Our Golden State Can We Save Ourselves ? Or Why Elections Matter

1. Our Golden StateCan We Save Ourselves? Or Why Elections Matter Assemblywoman Diane L. Harkey 7-16-12

2. Structural Deficit Must be Resolved (We Live from Booms to Busts) Total Structural Deficit $35.4 B Long-Term Debt (+RAN) increased from$59B in 2007 to $90B in 2011 Does Not Include Deficit in Unemployment Ins. Trust Fund = $10B

3. 2012-13 at $92 B GF Excludes $5+ B for Corrections Realignment Where Does All the Money Go? GF Increasing to $112 B by 2015 Health & Human Services = 27% increasing 7% per year Debt Service 7.8% increasing to 10% by 2015; Pensions 5% by 2015 K-14 Education = 37% (state backfill $ only) K-12 State Ranking = 48

4. Working Towards Solutions? (taking from local government, phantom income and tax increase budget)

5. The #1 Problem Unemployment: Water Wars Housing & Market Crash Solution: Government Intervention or Encourage Private Sector Jobs “You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.” Rahm Emanuel

6. Governor’s #1 Priority? $8 Billion for CA’s High Speed Rail? $5B+ Education Trigger Cuts? Reduce/Realign Criminal Justice? • No Business Plan, Funding, Ridership, & Violates Prop1A • Inc Debt & GF d/s • Requires Local Tax Support/Obligation • Lots of Promises and Few Jobs • GAO, LAO, Auditor, Staff Reports Neg

7. Trigger Cuts Sustained Credit Rating What Will $6B GO & $10B RAN Do?

8. Governor’s #1 Solution – Increase State Revenues thru Taxation • 2012 Ballot Initiative – Sales & PIT * • Cap and Trade – Revenues c/b securitized? • Central Planning and Taxing Authority for Housing, Rail & Trans, Water, Education, Public Safety; Realign Locals • Tax reform = Code for Tax Increase • Sales Tax – Broaden the Base • Split roll; Oil severance, SSF • Punishing Tax Cheaters (eliminating legal deductions or tax “expenses”) *Top 1% of taxpayers pay up to ½ of state’s income taxes (LAO 2011 Cal Facts)

9. Sacramento Fix? Stop Foreclosures and Eliminate Prop 13!(reduce local parcel tax threshold to 55%) Predictable Result – Market Instability, Fewer Lenders; Higher Prop Taxes, Lower Tax Receipts, Lower Values.

10. Plus CARB To the Rescue? Cap and Trade • Rationing and allocation of free and auctioned "pollution" certificates among certain industries (oil producers, refiners, electricity generators, and other large industries producing more than 25,000 metric tons of CO2 e per year) • Agriculture and Forestry – exempt; regulated separately • Auction - certificates sold to covered entities (fiat currency) • Quarterly auctions - current year and "vintage" allowances (used 2015 and beyond) • Free allowances allocation decreases (2020 GHG goal) • Ability to bank some allowance certificates for future • Secondary market for unused offset credits and derivatives • Initial price estimated between $10 and $50 per allowance; increasing over time

13. We Are Getting Fleeced • Cap & Trade Increases State Spending, Regulators, and Investment Bank Revenues • Decreases Private Sector Employment • Increases Costs of production, electricity, water and cost of living in CA; • Risk of Wide range of revenues or losses; market manipulation; Leakage • Assumes businesses have few choices • Pollution goals could be unmet • Assumes CARB can monitor and control business losses; increase the price of energy; hold down costs for consumers; control market manipulations; protect local municipalities; hire WCI, Inc to help? • Distributors of Energy Favored over Producers • No allowance for CA company growth

14. Saving California = Increase & Expand Existing Private Sector Employment & State Revenues • Cap Emission w/o Cap & Trade Auctions (if you must!) • Focus on local infrastructure needs (water, highways, local rail & transit) • Ensure a steady supply of water to the Central Valley and So Cal • Prioritize Spending at 2006 level • Begin Pension Reform • Begin Tort Reform • Encourage Retail Bank Lending with understandable guidelines (see related Dodd-Frank Graph)

16. OR…Remaking California? • San Francisco Vision: Increase State Government, Legal Profession, Hospitality & Service Jobs, Financial Products, Info & Green Tech, HSR maintenancejobs? • Replace current middle class jobs in Ag, Mfg, Energy Production, financial services • Increase taxes, fees and fines • Decrease personal choices & freedoms • More Central Planning, more local taxation, higher gasoline prices, managed care, public transportation, dense living, bicycles & trains = better for your health???? • Realign and Bankrupt Cities?????

17. What We Cannot Afford To Do Elections Matter!