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A Blueprint to Renew California:RepoRt and Recommendations pResented by the
think Long committee oR caLioRnia
8/3/2019 Think Long Committee's Recommendations
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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
8/3/2019 Think Long Committee's Recommendations
3/98
Ar r lr, t L
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t l rl wr m
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w ru r wl l
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our ul l xr
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bll Lr, Llv al m tlr, J
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ll, rl llu n
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t rr rr ur r r r
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2012. m rl rqur ll
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cr, t L c r clr
8/3/2019 Think Long Committee's Recommendations
4/98
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Lv grl b w
br p uur
ar r lr ulw rr xr, wll ll
l ( l ax), t L
c r clr r llw
r ruurl rr r
clr ul r ll
w v wr.
Wl l l-r rwr r
vr vr , ur
l wul:
Createapositivebusinessenvironmentforjob
r
Reducethepersonalincometaxacrossthe
r wl r clr rrv
x ruur
Fundeducationbyanadditional$5billion
wl r rr
Provide$2.5billiontotheUniversityofCaliforniaandCaliforniaStateUniversity
r u w r
clr l
Empowercountygovernmentsandhelpreduce
publicsafetycostsbyproviding$1.5billionin
l u
Provide$1billiontoCaliforniacitiesinblock
r r ll
Startpayingdownthestateswallofdebtand
lz --u u l
GiveCaliforniansrealpowertomake
vr ul
Improvetheprocessformakinglong-term
l
our r r r
r r u R d
rrv u ul-r u; w-r
llv w r
vr; rr v u; k-12
l rr; l ll ul
u clr r l u
w ur u ur;
u rulr rvl r j
r.
bu r ur rl r r:
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
u l vr rl ul
rl, ur l wll l ru
w ur r. o
ll ull wul l
l r r rruur r r lll
r .
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
-r cz cul r gvr
aul, w wul wr
l v rl ll r ul
rvl, wll ur ul rr
xll u, wrl-l rruur, u qul l, ru r
j r vr l
l ru v
ll r
ul l vr l-r. a
-ll qul-rl , cz
cul wll ur clr xr
r rur v.
Rebooting Californias Democracy:
8/3/2019 Think Long Committee's Recommendations
5/98
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.
Wl clr rrv
x ruur, w wul ru r r everyr
andreducethesalestaxongoodsfrom5%to4.5%whilebroadeningthesalestaxata5%ratetoapply
rv, w r r rr. eu
l r wul x.
t w lw wul rv l x
rebate.Thoseearning$45,000andunderwould
zr x. t wr l l
withincomesupto$95,000wouldpayonly2%.The
wr x rr r wul
ul. t v u wul
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
r x wll l lz
u l u wl r
$10billioninnewrevenuesannuallytostartpaying
w wll , rv u
forK-14schools,forCalStateandtheUniversityof
clr r ll ul r ll
.
sll u-z u rrr,
s rr LLc r
Californiaeconomy.UnlikethelargeCcorporations,
r l r ru x
rl x r. trr, pit u wll
j-r u r. r xl,
abusinesswithataxableincomeof$480,000that
wouldhavepaid$39,452inincometaxesunderthe
currentsystemwillpay$33,114undertheproposed
.
urr, r l l r wul
rr wl, ,
clr rr x,
, wul ru v w
r r rv u l.
I. EMPOWERING LOCALGOVERNMENT AND REGIONS
t c lv vr
r ul r l-r,
w u r rv vr
ul rv, rull rl u
rl r rv
rr jur.
urr, ur l-r j l wul
vr wl rr r
u. s clr
r, w r
lr r- rr l
l l ll wrr u ul r
u.
Wl c r rl
-rlz, vlu rl
rvu rl, w v
vr r rl w ul
l. t wll r-l r
vlv gvrr, llur
u vr. i u lu ll
r.
t c r Llv alR pr L-tr
su Rl, r gvrr
brw llur, w lu:
Developlocalfundingallocationformulaswithan
wr l-r
Simplifythestructureoftherealignment
u rv l fxl
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Enactstatutorychangestoprovidecountieswith
rr rr fxl
Ensurethatlocalscalincentivesarealignedwith
w l
Promotelocalaccountability
Clearlydenethestatesroleandfunding
rl
Avoidstate-reimbursablemandates
a l ur x rr l, w r
u clr x wll ur
l fw u ll vr r
rl, rulrl w r ul
rruur. i l, ur l
wouldgenerate$1.5billionannuallyforcountiesto
vr ul rl. o ll llr
ull wul fw ll l r r
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.
1. PURPOSE: t cz cul r gvr
aul , rl
-r wul l
vl v l-r
l r clr uur. i wul
w r, r, r
u r r r
r ul xll, wrl-
l rruur, vrl qul
v u l r -
w j. i urvw wul lu l-r
l rj, rruur, wr,
r ul r l.
t cul l wul w r
rr ur ul
vr l w ur
v v.
i r, ur wul r
vr, l r-r rz
llur gvrr w l-r
rv x ll l.
t l wul ur clr r
wl l wr l vul
w r wr.
2. ROLE AND POWERS: a rl l
clr r rl v
ll, lr vr ul
rl u w r :
Settingstandards,oversightofperformance
ll lvl vr, ur r
r jur
Long-termstrategicconcerns
8/3/2019 Think Long Committee's Recommendations
7/98
t cul wul l rl rl
vr l-r l. a rl
u wul rv ru wr
llv xuv r,
rl rz, u, , r
l ul u lr
r u, lr vrl
u wul wr r u
r r l l,
r, l rzl ur,
r-r .
t ulll rl cul wul v
llw wr:
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
s ul cul
rlv r v
rru l ll
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.
a u, cul wul lr
urur, u x v r-
v w r l-r ul r
r qul rl vr.
