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In anticipation of Governor Schwarzenegger’s State of the State Address this afternoon, CALPIRG advocates made their own policy recommendations to the governor on critical issues facing the state of California in 2008, including health care, privatization of public assets, mortgage lending reforms, and balancing the state budget.

Recommendation #1: Don’t rush into privatization deals without first establishing public interest protections.  

Today the Governor is expected to call for new partnerships with the private sector to help meet the state’s infrastructure needs. In December, CALPIRG Education Fund released a report analyzing the pitfalls of road privatization deals in other states. Read the full report, Road Privatization: Explaining the Trend, Assessing the Facts, Protecting the Public. The report included seven principles necessary to protect the public interest in deals that privatize public assets:  

·        Public control must be retained over decisions about big-picture infrastructure planning and management;

·        In considering privatization of toll roads, fair value must be guaranteed so future toll revenues won’t be sold off at a discount;

·        No privatization deal should last longer than 30 years because of uncertainty over future conditions and because the risks of a bad deal grow exponentially over time;

·        The state should require state-of-the-art maintenance and safety standards instead of statewide minimums;

·        The state should demand complete transparency to ensure proper process;

·        The Legislature must approve the terms of a final deal, not just approve that a deal be negotiated; and

·        No budget gimmicks. A deal must make long-term budgetary sense, instead of helping only in the short term.

“Especially in tough budget years, a short-term influx of private cash is tempting. But Governor Schwarzenegger should not propose any privatization deal that fails to protect the public interest in the long run,” said Emily Rusch, CALPIRG Advocate. 

Recommendation #2: Stay committed to health care reform.  

The health care reform bill that recently passed the Assembly, ABX1-1, will expand group coverage through a purchasing pool and subsidies to low-income Californians, prevent insurance companies from denying coverage or charging increased premiums to the sick, and mandate them to spend 85 cents on the premium dollar on actual health care benefits. Millions of Californians who today either don’t have access to or can’t afford health insurance would get coverage because of the bill. For those Californians, ABX1-1 is the difference between sickness and health. And for those who do have insurance, ABX1-1 means security from the fear that losing your job or getting divorced or getting sick or old will also mean losing your insurance. Because ABX1-1 opens up many new sources of revenue, including millions in federal matching funds, passing it will also help fix the budget long-term by putting health care on a secure footing. Read CALPIRG’s letter of support for ABX1-1.

“Opponents will try to divert attention away from health care reform in 2008. But with recent polls showing that almost three-quarters of Californians are justifiably concerned about the cost and availability of their health-care, it’s critical to fix the system now, rather than leaving it to get worse,” said Michael Russo, CALPIRG Health Care Advocate.

Recommendation #3: Support long-term reforms to the mortgage lending industry to prevent future crises.

With California’s growing budget deficit largely fueled by the decline in the housing market, sub-prime mortgage lending not only threatens individual homeownership, but also the economic stability of the state. According to the Center for Responsible Lending, California has experienced a $67.2 billion loss of home value. While there is plenty of blame to go around for this collapse, Governor Schwarzenegger should prioritize stopping abusive lending practices to prevent another crisis in the future. California should adopt policies to ensure that brokers act in the interest of their clients, require lenders to honestly assess a borrower’s ability to repay, and protect consumers from unreasonable fees and penalties.

“It’s not enough to help current families in need,” said Pedro Morillas, CALPIRG Legislative Advocate. “To protect the American dream of home ownership and strengthen our economy, California has to adopt policies that stop abusive loan practices once and for all.”

Recommendation #4: Protect funding for critical public programs and services, including public transportation.

Public transportation, health care services, education, and public safety are just a few of the important services provided through the state budget. For example, California’s booming population requires us to develop and maintain transit services that prevent traffic congestion from getting worse and contribute the least amount of unhealthy pollution. Unfortunately, last year’s budget cut more than $1.2 billion from our public transit agencies, reducing needed funds for bus, light rail, and subway lines throughout the state.

“Across-the-board, draconian cuts are short-sighted and fail to take into account the short-term and long-term benefits of transit, education, public safety and other services,” said Emily Rusch, CALPIRG Advocate. “Public transit services in particular already suffered heavily in the last budget, even though California depends on quality public transit to reduce congestion and pollution.”

Recommendation #5: Demand greater transparency and accountability in budget revenue and spending.

With the significant budget shortfall, cutting services and/or raising taxes aren’t the only options. Governor Schwarzenegger should increase transparency and accountability to ensure tax dollars are fairly collected and spent wisely on public priorities.

For example, California still lags behind other states in disclosing where tax dollars go. A recent report by Good Jobs First gave California an “F” for failing to provide public information about financial and tax subsidies given to private entities through programs like the Urban Enterprise Zone program.

Additionally, corporate tax avoidance continues to flourish, with over half of profitable corporations in California paying no more than the state’s $800 minimum franchise tax in 2001. One way corporations avoid taxes is by underreporting profits to the California tax authorities while reporting much higher profits to shareholders. CALPIRG supports policies requiring companies to report differences between tax and book income, which would also lead to more accurate tax reporting and increased revenue for the state. Read more about policies to increase transparency in corporate tax reporting in our 2006 study, Sunshine for California: Shining Light On Corporate Tax Secrecy For Healthier State Budgets, Investments and Markets.

“Especially in light of the difficult year ahead for California’s state budget,” said Emily Rusch, CALPIRG Advocate, “we must ensure that companies are paying their fair share, and provide taxpayers with full information about how our tax dollars are spent.” 

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