Recovering From Fiscal Disaster

Listen up, Governor Brown

Back Commentary Feb 1, 2011 By Winnie Comstock-Carlson

At the end of 2010, I asked several dozen of our region’s business and thought leaders what advice they would like to give our new governor. Last month, in an open letter to Gov. Jerry Brown, I summarized their thoughts on how the new administration should change important areas of state governance. This month, the same group of local leaders offer ideas on how to recover from our current fiscal disaster.

Drastic spending cuts are at the top of the list, and it’s encouraging to see that the first budget proposals we’ve seen from the governor include some painful but necessary cuts in social service programs. We also applaud his plans to shift funding and responsibility for a number of programs to counties. There is no doubt that local governments, rather than the state, can better assess needs and provide services in areas such as juvenile justice and mental health.

But in the view of those we polled, the governor needs to go much further in reducing the cost of government. He should start, as most CEOs do, with labor costs. Begin by surveying private industry salaries and benefits in California as well as government labor costs in other states that are closer to balancing their budgets.

Based on this data, develop a pay scale that is competitive (including all benefits), and begin the process of renegotiating all labor contracts. This will be a slow, difficult process — but an absolutely necessary one.

Then, tackle state employee pension reform. Given that estimates of the state’s unfunded retirement liabilities run into the billions, we simply can’t return to fiscal health without such reform.

All current state employees should retain their defined benefit pension plan but be required to make significant contributions to it based on a realistic assessment of future pension fund earnings. In other words, the pension plan must begin to pay for itself. All new employees should participate in a defined contribution plan rather than the current defined benefit plan.

These kinds of spending cuts are necessary but far from sufficient. We can neither tax nor cut enough to get ourselves out of this mess.

The only path out of our fiscal disaster is more jobs. How do we create new jobs? Become far more business friendly, say regional leaders, who have no shortage of ideas. Among them:
• Make the lieutenant governor responsible for a TeamCalifornia private/public partnership to retain, grow and attract new businesses.
• Develop a statewide economic development strategy based on regional sectors of strength.
• Help local governments identify business sites, and get them properly entitled; maintain an inventory of ready locations.
• Attract and retain companies by providing hiring and investment tax credits.
• Create a bracero guest-worker program to decriminalize illegal immigrants and maintain the necessary work force.
• Establish a nonpartisan commission to review all proposed regulations for their overall economic impact.
• Analyze state regulatory agencies: Determine if they are necessary, overregulating or need more staff to gain efficiency.

Most of us in the business community believe that steps like these are the only sensible way to restore fiscal health. We must grow the market and increase the number of jobholders who pay taxes — rather than pretend we can solve our problems by raising taxes.

We also believe the best route to social justice is to create the conditions for the high-quality, high-paying jobs that will allow all Californians to properly feed, house and educate their families — and, in the process, leave a positive legacy for the next generation.

Gov. Brown, will you join us in this effort?