Blueprint to Renew CA

8/3/2019 Blueprint to Renew CA

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A Blueprint to Renew California:RepoRt and Recommendations pResented by the

think Long committee oR caLioRnia


2/24

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Think Long Committee or Caliornia

Nicolas Berggruen

David Bonderman

Eli Broad

The. Hon. Willie Brown

The Hon. Gray Davis

Maria Elena Durazo

The Hon. Matthew Fong*

The Hon. Ronald George

Antonia Hernandez

The Hon. Robert Hertzberg

Gerry Parsky

The Hon. Condoleeza Rice

Eric Schmidt

Terry Semel

The Hon. George Shultz

Dr. Laura DAndrea Tyson

*We were honored to have Matt Fongs active participation until his passing


3/24

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4/24

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Reducethepersonalincometaxacrossthe

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Fundeducationbyanadditional$5billion

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Provide$2.5billiontotheUniversityofCaliforniaandCaliforniaStateUniversity

r u w r

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publicsafetycostsbyproviding$1.5billionin

l u

Provide$1billiontoCaliforniacitiesinblock

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LOCAL EMPOWERMENT. Returning decision-

making power and resources when appropriate

from Sacramento to localities and regions where the

real economy functions and government is closer to

the people and thus more responsive, exible and

accountable. Bygenerating$1.5billionannuallyfor

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w ur r. o

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AN INDEPENDENT CITIZENS WATCHDOG. Creating

an independent watchdog for the long-term public

interest as a counterbalance to the short-term

mentality and special interest political culture

that dominates Sacramento. t rl

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Rebooting Californias Democracy:


5/24

A MODERN, BROAD-BASED TAX SYSTEM. Updating

Californias tax system to mirror the real composition

of our modern service and information economy

and provide a stable, broad-based tax system that is

sustainable over the long term.

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andreducethesalestaxongoodsfrom5%to4.5%whilebroadeningthesalestaxata5%ratetoapply

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rebate.Thoseearning$45,000andunderwould

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withincomesupto$95,000wouldpayonly2%.The

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pay7.5%.Becauseofthe1%surchargeformental

l llr, wul r

8.5%.

Afamilywithincomeof$90,000,whichwould

havepaid$1,449inpersonalincometaxesunder

thecurrentsystem,wouldnowpay$832amore

than40%reductionintheirstatepersonalincome

x. ovrll, rr wll clr

rrv x . hul w aju

GrossIncomeoflessthan$20,000peryearwouldpayanaverageof$71moreindirectandindirect

statetaxes,whilethoseearningmorethan$1million

wouldpayanaverageof$11,478.

t u rl x

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$10billioninnewrevenuesannuallytostartpaying

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forK-14schools,forCalStateandtheUniversityof

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currentsystemwillpay$33,114undertheproposed

.

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I. EMPOWERING LOCALGOVERNMENT AND REGIONS

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Developlocalfundingallocationformulaswithan

wr l-r

Simplifythestructureoftherealignment

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6/24

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Enactstatutorychangestoprovidecountieswith

rr rr fxl

Ensurethatlocalscalincentivesarealignedwith

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Promotelocalaccountability

Clearlydenethestatesroleandfunding

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a l ur x rr l, w r

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wouldgenerate$1.5billionannuallyforcountiesto

vr ul rl. o ll llr

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r rr u.

II. THE CITIZENS COUNCIL FORGOVERNMENT ACCOUNTABILITY

California is caught in a downward spiral. According

to the California Deliberative Poll conducted in June

2011, the public believes that nearly 40 cents of every

dollar is wasted because government performance

is not evaluated or accountable. The public therefore

understandably resists investing public resources in

the future if it cannot be assured its hard-earned tax

dollars are being used to improve Californians lives. As

a consequence, the world is moving on and California is

being left behind.

California desperately needs a return to good

governance. This means, above all, restoring the publicstrust in governments ability both to act eectively,

responsively and accountably in the long-term interests

of all Californians and to move away from the short-

term politics of Sacramento.

The Think Long Committee believes it is not enough for

elected political gures to pledge they will pursue good

governance. To ensure accountability and to balance

the short-term politics of Sacramento, good governance

should also be entrusted to a body of citizens invested

with the power to demand performance from their

elected ocials as well as the power to place initiative

proposals, addressing reform in areas such as jobs and

education, directly before their fellow Californians for

approval.

To this end, the Think Long Committee proposes

to establish a Citizens Council for GovernmentAccountability. As this would involve amending the

California Constitution, the Committee intends to

qualify an initiative measure.

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2. ROLE AND POWERS: a rl l

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Settingstandards,oversightofperformance

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7/24

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Placinginitiativesdirectlyontheballot

The Council would be empowered to develop and

place initiative proposals directly on the ballot.