3. MEMBERSHIP/TERMS/VOTING RULES:t
Councilwouldbecomposedof13voting
r ur x- -v r.
n r wul
gvrr. t s Rul c wul
w r, r
w lr ll r. t sr
al wul w r,
r w lr ll
r. a l w gvrr
wul rr r w
lr ll r. t ur x-
-v r wul lu drr
, s trurr, s crllr,
ar grl, w u wul
lu l v rl.
t cul wul r w ll
.
tr wul l w x-r r
. a l r u r
r u arl Vi,
8, u () clr cu,
w vr c Jul
prr. t l r
ur l-r rv u
ur r lrl l
ul ll fu r
r. mr cul wul
rv r- wul
rur r ll rl r
x urr rr r
u.
a l jr cul v wul
rqur l ur v rl
ll w-r v wul
rqur r ul .
a r cul ul rv
w-r v s r l
r rru.
4. QUALIFICATIONS: a-lr wul
u r clr w vr
xr u r lr, rr
vrr, llv lr, rr ju r
ju, uvr r lr r
ur, lr u r, wll
u u r l rrur w
v r
8/3/2019 Think Long Committee's Recommendations
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r rl rfv ,
ulurl l vr clr.
sr f--r rul wul l
rv ul r rv rr.
t xl f--r lw
(CaliforniaGovernmentCodesection87103)that
l ul l, cul wul
rqur l w lw. tu, r wul rqur l ul
rr, wll
r lur u, u
u lv .
a wul uj rr
l r l ju
rr v r ll
biasorimpropriety,specicallysectionA(3)of
Canon5oftheCaliforniaCodeofJudicialEthics.
t ll rll l
u r ll rz r ; r
ru ll r r ll
rz r x v
ur llr lr r r ll
r r ll rz r ,
orinexcessofanaggregateof$1,000inany
lr r r ll ll r r ll
rz r .
5. PUBLIC PARTICIPATION: t cul wull rulr r ul u
l rl l l
ww r r ul ul
r.
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.
ll, cul wul l ul
r u vll
l, lu w v lu
u, rr ll vr r
r l rr clr
r.
6. STAFF: t cul wul l w
, x r vl rv
r rul, v l rw
l xuv l (ul
rv) ur qu xr
r w ll .
7. FUNDING: t cul wul v uu
baseappropriationofnolessthan$2.5million
x f r, u
wul lu r gvrrr u. t u
r r cul r
-qul rl . cul
r wul l rv r- x.
i , Llur wul l
rr wvr l u
r. t r ur
u wul r
cul u wul uj
r ru gvrr rLlur.
8. Integrating Foresight The Golden State
Strategic Agenda: clr ur w
uru l l
rqur. t vlu rul
r r l. t r
r u l,
rv -, u r
v lr.
t cul wul rr r w
rvw rl w l
- r r
rrz l r r
r Golden State Strategic
Agenda.
t cul wul l rw
rur vru vrl
u vlv l. t
c r llw
u r w wr w
cul vl gl s sr
a:
Infrastructure.TheCouncil,withthesupport
dr , wul v
rl r r clr
irruur pl w vrll
r l.
8/3/2019 Think Long Committee's Recommendations
9/98
EnvironmentalGoalsandPolicy.TheOce
pl Rr rqur
ru rr u rw
vl, rl
wul r w cul
r vrll r l.
Workforce/HumanCapital.TheCouncil
wul r w rlv u wrr vl
wrr ur,
l rv, lr, u, -r
r r .
Energy.TheEnergyCommissionisrequired
vr w r ru rv
r r. t l ul
vl r w cul,
cul ul r r
l vrll r l.
Water.TheDepartmentofWaterResources
rqur ru wr l
(bull 160) vr v r. dWR ul
vl l r w
cul, cul ul r
r l.
Transportation.TheDepartmentof
trr ru rv
rr l r w 20-
r rz. clr ul vl
l r w cul,
cul ul r
r l.
StrategicGrowthCouncil.Thiscabinet-level
r xuv r v
rl r rw, r r,
rv l ur ll
vr. i wul v cul r vrll r l.
9. Integrating Oversight:t cul wul
Ll hvr c
buru s au l
rvw rr. t llw
rr r:
LittleHooverCommission.TheCommissions
urz u wul
ur c, r
rvw, v
, lu r r v
l jv cul
r .
BureauofStateAudits.TheBureau,aspart
u, wul ur
v , lu rr v l jv
cul r .
III.A BROAD-BASED TAXSYSTEM FOR THE FUTURE
Purpose
t v clr r
uur rw rr x
rv u l, r u l
r u r rr rl
l-r rw.
Problem
tr r u r clr r u
rll. s r rl
l r, u rl l u l
rur rul r ul. s
vr l, wvr, r l
u vll u x
l u, l-r u .
tr rl l r --
u u l rl r, v
j rw.
ovr 60 r, clr v
r w ul rulur
uur rl rv
rv. a urr, ur x rvu
l rl l u x r rv
byPersonalIncomeTax.In1950,SalesandUseTax
r l 60 r ll rvu;
today,itaccountsforabout25percent.Personal
i tx u r ll r 10
percentoftotalstaterevenuesin1950;today,it
accountsformorethan50percent.
