterday show that poverty in California remains high. Our brief report on the new Census data shows that the share of all Californians with incomes below the federal poverty line in 2013 remained significantly higher than in 2006, the year before the Great Recession began. More than 5.6 million Californians — over one in seven — had incomes below the poverty line in 2013.

What’s more, nearly 2 million California children were living in poverty in 2013. Although the state’s child poverty rate — 20.3 percent — is down significantly from that in 2011 (24.3 percent), children still account for a disproportionate share of Californians living in poverty.

This CBP infographic (below) highlights the new top-level poverty data from the Census and shows why state policies that boost workers’ earnings can play a major role in reducing poverty and fostering greater economic opportunity across our state. A full-size (PDF) of this infographic is available here.

— Steven Bliss

CBP-Poverty-Infographic-2014-for-Blog


Proposition 47 Would Continue Trend Toward Local Public Safety Solutions

September 10, 2014

Yesterday the CBP released an analysis of Proposition 47, “The Safe Neighborhoods and Schools Act,” which will appear on the November 4 statewide ballot. The measure would reclassify seven categories of nonviolent drug and property crimes as misdemeanors, thereby reducing penalties for various low-level offenses (except for individuals with specific serious, violent, or sex offense histories). In addition, Proposition 47 would allow for resentencing of individuals who were previously convicted of the reclassified crimes.

In essence, the measure proposes a series of amendments to current sentencing law in California that would simplify, lower, and equalize the penalties for common nonviolent crimes, such as shoplifting and drug possession for personal use. By doing so, Proposition 47 would continue California’s recent trend of moving away from state corrections for nonviolent crimes and investing in local public safety solutions.

This type of sentencing modification was embodied more broadly in 2011 when the Legislature transferred — or realigned — responsibility for supervising individuals convicted of low-level felonies from the state to counties based on a framework proposed by Governor Brown. Despite the large-scale shift that realignment created, there may still be a need for a deeper revision of California’s sentencing laws.

California’s sentencing structure is a complex system of laws that offer little transparency into the purpose or effectiveness of the system as a whole. Competing goals of punishment and rehabilitation have swung largely in favor of incarceration since the 1970s. However, as our analysis of Proposition 47 shows, overreliance on incarceration can be harmful to communities and costly to the state. Additionally, sentencing outcomes are heavily influenced by the discretion of local criminal justice administrators — for example, police, prosecutors, and judges — which can result in a system of justice by geography. On the one hand, this can mean that where people live arbitrarily affects the likelihood they will be sentenced to a period of incarceration. On the other hand, flexibility in the system allows local jurisdictions to respond more effectively to the particular needs of their communities.

The Legislature, Administration, and judicial branch have all acknowledged a need for a more comprehensive revision of sentencing laws, but have been slow to take action, often due to disagreements over who should have what decision-making power and responsibility.

Proposition 47 presents an opportunity for voters to weigh in on one aspect of California’s sentencing structure: how to respond to certain nonviolent crimes. The measure would lead to a decline in incarceration and would invest the resulting state savings into drug and mental health treatment, school truancy and dropout prevention, and victim services. These three areas have been shown to improve public safety and could result in further criminal justice savings.

Insofar as the measure reduces criminal justice spending in the long term — both through decreased use of state prisons for nonviolent crime and through investment in local public safety solutions — California could use freed up resources to invest in critical public systems and services that are operating at severely diminished funding levels such as child care, education, and services for low-income seniors and people with disabilities.

— Selena Teji


Learning the Right Lessons From the Fight over Tesla’s “Gigafactory”

September 4, 2014

The announcement that Tesla has selected the state of Nevada over other western states for its new “Gigafactory” will undoubtedly reignite the debate about whether California is unfriendly to businesses. Critics will likely point to policymakers’ inability to secure a California location for the new manufacturing plant as another indicator that tax and regulatory policies drive businesses and jobs out of the state. However, it’s worth taking a step back to look at what lessons can really be learned from this experience, and what policymakers should consider moving forward.

