Campaign Check: Debate Debunking
The third and final debate between the two major candidates for governor offered voters a chance to compare two very different visions for California.
For us, it also offered a chance to check out some of the statements offered as facts.
This week, The California Report's ongoing election season segment Campaign Check tackles a few of the many statements made by Meg Whitman and Jerry Brown during their Tuesday night dustup on the campus of Dominican University.
As is often the case, the statements I selected largely had nuggets of truth wrapped in a few layers of spin.
Whitman's Plan to Scrap the Capital Gains tax
There was an awful lot of back and forth on this proposal, with Whitman defending its stimulative effect on the economy and Brown lambasting it as dire news for public schools.
Let's start with two bit of facts that Brown seems to have gotten right: the capital gains tax does account for somewhere around $5 billion in state revenues, depending on the year. And, as state data shows (page 16 of this PDF), some 82% of those who pay have an adjusted gross income of $500,000 or more.
Beyond jabs at helping the wealthy, Brown's main focus was that Whitman's elimination of the capital gains tax would devastate public schools. And here we wade into a gray area of budgeting and economics. The state's Proposition 98 school guarantee usually translates into about 40% of general fund revenues (the newly inked budget actually pegs K-12 education at almost 42% of the general fund); Brown therefore is assuming that Whitman's tax cut will cut school funding under the same or similar proportion.
But Whitman has, time and again, denied any interest in cutting school funding beyond current levels (which, though, are themselves lower than Prop 98 would have otherwise guaranteed).
In truth, it's... well... complicated. It's not inconceivable that, as governor, Whitman could find other places to reduce spending if revenues dropped. But it's also true that, given the complex nature of Prop 98, any drop in aggregate school funding would also lower the guaranteed level of money for schools -- a sort of automatic spending cut -- though Whitman could advocate for school funding above that guarantee.
This is mostly part of an ongoing fight about supply side economics, one that's been raging for years. As I first reported back during the primary, Whitman's tax cuts are predicated on a subsequent spark to the state's economy. If such a spark happens, then there's no revenue loss. In a brief interview this past winter, she said she believes any resulting loss in revenue will be made up "within the first year." As I found back in April, some are skeptical.
Nevada, Texas, Washington
One other element of the capital gains fight that came up Tuesday night: Whitman's statement that California is uncompetitive with the three states listed above, which have no capital gains tax.
The trouble with this line of argument is that it's an apples versus oranges comparison. Consider Texas, a state that Whitman often says is after California's businesses and jobs. Official data shows that Texas' tax structure is highly dependent on property taxes; according to the annual report of the state's comptroller, "[Texas] ranks third in the country in its reliance on the property tax to fund government services." As we know, California's property taxes are intentionally constrained by Proposition 13. In fact, if you take Texas' 2008 property tax revenues -- $39 million -- and use a per capita amount which can then be applied to California's larger population -- it appears that the Golden State would have taken in $10 billion more in property taxes under the Texas system. Doubtful, though, Californians would have approved of that.
Problems also exist in comparing California to Nevada (very small population, 75% of revenues come from sales taxes) and Washington state (which has not only a sales tax but a rather complicated business and occupation tax). Bottom line: eliminating California's capital gains tax wouldn't seem to level the playing field.
Brown: Pension Reformer of Yore?
"When I left the governorship in '82, I put in the budget act, get a two-tiered pension system as soon as possible. They ignored that."
That was Jerry Brown on Tuesday night lamenting what he characterized as legislative inaction on a pension reform plan he said he offered 28 years ago.
Which means I had to track down his 1982-93 budget proposal, where on page 26 of the summary is a section marked "Two-Tier Retirement System." So far, so good.But the proposal was not more than a broad sketch, at best. The budget said Brown's idea was "still in its developmental stages." And depending on how those pensions were calculated -- he called for a cap of 70% of an employee's final salary -- it might not have been a huge savings compared to current ideas. Bottom line, though, is that there's not any evidence (archived news search turns up zippo) that Brown put any gubernatorial weight behind the issue. Suggesting something... and actually advocating for something... can be very different in Sacramento.
Hurting "97%" of California jobs
Meg Whitman took a slightly new tack Tuesday in her position to suspend the state's climate change law, AB 32. "Today, only 3% of our jobs are 'green jobs' and 97% of jobs are in the other part of the economy," she said. "And AB 32 is going to do real damage to the 97% of the jobs in the rest of the economy."
The Whitman campaign said the source for the 3% figure is Governor Arnold Schwarzenegger. Back in April, his team released the findings of a survey of businesses about how many 'green jobs' there really are (and let's not forget, there is no universal definition of a 'green job'). It's true that the numbers came back somewhere in the 3% range, so no problem with Whitman's argument there.
But the characterization of the other 97% jobs seems a bit of a stretch. For starters, only 35% of the state's employers responded to the Schwarzenegger survey. Even so, a whopping 86% of those employers said they do have at least some 'green' workers. And while Whitman singled out, among others, the manufacturing sector as particularly hurt by AB 32, the Schwarzenegger survey finds that sector as leading the way on 'green jobs.'
(Here's a PDF of the governor's survey on green jobs. You can also watch a 20 minute Q&A with Schwarzenegger and his top labor adviser that's online.)
A Follow-Up: $15 billion in spending reductions
While not so much a fact check, I did ask the Whitman campaign to flesh out some of the details of how the GOP nominee would reduce state spending by $15 billion, given that the candidate said in Tuesday's debate that she's laid out a "specific" plan. As I've reported before, she's planning to reduce by $15 billion over four years... not all at once.
Here's the breakdown, according to the Whitman campaign:
Shrinking the state workforce, through attrition, by 40,000: $6.8 billion (year 1: $500 million, year 2: $1 billion, year 3: $2 billion, year 4: $3.3 billion). They say the numbers were derived through analyzing state personnel data.
Pension reform (she wants a 401-k style plan for rank-and-file workers): $5 billion over four years.
Eliminating Medi-Cal fraud: $2.7 billion over four years (zero, they say, in year 1).
Tuition increase for out-of-state college students: $1 billion over four years.
NOTE: A spokesperson for the Whitman campaign points out the above $15 billion isn't the only place to save, and points out that many ideas in Schwarzenegger's failed 2004 California Performance Review could be dusted off.