8/3/2019 Think Long Committee's Recommendations
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0
Figure 1
clr s Rvu sur
SOURCE:CaliforniaDepartmentofFinance
Thiscametoaheadinscalyear1999-2000
w - rul v, u
rr, r l
. i vr, x vrl
rl vll
- rr u rvu soarby23percentinasingleyear.
s l r
r u rr
ur rvu rl x
urr rrw x .
W vl r , rr
- x, rrw
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,
, ur prl i, rw
atananemic3percent,butGeneralFundrevenues
plummetedby19percent.Thiswastheipside
rvu vll w x
vrl rl .
b l rl ,
clr rvr r r
rr x r
r u ur r
u ruurl . t,
clr rr x r w
r x r r wr
. i lr r, rw l
l qu u rv
u u ul .
Figure 2
cr t mrl crr tx R
SOURCE:FederationofTaxAdministrators,February2011
Solution
t w ru wll , ru
ur vll rv
u l wl r rvu ur
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.
8/3/2019 Think Long Committee's Recommendations
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Wl w x l u
, w , r xl, x l ll,
ul, u r rurl rv. i
, w ru u u
r r r uz w ru
rv r.
t r u, c r
r x wl ru rl x r r r
rr r w v lvl l
w r . hwvr, w x wll
v ru u r rvu
ru ur lr
r rv l rw u r
rv r l l-r
rw u u, ul
v rruur.
W l , t L c
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 ,
x r wul vr w-
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
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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
8/3/2019 Think Long Committee's Recommendations
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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
clr rvu r l
ur l r u, lv r
l rv, l v w u
u. t ru wll
rl u rr
lu ur l u,
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4,isscheduledtogobeforethevotersin2014.
t ur l w r
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November2012,andnotbedelayedto2014.
2. Multi-yearbudgeting. t c ur
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8/3/2019 Think Long Committee's Recommendations
14/98
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ul-r u l wul l r
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3. Legislativeoversightintwo-yearsession.a
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4. Pay-Goforlegislationandballotmeasures.
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than$25million,afterconsideringtheproposed
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than$25millionbecauseofinsucientosets,
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5. Modifytermlimits.clr r
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8/3/2019 Think Long Committee's Recommendations
15/98
r r al r s r
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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
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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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aninitiativeshouldbebasedon5percentof
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thecollectionofsignaturesfrom160daysto365
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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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8/3/2019 Think Long Committee's Recommendations
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t s ru
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outdatedgovernmentregulations.User-friendly,
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2. Accelerating the CEQA permitting process.
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statePublicUtilitiesCommissionarehandled
(Calif.PublicUtilitiesCode section1759).
RequirethatspecialtraininginCEQAmatters
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l r w jur
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enactedAB900(Buchanan/Gordon/Steinberg)
andSB292(Padilla),whichcreatesimilarCEQA
x r r u r lr
j-ru rj.Inaddition,SB226(Simitian/Vargas),whichthe
gvrr l , ur
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rwl r rj ru
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clr l ul r lu l
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l.
3. Aligning workorce skills with uture jobs.
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Establishingajobsconsortiumofcutting-edge
companiestocreateamentoring/internship
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stem (s, tl, er
m) u u ll,
CSUsandUCstofuturejobs.Thepipelineof
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4. Renewing the commitment to higher
education as a oundation or growth. r
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CaliforniaStateUniversityandtheUniversityof
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Guaranteeaordability.Californiashould
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segmentsofhighereducationi.e,UniversityofCalifornia,CaliforniaStateUniversities
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forgraduation.(Itis50%inNorthCarolina.)
5. Addressing the $765-billion inrastructure
debt. clr rruur
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localvotersbya55%majorityvote,ratherthan
thecurrentrequirementofa2/3vote.However,
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thePublicUtilitiesCommission(PUC)should
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t ul ur ur wr
withthePUCtoexpandtheCaliforniaAdvanced
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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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rwr, vlu r
rl. pl ul lu:
Meaningfulteacherandprincipalevaluations.
Non-senioritybasedlayos(i.e.,elimination
ofLastIn/FirstOuthiringandring).
Earnedtenure(i.e.,basedoneectiveness
andmovingfrom2to5years).
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l (.., qul ru r
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2. Promotingequalityandopportunity r -
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4. Improvingaccountabilitysystemswl
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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.
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Appendix i
Think Long Committee
Presenters and Participants
Contributors to Jobs, Infrastructureand the Workforce Report
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Nicolas Berggruen
Berggruen Holdings
David Bonderman
TPG Capital
Eli BroadThe Eli and Edythe Broad Foundations
The Honorable Willie Brown
Willie Brown Inc.
Former Caliornia Assembly Speaker
Former Mayor, City o San Francisco
The Honorable Gray Davis
Loeb & Loeb LLP.
Former Governor
State o Caliornia
Maria Elena Durazo
Los Angeles County Federation o Labor, AFL-CIO
The Honorable Ronald George
Chie Justice, Retired
Caliornia Supreme Court
Antonia Hernandez
Caliornia Community Foundation
The Honorable Bob HertzbergMayer Brown LLP.
Former Caliornia Assembly Speaker
Gerald Parsky
Aurora Capital Group
Former Chair
UC Board o Regents
The Honorable Condoleezza Rice
Thomas and Barbara Stephenson Senior Fellow,
Hoover Institution
Former Secretary o State
Eric Schmidt
Google Inc.