First, site-location decisions are about more than just taxes or regulations. Where businesses locate depends on a multitude of factors, including the availability of skilled workers, shipping and transportation costs, and the quality of public services. This is further borne out by the fact that one region in Texas is reported to have offered Tesla almost $800 million in subsidies and tax breaks and still did not convince Tesla to locate there — and this reported offer far exceeded the $500 million that Tesla requested. While we will learn more specifics in the coming days about the reasons why Tesla chose Nevada, it is unclear that Nevada has the capacity to offer a similar upfront deal, considering that this would represent a substantial share of the state’s total $6.4 billion budget.

Second, California will still see some economic benefit from a Tesla factory located in Nevada. In our open letter to policymakers, signed with stakeholders from other western states, we emphasized that states have an interest in cooperating given that the automotive industry spans across states and cities. As the Sacramento Business Journal reports, a Tesla factory in Reno could help the Sacramento region because warehousing and supplier companies could locate along the Interstate 80 corridor. This speaks to the need for states to be more transparent and cooperative in their approaches to economic development, since Nevada taxpayers may end up paying for a decision that could benefit California anyway.

Finally, it’s worth pointing out that California’s job growth is outpacing the national average, and this includes jobs from companies expanding in or relocating to California. While we have written extensively about how California’s economy remains difficult for many of California’s workers, the state’s high unemployment rate is more about the historic losses incurred during the recession rather than California’s economic growth being comparatively weak. Companies like Mercedes have expanded operations in California, and the state is adding an average number of new jobs each month that is four times what the Tesla plant would have directly provided in total, if the new factory met expectations.

With these things in mind, what should policymakers do? It’s understandably frustrating to engage in a public fight over securing jobs that would benefit a community, only to “lose” that fight. However, policymakers should not learn the wrong lessons from this experience: that California needs lower taxes or needs to offer even costlier deals to individual companies. Research consistently shows that tax cuts at the expense of public investment are not the best means by which to spur job growth. Enhancing public services and investing in a skilled and educated workforce remain the preferred long-term strategies. For instance, with the amount of public subsidies California was considering for Tesla — estimated to be around $500 million – the state could have tripled this year’s increase in General Fund support for the California State University system. It’s this type of investment — and similar ones that create the foundation for future growth — that will promote broad-based economic prosperity in the future.

— Luke Reidenbach

 

 


Transparency Still Missing in the New K-12 School Funding Formula

September 3, 2014

Once again California’s new funding formula for K-12 schools — the Local Control Funding Formula (LCFF) — will be the focus of the State Board of Education (SBE) meeting tomorrow in Sacramento. As at its prior meeting in July, the SBE will review proposed changes to regulations they adopted this past January that govern LCFF spending. These include changes to what school districts must report in their Local Control and Accountability Plans, or LCAPs. All California school districts were required to adopt LCAPs by July 1 using a template the SBE approved earlier this year. In response to comments made by students, the SBE improved the LCFF regulations since its last meeting by specifically calling for greater student participation in the development of school district LCAPs. However, key issues remain, including whether school districts will be required to transparently report how much they spent to support disadvantaged students in 2013-14.

As we have blogged about previously, it is critical that the SBE adopt regulations that require school districts to clearly report a baseline spending level so that stakeholders can gauge the extent to which school districts are increasing or improving services to support disadvantaged students. While the regulations adopted by the SBE in January do require school districts to use prior-year spending on disadvantaged students as a starting point for estimating the level of support going forward, they do not require transparent reporting of this baseline level of spending. Unfortunately, the SBE rejected requests for this basic level of transparency in its most recent responses to comments submitted by education advocates.

The SBE is likely to adopt permanent regulations later this year, and those rules, as well as the LCAP template, will determine what LCFF spending school districts are required to report — and how they are required to report it — for years to come. After tomorrow’s SBE meeting, the public will have through September 22 to submit comments on proposed changes to the regulations and the LCAP template. All concerned about transparency in LCFF spending should use that period to engage in the process and let their voices be heard.

— Jonathan Kaplan


New CBP Report: Making the State’s Economy Work Better for Low- and Mid-Wage Californians

September 3, 2014

Earlier this week, we released our annual Labor Day report, taking a look at the latest employment and wage trends, what they mean for workers and their families, and some key implications for public policy.

Beyond Recovery: Making the State’s Economy Work Better for Low- and Mid-Wage Californians shows that while our state has regained the number of jobs it lost during the Great Recession, the current economic expansion follows decades of wage stagnation that has meant diminished opportunities for many California workers. The report also shows that low-wage earners account for a growing share of the state’s workers overall.