This would assist the residents of California indeveloping a more active voice regarding the long-

term future direction of the state, rather than be

faced, as is currently true, with only disconnected

single-issue or special interest choices. The Council

would also work with elected ocials, receiving and

monitoring information, and proposing legislation.

AuthorizationtodirecttheSecretaryof

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The Council would be authorized to comment on

relevant initiative proposals with respect to their

long-term impact on the states strategic priorities.

Subpoenapower

The Council would be granted the same subpoena

power currently held by the Little Hoover

Commission i.e., to issue subpoenas to compel

the attendance of witnesses and the productionof books, records, papers, accounts, reports and

documents.

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3. MEMBERSHIP/TERMS/VOTING RULES:t

Councilwouldbecomposedof13voting

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4. QUALIFICATIONS: a-lr wul

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8/24

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In short, the residents of California would have

direct input in the Councils policy-making and thus

in the Councils decisions regarding which of the

Councils initiative proposals would be placed before

the electorate.

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6. STAFF: t cul wul l w

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8. Integrating Foresight The Golden State

Strategic Agenda: clr ur w

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Agenda.

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Infrastructure.TheCouncil,withthesupport

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9/24

EnvironmentalGoalsandPolicy.TheOce

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Workforce/HumanCapital.TheCouncil

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Energy.TheEnergyCommissionisrequired

vr w r ru rv

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Transportation.TheDepartmentof

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9. Integrating Oversight:t cul wul

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LittleHooverCommission.TheCommissions

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BureauofStateAudits.TheBureau,aspart

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III.A BROAD-BASED TAXSYSTEM FOR THE FUTURE

Purpose

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Problem

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uur rl rv

rv. a urr, ur x rvu

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byPersonalIncomeTax.In1950,SalesandUseTax

r l 60 r ll rvu;

today,itaccountsforabout25percent.Personal

i tx u r ll r 10

percentoftotalstaterevenuesin1950;today,it

accountsformorethan50percent.


10/24

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Figure 1

clr s Rvu sur

SOURCE:CaliforniaDepartmentofFinance

Thiscametoaheadinscalyear1999-2000

w - rul v, u

rr, r l

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rl vll

- rr u rvu soarby23percentinasingleyear.

s l r

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ur rvu rl x

urr rrw x .

W vl r , rr

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r rll lu clr r

rr , r l r

w gvrr brw r wll

l-r ruurl u .

Betweenscalyears2007-08and2008-09,justas

l r w r l,

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atananemic3percent,butGeneralFundrevenues

plummetedby19percent.Thiswastheipside

rvu vll w x

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clr rr x r w

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Figure 2

cr t mrl crr tx R

SOURCE:FederationofTaxAdministrators,February2011

Solution

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rur l qu u rl

rv, t L c lv w rr u r x .

Californias$2-trillioneconomyisnolonger

uur rulur, u

rrl rv r

v. y, clr x u

nearly$1trillionthatis,roughlyhalfofthestates

uu x.


11/24

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ru ur lr

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rv r l l-r

rw u u, ul

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r llw rr:

Broadenthetaxbasetoincludeservices.

t w l x rv wul

atarateof5to5.5%andwouldapplyto

ll rv, u wll

ur, x r l r

ul rv. curr rj

showthattheratewillneedtobe51/8%to

v rvu r

v. i rvu r ur u

r ru , r

couldendupbeinglessthan5%.

t r w x ,

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r r llw:

3%eectiveJuly1,2013,allowing7

r

v nvr 2012

ll r x l, u

ur rr r w x.

4%eectiveJanuary1,2014,butthe

ratecouldbeashighas4.5%.

5%eectiveJanuary1,2015,butthe

ratecouldbeashighas5.5%.

Broadenthetaxbasebyreducingdeductions

fromthePersonalIncomeTax(PIT)and

loweringtaxratesonthePIT,thecorporation

tax(Corp)andthesalestaxongoods

t ur wul l r

ll z u x r

r r, rr x, rl

ru R&d. txr wulrv x r u,

equalto$45,000forjointlers($27,500for

l lr).

i wul l r u

l l r rul r

ul- rr r.

ReducemarginaltaxratesinthePITwhile

simplifyingthecode,reduceratesimposed

underthecorporationtaxandthesalestaxon goods.

t urr x r ruur wul

rl, w ur x r

ru w.

Undertherevisedstructure,beginningin

2014therewouldbenopersonalincometax

onjointlerswithincomesupto$45,000

becauseofthestandarddeduction($45,000

joint;$27,500forsinglelers).Ataxrateof2r wul l j

lersupto$95,000,anda7.5%ratewould

l v u. t

1%surchargeformentalhealthonthose

withincomesover$1millionwouldremain,

makingthateectiverate8.5%.

Lw- ul wul rv

l x r r

r w l x

rv vr ul w

lr .

t x r rr wul

bereducedfrom8.84%to7%belowthe

l vr.

t ru pit r wll v v

ll -z u, w

r rz rrr r -ru


12/24

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u, u s-cr LLc u

rl x rr x.