Terry Semel
Windsor Media
The Honorable George ShultzThomas w. and Susan B. Ford Distinguished Fellow,
Hoover Institution
Former Secretary o State and Treasury
Dr. Laura DAndrea Tyson
S. K. and Angela Chan Chair in Global Management
Haas Business and Public Policy Group
University o Caliornia, Berkeley
Former Chair
Presidents Council o Economic Advisers
We are honored by the
participation o:
The Honorable Matt Fong*Former Treasurer, State o Caliornia
*W wr hoor to hav Matt Fogs actv ar tcato utl hs assg
And appreciate the
participation o:
Leslie Miller
Google, Inc.
Rusty HicksLos Angeles County Federation o Labor, AFL-CIO
Think Long or Caliornia Committee
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Alan Auerbach
Proessor o Economics and Law
University o Caliornia, Berkeley
First Lady Ann Gust Brown
State o Caliornia
Governor Jerry Brown
State o Caliornia
James Canales
President and CEO
James Irvine Foundation
John Cogan
Senior Fellow
Hoover Institution
Diane Cummins
Advisor to Governor Jerry Brown
Nadya Chinoy Dabby
Director
The Broad Foundation, Education
Joe Dear
Chie Investment Ocer
Caliornia Public Employees
Retirement System
Amy Dominguez-Arms
Program Director
James Irvine Foundation
Stuart Drown
Executive Director
Little Hoover Commission
Hon. Ronald George
Chie Justice (Retired)
Caliornia Supreme Court
Daniel Hancock
Chairman
Little Hoover Commission
Doug Henton
Chairman & CEO
Collaborative Economics
Fran Inman
Past Chair
LA Chamber o Commerce
Hon. Bill Lockyer
Treasurer
State o Caliornia
Jim Mayer
Executive Director
Caliornia Forward
Gregory McGinity
Managing Director o Policy
The Broad Foundation, Education
John Mockler
President
Mockler & Associates
Hon. Gavin Newsom
Caliornia Lt. Governor
Hon. Roger Niello
Governance Fellow
University o Caliornia CenterSacramento
Joe Nunez
Associate Executive Director
Caliornia Teachers Association
Scott D. Pattison
Executive Director
National Association o State
Budget Ocers
Aaron Read
CEO
Aaron Read & Associates
Michelle Rhee
Founder & CEO
StudentsFirst
Ed Roski
Chairman o the Board & CEO
Majestic Realty Co.
Jean Ross
Executive Director
Caliornia Budget Project
Hon. Arnold Schwarzenegger
Former Governor
State o Caliornia
Senator Darrel Steinberg
President Pro Tempore
Caliornia State Senate
Robert Stern
President
Center or Governmental Studies
Joan Sullivan
Los Angeles Deputy Mayor o
Education
Mac Taylor
Legislative AnalystState o Caliornia
Mayor Antonio Villaraigosa
City o Los Angeles
Tracy Westen
CEO
Center or Government Studies
Julie Meier Wright
Former Secretary
CA Trade and Commerce Agency
Think Long Presenters and Participants:
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CO
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Bill Allen
President & CEO
Los Angeles Economic Development Corporation
Bob Balgenorth
President
State Building and Construction Trades Council oCaliornia
Greg Blue
Director o Governmental Aairs
SunPower Corporation
Victoria Bradshaw
Former Secretary Caliornia o Labor and Workorce
Development Agency
Kathleen Brown
Chairman o Investment Banking, Midwest
Goldman Sachs
Tony Brunello
Former Deputy Secretary or Energy and Climate
Change
Caliornia Resources Agency
John Bryson
Retired Chairman & CEO
Edison International
Patrick Callan
President
National Center or Public Policy and Higher
Education
Rachelle Chong
Regional VP o Government Aairs or Caliornia
Comcast
Governor Gray Davis
Former Governor
State o Caliornia
Superintendent John Deasy
LA Unifed School District
Governor George Deukmejian
Former Governor
State o Caliornia
Michael Donnelly
Sr. Vice President o Merchandising
Kroger Co.
Norman Emerson
Principal
Emerson and Associates
Sarah Flocks
Public Policy Coordinator
Caliornia Labor Federation
Mayor Bob Foster
City o Long Beach
Chris Garland
Chie o Sta to Lieutenant Governor Gavin Newsom
Russ Gould
Chair Emeritus
UC Regents
Carl Guardino
President & CEO
Silicon Valley Leadership Group
Ted Harris
Principal
Caliornia Strategies
Christine Herron
Director
Intel Capital
Bob Hertzberg
Mayer Brown LLP.
Winston Hickox
Former Secretary o Caliornia Environmental
Protection Agency
Doug Hutcheson
CEO
Leap Wireless/Cricket Communications
Irwin Jacobs
Founder and Former Chairman
Qualcomm
Contributors to Jobs, Inrastructure and Workorce Report:
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Consultants to Think Long
or Caliornia:
Nathan Gardels
Sr. Advisor Nicolas Berggruen Institute
Global Viewpoint
Joanne C. Kozberg
Caliornia Strategies
Mike Genest
Capitol Matrix Consulting
Tim Gage
Blue Sky Consulting Group
Jason Kinney
Caliornia Strategies
Steven CahnCaliornia Strategies
Andrew Chang
Chang & Adams Consulting
Peter Schaasma
Capitol Matrix Consulting
Brad Williams
Capitol Matrix Consulting
Shawn BlosserBlue Sky Consulting
Maureen Dear
Legal Advisor
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Appendix ii
Californias Budget Woes:
How is our Fiscal Health?
