Certain perennials accompany life in California: the weather will always be fair, the scenery will always be breathtaking, the budget will always be on the brink of outright chaos, and the state’s liberal intelligentsia will always be chasing tax increases as a remedy. So it is as the 2012 elections approach, with the state facing a $9.2 billion budget deficit and Governor Jerry Brown pushing a November ballot initiative that would raise income and sales taxes.
California law provides two mechanisms for increasing taxes. The state legislature can implement an increase via statute, but that requires a two-thirds majority—a rule stemming from 1978’s Proposition 13, the famous ballot measure limiting property taxes. The other way is to follow the same route as Prop. 13 and take the issue to the voters through the initiative process. With Republicans controlling just enough seats in the legislature to thwart Brown’s ambitions, the governor has chosen the second path.
Circumventing conservative opposition in the legislature doesn’t mean that Brown’s proposal is on a glide path to victory, however. Despite early polls showing the measure performing well—a survey conducted by USC and the Los Angeles Times in late March indicated 64 percent support among registered voters—the way ahead is far from smooth. The polls will almost certainly tighten as Election Day nears, particularly given California voters’ longstanding aversion to tax hikes. As Jon Coupal, president of the Howard Jarvis Taxpayers Association, observes, “Voters have rejected the last seven tax increases put on the ballot.” The same USC/Times poll that heartened Brown and his allies also reflected that resistance: 45 percent of voters said that, as far as they’re concerned, taxes were too high already and that the budget deficit should be made up exclusively through spending cuts.
So Californians can expect a costly and noisy several months. Running a statewide initiative campaign in California, home to some of the largest and most expensive media markets in the nation, is often a bank-busting proposition. Total spending on Proposition 8, a controversial constitutional amendment that proposed banning same-sex marriage statewide, topped $83 million in 2008. That same election cycle, a much less prominent measure to regulate the treatment of farm animals attracted nearly $20 million in spending. Brown needs an ally capable of bringing that kind of financial firepower to bear—which is where the California Teachers Association (CTA) comes in.
With a membership of approximately 325,000 and a tax-free income that totaled $186 million in 2009, the CTA possesses unrivaled manpower and financial resources. It’s not shy about using its muscle. In the 2010 election cycle, the CTA spent approximately $13.7 million, making it the largest financier of that year’s ballot initiatives. As I document in a story in City Journal’s forthcoming Spring issue, this was part of a longstanding trend. In the first decade of the new century, the CTA spent more than $210 million on political campaigning—more than the pharmaceutical, oil, and tobacco industries combined—easily making it the largest special interest in California politics. The spending wasn’t limited to advocacy on education issues. The CTA bankrolled everything from efforts to create a single-payer health-care system in California to campaigning against a measure to limit the state’s use of eminent domain. In essence, the union has become an all-purpose funding mechanism for the California Democratic Party, to which it is the single largest donor. Such fiscal clout helps minimize dissension within liberal ranks, where in recent years an affinity for public education reform has become haute couture in certain circles.
As a result, when Brown came knocking with his tax-increase initiative, the CTA readily endorsed it, even as another teachers’ union, the California Federation of Teachers (CFT), campaigned for a rival initiative focused exclusively on the income tax. Brown eventually struck a bargain with the CFT, incorporating aspects of its proposal in exchange for the union’s endorsement of his initiative. And as was inevitable, the CTA announced in late March that it had donated $1.5 million to Brown’s tax-increase campaign, the largest contribution the effort has yet received.
Why the enthusiasm from the state’s largest teachers’ union? To hear CTA officials tell it, California’s schools are positively starved of resources. The talking points on the union’s website claim that California schools “can’t afford any more state budget cuts,” citing Brown’s claim that they could face an additional $5 billion in spending reductions if the initiative fails at the polls. The union also claims that “this initiative guarantees that new revenue for education will be spent on schools at the local level, not administrative costs or Sacramento bureaucracy.”
Perhaps the CTA protests too much. Public education in California has been subject to significant budget cuts in recent years, but the reason the CTA is so quick to disavow “bureaucracy” in terms usually reserved for small-government advocates is because that’s where a disproportionate amount of the system’s costs reside. In a 2008 report, for instance, the Los Angeles Daily News found that the Los Angeles Unified School District’s bureaucracy had ballooned by 20 percent from 2001 to 2007—at the same time that 500 teaching positions were eliminated. The News estimated a total of 4,000 bureaucrats in L.A. Unified with annual salaries averaging $95,000. If CTA members’ focus is steering money toward the classroom, and they’re as averse to government waste as they claim, one would think that pruning this bloated bureaucracy would take precedence over shifting more costs to California taxpayers.
What may really be driving the CTA’s fervor, however, is the dawning reality that the state doesn’t have the resources to fulfill its hemorrhaging pension obligations to California teachers. CalSTRS, the teachers’ pension system, faces an annual shortfall of $4.5 billion—money that state government shows no signs of being able to find. If Sacramento can’t step up, the burden falls to local school districts. As Stanford lecturer (and former Arnold Schwarzenegger economic advisor) David Crane has noted, backfilling the pension shortfall “would take up more than 100 percent of [school districts’] share of the tax increase, leaving none of the new money for students.” In short, the tax fight isn’t about California students; it’s about the tony neighborhoods their teachers will get to retire to.
Bureaucracy and pensions aside, an even greater flaw mars the union’s thinking. CTA officials contend that Brown’s proposal—an extra quarter of a cent added to the sales tax and up to three extra percentage points on the state income tax, depending on income levels—represents only a modest increase, a cost that the Golden State’s economy can easily absorb. But the margin of the increases is less significant than the final rates they will produce. If Brown’s package passes, California would have both the highest state sales tax in the nation and the highest top income-tax rate. That will only continue to drive economic activity out of the state, a trend that recent IRS data shows cost California $27 billion in tax revenue from 1999 to 2009.
The lesson should be clear: the kind of punitive taxation that Brown’s initiative promotes is precisely what depletes the tax base necessary to finance California’s public schools and pay the salaries of CTA members. Raise rates and you only dim the prospects for public education further. Someday, perhaps, the Golden State’s political leaders will break this vicious cycle. For now, however, it’s just another of California’s perennials.