Wl ru ll x r, wul

r pit rrv ur. ovrll,

rl wul lwr pit r ll

ru xr. t l x r

wouldbeloweredfrom5%to4.5%.

all, w wul ul wr

propertytaxexemptionfrom$7,000to$14,000with

quvl x rr r.

o vr, ul w ju r

incomesupto$1millionwouldpayadditionaldirect

andindirecttaxesrangingfrom$71to$806per

household.Householdsearningmorethan$1million

wouldpayanadditional$11,478.

t c rl wul progressivetaxstructurewiththetop5percentof

rr 62 r ll rl x

ll .

Figure 3

e pr prl i tx t

WouldBePaidbyTop5PercentofFilers

SOURCE:ThinkLongCommittee

W vll w rvu w w x

toreach$10billionwhenfullyphasedinwe

r v llw u:

i r r, rvu ul l u

r ur w

r:

In2005,thepeopleauthorizedEconomic

Rvr b (eRb) w r

thedebtfromtheprioryears.Ultimately

thestatesoldtheentire$15billionofERBs.

t u l wll w

about$4.3billionby2013-14andtherst

rr r r x rvu r

v wll rr r

l ur .

i u -fw r l

fewyears,thestatedelayedpaymentstoK-14

schools,requiredbyProposition98,fromone

yeartothenext,totalingover$10billion.

t x rr r rvu r

v wll r u

forschoolsby$5billionannually,withthe

r r l ru

u rr .

Beginningin2014-15,theadditional$5billion

goingtoK-14educationwillbeprovidedin

x r l r jr

ur , pr

98maintenancefactor.Whilethemaintenance

r rr l rlincreaseK-14educationfundingbyabout$10

ll, v x l-r

ur uur l r r-r,

r, rr r u r

l. t u wll rw vr

rv r rvu r

w l x rv.

Beginningin2014-15,theremaining$5billionin

w rvu wll ll llw:

Upto$2.5billionforhighereducation.

Upto$1.5billiontocountiesfortherecently

pul s rl.

Upto$1.0billiontocitiesasunrestricted

rvu


13/24

Figure 4

sur al u

(Total:$10Billion)

SOURCE:ThinkLongCommittee

t rr r rvu wll

rvu l rul r

x rr.

IV.BUDGET AND OVERSIGHTREFORM

Californias budget and budget process no longer

operate reliably to support critical public programs. The

general fund budget, which is over-reliant on personal

income tax and capital gains, is notoriously volatile. As

Californias economy swings from boom to bust with

the national and international economies, the states

budget swings from being ush to multi-billion dollardecits. Health, social service and education programs

funded in good times have to be cut back in bad times

when they are needed most.

Instead of adopting common sense reform like a

rainy day fund reserve already in place in many states

California lawmakers have exacerbated budget

problems through poor planning in good times, and

through smoke and mirror gimmicks or borrowing in

bad times.

Further, the review or oversight of state programs is

insucient to ensure that California taxpayers are

getting the results promised by their representatives.

The Legislature spends little time engaged in a

constructive dialogue with the Executive Branch over

the goals of state programs and how to ensure that

programs are achieving those goals.

The Think Long Committee has developed a set ofbudget reforms that aim to change the budget culture

in Sacramento to focus on long-term results and

performance.

1. RainyDayFund. t u l

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ur l r u, lv r

l rv, l v w u

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a R d u rrwr, -

wr rl. a ll

ur, al cul a

4,isscheduledtogobeforethevotersin2014.

t ur l w r

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DayFundasproposedinACA4beincluded

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5. Modifytermlimits.clr r

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15/24

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V.INITIATIVE REFORMt v ulur x clr rl J m wr r.

p r f rr l.

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(l r) l r w

rivalinitiatives.In2009,RonaldGeorge,atthetime

clr ju, wrr ull u

lr: h vr v w

l vr l r w

rl,

v u ru r r?

-TheEconomist,April23,2011

Abuse of the initiative process undermines the capacity

of representative democracy to function eectively.

The following proposals for reform are targeted at

curbing these abuses to ensure that the initiative process

remains a vital recourse of the public will not a tool

of special interests or an unwieldy blunt instrument for

budgeting at the ballot box. Set forth below are a series

of reforms to the initiative process intended to improve

the process and restore it as an instrument that can

be used to serve the broadest interests of Californians.

The Citizens Council for Government Accountability,

proposed elsewhere in this report, provides for an

innovative use of the initiative process also designed

to further ensure that the initiative process remains a

mechanism of good governance in the public interest.

1. Transparency.Vr r uur w v r r. t

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2. Indirect Initiative/legislative review when

qualied. gv lx u

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3. Numberofsignaturestoqualifybasedon

voters registered in the last general election.

