With a $20-billion state budget deficit, Californians face a fundamental choice: We can protect seniors, people with disabilities, and children from another round of devastating cuts to their health and human services—on top of last year’s deep cuts—or we can protect corporations from losing $14 billion in tax breaks the state has provided in recent years. We can’t do both. It’s critical Central Coast residents tell state legislators which choice to make.
The Central Coast Commission for Senior Citizens, Independent Living Resource Center, Food Bank Coalition, Central Coast Clergy and Laity for Justice, and Health Access have coalesced to engage the SLO community in a shared vision for a Family Recovery Budget that would help families, seniors, people with disabilities, and local employers bounce back from the deepest recession in decades. Our first effort is a rally, parade, and table at the SLO Farmers Market on Thursday, July 29.
Governor Schwarzenegger’s “cuts only” budget proposal represents the worst possible choice for the Central Coast. Under the governor’s budget proposal, the Central Coast stands to lose more than 11,000 public and private sector jobs and $43 million in regional economic activity, according to a new study by University of California Berkeley economist Ken Jacobs. The governor’s budget would also deny medicine and other primary and preventive care to medically fragile seniors and people with disabilities; increase the financial burden on families trying to work, raise children, and care for ailing parents; and lose hundreds of millions of dollars in federal funds for health care, job training, and child development programs statewide.
There is no better bang for the state buck than investing in health and human services, both because it brings huge amounts of federal matching funds into local programs, and because such programs mainly employ and benefit low- and moderate-income families who spend every dollar they earn on local goods and services. This is well documented in the Jacobs study, which is available online at laborcenter.berkeley.edu.
By contrast, there is little evidence to back up the claim that the $14 billion California spends every year on corporate tax breaks helps create jobs. Most corporate tax breaks are not really designed to create jobs, are never audited to find out whether they actually create jobs, and the few audits that have been done (for the Enterprise Zones Tax Credit, for example), have shown no overall impact on job creation.
What corporate tax breaks are designed to do is increase shareholder profits, and they do that very well. Consider, for example, the reinstituted Net Operating Loss (NOLS) break, which will cost the state $500 million annually. If a company makes a profit and pays taxes for two years, but has a loss the third year, it can use that loss to get a refund of the taxes it paid in the two previous years. This will essentially force the state to grant retroactive tax refunds. How will that help create jobs?
Another break, the single sales factor election, in essence will let companies decide how much they want to pay in state taxes. This break is particularly helpful to such companies as Chevron, which have a high percentage of their property and payroll within California but a relatively low percentage of overall sales in the state. Instead of paying taxes on property, payroll, and sales, as of the 2011 tax year they can choose to pay taxes only on sales within the state. It will cost California $900 million annually in lost tax revenue, and give a windfall of $20 million annually to nine companies. Will it help create new jobs at Chevron? There’s no evidence to suggest it will.
What the evidence shows is tax breaks do stimulate huge increases in dividends for shareholders: Intel, for example, which was one of the primary beneficiaries of the $2.5-billion package of corporate tax breaks enacted last year, closed its last California plant last year but increased its dividend payouts by 288 percent this year.
Any savings from the governor’s cuts to health and human services would be short-term at best, but more Central Coast residents would end up unemployed and in worse circumstances at inevitably much higher cost to taxpayers. For example, the North County Women’s Shelter had to lay off 11 staff after the governor zeroed out funding for domestic violence shelters last year. One of those employees lost his home as a direct result of losing his job. This year, the governor proposes to “save” $1.5 billion by reducing access to primary and preventive care for children, seniors, and people with disabilities and chronic illness. This includes such brilliant ideas as limiting adult Medi-Cal recipients (most of whom are elderly or disabled and live on less than $1,000 per month) to six prescriptions per month and 10 doctor or clinic visits per year. Consider what could happen to Frances, who works full-time but has cerebral palsy and high blood pressure, is a survivor of thyroid cancer, and takes six prescriptions a day to manage her pain, muscle spasms, blood pressure, and thyroid. She’d better not get pneumonia, because her antibiotics wouldn’t be covered.
The governor is neither stupid nor vicious: He’s proposing stupid cuts because there is no way to fix California’s massive state deficit without them— unless smart revenues are included as part of the solution. The Department of Waste, Fraud and Abuse has long since been eliminated and we are now talking about taking medicine away from seniors and wheelchairs from the disabled. We can avoid these stupid cuts and foster an economic recovery that works for the majority of Californians, not just a handful of Wall Street investors, if we agree on some basic priorities.
Senate President Pro Tem Darrell Steinberg (D-Sacramento) and Assembly Speaker John Perez (D-Los Angeles) are working on a proposal to replace the worst of the health and human services cuts in the governor’s proposal with a modest fee on oil drilling to raise $1.5 billion a year, coupled with a rollback of $2 billion in new corporate tax breaks enacted last year. There are signs some moderate GOP legislators may prefer this approach, given the human impact and job losses that would ensue from a cuts-only approach. Unlike any other government of an oil-producing region, California doesn’t charge oil companies a fee for extracting oil. The governor himself proposed a 9.9-percent oil severance fee last year but backed away from the idea under pressure from his party. Maybe he’ll be willing to consider it again if he sees public opinion favors it. It’s imperative to tell your legislators to pass a budget that protects seniors and such medically fragile people as Frances, not one that only benefits the likes of Chevron and Intel.
The SLO Budget Coalition meets every Friday at 3 p.m. The public is invited. For more information about the coalition or to volunteer for the July 29 rally and march, contact Carl Hansen at email@example.com, 238-4664 or Jerry Mihaic, Independent Living Resource Center, firstname.lastname@example.org, 462-1162. ∆
Jessica Rothhaar is the Budget Program Director for Health Access, a statewide health-consumer advocacy coalition. Contact her via the editor at email@example.com.