Was the state collecting all the rent it was due?

A state lawmaker used an East Bay example today to illustrate his request an investigation into whether the State Lands Commission has failed to collect fair market value in rent for publicly-owned lands held in trust, even during the height of the real-estate boom.

Dave CogdillState Sen. Dave Cogdill, R-Modesto, sent a letter asking that the Joint Legislative Audit Committee (of which he’s a member) authorize the State Auditor to examine the issue.

“The State Lands Commission, effectively the state’s landlord for publicly-owned properties, may have been shortchanging California taxpayers for decades by charging tenants rock-bottom rent for prime properties, even during the height of the real estate boom,” Cogdill, who chairs the Senate Select Committee on Surplus Property, said in a news release.

A 1984 state audit recommended that the Commission change how it collects rent and appraises properties, yet there has been no follow-up to verify that those changes were made, he said.

As an example he cited USS-POSCO, a steel company that continued to occupy 490 acres of state-owned land in Pittsburg for 12 years after the lease expired. The property originally was leased at $235,137 per year, but the Commission only collected a total of $66,784 in back rent during the 12 year period even as California’s land prices peaked.

Cogdill, who formerly owned a real-estate appraisal business, also says a formula the Commission uses to calculate lease rates hasn’t been updated since 1980.

“Considering these are just a few examples of mismanagement out of the 4.5 million acres of public land managed by the State Lands Commission, potentially millions in taxpayer dollars have been lost,” he said. “Ensuring the state collects fair market value in rent for our taxpayer-owned properties plays a vital and timely role in easing our state’s continued budget crisis.”

The Joint Legislative Audit Committee will vote at its Aug. 4 hearing on whether to approve Cogdill’s audit request.


What they’re saying about the State of the State

We’ve got a full story up on the governor’s speech and Legislative leaders’ reactions, but here are some other quarters heard from:

From Assemblyman Sandre Swanson, D-Alameda:

“I am encouraged by the broad themes the Governor emphasized in his address, including making education a larger budget priority than prisons. This is the third state of the state address I have attended since taking office in 2006, and it is probably one of the most important, considering the fact that California is at a crossroads where the next year can define the character and determine the future of the entire State for decades to come.

“The Governor acknowledged that there is a severe financial crisis in California, and I agree with the Governor’s statement that the State needs to make education a priority. We are spending 11 percent of our budget on prisons and only 7 percent on higher education. We need to find a real, long-term solution to this systemic problem by determining our priorities and realizing that we increase the prison population by not instituting an aggressive rehabilitation strategy, failing to reduce prison overcrowding, and failing to respect education and the intellectual potential of our children.

“Privatization of prisons, however, is not the solution. Instead, we need to thoughtfully and critically evaluate the prison system, with a focus toward restructuring the parole system and reducing the recidivism rate, thereby realizing a savings of billions of dollars a year and freeing up funding for education.

“Although I don’t agree with some of the Governor’s solutions, I do agree with his proposals for job training, job development, and tax credits for housing and green technology. Those proposals are worth considering and I look forward to reviewing the details.”

From California Republican Party Chairman Ron Nehring:

“Too many Californians are hurting because the state’s economy is still lagging way behind the nation’s, with higher unemployment and slower growth. The Governor made it clear that improving California’s economy is his top priority in 2010 by promoting economic growth and the job creation that comes with it.

“Solving the state’s current budget crisis starts with fixing the health of California’s economy. Increasing the number of available jobs, supporting small business development, and allowing for more shovel-ready projects to actually get their shovels in the ground will finally create the positive economic results that Californians desperately need.

“With California already at the economic brink, we don’t need more job-killing policies from the Democrats. This is a critical time for all Californians and, hopefully, the Democrat legislators will stop taking their orders from the public employee unions and special interest groups that willingly stand in the way of opportunity, and realize that higher taxes and more red-tape will end up destroying the dream that made California great. We support the Governor’s efforts to re-establish California as a business-friendly environment and help make the Golden State golden again.”

From California Democratic Party Chairman John Burton:

“For the last three years the budget has been balanced on the backs of the aged, the blind, the disabled, the poor and those who are without a strong voice in Sacramento.

“Our sincere hope is that the governor’s call for teamwork extends to members of his own Republican Party in the legislature. California Republicans should at least consider, if not agree to, a tax on oil company profits instead of insisting on what amounts to wholesale divestment from California.”