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4. Allow ballot measures that amend theConstitutioningeneralelectionsonly.

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VI.JOBS,HIGHEREDUCATIONAND ECONOMIC GROWTHThe Committee believes that restoring economic vitality

and job growth to California requires both streamlining

burdensome regulations on business and facilitating

public investment in a well-educated workforce

and infrastructure, from smart energy grids to the

broadband information highways of the future.

A guiding objective of the states long-term strategy

should be to build a vibrant, job-creating business

climate that can sustain a solid middle class while

continuing to make California a welcoming place where

families and individuals will want to reside.

As it continues protecting Californias environment and

working conditions, our state government must also

be a proactive facilitator and partner for job-creating

businesses, laying out the red carpet, rather than, too

often, tying up potential growth with red tape.

Such an approach is essential to re-establishing a

manufacturing base in California and for expanding

exports in the coming decades when most growth will

take place in emerging economies led by China.

The Think Long Committee proposes the following

recommendations, drawn from its Jobs, Infrastructure

& Workforce report (see Appendix), to start us down this

path:

1. Streamlining / improving customer service.

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17/24

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2. Accelerating the CEQA permitting process.

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(Calif.PublicUtilitiesCode section1759).

RequirethatspecialtraininginCEQAmatters

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3. Aligning workorce skills with uture jobs.

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Establishingajobsconsortiumofcutting-edge

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4. Renewing the commitment to higher

education as a oundation or growth. r

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19/24

Guaranteeaordability.Californiashould

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forgraduation.(Itis50%inNorthCarolina.)

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21/24

VII.K-12 EDUCATION REFORMQuality K-12 education is the foundation of any solid

middle class society, providing opportunities for upward

mobility. This is especially so in a knowledge economy

that faces sti competition globally and where students

in other countries from Singapore to South Korea to

China outperform Californias students. To ensure the

states long-term competitiveness, California schools

must be brought up to global standards.

However, the issue of the states decaying educational

system goes far beyond economic and business

concerns. At a moment when some argue that the poor

quality of Californias public schools is the civil rights

issue of our time, serious, systematic and signicant

reforms are needed. Without improvements to learning

outcomes, students in many of the poorer communitiesof California will remain on the wrong side of the

Achievement Gap, trapped in some of the countrys

worst schools.

The Think Long plan would provide for a steady and

growing ow of revenue to education over the coming

decades $5 billion annually for K-14 schools and $2.5

billion annually for higher education at California State

University, University of California, and Californias

community colleges. We believe such new fundingshould not be automatically given to a system that is

failing to educate millions of Californians. It instead

should be tied to improving performance of K-12

schools, as a result of rigorous evaluation of teachers, as

well as curbs on automatic teacher tenure and seniority.

We further believe that new nancing for education

should be designed in such a way as to provide parents,

especially the working poor, with the maximum choice

over how and where their children are educated.

In addressing these issues, the Committee spoke witha number of education leaders who provided their

expertise and perspectives. They and many others have

spent their careers researching ways to improve the

educational system, and their collective knowledge

provides the scaolding upon which the Committee

bases the following key reform priorities:

1. Teacher and principal efectiveness. mrz

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VIII.PENSION AND HEALTHBENEFIT REFORM

Given the complex issues of long-term public pension

and health benet liabilities, it was beyond the

scope and time frame of the Committees year-long

deliberation to address this critical public policy

matter. While pension systems are in various states of

under-funding in dierent jurisdictions, they represent

an unsustainable burden on many of these budgets,

competing for funding with education, infrastructure,

job creation and social services.

Estimates of the total unfunded liabilities range as high

as $500 billion. Unless resolved through negotiations

between state and local ocials and public employee

unions all other reform progress is at risk.

On October 27, as this report was being nalized,

Governor Brown proposed a package of pension reforms

including a hybrid 401k system, extension of the

retirement age to 67 and increased contributions from

employees that he indicated would save taxpayers

about half of the projected costs of pensions and retiree

health care benets in the long run. We recommend

that the Governor, Legislature and local government

ocials make it the highest priority to work with publicemployee unions to nd ways to address the long-term

costs of pensions and the unfunded liabilities that have

already been built up.

These proposals are the result o a consensus by the members o the Think Long Committee

or Caliornia. Having in common the ambition o a unanimous position, this report is thereoreapproved without implying that each member completely agrees with every individual proposal.

However, what we all agree on is that, as a whole, these reorms, i implemented, will go a long

way toward restoring good governance to Caliornia. Maria Elena Durazo abstained on the fnal

recommendations. Matt Fong passed away during the course o the year.


23/24


24/24

A Blueprint to Renew California:RepoRt and Recommendations pResented by the

think Long committee oR caLioRnia

Blueprint to Renew CA

Documents

Transcript of Blueprint to Renew CA