From the Dispatch

California Progressives Score Key Transparency Victory

Altaf Rahamatulla — Thu, 02 Sep 2010 13:18:27 -0400

In August, California lawmakers approved AB 2666, a bill sponsored by Asm. Nancy Skinner that requires the state's Franchise Tax Board to compile information on corporate tax expenditures and publish the information on California's Reporting Transparency in Government website. Pedro Morillas, a Consumer Advocate with CALPIRG, commented on the bill's movement, “[c]orporate tax breaks will no longer be a bottomless pit for taxpayers. We’ll still be sending money down the hole, but now we’ll be able to see where it lands.” In 2009 alone, the state spent $14.5 billion on corporate tax expenditures with no oversight or accountability mechanisms.

In recent years, California has taken steps to improve transparency of state spending, but significant work still remains. In U.S. PIRG's Following the Money: How the 50 States Rate in Providing Online Access to Governm ent Spending Data - a comprehensive analysis and ranking of each state on the development of comprehensive, one-stop, one-click budget accountability and accessibility - California's online transparency efforts received a "D" for poor search-ability and lacking complete information about current and past contracts. The report also discusses some of the major benefits of corporate transparency, which can promote sound fiscal practices, identify spending inefficiencies, reduce corruption, and encourage a more focused budget process.

The legislation now awaits the signature of Gov. Arnold Schwarzenegger, who has been a strong advocate for accountability throughout his gubernatorial tenure. For instance, in June 2009, the Governor signed an executive order that augmented the scope of the state's transparency website. He emphasized, "[t]he people of California have a right to know what they are getting for their money. In this time of deep recession, it is more critical than ever that state government operates efficiently and is accountable to the people."

A confluence of factors have contributed to greater legislative and activist interest in pursuing transparency, including: the lingering effects of the economic downturn, budget shortfalls and plummeting revenues, the abuses of the financial sector and their major role in the recession, and the transparency requirements in the Recovery Act. Within this framework, progressive state legislators have been advancing transparency and accountability initiatives in order to safeguard taxpayers, foster better budgeting practices, promote good jobs, and garner savings. As part of our 2010 Shared Multi-State Agenda, the Progressive States Network has been working with lawmakers nationwide to promote Corporate Transparency in State Budgets policies.

Private Tax Filing Firm Lobbying to Scrap Successful State Tax Preparation Services

Altaf Rahamatulla — Thu, 26 Aug 2010 12:17:37 -0400

Intuit, a private firm that manufactures TurboTax, has pushed California lawmakers to eliminate the popular, successful, and cost-effective public tax filing services, ReadyReturn and CalFile. These two programs offer millions of low- and middle-income Californians a free and reliable method to calculate and file taxes. They are also wildly popular - ReadyReturns's user satisfaction rate reaches above 98 percent. The state's Franchise Tax Board estimates that in total, ReadyReturn and CalFile save taxpayers between $4 million and $10 million in filing fees and reduces the state's processing and administrative costs by $500,000 a year. Considering the depth of the state's fiscal and economic woes, these savings are sorely needed.

Intuit has spent over $1.25 million in the past five years on lobbying efforts to kill the programs and provided right-wing politicians with over $2 million in campaign support. Their efforts have had a visible impact: conservative state lawmakers have withheld support for domestic violence shelter and police department funding in an attempt to force the elimination of the programs.

In their crusade against government and public structures, the anti-tax movement is joining the opposition to these types of tax preparation programs because a dependable, popular, and cost-effective government service does not suit their hackneyed and hollow messaging.

As Professor Dennis J. Ventry Jr. of the UC Davis School of Law notes, "[a]bolishing ReadyReturn and CalFile would hurt Californians. Intuit's alternative would cover fewer taxpayers and provide fewer services; it would cost individuals millions of dollars in preparation fees (much of which Intuit wants to pocket); and it would kill two programs that actually save the state money. It doesn't add up for anyone. Except Intuit." Accordingly, this effort to eliminate a successful government program that saves money and assists millions of taxpayers follows the pattern of right-wing behavior at both the state and federal level -- placing the interests of large corporations and the very wealthy over middle class families and effective economic and fiscal policy.

