Millions for Nonexistent Higher Education Enrollment Growth

The University of California and the California State University system would receive $112 million in Gov. Arnold Schwarzenegger’s proposed budget for the state fiscal year beginning July 1 to pay for increased enrollment even though UC, CSU – and the governor’s own spending plan – shows enrollment will decline next year.

The revelation comes on Page 17 of the Legislative Analyst’s 45-page assessment of higher education spending in the GOP governor’s budget, which he presented to lawmakers in January.

Schwarzenegger highlighted higher education spending in his January State of the State speech saying California “can no longer afford to cut higher education and backing a constitutional amendment prohibiting prison spending from exceeding that for higher education.

“Spending 45 percent more on prisons than universities is no way to proceed into the future,” Schwarzenegger said in the January 6 speech.

“What does it say about our state? What does it say about any state that focuses more on prison uniforms than on caps and gowns? It simply is not healthy.”

Under Schwarzenegger’s proposal, the $112 million would cover enrollment increases of 2.5 percent at both UC and CSU.

UC would receive $51.3 million to pay for an additional 5,121 full time students. CSU would get $60.6 million to pay for an additional 8,290 students.

However UC and CSU have both taken steps to reduce enrollment and estimate lower – not higher – enrollment next year.

UC plans to curtail freshman enrollment by 1,500 next year – after reducing freshmen enrollments by 2,300 this year.

This year, UC estimates it has 213,880 fulltime students, which will fall to 213,049. Despite the $112 million for enrollment growth, Schwarzenegger estimates the UC will have 209,977 students next year.

CSU, which received a record 609,000 applications for admission last fall, has announced plans to reduce admissions by 40,000 over the next three years.

It plans to reduce enrollment by approximately 30,000 students next year – a 9 percent drop from the current year and a 13 percent decrease over two years counting this year’s reductions of 17,000.

The 23-campus system estimates enrollment will fall from 340,643 to 310,317 next year. The GOP governor’s budget shows enrollment of 339,873.

Both UC and CSU say that their planned reductions would be smaller if they were given more money, as Schwarzenegger proposes, but they still expect lower enrollment next year.

“Providing enrollment growth funding for the universities in the budget year does not make sense because neither UC nor CSU would actually enroll more students,” the analyst wrote.

“In fact, the governor’s proposed enrollment levels, as well as (UC and CSU’s) own plans call for reduced enrollment.”

Schwarzenegger’s budget plan contains a “cut list” of additional spending reductions if California does not receive $6.9 billion in federal money sought by the GOP governor.

The $112 million for UC and CSU is on that list.

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Legislative Analyst Predicts Short Term Job Loss from AB 32

Implementation of AB 32, California’s landmark greenhouse gas reduction law, will cause job losses in the near term, according to the state Legislative Analyst.

In a 10-page letter dated March 4 requested by Sen. Dave Cogdill, a Modesto Republican, the analyst questions the modeling used by the state Air Resources Board in its assessment of the law’s long-term impact and predicts that, at least in the short term, energy prices will rise as a result of the law.

“It seems most likely to us tha the implementation of AB 32 … will result in the near term in California job losses,” the analyst wrote.

“In the longer term, the employment effects in our view are unknown and will depend on a number of yet-to-be determined factors. These include future energy prices, technological developments in the energy area, normal adoption by households and businesses of increasingly efficient energy technologies even without AB 32 in place, legislative actions … and the state of California’s economy.”

In response to previous criticisms by a group of scientists asked to review its AB 32 implementation plan, the air board defended most of its actions as “appropriate.’

(Editor’s Note: in the document linked to above, the criticisms of the scientists follow the air board’s 13-page critique of their findings.)

The board is currently updating its economic analysis of the law’s impact.

Cogdill said the analyst’s latest review showed AB 32 to be “failed environmental policy and that it should be abandoned.

“At a time when California’s jobless rate is nearly three points higher than the national average, we should be doing everything we can to ensure any Californian who wants a job is able to get one,” Cogdill said in a statement when the letter was released.

“Moving forward with this environmental experiment, like the water crisis, will be another manmade disaster for our lagging economy.”

The Schwarzenegger adminstration said in response:

“Pursuing green policies is the solution to our economic woes, not the cause,” said David Crane, a special advisor to Schwarzenegger for jobs and economic growth. “Countless studies show California’s economy will be better off and more secure with green policies like AB 32. AB 32 will ensure we are protected against volatile energy prices by reducing our dependency on foreign fuel while generating jobs throughout the state.”

AB 32 requires California, by 2020, to reduce its greenhouse gas emissions, which include carbon dioxide, to 1990 levels.

