The California Reform Industry — A Prognosis

In the current recession, the ranks of the unemployed in California have swelled by nearly 1.2 million.

Still, one industry seems to be thriving in America’s nation-state: the California “reform industry.”

The key organizations in the Golden State’s world of reform are California Forward and Think Long, each with high-profile board members including Hoover’s George Shultz and Condoleezza Rice, former California Gov. Gray Davis and ex-Assembly Speaker Robert Hertzberg as well as leaders from business and labor organizations, a cadre of political and policy consultants, and enthusiastic funders.

I’m unaffiliated with either group.

My perspective on state government was honed over the past two decades as a campaign consultant for Pete Wilson’s and Arnold Schwarzenegger’s successful gubernatorial runs. And as cabinet secretary and deputy chief of staff to Wilson, as a Schwarzenegger appointee to California’s Little Hoover Commission and as a political strategist on more than 50 state and local ballot initiative efforts including Proposition 14, which abolished partisan primary elections and replaced them with a “top-two” system that made its maiden voyage this June.

Over the years, I’ve culled reams of reform proposals and have found an intriguing paradigm: The appetite for reform grows when the California economy — and state and local government finances — is under stress.

No responsible party argues now that California is on track or will right itself on the natural.

In fact, there’s a strong bipartisan consensus that the Golden State needs a sustained push of reforms aimed simultaneously at its executive branch  — I’m thinking of all those miscellaneous statewide officers who crowd the dais at the Governor’s annual State of the State address — the Legislature and the initiative process.

Some reforms should be big. Big ideas with big impact on California’s fiscal condition.

But, speaking as a political strategist, some reforms should be served in moderate portions, digestible bites that voters can understand and absorb.

So what looks appetizing on the California reform menu, and what should be sent back to the kitchen?

California Forward now has a constitutional amendment on the November ballot, which it says will “improve” the budget process for state and local governments. The measure includes “Community Strategic Action Plans for advancing community priorities” to “encourag[e] local governments to collaborate to achieve goals more effectively addressed at a regional scale.”  The measure also calls upon the Legislature to create “an oversight process for evaluating and improving the performance” of state and local programs.

While neither idea is potentially harmful, the upside appears to be somewhat limited.

One “big idea” in the measure appears to be its “pay-as-you-go” language requiring lawmakers to identify a funding source for new programs and tax cuts costing $25 million or more before they are enacted.  California’s Legislative Analyst’s review of the proposal, said the provision “could result in state program costs being lower,” though the net fiscal effect is “unknown.”

California Forward also proposes moving to a two-year budget cycle.

That might help but there may be unintended consequences – specifically, California’s volatile revenue picture. Why not keep a closer eye on state finances – say, a quarterly financial update, as publicly traded companies do.

Earlier this year, Think Long retreated from its plan to place on the statewide ballot an initiative to overhaul California’s complex tax code.  

That tactical retreat was wise, in my opinion. Tax-related initiatives make big, fat targets for any special interest whose ox is gored. Look no further than Prop 29’s defeat in June – thanks, in large part, to a brutally effective opposition campaign funded by tobacco companies.

That said, California’s tax code needs an overhaul, ideally to lower rates and broaden the tax base.  It may be counter-intuitive to reformers who view Sacramento a part of the problem and not the solution but the best route to success in the area of tax reform is through . . . the Legislature.

The topic is simply too complex to place before the voters in initiative form.  The Legislature, on the other hand, has staff who can help sift through the various options and can conduct the many committee hearings to provide transparency in the very political process of the inevitable give-and-take among competing interests.

One other idea that received a great deal of attention in the Think Long playbook is its proposal for a “super committee” of respected and independent individuals able to place measures directly on California’s statewide ballot, bypassing both the Legislature and the traditional signature-gathering process.

I would tweak this proposal slightly – for instance, by adapting the “citizen Legislature” concept developed by Common Sense California, based on experience in other countries.

The idea would be that, once every two years, a group of several hundred average citizens would consider and place on the ballot one measure – and one measure only – on the subject of its choosing.  It might be a simple education reform or a campaign finance overhaul. Whatever the participants decided.

There’s also value in creating a new process whereby a previous initiative can be outright repealed, once its flaws have become painfully obvious to all.

One such candidate for a “do-over” might be Proposition 98, which has clearly demonstrated, over its more than 20-year history, a failure to provide transparent and predictable funding for California schools.

The odds of any Legislature proposing permanent modifications to Prop. 98 are zero.  But a far superior mechanism can and should be developed – one that ideally creates “rainy day” funds at every school district in California, thus eliminating the annual springtime ritual of mass-mailing pink slips to thousands of teachers.  Voters would also embrace, I believe, a new approach that guaranteed funding for the University of California and the California State university system, which are not provided for in Prop 98.

Now that term limits have been tweaked, independent redistricting implemented, and partisan primaries scrapped, a hard look at the Legislature by the reform community is in order. To this end, California Forward and Think Long should focus on what makes the legislative bodies dysfunctional.

One important reform would be to extend the state’s Open Records Act to the Legislature. It exempted itself under Proposition 53.

Next, reformers should change the vocabulary surrounding the state budget.

To that end, two phrases should be banned:

1)  Structural Deficit. Early in the 2003 recall campaign, a few of us gathered poolside at the Schwarzenegger compound to discuss approaches to the budget.  One of his advisors said the term “structural deficit” needed to go.  The phrase suggested the budget was on autopilot, with a built-in bias toward spending.  This advisor said the phrase was a cop-out and suggested replacing it with two terms: (a) “inherited debt” – referring to budget gimmicks and short-term borrowing, and (b) “operating deficit” – referring to the current-year problem of receipts being insufficient to cover expenses.

2)  Kabuki. This was used often by Schwarzenegger at his gubernatorial press conferences. As in: “We’ve got to have a Kabuki dance in Sacramento before we can pass the budget.” Kabuki is a carefully orchestrated form of Japanese dance-drama dating back to the 17^th Century. The actors and directors are among the most respected citizens in the land. Some of the scripts have been unchanged for centuries. Kabuki is never behind schedule or, despite the heavy make-up, intellectually dishonest.

The leading indicators for California’s “reform industry” are generally positive. With the right mix of products and some good marketing — and a little bit of luck — these reformers have a good shot at success.

And what’s more Californian than taking a risk and going for a big win? 

Joe Rodota is the CEO of Forward Observer, a national public affairs research and strategy firm with offices in Washington, D.C. and Sacramento. Previously, he served as political and policy advisor for two U.S. Presidents and two California governors. This piece was originally commissioned by the Hoover Institute at Stanford.