From former eBay CEO and Republican gubernatorial candidate Meg Whitman:

“Governor Schwarzenegger’s remarks were a sober reminder that we have a government that we can no longer afford and we have serious challenges to overcome. I am confident that by focusing on the number one priority for the state, creating a prosperous economy and putting Californians back to work, we will succeed. As Governor, I will focus on implementing targeted tax cuts and eliminating burdensome regulations so it’s easier to create jobs and start new businesses. We must also put an end to the never-ending cycle of wasteful overspending in Sacramento and spend smarter so we can focus on priorities like improving our schools. Time is urgent. Californians cannot afford to let Sacramento politicians in the legislature continue to promote the same failed policies of the past. We must overcome our challenges by counting on the innovative and entrepreneurial spirit that is a hallmark of California, and put in place real, lasting solutions.”

From state Controller John Chiang:

“A year ago, I told the Governor and Legislature that without their courage and collaboration in fixing the budget, there would not be enough cash in the treasury to pay for hard-working Californians’ tax refunds through the spring, and local governments would be hung out to dry. Our cash crisis last year was a shameful chapter in California’s history and a dark reminder of the consequences of a government’s reluctance to make tough decisions quickly.

“We are a year older, and I hope we are a year wiser. Although the deficit is a third of the size of what we faced last year, the one-time solutions and accounting tricks in the last budget pushed more problems into 2010. There are no easy cuts to now bare-bone programs, and federal stimulus funds are drying up.

“I hope we have learned that the best prevention against future payment delays and IOUs is for the Governor and Legislature to quickly provide lasting, responsible budget solutions. I look forward to updating the State’s cash outlook for the year as soon as I have the opportunity to test the cash flow data in the Governor’s budget proposal.”

Lots more after the jump…
Continue Reading


‘Enough is enough’ … or not

State Senate President Pro Tem Darrell Steinberg, D-Sacramento, addressed reporters late last night at the State Capitol:

A short while later, the Senate Republican Caucus ousted Dave Cogdill, R-Modesto, as its leader because he’d agreed to some tax increases as part of the budget solution. The new leader is Dennis Hollingsworth, R-Murrieta, who has vowed not to support any tax increases at all.

In other words: Back to square one.


Jerry Brown urged to probe GOP vote-trading

First the state budget was under negotiation, then in litigation, and now in unending confrontation, all the while subject to bloviation and obfuscation. Next up: Prosecution?

Labor and environmental groups have asked California Attorney General Jerry Brown to investigate whether Republican state lawmakers are engaging in illegal vote trading during budget talks.

“It’s a serious question and we’re reviewing the matter carefully,” Brown responded in a statement issued through a spokesperson.

The California Labor Federation, the State Building and Construction Trades Council, Sierra Club California and the Planning and Conservation League wrote a letter to Brown on Wednesday – and sent a copy to U.S. Attorney General Eric Holder, too – citing reports that the Legislature’s GOP leaders are withholding their votes on a state budget while attempting to win votes on unrelated matters.

“Specifically, they have demanded that legislators vote for proposals to weaken labor and environmental standards as a condition for any ‘aye’ vote from Republican caucus members on the overall budget,” the letter says.

It claims such horse-trading violates California Penal Code Section 86, which prohibits lawmakers from giving or promising to give “any official vote in consideration that another Member of the Legislature shall give this vote either upon the same or another question.” Violations are punishable by two, three or four years in prison.

“The budget negotiations, both as reported privately and publicly, clearly violate this anti-bribery statute,” the letter says. “Vote trading is illegal under any circumstance. Vote trading during this deep fiscal crisis is unconscionable. Political gamesmanship threatens the livelihood of millions of California taxpayers, workers, and vendors.”

See the Republican responses and more context, after the jump… Continue Reading


Isn’t this the Legislature’s job?

Gov. Arnold Schwarzenegger signed an executive order today creating a bipartisan “Commission on the 21st Century Economy” to “re-examine and modernize California’s out-of-date revenue laws that contribute to our feast-or-famine state budget cycles.”

The 12-member panel — six appointed by the governor, three each by the Assembly Speaker and State Senate President Pro Tem — is supposed to report by April 15 on “changes that will result in a revenue stream that is more stable and reflective of our economy,” according to the news release from the governor’s office.

“Unlike our diverse economy, our state’s revenue system is the epitome of boom or bust and right now we are paying the price,” Schwarzenegger said in this release. “That is why I have worked with the legislative leaders to find a long-term solution to our revenue problem. And today, I am signing an executive order creating a bipartisan Commission on the 21st Century Economy to study our revenue system and help California achieve the long-term fiscal stability our state needs and our people deserve.”