In its scoping plan, the air board details 31 actions to accomplish that goal. One is increasing vehicle fuel efficiency to 44 miles per gallon – a law imposed prior to AB 32’s passage that has not been implemented because of court challenges.

The scoping plan counts the increased fuel efficiency as part of AB 32’s implementation even though the requirement was on the books prior to AB 32’s passage. Several of the scientists who reviewed the air board’s plan said the vehicle efficiency shouldn’t be counted.

Other emission reduction measures include increasing energy from renewables sources to 33 percent of California’s supply and greater energy efficiency.

Accounting for nearly 20 percent of the emission reductions is a cap-and-trade program in which business who wish to continue polluting at their current rate or need more time to ratchet down emissions would pay for credits from entities that have already reduced their emissions.

In the letter to Cogdill, the analyst says the program will contribute to higher energy prices.

“Measures in the (scoping plan) directly affecting energy prices, such as a cap-and-trade program, almost certainly raise the near-term prices of electricity, gasoline, and certain other energy sources,” the analyst wrote.

“These increased energy prices would, in turn, change the amount and mix of energy used, energy-related jobs, and sales and employment in industries producing goods and services using energy.”

Better vehicle fuel efficiency will increase the price of vehicles but also lower their operating costs, the analyst said.

As it did in a previous review, the analyst questioned the air board’s modeling, which concludes AB 32 will cause a net gain of 120,000 jobs by 2020 – a .7 percent increase.

The modeling used has “inherent limitations,” the analyst said. Among them is being only able to gauge responses of hypothetical ” average” households and firms rather than subgroups. Because of that, sectors in which the job impact is most severe can be obscured by the average.

The model used by the air board “attempts to approximate but does not exactly reflect California industrial economy, including how its industrial productivity differs from the rest of the nation.”

It also uses 2003 as a base year and, the analyst notes, “does not reflect underlying changes in the California economy’s structure that have occurred during the recent severe recession, ongoing housing market turbulence, and restructuring of the financial markets.”

The analyst also says the air board may have overstated the number of manufacturing jobs created by AB 32, leaves “unclear” the job impact of some of the less significant actions it proposes to reduce emissions and fails to account for job impacts during the transition to full compliance in 2020.

“The transition under the (scoping plan) will involve various labor force dislocations, including temporary job losses and unemployment for some people and permanent employment and income disruptions for others,” the analyst wrote. The (air board’s) analysis does not identify these.”

However, the analyst concludes:

“The effects that do occur (from AB 32) may not prove to be particularly large relative to the overall economy, in part reflecting the relative role played by energy costs and the (scoping plan’s) specific measures. Certain individual businesses and households, however, would be seriously affected.”

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Legislation to End State Furloughs Sooner Is Sent to Governor

On a bipartisan vote, legislation ending furloughs for state workers in departments that aren’t paid out of California’s cash-starved general fund was sent to Gov. Arnold Schwarzenegger by the Senate on March 8.

The measure, SBX8 29, was sent to the GOP governor on a 27 to 7 vote by the 40-member upper house.

‘This is absolutely the right thing to do,” said Sen. Dave Cox, a Fair Oaks Republican, in support of the bill. “We need to move on from where we are.”

Authored by Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat, the bill would also exempt employees of the Franchise Tax Board and Board of Equalization from furloughing. The rationale is that more audits and tax collections would occur if employees at the two collection agencies returned to fulltime work.

A study by the Senate Office of Oversight and Outcomes compared furlough savings to revenue generation at the tax board and Board of Equalization. The report says California has lost $6.36 for every dollar saved through furloughs at the Board of Equalization and $7.15 for every dollar saved through furloughs at the tax board.

Some 70,000 employees work at departments, like Motor Vehicles, which are not paid for from the general fund. There are an additional 9,000 employees at the two tax collection agencies.

Two-day-per-month furloughs began in February of 2009 and were increased to three days per month in July of the same year.

The three days without pay represents a nearly 14 percent pay cut for state workers.

During the current fiscal year, which ends June 30, the furloughs are supposed to save $2.5 billion.

In his proposed budget for the fiscal year beginning July 1, Schwarzenegger ends the furloughs.

When imposing the furloughs the Schwarzenegger administration weighed applying them only to general fund supported state agencies but rejected the idea fearing an exodus of employees from the affected departments to non-general fund departments.

If signed into law by the GOP governor, Steinberg’s law would take effect in 90 days giving employees in non-general fund departments a reprieve of three furlough days.

However, the Franchise Tax Board estimates that if its employees were allowed to work three additional days in June, it would generate $31.2 million in additional revenue for California.