Resources

California Budget Bites - Summer Doldrums Reveal Yet Another Threat to Ready Return
Progressive States Network - Right-wing Budget Hypocrisy: Taking Recovery Funds, Denouncing Deficits and Promoting Costly Tax Cuts
The Los Angeles Times - Intuit just won't quit

Georgia's Draconian Voter Verification System Passes Federal Muster

Cristina Francisco-McGuire — Thu, 26 Aug 2010 12:09:25 -0400

Two years of courtroom battles ended on Monday as Georgia received a green light from the US Department of Justice (DOJ) to go ahead with its controversial voter verification system, a major step backward for the state. "It came as something of a shock," said Laughlin McDonald, the voting rights project director for the American Civil Liberties Union, which joined a lawsuit against the voter ID system.

DOJ itself has blocked the program in the past, calling it “a flawed system” that subjects a disproportionate number of minority voters to “additional and, more importantly, erroneous burdens on the right to register to vote.” However, DOJ backpedaled once Georgia revised the system last week to only include first-time voter registration applicants; initially, first time voters as well as voters making technical changes to their driver’s licenses were affected by the program.

A Burdensome ID System: Georgia’s voter verification system checks voter registration information against drivers' license and Social Security databases – databases that are, according to voting rights groups, error-ridden. Voter registration procedures further require birth certificates and other documents as proof of citizenship, which many people, especially students, minorities, and the elderly, cannot readily access.

The flawed procedures were brought to light before the 2008 presidential election, when thousands of US citizens were erroneously flagged as non-citizens. After a coalition of voting rights groups sued the state on behalf of Jose Morales, a naturalized Latino citizen incorrectly purged from the voter rolls, the voter verification system was blocked until a Section 5 review could be completed. Under Section 5 of the Voting Rights Act of 1965, Georgia and other states with a history of discrimination are required to submit any changes in voting procedures to the DOJ or the US District Court in Washington DC for pre-clearance prior to implementation.

Fear of a Rightwing Supreme Court: The scope of Georgia’s now approved system is actually much broader than a proposed version that was rejected by DOJ in 2009, which would have only applied voter verification to first-time applicants who registered by mail and did not provide proper identification. Though DOJ has not issued a formal statement explaining its actions, Laughlin McDonald of the ACLU speculated that DOJ pre-cleared the program because Georgia's lawsuit specified that if the court found its system constitutional under the Voting Rights Act, then it should also rule all of Section 5 unconstitutional – people “were concerned what this [Supreme Court] would do if it was given an opportunity to rehear a case like this."

Resources

Atlanta Journal-Constitution - Justice Department approves Georgia voter verification system
ACLU - ACLU Intervenes in Georgia Voting Rights Act Challenge
Morales v. Handel - Letter from Civil Rights Division Acting Assistant Attorney General to Georgia Attorney General
Georgia v. Holder
NAACP Legal Defense Fund - Case: Georgia v. Holder
US Department of Justice - About Section 5 of the Voting Rights Act
Progressive States Network - Indiana Supreme Court Upholds Restrictive Voter ID Law
Progressive States Network - The New Voter Suppression and the Progressive Response

CAFTA Trade Lawsuit Highlights Threat To State Regulations From Bad Trade Agreements

Tim Judson — Thu, 26 Aug 2010 11:11:51 -0400

We've detailed in the past the way new international trade deals empower corporations to undermine local regulations. A recent case highlights just how byzantine and dangerous the process is getting:

A Canadian mining company is using a recently established Nevada subsidiary to use the federal Central America Free Trade Agreement (CAFTA) to try and overturn mining regulations in El Salvador.

Earlier this month, a tribunal under CAFTA ruled against the US government’s objections to the mining company's lawsuit and allowed the case to proceed.

Corporate "Investor Rights" Expanding: The case will be a high-profile test of so-called “investor state enforcement” (ISE) provisions which have become a common feature in trade agreements since NAFTA. These same investor rules are a central feature of three pending trade agreements (with Korea, Colombia, and Panama), which the Obama administration plans to finalize in coming months.

First invented as part of NAFTA, ISE rules grant companies which operate in one of the states that are party to the trade pact the right to sue another party country's government if that country’s federal or state laws and regulations impinge upon the company’s investments there. Such cases are heard by private arbitration tribunals outside of the defendant country’s legal system. These extraordinary private-investor rules grant foreign companies greater rights than domestic companies, which may not have legal basis for challenging commonly accepted public interest laws. Between 1994 and 2009, sixty-four cases were brought against countries under NAFTA, costing governments untold millions of dollars in legal expenses and amounting to billions of dollars in potential judgments. In total, governments have been found liable for over $200 million in judgments under NAFTA.

