This morning Governor Jerry Brown and his allies of inconvenience the, state’s massive public employee unions, must be looking at the results of the June election with much dismay.  Governor Brown will be wincing at the looking-most-probable defeat of Proposition 29, the major tax increase on tobacco products.  The union bosses will be keenly dismayed that voters in two of the state’s largest cities, San Jose and San Diego, passed ballot measures that curtail many of the lavish retirement benefits of the employees in those cities.

If Governor Brown is now keeping a tally, the magic number is eight.  The last eight times that California voters have had to decide at the ballot box whether to raise taxes (of any sort), they have decided against it.  For liberals like Brown who see that the path to balancing the state’s budget should come by reaching further into the pockets of the very wealth creators on whom we need to depend for private-sector wealth creation in this state, the defeat of Prop. 29 comes as a heavy blow.  After all, despite Brown’s prior stated concerns about California’s over-dependence on personal income taxes from a relatively small group of earners  (and the attendant roller coaster ride of ups and downs depending on how this group of folks is doing financially), the Governor has gone “all in” on another income tax hike, hoping to use class warfare to get the majority of general election voters to tax the much smaller group of folks making over $250,000 a year (or as the Governor lamely puts it, millionaires after four years).

It should be instructive to Brown that Proposition 29 was also an attempt to get a broad group of voters who largely do not use tobacco products to tax them.  So its probable-defeat is more than just another tax increase failing at the ballot box, but it is an indicator that a great many Californians think that taxes in this state, in general, are too high.  Even if they are not taxes that do not directly impact them.

And if you a public employee union boss it is time to start taking Prozac intravenously.  After years of unfettered and unchecked increases in salaries and benefits to the point of absurdity, aided by the ability of these very unions to throw well over a hundred million dollars each election cycle into to elect and re-election state and local politicians who will literally give them anything they want, the public is pushing back through the power of the ballot initiative.  The ballot measures that passed in both San Diego and San Jose were not modest, but represented some serious reductions for public sector workers in two of the countries largest municipalities.  It is especially note worthy that in San Jose, where the vote was most overwhelming, the reforms also included clipping the lavish, unaffordable compensation going to public safety workers.  I should also add to those who feel that the lower turnout of a June election was somehow to blame, the margins of passage on these measures were so high that it is clear they would have passed even on a general election ballot.

Not too long ago, the idea of trying to “take on” reforming the salaries and benefits of police officers or firefighters was considered a folly, and the strong willingness of voters to do just that is a demonstration that there are no “sacred cows” anymore — only a need for common sense and to bring down these staggeringly large unfunded pension liabilities that are gobbling up funds that could, and should be spent elsewhere.

All of this sets the state for “ground zero” — the November general election.  On this ballot, the Governor and some public employee unions will try to convince voters of the urgent need to pass sales and income tax increases.  Still other public employee unions, along with liberal heiress Molly Munger will be pitching yet another income tax increase.  And another member of the “1%” — Bay Area investor Tom Steyer will be trying to convince voters to pass still another billion dollar tax increase on businesses that sell a lot of consumer goods in this state.  It seems to me that just trying to make the case for a single tax increase measure is dubious at best given the state of the economy and the growing track-record of ballot box failures for such efforts   But for the voters to be bombarded with so much messaging about why, during a recession, voters should raise their taxes, makes it all seem like a quixotic endeavor.

The tragedy here, of course, which will also aid in the defeat of all of the proposed tax increases, is that there is still much waste, fraud and abuse in state government to be tackled by the legislature.  There are still so many ways to reduce state spending.  There are still so many burdensome taxes, fees and regulations that are inhibiting economic growth in the once-Golden State, doing harm to the economy rather than encouraging a speedy recovery.  The campaigns against these tax increase will be well-funded, and the messaging to voters will resonate — which is that the same special interest public employee unions that have brought us the pension crisis want to reach back into your pockets to take out money to fund their salaries and benefits.

Which brings me to a final conclusion — which is that Governor Brown may continue to find that in hitching his saddle to the state’s public employee unions, that he has picked friends that are growing more and more unpopular in this state.  We’ve seen some voter-revolt in two major cities, but this has hardly alleviated the pressure for reform.  In fact, all of the media attention on the passage of these measures has only helped to bring this issue to the fore as we head into the Fall political season.

And it should give both the Governor and the unions pause that on the ballot this November is the Stop Special Interest Money Now measure, that if passed would reign in the ability of groups like the public employee unions and corporate rent-seekers seeking favor with those in power from continuing to fund the election of politicians who seek to plunder the earnings of California’s private sector workers to enhance their increasingly generous, government pay and retirement benefits.

In theory its not too late for the Governor and the unions to abandon these reckless efforts to raise taxes, and to enact meaningful pension reforms that actually reduce the massive unfunded liabilities that we are facing at the state and local level.  But we all know that this simply will not happen.  Brown is beholden to these very unions who provided the bulk of the advocacy for his election in 2010, and to which he will look for similar support for his re-election in 2014.  Similarly legislative Democrats depend on the largesse of the public employee unions to keep them in political power as well.

This November, the people will have the final say on whether or not raising taxes is a good idea or not.  And I think we all know where they are leaning.  That said, while “Rome burns” the Governor and the legislature prepare a budget for the new fiscal year which will include within it projected increases in tax revenues from a very unlikely source — the rightfully cynical, recession-plagued California voters.

This entry was posted on Thursday, June 7th, 2012 at 8:15 am and is filed under Blog Posts.