Legislative Analysts Ofce report, October 27, 2011
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LAO
Californias Budget Woes:How Is Our Fiscal Health?
Legislative Analysts Office
www.lao.ca.gov
Randall Lewis Seminar Series
University of California, Riverside
October 27, 2011
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Background
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General Fund SpendingBy Program
2011-12
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General Fund SpendingBy Object
2011-12
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General Fund Revenues
2011-12
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The Change in OurGeneral Fund Revenue Structure
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The Origins of Our Situation
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Increasing Revenue Volatility
What Is Volatility?
State revenues change more dramatically thanthe economy.
From 1979-80 Through 2003-04, Revenues
Were Twiceas Volatile as the Economy
From 1991-92 Through 2003-04, RevenuesWere 3 Timesas Volatile
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The Capital Gains Roller Coaster
Net Capital Gains Income in California (In Billions)
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Poor Budgeting Practices
Failure to Build Up Reserves During theGood Times
Boom in Revenues Used for Ongoing
Spending Commitments and Tax Relief Did do some one-time spending
(capital outlay).
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End ResultState EnteredRecession in Poor Fiscal Shape
State Had an Underlying Out-Year BudgetProblem in Excess of $7 Billion
No Budgetary Reserve to Cushion Blow of
Recession
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Addressing Our BudgetDuring the Recession
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Recession DevastatedState Revenues
Percent Reduction in Baseline RevenuesNovember 2010 Estimates Compared to January 2008 Estimates
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Very Modest Recovery Forecast
Job Loss in Percent
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The 2011-12 Budget
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Actions to Close the2011-12 Budget Gap
Two-Year General Fund Benefit (In Billions)
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MajorExpenditure-Related Actions
Two-Year General Fund Benefit (In Billions)
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Major Revenue-Related Actions
Two-Year General Fund Benefit (In Billions)
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Revenue-Related ProposalsNot Included in the Budget
Extension of Tax Rate IncreasesAdopted in 2009
Personal income tax (PIT), sales and use tax(SUT), vehicle license fee (VLF)
Tax Provisions Mandatory single sales factor.
Changes to enterprise zone credits.
Sales tax exemption for manufacturingequipment.
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Impacts on Local Government
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RealignmentMajor Shift inServices From State to Counties
Transfers Over $6 Billion in Services
Adult and juvenile offenders and parolees.
Mental health programs.
Foster care and child welfare services.
Provides Counties With EquivalentOngoing Funding Sources
Just over 1 percent of state sales tax.
Certain VLF revenues.
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RealignmentMajor Service DeliveryChanges in Correctional Programs
Lower-Level Offenders, Parole Violators,and Parolees Will Now Be Served Locally
Estimated to Reduce State Prison
Population by 40,000 Inmates (About25 Percent) by 2014
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Redevelopment Agencies
One Bill Eliminated All Redevelopment Agencies
A Second Allows Existing Agencies to Continue ifThey Make Payments to Other Local Agencies
State Savings of $1.7 Billion in 2011-12 and$400 Million Annually Thereafter
Currently Challenged in Courts
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The Trigger
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Mechanism Established toAddress Revenue Shortfall
Given $4 Billion Revenue Assumption,State Adopted Cuts to Go Into EffectMid-Year if Monies Fail to Materialize
Spending Reductions Would CoverAbout 60 Percent of Potential Shortfall
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Trigger ReductionsFall Into Two Tiers
Tier 1: Revenues Fall at Least$1 Billion Short
$600 million in specific cuts (such as$100 million to the University of California).
Tier 2: Revenues Fall More Than
$2 Billion Short Up to $1,860 million in education cuts,
primarily K-12.
K-12 cut prorated, based on revenueshortfall.
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Key Challenges
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Closing Our RemainingBudget Gap
The State Made Much Greater Progress in2011-12 in Reducing Structural Budget Problem
We Are Still Likely to Have a Significant ProblemNext Year
Revenues will be key.
Our Mid-November Fiscal Forecast Will EstimateRemaining Problem in 2012-13 and Out-Years
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Deciding on theSize of the Public Sector
Much of the Debateat Both State and FederalLevelComes Down to:
What is the appropriate size of government?
Your Answer Determines Whether You Support
New Revenues or Expenditure Reductions
If Governor Has His Way, You Will Have a Chanceto Vote on Revenue Increases This November
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AddressingBudget-Related Obligations
The State Has Accumulated a Variety of DeferredExpenses Over the Past Decade:
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Addressing Public EmployeePost-Retirement Obligations
The State Has Unfunded LiabilitiesPension andRetiree HealthProbably Well Over $150 Billion
Two Major Implications:
Increased state costs to begin to address these
obligations.
Continued pressure to modify benefitsprimarily related to future employees.
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Addressing Our StateUnemployment Insurance Shortfall
The State Currently Owes Over $9 Billion to theFederal Government Related to OurUnemployment Insurance Program
We Will Need to Raise Employer Costs and/or
Reduce Future Benefits to Bring Our AccountBack to Balance
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Making Choices on Infrastructure
The State Has Huge Infrastructure Demands:
Water, highways, universities, schools, etc.
Capital Outlay Spending Is Also One of theOnly Ways for State to Contribute Immediately to
Economic Growth
The Tradeoff?
Every $5 billion in new bond spending generates$350 million in debt service payments.
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Achieving Budgetary Reform
Key Is Addressing Revenue Volatility By:
Taking revenues off the table during goodtimes.
