Dave Cox Senate Report: July 2007

Budget Update

The Legislature and the Governor had not come to an agreement on a final budget for the State of California by the time the fiscal year began on July 1 st. As of this moment there is still not an agreement.

I have voted for budgets in the past and I have voted against many of them. For me, it is more important to have a good budget than an on-time budget. The budget that emerged from a joint Assembly/Senate Conference Committee this year has a deficit between revenue and expenditures that is between two and three billion dollars. At a time when state revenues are declining, we should not be in a situation where we spend more than we take in.

California ’s economic climate is positive. Despite problems in the real estate market, our job growth is continuing at a steady pace. We should be able to resolve our budget problems in the near future. I am ready to consider a budget that makes sense for the future of our state.

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Dog & Cat Spay and Neuter Bill

AB 1634 (Levine), which would have required the spaying or neutering of privately owned dogs or cats, was withdrawn by its author at the Senate Local Government Committee hearing on July 11 th. It cannot be considered again until January of 2008.

If a vote had been taken at that hearing, I would have voted against this bill. As a proud pet owner myself, I do not feel that it is the business of the State of California to tell individuals how to take care of their personal pets. In addition, the mandate on cities and counties to provide spaying and neutering services was required without state funds to perform such services. A one-size-fits-all type of solution to the pet overpopulation problem does not work well in rural areas where dogs are raised for work in farming and ranching operations.

AB 1634 generated an immense amount of interest on both sides from the people of California and the people of the First Senate District.

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Demographics Are Destiny?

Some of our readers may have seen headlines recently about population projections that forecast California to have nearly 60 million people by 2050, and that Latinos will be over 50 percent of the population somewhere around 2040. The current population of California is about 37 million.

There is no question that the Latino population in our state is growing, and the population of non-Hispanic Whites is declining. Let’s look deeper into these population projections and try to determine what they mean.

The projections recently featured in newspapers came from the State Department of Finance (DOF), which does research on population trends in the state. California is becoming increasingly diverse. The White population fell below the 50 percent mark just before the 2000 census was taken. At that time, it became reality that no racial group had a majority in California. Thirty years earlier, Caucasians were 80 percent of the state’s population.

It is also true that the state’s population growth no longer comes from migration from other states. That number is now negative, meaning more Californians are leaving to other states than are coming in from the rest of the U.S. Our growth now comes from in-state births and immigration from other countries, both legal and illegal. It is also a fact that our population is becoming older. The first Baby Boomers will reach retirement age in 2011, and the percentage of senior citizens will continue to increase after that. Between 2000 and 2020, the 65 and over age group is projected to increase by 71 percent.

On the other hand, the number of children in California is not expected to grow nearly as much. People born during the “baby bust,” which followed the baby boom, are having fewer children. In addition, second-generation Latino families have lower birth rates than their first-generation parents. The growth rate of working aged people aged 25-64 is expected to grow at a rate slightly higher than the overall population.

Geographically, it is a fact that population growth is faster in inland California than it is on the coast. The DOF projections show Riverside County growing by 3 million people over the next 50 years, and Placer County increasing by 500,000 – a 200 percent increase. Sierra County is the only county that the DOF projects will lose population over the next 50 years.

We must remember that these projections are just that: projections. Many things could happen in the next 50 years. The phenomenon that has upended previous projections has been economic recession, such as the one in the early 1990’s that cut California’s projected growth rate over that decade by nearly one million people.

What does all of this mean? It means that health care spending will continue to increase, and the demand for senior citizens services will go up. Since the aging of the population is a national trend, the pressure on Social Security and Medicare will be intense. State school enrollment will slow, but many inland areas will continue to see challenges with more students from homes where English is not the primary language. Growth in the inland areas presents the challenge to increase our housing and transportation infrastructure while preserving agricultural land. And most importantly, we must preserve an economic climate that provides jobs to all of our citizens that will finance our aging, educational, and infrastructure challenges.

To look at the Department of Finance population projections, go to:
http://www.dof.ca.gov/HTML/DEMOGRAP/ReportsPapers/Projections/P1/P1.asp

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State Retirement Health Care Estimate

Last year, the Legislature required the State Controller to estimate California’s state retiree future health-care liability. This valuation is necessary for the state to comply with new accounting rules that have been recently applied to all public pension systems.

In May of this year, the Controller reported that the state’s estimated unfunded liability totaled nearly $48 billion. This is due to the fact that the State does not put aside money to cover future health care liabilities – rather, it takes a pay-as-you-go approach, funding only the current year of coverage from the state general fund every year in the State Budget.

The non-partisan Legislative Analyst’s Office (LAO) reported that in order to continue to offer a comprehensive health benefits package to retirees both currently and in the future, the State should pre-fund the programs. This is how defined benefit retirement plans for public employees are currently funded, and have been funded for decades. This method allows for investment returns to help pay for future liabilities.

The LAO has launched a new web site designed to disseminate information regarding this issue, which can be found at www.lao.ca.gov/retireehealth

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Where the Lottery Money Goes

As we have discussed in previous newsletters, The California Lottery provides less than 2% of the funding for K-12 education in California. Every year the California Department of Education is required by law to publish a report describing how lottery funds are expended. Again this year, the department reported that a majority of lottery funds allocated to local school districts are being spent on salaries and benefits for teachers. Last year, 64.2% was spent for that purpose, compared with 64.9% in 2004-05 and 63.5% in 2003-04.

The Department of Education has always recommended that districts use lottery funds strictly for non-recurring costs, as lottery funding levels can not be relied upon from year to year. Should lottery funding decline, local school districts would need to find funding elsewhere to pay teachers’ salaries. It is easy to see why relying upon lottery funds for recurring costs such as salaries and benefits is a poor idea.

Many people like to play the Lottery, but as a permanent funding source for education, it is not the best option.

For more information on how lottery money is used you can go to the California State Lottery Website at: http://www.calottery.com/default.htm

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Quotes of the Week

“We don’t celebrate dependence day on July 4th, we celebrate Independence Day.”
- Ronald Reagan

“I’ve always thought that the common sense and wisdom of government were summed up in a sign they used to have hanging on that gigantic Hoover Dam. It said: Government Property. Do Not Remove.”
- Ronald Reagan

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