By far, the more significant implications of ISE rules are the threats they pose to the environment, workers, public health, and other public interest constituencies. In addition to the expansive opportunities they afford to multinational corporations to undermine public interest laws, they can drain government resources and create a chilled policy environment in which elected officials and public agencies feel constrained by the threat of investor-state actions. The El Salvador case is exemplary of the danger states face from the investor-state rules included in the proposed Korea-U.S. Free Trade Agreement (Korea FTA), in particular.

The El Salvador Case and the Threat to Local Regulation: The Canadian mining company, Pacific Rim Mining Corporation, is challenging a progressive mine-licensing law passed in 1996 with a two-step licensing process. First, a company must obtain a permit for exploratory mining, which Pacific Rim did in 2002. Before it can initiate commercial mining, the company must next obtain a full-scale exploitation permit, which requires approval of both an Environmental Impact Assessment (EIA) and a financial and technical feasibility study in order to protect El Salvador’s scarce potable water resources. Pacific Rim has not submitted such an application.

Pacific Rim's plans included using two tons of cyanide per day to process the ore, at a site located on El Salvador's largest river and source of drinking water. Due to the dangers posed by such mining practices, a national movement formed against precious metal extraction, and in March 2008, the conservative government led by President Elias Antonio Saca announced that no more permits would be issued until a new, thorough environmental study was completed and a mining reform law was passed.

Faced with this changing political environment, Pacific Rim decided to exploit CAFTA’s investor-state rules. At the time, however, the company had no U.S.-based operations and therefore no standing under CAFTA to sue El Salvador. So in December 2007, it reincorporated a Cayman Islands subsidiary in the state of Nevada, and in April 2008, following President Saca’s announcement, sent a letter to the Salvadoran government threatening to file suit. In December, Pacific Rim filed suit, claiming hundreds of millions of dollars in damages.

The El Salvador government filed for dismissal, but on August 2, 2010, the arbitration panel rejected the government’s position and ruled that the case will move forward. The government has since filed a second set of objections challenging Pacific Rim’s “nationality change” as an abuse of the treaty and claiming that Pacific Rim’s Nevada subsidiary is not the proper interested party, but rather the Canadian parent corporation, which has no significant investment interests in the U.S.

The case could determine how broadly ISE provisions will be extended in practice, and it illustrates the dangers to states’ sovereignty posed by future trade deals. If a multinational corporation can relocate a subsidiary to the US to undermine another FTA country’s laws, then the same could be done to undermine progressive US state laws, such as California’s new vehicle efficiency standards, that have been upheld as constitutional. The Obama administration plans to move first on the Korea FTA, which poses the greatest risk of investor-state suits of any agreement since NAFTA. Korea-based corporations have hundreds of operations located in the US, and as it is written, the Korea FTA would even enable companies to skirt new US financial reforms.

Resources

Public Citizen’s Global Trade Watch -

Progressive States Network - Trade and the States: Promoting Collaboration on Negotiating and Implementing Trade Deals

Right-wing Budget Hypocrisy: Taking Recovery Funds, Denouncing Deficits and Promoting Costly Tax Cuts

Altaf Rahamatulla — Thu, 19 Aug 2010 13:52:00 -0400

Right-wing officials have consistently expressed opposition to the federal recovery effort, even as they take credit for the American Recovery and Reinvestment Act's (ARRA) impact on economic growth.

In the past few months, conservative governors who routinely criticize the federal government's state fiscal relief and job creation efforts, including Minnesota Gov. Tim Pawlenty, Virginia Gov. Bob McDonnell, Texas Gov. Rick Perry, and New Jersey Gov. Chris Christie, heavily relied on recovery funds to balance steep shortfalls in their respective state budgets and touted projects that were only made possible by the Recovery Act.

Perhaps the most notorious recent example is South Carolina Gov. Mark Sanford. Sanford previously likened the Recovery Act to "slavery" and filed a bogus lawsuit to prevent South Carolina from using ARRA funds, but signed legislation in June to expand eligibility for unemployment benefits in order to access $97.5 million in federal spending to support ailing unemployment insurance funds.