Building up and maintaining reserves that willbe there in bad times.
Many Other Possibilities
Performance based budgeting.
Two-year budgeting.
Improved program reviews.
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Considering Tax Reform
Incredibly Difficult Task With No ClearConsensus on What to Do
Most Widely Discussed Topics
PIT: reducing volatility.
SUT: broadening base and not taxingbusiness-to-business transactions.
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Visit the LAO website at:www.lao.ca.gov
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Appendix iii
Jobs, Infrastructure
& the Workforce
Think Long Committee report, September 2011
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STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION
IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTI
ASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCA
ORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOV
VESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT
G IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGH
ON A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING I
ION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVER
NVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKIN
DUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVE
NOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING
ENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE
GHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTUR
G IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREA
ERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PE
NG HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRU
VESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY
NG GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTIN
E MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A P
TREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION
IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTI
ASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCA
RITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVA
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N INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER
A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN IN
INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNME
TING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HI
ATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTIN
VATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING G
INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MA
R EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE I
INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLI
MENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE
HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTU
ING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STR
OVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN
AKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRAS
INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A PRIORIT
LING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION INVEST
LE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTING IN I
TURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCATION A
TREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVATION
IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT INVESTI
ASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER EDUCA
RITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN INNOVA
STING IN PEOPLE MAKING HIGHER EDUCATION A PRIORITY STREAMLING GOVERNMENT I
N INFRASTRUCTURE INVESTING IN INNOVATION INVESTING IN PEOPLE MAKING HIGHER
A PRIORITY STREAMLING GOVERNMENT INVESTING IN INFRASTRUCTURE INVESTING IN IN
Jobs,Infrastructure &
the WorkforceSeptember 2011
THINK LONG COMMITTEE FOR CALIFORNIA
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This report was prepared by Doug Henton, Chairman and CEO of Collaborative Economics and JulieMeier Wright, retired President of the San Diego Regional Economic Development Corporation and formerSecretary of the California Trade and Commerce Agency with the assistance ofSteven Cahn, Joanne Kozbergand Nathan Gardels of the Think Long Committee for California. It is based on:
Extensive interviews with current and past leaders of Californias economic development. Those
interviewed include:
Bill Allen, President and CEO of the Los Angeles Economic Development Corporation; Bob Balgenorth,President of the State Building and Construction Trades Council of California, AFL-CIO; Kathleen Brown,Chairman of Investment Banking, Midwest, Goldman Sachs; John Bryson retired Chairman & CEO of EdisonInternational; Gray Davis, former California Governor; George Deukmejian, former California Governor;Michael Donnelly, Sr. Vice President of Merchandising, Kroger & former President of Ralphs Grocery Co.;Bob Foster, Mayor of Long Beach and former President of Southern California Edison; Chris Garland,Office of Lieutenant Governor Gavin Newsom; Russ Gould, former Director of the California Departmentof Finance and past Chairman of the University of California Regents; Carl Guardino, President and CEOof Silicon Valley Leadership Group; Christine Herron, Director of Intel Capital; Doug Hutcheson, CEOof Leap Wireless/Cricket Communications; Irwin Jacobs, founder and former Chairman, Qualcomm; JeffJonker, Chief Business Officer of Satori Pharmaceuticals; Stephen Levy, Director of the Center for the
Continued Study of the California Economy; Lenny Mendonca, Director of McKinsey and Company, Inc.;Leslie Miller with the Office of the Chairman of Google, Inc.; Gavin Newsom, Lieutenant Governor ofCalifornia; Manuel Pastor, Professor of American Studies & Ethnicity, University of Southern California;Noel Perry, Founder of Next 10; Art Pulaski, Executive Secretary-Treasurer, California Labor Federation;Charles Reed, Chancellor of the California State University; Fred Ruiz, Chairman & CEO of Ruiz Foods;Peter Schwartz, Co-founder & Chairman of Global Business Network; Ashley Swearengin, Mayor of Fresno;Laura Tyson, S.K. and Angela Chan Chair in Global Management of the Haas Business and Public PolicyGroup, University of California, Berkeley; Peter Uebberoth, Founder & Principal, Contrarian Group; MegWhitman, former CEO of eBay; Pete Wilson, former California Governor; and Mark Yudof, President of theUniversity of California.
Discussion of the Think Long Committees Task Force on Jobs, Infrastructure & the Workforce held atGoogle, Inc. on May 6, 2011, and chaired by Lieutenant Governor Gavin Newsom. The following task
force members were present: Julie Meier Wright, Sarah Flocks representing Art Pulaski, Christine Herron,Bob Hertzberg, Stephen Levy, Leslie Miller and Noel Perry. Becky Morgan attended as a guest.
Discussion of the Think Long Committee at a meeting on August 10th, 2011, chaired by Dr. Laura Tyson.
The Think Long Committee wants to thank Stephen Levy for his major contribution to this endeavor as wellas the following individuals:Greg Blue, Director of Government Affairs, SunPower Corporation; VictoriaBradshaw, former Secretary California of Labor and Workforce Development Agency; Tony Brunello, formerDeputy Secretary for Energy and Climate Change, California Resources Agency; Patrick Callan, President,National Center for Public Policy and Higher Education; Rachelle Chong, Regional Vice President ofGovernment Affairs for California, Comcast; Norman Emerson, Principal, Emerson and Associates; ChrisGarland, Chief of Staff to Lieutenant Governor Gavin Newsom; Ted Harris, Principal, California Strategies;Winston Hickox, former Secretary of California Environmental Protection Agency; Loren Kaye, Presidentof California Foundation for Commerce and Education; Robin Kramer, Commissioner, Port of Los Angeles;
Sunne Wright McPeak, President and CEO, California Emerging Technology Fund and former Secretary,Business, Transportation & Housing Agency; Mark Watts, Principal, Smith, Watts and Co.; and Peter E.Weber, Chair, Executive Committee, California Partnership for the San Joaquin Valley.
