Editor’s Note: in Part Two of OC Daily’s interview with Josh Newman, the dark horse Democratic candidate in Senate District 29, we cover taxation and ballot-box budgeting issues such as extending Prop. 30, re-visiting Prop. 98 and changing Prop. 13.
Matthew Cunningham: I’d like to discuss what I think are indicative issues on taxes, economy, education, to give people an idea of where you fall on things.
Do you support or oppose extending the Prop 30 temporary tax hiked to keep funding schools for certain levels? Would you let them expire like the voters were promised when they went on the ballot?
Josh Newman: Do I want to extend the Prop 30 taxes? No. The answer’s no. Is there a plausible alternative to do that? That’s an open question. My expectation would be that the legislature and the governor’s office would explore every means possible to allow that tax to sunset as promised.
MC: Let’s put it this way. If you were in the state senate and that came up, would you vote yes or no? What would be a plausible alternative? Or let’s say there’s no plausible alternative and the state needs to keep this revenue coming in. Would you vote to continue it, or would you vote like-
JN: I’d go at it this way. There has got to be an alternative to ballot-based initiatives. If the legislature can’t figure out how to properly allocate revenues and the taxpayers have to do it themselves, that raises questions about the role and value of the legislature or legislator. The argument in what, 2012 or 2014 when Prop 30 was passed – there was simply no other way to do it, and it was interesting to me that Jerry Brown did something that most people would have regarded as politically untenable, even suicidal, to put a ballot measure on before the voters to raise taxes. I think it was clear that he made the case, and the majority of the voters accepted the necessity. That was presented as a stop gap measure, a solution to a short term problem. To a structure problem, we’ve got to address that structural problem so that we’re not in that position again. To that extent, they haven’t-
Ballot-Box Budgeting and Prop. 98
MC: Do you think they have addressed it structurally?
JN: Probably not. I mean, clearly not. That’s because we as a state over an extended period of time have had other ballot issues that have hamstrung our ability to fund education, and we’ve resorted to formulas that are very complicated to fund education. When you hit a ceiling on those ballot-based formulas, it is reasonable to say, how do we ensure that every California kid gets the same quality of education? It shouldn’t be the norm that there’s a special tax to pay for education, and that if it was presented to voters as a sunset proposition, it should be allowed to sunset, and in that interval we should have solved the problem.
MC: That’s an interesting question regarding ballot-box budgeting. Do you think that is something the state should get away from, in terms of.. You said we have all these formulas that are set by these ballot propositions, and so then they can’t be unwound either way, so the legislature has little flexibility in terms of legislating.
JN: I think it’s not wrong to view that as a commentary on the citizen perception of the legislature, which is, if we don’t trust them we’re going to do this ourselves, or if they aren’t willing to do it we have to do it ourselves. It does raise the question, what is the value of the legislature?
MC: What about measures like Prop. 98? Let me ask you a question. I voted for it back in 1988, when there was still the post-“Nation at Risk” conventional wisdom that public education was underfunded and just needed more resources to succeed and it ought to be guaranteed a certain funding floor. In retrospect, I wish I could take back that vote for ballot-box budgeting. Do you think it should be undone?
JN: The only way you undo those things is if the voters have some assurance that the legislators they elect are going to do the work smartly with their interests in mind in a way that gets us to a better basis, and to the extent that clearly the perception seems to be that that is not likely, and voters seem to be, I think, more comfortable than I think we should be with ballot-box budgeting and with formula-based.. these kinds of points, because at some point you cannot formularize everything, because those formulas start to collide in the way that Prop 13 has an impact on revenues, and then you can solve it, for a time, for one particular issue.
What then? What is left after that? Then you wind up with a very small amount of discretionary revenues in a state that’s massive. With 40 members of the state senate, you know, the legislature and the assembly, who aren’t really willing, on any given day, to have those kinds of arguments, which are necessary, and to take a stance. I think that this ballot-box budgeting has given elected officials the luxury of not having to do that.
MC: Would you get rid of Prop 98? Or at least-
JN: I think you can’t simply get rid of it, but I think you need to have a conversation about what’s a smarter, more responsive, more collaborative approach to allocating fund to accomplish the shared objectives of the state. Get rid of it sounds kind of severe, but move away from that approach. We should, but I think to do that, you need a better, smarter, more conscientious legislature than we have right now.