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Lawmakers Tell Lobbyists to Do as We Say, Not as We Do

Lawmakers placed Proposition 15 on the June ballot. They titled it the “California Fair Elections Act of 2008.”

The measure requires lobbyists and their employers – irrespective of whether they work for private sector entities or local government – to pay an annual $350 fee that would be used to offer public financing for candidates for Secretary of State, who licenses lobbyists, among other professions.

To use these funds – some $6 million every four years – a candidate would need to get the signatures of 7,500 registered voters and have each contribute $5.

The state’s 1,239 lobbyists, 383 lobbying firms and 3,153 lobbyist employers object to being singled out to pay for this test run of public financing of political campaigns for two election cycles.

Among other things the proposition says:

“The current campaign finance system burdens candidates with the incessant rigors of fundraising and thus decreases the time available to carry out their public responsibilities.

“The current campaign finance system diminishes the free speech rights of non-wealthy voters and candidates whose voices are drowned out by those who can afford to monopolize the arena of paid political communications.

“The current campaign finance system fuels the public perception of corruption at worst and conflict of interest at best and undermines public confidence in the democratic process and democratic institutions.

“Existing term limits place a greater demand on fundraising for the next election even for elected officials in safe seats.

“The current campaign finance system undermines the First Amendment right of voters and candidates to be heard in the political process, undermines the First Amendment right of voters to hear all candidates’ speech, and undermines the core First Amendment value of open and robust debate in the political process.

And:

“Citizens want to ensure the integrity of California’s system of electronically reporting lobbyist contributions and the integrity of future Secretaries of State to administer lobbyist disclosure programs. Voters would like the opportunity to elect a Secretary of State who has not accepted any contributions from entities or individuals that employ lobbyists.”

(Editor’s Note: Isn’t that the source of the “public financing?” Lobbyists and their employers?)

The author of the 2008 legislation that became Proposition 15, AB 583, is Sen. Loni Hancock, a Berkeley Democrat.

Hancock is holding a March 24 lunch fundraiser at Chops Steakhouse just across the street from the state Capitol. She seeks anywhere from a $1,000 to a $3,900 contribution.

In fact, of the lower house’s 50 Assembly members, 34 voted for Hancock’s bill. Of those, as of March 5, 30 have already held their first fundraiser of 2010.

Of the 17 Senate Democrats who voted for Hancock’s bill, 12 have held fundraisers during the current legislative session.

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Signature Uncertain on Transportation Financing Proposal

The Legislature sent Gov. Arnold Schwarzenegger on March 4 a complicated transportation-financing scheme that eliminates the sales tax on gasoline but increases the excise tax on it.

A spokeswoman for the GOP governor said Schwarzenegger hadn’t decided to sign the measures because lawmakers sent no legislation to help create jobs.

“Two months ago in his State of the State (speech), the governor said job creation must be our Number One priority,” said Rachel Arrezola, Schwarzenegger’s chief deputy press secretary.

“With unemployment likely to get worse, it’s imperative that the Legislature act now.”

Senate Democrats claim the measure they passed will create 18,000 based on a widely used estimate that $1 billion in highway spending creates 15,000 jobs.

The proposal, contained in ABX8 6 and ABX8 9, is a variation on a scheme Schwarzenegger proposed in his January budget. Schwarzenegger would have eliminated the 6 percent sales tax on gasoline, reducing state revenues by $2.8 billion but increasing the excise tax by nearly 13 cents to raise $1.8 billion.

The GOP governor said in his budget the $1 billion difference was a tax break for drivers.

Democratic lawmakers initially filled two-thirds of the $1 billion gap by delaying until 2011 a tax break allowing allied companies to swap various unused tax credits and limiting the use of net operating loss deductions in 2010 to 68 percent of income.

The two actions would have boosted state coffers by $655 million for the fiscal year beginning July 1.

However, Schwarzenegger objected and Democrats removed the provisions.

The second piece of the transportation-financing plan leaves the sales tax on diesel fuel, raising it from 5 percent to 6.75 percent, which represents $435 million in revenue. The excise tax on diesel would be lowered from 18 cents per gallon to 13.6 cents.

For the current fiscal year and the next one, $400 million of the sales tax on diesel would be earmarked for transit systems operations. In subsequent fiscal years, the annual funding falls to $350 million.

The state constitution prevents excise tax from being spent on anything other highway construction and mass transit right-of-way.

Primarily by using highway tax revenue to pay nearly $860 million in debt service, the package saves the state’s cash-poor general fund just under $1 billion in the fiscal year beginning July 1.

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