The Think Long Committee applauds Governor Jerry Brown and leaders in the Legislature for their effortsto address Californias economic challenges and its double-digit unemployment rate.
Finally, the Committee thanks Lt. Governor Gavin Newsom for chairing its Task Force on Jobs, Infrastructure& the Workforce and for his focus on improving the states economic prospects.
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CONTENTS
INTRODUCTION..........................................................................................................................................6
KEY RECOMMENDATIONS...........................................................................................................................8
FACTS ABOUT THE CALIFORNIA ECONOMY............................................................................................12
FRAMEWORK..............................................................................................................................................14
RECOMMENDATIONS & GOALS................................................................................................................17
Investing in Infrastructure.........................................................................................................................18
Investing in People...................................................................................................................................23
Making Government Job Friendly and California Attractive to Private Investment....................................26
CONCLUSION............................................................................................................................................28
ENDNOTES.................................................................................................................................................29
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INTRODUCTION
6
California and its economy enjoy many strengths and advantages compared to itsnational and global competitors. The worlds eighth largest economy, the stateincludes industries with significant long-term growth potential. California is thenations leading center of technology and innovation, capturing $1 in every $2of the nations venture capital funding. It is the dominant entertainment centerwith 40% of the nations jobs. California also is the leading Pacific Rim center forexports, foreign trade and investment. It remains the nations largest agriculturalproducer and exporter, and tourism has solid long-term growth prospects asconsumers around the world experience rising incomes.
But, the competitive climate has become even more challenging for Californiaand the nation. Other countries such as China, India and Brazil are producingstrong economic growth and making rapid advances in technology while investingaggressively in infrastructure and education. No longer is America the onlycenter of technology and innovation. Instead, both California and the nation areexperiencing high rates of high school dropouts and failing to increase the numberof college graduates, particularly in science, technology, engineering and math.
California, and the nation as a whole, still can seize economic opportunities, butonly if both overcome these multiplying sets of challenges challenges made eventougher by the ongoing economic downturn and lingering effects from the GreatRecession. Failing to act with a real sense of urgency will threaten the essence ofthe California lifestyle, which is built on the states middle class, its workers andtheir families and is fueled by opportunity and innovation in an evolving globaleconomy. Cultivating a healthy economy in California will provide the good jobsthat pay family-supporting wages.
In setting forth how California best can adapt to these challenges, the Think Long
Committee for California Task Force on Jobs, Infrastructure and the Workforce firstanalyzed the results of 20 years of prior reports as well as conducted interviewsand held discussions with more than 50 business, government, academic and laborleaders from regions throughout the state.
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From this work, a set of recommendations emergesaround three key points:
California is an economy of distinct regions
Productivity and innovation are key to futuregrowth and prosperity
Public policy should promote productivity andinnovation in both the public and private sector
Since California is an economy of distinct regions, anystatewide economic strategy that seeks to bolster broad-based prosperity and a healthy middle class of skilledworkers must be built from the bottom up. Further,such a strategy requires both reducing the cost of doingbusiness by streamlining our complex regulatory processand adding value to the business climate by investing ininfrastructure, innovation and people.
As it establishes an economic strategy, the state shouldfocus resources and policies where its strengths andcomparative advantages lie: its climate; the relative sizeof its market; a highly skilled workforce; regions that arehubs of innovation; and access to trade with Asia andLatin America.
The Task Force also carefully reviewed the oftenrepeated criticism that California is a terrible place todo business. These complaints have been around fordecades, through good times and bad, and there are
dissenting views. Here is where there is no dissent:Good customer service is essential, whether one istalking about a business or a government agency.California must provide that higher level of service inorder to compete with other states and nations. As werecommend in this report, it can start by providing singlepoints of contact for interested investors and businesses.Consolidation of duplicating agencies and streamliningregulations can save money over the long term, butthe main immediate payoff will be in better customerservice.
Traditionally, the debate about creating an economic
strategy for California has revolved around twocompeting definitions of a good business climate:
Cost-Driven: In this view, a good business climateis defined as the absence of high taxes, excessiveregulations, high labor costs and high utility rates.Businesses are assumed to be cost-driven and thuslocate and grow in environments that provide thelowest-priced inputs (land, labor, capital) and theleast interference by government.
Innovation-Driven or High-Road: In this view, agood business climate is defined as what is addedto the environment for industries and companies.This includes a skilled workforce, accessibletechnology (often from a state university), capital
markets, quality infrastructure and a network ofsuppliers. Government has an important role toplay in helping to create and maintain this type ofbusiness climate.
As noted, a competitive business climate for Californiarequires both critical investments that add to productivityas well as policy reforms that reduce the costs andcomplexity of doing business.