In sum, Beyond Recovery underscores that simply recovering from the Great Recession will not be enough to ensure a mix of jobs that makes broad-based economic growth possible. The report highlights a number of ways that state policymakers could help broaden economic opportunity for California’s workers and their families. These include investing in services that help Californians find and keep stable employment, broadening access to high-wage careers by rebuilding support for California’s public higher education system, and ensuring that low-wage jobs pay adequate wages.

Our Labor Day report received media attention across the state. Midday Edition on KPBS in San Diego featured a segment on the report, during which CBP Policy Analyst Luke Reidenbach, the report’s author, discussed its key findings. The report also received coverage in the Los Angeles Times, San Francisco Chronicle, Sacramento BeeCentral Valley Business TimesInland News Today, and others. (Read our full press release.)

In the coming weeks and months, look to this blog and our website for further commentary on California’s economy and labor market and how state budget and policy choices can lay the groundwork for greater economic opportunity across the wage spectrum.

 Steven Bliss

 

 


An Open Letter to Five States’ Officials About Tesla Motors

August 26, 2014

The announcement earlier this year by Tesla Motors that it planned to establish a major electric-car battery factory in one of five western states has set off a bidding war among officials in these states. Yesterday, CBP Executive Director Chris Hoene joined with leaders at Good Jobs First and peer organizations in the other states to direct an open letter to state officials calling for greater openness in the process, strong accountability measures, and cooperation — not competition — among the states.

August 25, 2014

There is no question that state officials should place a high priority on boosting employment and fostering economic opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” — undoubtedly a valuable source of economic growth for its eventual home state — has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla — or any other company — could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent — no law requires you to negotiate with Tesla or any company behind closed doors — and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry — with its far-flung supply chains and 50-state market — is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Signed,

Diane E. Brown, Arizona PIRG

Chris Hoene, California Budget Project

Bob Fulkerson, Progressive Leadership Alliance of Nevada

Javier Benavidez, Southwest Organizing Project (New Mexico)

Craig McDonald, Texans for Public Justice

Greg LeRoy, Good Jobs First


How Should California Spend Nearly $2 Billion?

August 25, 2014

The state of California is poised to direct an estimated $1.8 billion over the next four years to new and expanded tax breaks for specific industries and businesses based on actions recently taken by state lawmakers, or actions pending and likely to be approved by state lawmakers in the coming days. These include:

  • Nearly $420 million in tax breaks for aerospace companies — specifically targeted to Lockheed Martin and Northrop Grumman — that are competing to build the next generation of stealth bombers, an incentive package approved by the state Legislature and signed into law by Governor Brown earlier this month;
  • Expansion of a state tax credit for film and TV production — from $100 million to $400 million annually — that is currently working its way through the Legislature; and
  • Efforts to lure Tesla Motors to build a new “gigafactory” in California, which are likely to include tax credits to help meet Tesla’s demands that state and local governments help pay for 10 percent (estimated at $500 million) of the cost of construction. The legislation, expected to emerge in the coming days, is also likely to exempt Tesla from some environmental (CEQA) requirements.

All told, these actions stand to commit the state to nearly $2 billion over the next four years in targeted tax breaks for business and industry.

We think that California would benefit more from investing this money in vital public systems and services. While we don’t question that state leaders should place a high priority on boosting employment and expanding opportunity, we do question whether these new and expanded credits and incentives are the best strategy for meeting those objectives. Consider just a few alternatives for the state’s $2 billion:

  • Phasing in a refundable state Earned Income Tax Credit (EITC) to further leverage the federal EITC, which would boost the incomes of working families most in need of assistance, raising thousands Californians out of poverty each year;
  • Continuing to restore the 110,000 subsidized child care and preschool slots (nearly one-quarter of the total) cut since 2007-08 that help working parents find and keep jobs and build a foundation for children’s success; and
  • Making a down payment on reinvesting in the economic engines that are the state’s higher education systems, for which state General Fund spending per student has declined significantly over the last three decades.

All of these alternatives, among others, are proven winners at helping working families to prosper, while the evidence on targeted tax breaks for businesses is mixed at best.

As state leaders clamor to give away tax credits to high-profile businesses and projects, we should all be asking the question “How should California spend nearly $2 billion?”

— Chris Hoene


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