I think it’s fair to ask, post-Jerry Brown, whether or not you’re for or against Prop 30, but you have to give the governor credit for having the chutzpah to put that on the ballot, to risk his political life to do it. What are the odds that the next governor will be that grave or that opinionated? Not so high. Then what happens after that?
Proposition 13 and A Split-Roll Tax
MC: You mentioned Prop 13. There’s always a talk about the split role. Do you favor a split role, or do you-
JN: That’s such a trick question, no offense, because it…
MC: It’s a real question…
JN: …but it winds up, because it’s such a loaded issue, people have such strong reactions…Prop. 13 was passed in what, 1978?…
JN: …most people don’t really know the mechanics of Prop 13, except to know that it’s good, right? It protects older Californians from losing their homes, right? We understand that, but what are the alternatives to this sort of a blunt instrument of Prop 13? There are probably some, but it’s not either or, right? I don’t think it’s fair to ask simply-
MC: I get your point on that, but the reality is there’s always the talk about it. It never quite materializes a ballot measure, but at some point probably either a combination of interest groups or the legislature will place on the ballot a measure that establishes a separate property tax rate or formula for commercial property.
MC: So, given a choice between the Prop 13 status quo and alternative of a different property tax rate for commercial versus residential property, would you support the latter?
JN: I would support exploring alternatives to overly rigid regimes that limit the ability of the legislature to get its work done. I hope that doesn’t sound vague, but it probably does. It will not be my first piece of legislation. If I’m a member of the state senate, I think we should welcome that conversation.
First you ask the question, is the status quo working? And if the answer is, as people believe, yes and no. Yes, it did achieve the goals of protecting older Californians from winding up in a detrimental position because of the value of their homes, but it also has some unintended effects, especially over time. The world has changed a lot since 1978, so the question becomes then, how do we achieve our goals and how do we generate the revenue necessary? It’s not simply to throw Prop 13 out the window. I don’t think the whole system… that’s not a panacea either. That’s been sort of presented as the either or. I don’t think it is either or. We do have to consider different approaches, because otherwise we box ourselves in in a state that has almost 40 million people now, and massive problems, and massive obligations, so we’re not likely to get government down to a small enough size where you can just rely on Prop 13 formula, Prop 98 formula, and still have residual revenue, you see what I’m saying?
MC: Is it fair to say that you don’t think Prop 13 works? I understand your point about it not being either- or. At the same time, in a way it is. There’s either Prop 13 as it is now or there’s something else. It is an issue nobody likes to talk about it in detail, but it’s an issue.
JN: Prop 13 is part of a system that’s not working, is how I would frame it, right? It’s part of a system of taxation and revenue generation that’s clearly very clumsy at this point, and hard to maintain in such a way. Even if you’re a small government Californian, you still run up against the limitations of Prop 13, 98, whichever.
Do we have to rethink it? Absolutely, especially when you consider the state’s infrastructure needs in the next 20, 30 years? Is there a simple solution? No. Do elected officials need to have the courage to address it and have that conversation and go back to their constituents and say, we need to talk? The answer is yes.
Why don’t elected officials do that? The answer’s kind of obvious, right? If you can kick that can down the road for 2 years or 4 years, and your whole goal in life is to get through 12 years of term limit eligibility, you’re going to keep kicking that can. Will I as a state senator in my 4 years, I’ll be happy to do that. Am I willing to risk not getting re-elected? Absolutely. Do I have a prescription right now? No.
Taxing Services and Revamping the State Taxation System
MC: A couple things, if I remember both of them. Let’s look ahead. Let’s say you win. You’re in the Senate. One of your colleagues is Senator Herzberg from Los Angeles. A very influential guy, pretty middle of the road. But he wants to talk about revamping the tax system in California. Some of his ideas are good and others not so good, but one thing he talked about is taxing services, which are not taxed now. Would you support or oppose a tax on services?
JN: If it’s offset by something else. Let’s talk about the offsets. What’s the total mix? Bob Herzberg is a smart guy. The answer is not simply to find something that is untaxed and tax it. It’s about what is the overall allocation? What’s the balance? That’s the Prop 13 issue, in the first place, which is it creates an imbalance if you can’t generate in property taxes what you used to or what you need to.
Am I open to revisiting the total mix of taxation? Absolutely.
Tomorrow, in Part Three of OC Daily’s interview with Josh Newman, we talk about his first piece of legislation and charter schools.