Said soon-to-be-gone Senate President Pro Tem Don Perata, D-Oakland: “California’s tax system is antiquated and long overdue for an overhaul. Our state is one of the most advanced economies of the 21st century, but it relies upon an outdated and volatile tax model that no longer makes sense. This commission will examine how to best capture revenue in California’s dynamic economy and put the state’s finances on the stable and sound footing needed to remain a global leader.”

And Senate Republican Leader Dave Cogdill, R-Modesto, said, “Keeping California competitive in a global economy is the key to a strong and healthy state budget. I applaud the Governor for working with legislative leaders to address California’s broken budget system and I look forward to reviewing revenue-neutral recommendations from the commission, not just on fixing our revenue system, but also on how the state can adjust its spending levels to come into alignment with revenues.”

But isn’t it the Legislature’s job to be the stewards of California’s long-term fiscal well-being? We wouldn’t need a blue-ribbon commission if our lawmakers weren’t so intransigent, so apt to put ideology over reality. It’s abundantly clear that California doesn’t take in enough money to meet its needs for schools, prisons, health care and the like; we can’t keep cutting our way out of the problem, and claiming that we can is ludicrously irresponsible.

Yet even after the absurd standoff this summer and the resultant massive crap-heap that’s now masquerading as a state budget, it seems lawmakers still aren’t willing or able to do what must be done on their own.

Maybe this commission is meant to give some political cover to lawmakers who still feel their careers are endangered by doing the right thing for California. If so, whatever; just get it done.

But if this turns out to be (to borrow from the words of REM) “a way to talk around the problem,” and we’re still having the same tired ideological debate after this commission’s report has come and gone, it oughta be clobberin’ time for this Legislature. It’ll be a pretty compelling argument for doing away with the constitutional requirement that budget and tax bills need a two-thirds majority in each legislative chamber, a requirement so awesomely effective at bollixing up the works that it exists only in California, Arkansas and Rhode Island.


Perata, Bass to roll out joint budget plan

State Senate President Pro Tem Don Perata, D-Oakland, has just announced that he and Assembly Speaker Karen Bass, D-Los Angeles, will hold a news conference Wednesday morning to roll out their Conference Committee budget agreement.

Perata’s office said the plan rejects Gov. Arnold Schwarzenegger’s proposed deep cuts in education and health care and includes $9.7 billion in new revenue by raising taxes on the state’s wealthiest residents and closing corporate tax loopholes; that’s $1.8 billion lower than what the Senate recommended and $2.7 billion more in new revenue than what the Governor proposed.

On the spending side, this budget:

  • Provides $2.3 billion more for K-12 education than Schwarzenegger had recommended;
  • Restores $1.5 billion in health and human services the Governor cut, including nearly $200 million in health care services to some of the state’s most vulnerable residents, the reimbursement rate for Medi-Cal providers and federal pass-through funds for the aged, blind and disabled;
  • Cuts prison spending by $300 million with a reform package that helps lower the prison population; and
  • Restores $57 million in financial assistance for college students.
  • On the revenue side, this plan:

  • Reinstates the tax brackets on the wealthiest Californians by reinstating the 10 percent income tax rate for taxpayers filing joint returns with taxable income above $321,000 and the 11 percent rate for those with incomes above $642,000, generating about $5.6 billion;
  • Closes a corporate tax loophole for large corporations by suspending for three years companies’ permission to carry forward a portion of their losses incurred in one year for use as a deduction against earnings in later years, generating about $1.1 billion;
  • Suspends a tax adjustment for upper-income Californians, generating about $815 million;
  • Rolls back the nonrefundable dependent income tax credit (in 2007, $294) for taxpayers with adjusted gross income of more than $150,000 so that it’s equal to the personal exemption credit for all taxpayers (in 2007, $94 for single taxpayers and $188 for couples), generating about $215 million;
  • Rolls back the 1997 cut in the franchise tax, raising it from the current 8.84 percent rate to 9.3 percent, in order to raise about $470 million; and
  • Steps up tax enforcement — partly collecting money already owed to the state, partly accelerating revenues that would be paid in the future — to generate another $1.5 billion.
  • Perata’s release notes the state has cut $12.3 billion during the last three budgets, meaning “the fat is long gone, that a cuts-only approach would go deep into the bone of what the state provides. There is no free lunch: Quality education, health care, fire protection and law enforcement all require additional revenue.”

    In other words, “Perata and Bass to Cogdill and Villines: GAME ON!”

    UPDATE @ 1:48 P.M. WEDNESDAY: Here’s video of this morning’s news conference…