Sunday, January 13, 2019

Memo to California Governor Gavin Newsom

Congrats Governor Newsom. You are now the 40th Governor of California, the first Democrat since 1888 to succeed another Democrat as Governor. You gave your inauguration speech on Monday and presented your first budget on Thursday. You laid out your drams and ambitions for the State. The Sacramento chorus is cheering. It’s heady times for you. Sacramento is raking in the money. The Democrats hold a supermajority in both branches of the legislature. The Republicans have no control over the budget or taxes. The remaining Republicans in Sacramento are meek and quiescent. California is now a one party state with you as Governor. Governor Jerry Brown, your predecessor, built up a reserve fund for the state budget. You may have an extra $21.6 billion to spend next year. Yes, times are good for the Democrats. Enjoy the euphoria. These will be the best days of your four year administration. Yes, you are facing an economic maelstrom in California. You have the potential to become another Justin Trudeau and Francois Macron. They entered office a few years ago in Canada and France with overwhelming public support. Their polls are now in the tank, much lower than President Trump’s, for mishandling the economy. California is like a building, magnificent on the outside, but rotting inside. The state, your state, our state, looks in good shape from the outside at first glance, but the economic dry rot is eating away. California is increasingly anti-business. Business know it. 13,000 business have left the state from 2008-2017 because of high taxes, regulatory burdens, high housing costs, and the overall cost of doing business in California. Business’s that have moved their corporate or U.S. headquarters out of California include Bank of America, Bechtel, Carl’s Jr., Core-Mark Holding Company, Davita, Jamba Juice, Kubota, McKesson’s, Nestles, Nissan, Northrup Grumman, Occidental Petroleum and now the Raiders. Other companies, such as Apple, Beckman Coulter, and Chevron, have moved substantial operations out of the state. A Bureau of Census report last year showed 142,932 more Californians left for other states than came from other states. A survey last year of Bar Area residents said they would like to leave California. You promised in your inauguration to be “a prudent steward of taxpayer dollars,” and also to “be bold.” You can’t be both. And you won’t. The pressure to spend, spend, spend is too great. California’s $2.7 trillion economy may be the fifth largest in the world after the United States, China, Japan, and Germany, but it’s ranked 42nd out of 50 states in fiscal condition and 49th worst in taxes. The state is fiscally Mismanaged. Here’s your problems. You said in your inaugural address that you will recognize all Californians. You can’t. You are a San Francisco Democrat. You do not, and cannot, understand the Central Valley or Inland Empire, which do not enjoy the deceptive coastal prosperity. You decry the inequality in California. Yet your policies will increase it. Almost 20% of Californians live in poverty. California, with 12% of the nation’s population, has 1/3 of the nation’s welfare expenditures. California, with 12% of the nation’s population, has one-fourth of the nation’s homeless. The numbers grew by 14% in 2016-17 and then by 17% in 2017-18. You can see the large number of the homeless on the streets of San Francisco, Los Angeles, San Diego, and Orange County. It’s a modern American tragedy, and still growing in California. The liberal residents in San Francisco and Brentwood are increasingly upset with the homeless problem. The obvious solution is to throw money at the problem, another $500 million, but the more you spend on the problem, the more attractive California becomes to the nation’s homeless. Millions of Californians pay over half their income on rent. The problem will grow until the state’s cities and counties welcome homebuilding and lift exclusionary zoning practices. California, the rich, prosperous, affluent California has the highest poverty rate in the country. The state’s highways, roads, and streets are continuing to deteriorate. Governor Brown fooled the people by increasing the gas and registration taxes increased by saying it’s for the roads and highways. Much of the revenue is diverted to other purposes. These taxes are highly regressive, increasing the burden on poor workers by up to $1,000 a year. Yet you decry the inequity in the state. You support the Green agenda of your predecessors. California is to be 100% carbon free for electrical production by 2045, and 60% by 2030. The national average cost of electricity is 8.82cents/kwh. It’s twice that at 16.06cents/kwh in California. Alternative fuels are expensive. I can afford the electricity rates, but they are again a tax on the poor and an economic disincentive to commerce and industry. You want a high minimum wage. That will benefit those who keep their jobs, result in reduced employment in lower paying jobs. You yearn for a single payer health insurance system for California even though the cost will be more than the current state budget. You are asking the legislature to impose an individual mandate on all Californians, the mandate that has been repealed by Congress. This tax increase will suck more disposable income out of residents pockets. You propose in the meantime to provide Medi-Cal coverage to all undocumented immigrants under 26 at an estimated cost of $260 million. Medi-Cal currently covers 33% of California’s population. You are also proposing new taxes on residential water use as well as a phone tax to fund the 911 system. The public pension plans are grossly underfunded. You are proposing pumping an additional $4.8 billion into the pension funds. You are proposing a second year of free tuition at the community colleges, while the great University of California has been chronically starved of state funds for decades. You are proposing $1.8 billion on early childhood education programs, child care and full time kindergarten. An op-ed writer in the LA Times immediately wrote that $1.8 billion “isn’t enough.” Of course, there’s never enough money to supply all the “needs.” However, you premise much of the increased surplus on California’s Medi-Cal costs dropping 1%. You want six month paid family leave after the birth of a child, but haven’t figured out how to pay for it. You have to deal with Governor Brown’s Bullet Train fantasy. It will not be a “bullet” train, will cost over $100 billion to build, and will be uneconomical if to operate. You can pull the plug, or pour money down the rathole. You can expect a substantial increase in crime as a result of Governor Brown through AB 109 and Prop 57 reducing the state inmate size by 34,000 inmates. Felonies were reduced to misdemeanors, and misdemeanors reduced to tickets. He also eliminated much of the traditional cash bail system. California is leading the Resistance against President Trump. You know the federal district and appellate judges of the Ninth Circuit will have your judicial back in leading the judicial resistance to the President. Note, California needs billions in revenue from the federal government. The Trump Administration will try to cut off federal funds whenever possible. You can fight legal battles for the funds.

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