The key to high-road success is public investment toattract private investment. Californias strengths areits places and people. William F. Miller of Stanford
summarizes the direction for a high-road state economicstrategy:
What works? What is effective are people and placepolicies. What does not diffuse away quickly areinfrastructure and workforce. Although a few key peoplemay be mobile, large numbers of the workforce arenot. Polices that support the education and training ofthe workforce, that support research combined witheducation, that support a modern infrastructure, andsupport the development of institutions that facilitatecollaboration between business, government, and theindependent sector will have lasting effects of buildingcapacity that does not diffuse away. Develop the peopleand placesthe habitat for living and working.Supporting the ongoing development of Californiaspeople and places, its core strengths, should be thecentral approach of the states economic strategy.
The Task Forces report is divided into three sections:
An executive summary of priorityrecommendations for improving infrastructure,strengthening higher education / workforcedevelopment and streamlining regulation.
Facts about the California economy that informedthe recommendations.
A full set of actionable recommendationsand goals. Those include: education andbudget strategies to reform and fund increasedinvestment through strengthening localgovernment, proposals to organize and fundcritical infrastructure investments, and policies tostreamline regulation.
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The Silicon Valley Leadership Groups 2011 CEOBusiness Climate Survey identifies the key challenges indeveloping an innovation strategy for California:
Increasingly it is difcult or Silicon Valleycompanies to compete against other centers oinnovation and entrepreneurshipboth domesticand abroad. Among the unique challenges areglobalization and the international competitionor talent. A deteriorating state inrastructure in
areas ranging rom public education to publictransportation has added to the difculties orecruiting the best workorce, fnding them availablehousing, and educating their children to betomorrows world-class workorce.
The CEO survey reminds us that in competing forbusinesses we also must compete for talent, whichmeans competing for people. Executive interviewsconducted in recent industry studies for local workforceboards uniformly rank access to a skilled labor forceas the number one reason for locating in California.Fortunately investments in people and places dodouble dutyproviding great places to work whilesimultaneously developing great places to live.
The Think Long Committee has developed a series ofrecommendations for investing in California peopleand places to create communities and regions thatsay come here to live and work. PreK-12 educationrecommendations, while critically important to astrong California workforce, are not covered in thisreport as they are part of the Think Long Committeesbroader scope of deliberation. Key infrastructure, highereducation and job/workforce recommendations are
set forth below, as are recommendations for how tostreamline customer service (one-stop shopping) andhow regulations can be implemented to make Californiaa more welcoming place for innovation and jobs.
IMPROVING INFRASTRUCTURE
Think Long has identified infrastructure needs of morethan $765 billion over the next 10 years with nearlyhalf of these dollars currently without a funding source.(For more detail see chart on page 18.) Planning forand funding infrastructure in California is a partnershipeffort involving the state, local and regional agencies;the private sector; and the federal government. Thefunding gaps are large but it is critical, given Californias
continuing budget problems, that new investmentsare made strategically and wisely. Such investmentsalso would address immediately one of the biggestcontributors to the states high unemployment rate:the ongoing loss of construction jobs. Thoughtfulinvestments in infrastructure as suggested in theLegislative Analysts report A Ten-Year Perspective:California Infrastructure Spending will have bothsubstantial short- and long-term effects on the stateseconomic strength.
Before additional funds are allocated Think Longrecommends the state:
Develop a better process to insure thatinfrastructure investments are made wisely. Majorideas include rigorous evaluation of alternatives;devolution of planning and prioritization to thelocal and regional level where possible; andextensive reliance on user fees where feasible,including active promotion of public-privatepartnerships. The state also must ensure there areproper inter-regional and multi-modal linkages.
Carefully evaluate alternatives to additionalinvestment and identify innovative ways to invest.
There are many ways to expand infrastructurecapacity besides building. These approachesinclude conservation, metering for more efficientenergy use and the use of prices such as peak-hour pricing for energy and highways to reduce
KEY RECOMMENDATIONS
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peak demands and new construction needs. Thereare more efficient materials and construction
process available, as well. The state should bedevoting more resources to maintenance (versusrepair, which is more expensive) and also shouldreduce bureaucracy to expedite projects.
Implement the Water Innovation Roadmapby the California Council of Science andTechnology, Department of Water Resource andother partners. Doing so will promote scienceand technology solutions to the states water-supply challenges by using IT and smart systemsapplications to increase water efficiency; reduceenergy intensity of water systems; and assure that
surface and groundwater use is monitored usingremote sensing and satellite technologies.
A funding strategy for Californias unfundedinfrastructure gap should include the following:
Require a new dedicated funding source for futurestate General Obligations bonds. This approachfollows the well-accepted practice where localagency and school bonds are approved onlyif voters also approve a new funding source.Benefits include improved transparency andgovernance since voters will know that state
bonds arent free and reduce debt-service costs,which will free up funds for other purposes in thestate budget.
Adopt user fees, where appropriate, forinfrastructure funding. This can include tolls forpeak-hour freeway use and the use of publicprivate partnerships where the private sectorfinances and develops public infrastructure inreturn for user fees. The state should pursueopportunities for private-sector financing ofinfrastructure where possible although the reviewof infrastructure needs conducted by the Think
Long Committee for California found that a largeproportion of new investments such as road repairis not appropriate for the toll road/user fee model.
Follow the recommendations of the LegislativeAnalysts Office (LAO) and others to correct
deficiencies in the current state fuel-tax system toprovide funding that keeps pace with needs andinflation in an era when fuel efficiency and fueluse are improving rapidly and no longer able tokeep pace with transportation funding needs.
Improve local agency ability to plan for andfinance infrastructure by adopting the samerules for local infrastructure and transit districtsthat we have for schools, where new fundingcan be approved by local voters with a 55%majority. Also implement the recommend
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