Right-wing Senators and Congressional members harped on inflated short-term deficit concerns to oppose the recent extension of aid for Americans out of work and the approval of critical support for teacher jobs. Yet, conservatives continue to promote the extension of the economically unsound Bush tax cuts for the wealthy. As the Pew Economic Policy Initiative notes, financing the extension of these Bush-era tax cuts would cost $3.1 trillion over the next ten years. On top of that, these tax reductions do not stimulate the economy -- in fact, one federal dollar spent on Bush tax cuts results in only 29 cents in market activity, according to estimates by Moody's.

Alternatively, progressive actions such as increased infrastructure spending, providing aid to state governments, and extending unemployment benefits all yield considerably higher returns and have consistently proven to be significant catalyst of national economic growth.

The hypocrisy of right-wing officials is indicative of the their misleading rhetoric and the hollowness of their failed economic and fiscal policies.

Connecticut Defends Clean Elections Financing Program

Cristina Francisco-McGuire — Thu, 19 Aug 2010 13:48:23 -0400

Overriding a veto by their Governor, the Connecticut Legislature has strengthened its Citizens' Election system of public financing of elections that was first instituted in 2005. The Senate voted on August 5th to override Governor Rell's veto of the bill, SB 551, and the House followed suit last Friday by a 106-30 vote.

The vote comes in response to a Second Circuit decision issued in July. In Green Party of Connecticut v. Garfield, the court upheld the major provisions of Connecticut's Citizens' Election Program with one exception: the "trigger provisions," which allow additional public funds to be disbursed when nonparticipating candidates spend in excess of a certain threshold (also known as "fight back" funds), were ruled unconstitutional on the dubious argument that matching the spending of wealthy candidates somehow violates their rights to spend excessively.

The new Connecticut law gets around the court decision by doubling the amount of the initial grant for participating candidates to $6 million. Under the old law, participating candidates only received $3 million initially, but could have qualified for an additional $3 million in "fight back" funds if they were widely outspent by an opponent. A final $3 million, for a total of $9 million, would have been available if they were the subject of attack ads by special interests.

Connecticut's Citizens' Election program is funded through unclaimed property assets, such as real estate and life insurance policies.

All-Mail Voting Is One Winner of Colorado's Primary

Cristina Francisco-McGuire — Thu, 12 Aug 2010 15:29:31 -0400

As pundits attempt to digest what Colorado's primary on Tuesday night means for incumbents and insurgents alike, there is one thing everyone can agree on: voting by mail saved counties much-needed money while boosting turnout.

Of Colorado's 64 counties, 46 conducted their primaries entirely by mail. Not only did the number of votes cast this year surpass 2008's turnout by more than 100,000, counties have also been able to cut costs dramatically under the new system. According to Jack Arrowsmith, Douglas County Clerk and Recorder, the county anticipated saving taxpayers roughly $200,000, about half the cost of their usual elections. It's no wonder – the cost-per-voter in Douglas County for a mail ballot-only election is about $6 per voter, while the cost-per-voter at a polling place election is about $43 per voter using 2008 election costs. El Paso County experienced similar savings, managing to keep nearly $180,000 in their coffers. Generally, counties can save up to two-thirds of their traditional election-related costs by converting to all-mail elections.

Like Colorado, Hawaii also experienced increased voter turnout and lower costs during their recent all-mail special election in May.

Oregon has been conducting all of their elections entirely by mail since 1999, while 38 of 39 counties in Washington have already implemented all-mail voting.

New York: One Signature Away from Ending Prison-Based Gerrymandering

Cristina Francisco-McGuire — Thu, 12 Aug 2010 15:24:33 -0400

Legislation to end the practice of prison-based gerrymandering in New York, included within the 2011 state budget, passed both the Senate and Assembly last week. Once Gov. Patterson approves the budget package, the bill will go into effect in time for next year's redistricting efforts.

Seven of the current State Senate districts only meet minimum population requirements because of the prisoners they claim as residents, and 40% of an Oneida County legislative district is incarcerated – residents of those districts enjoy an unfair shift in representation as a result of their padded legislative districts. However, the bill will correct this distortion by accessing the home addresses of prisoners from the Department of Corrections' database and adding them to the population counts for the appropriate areas. Thirteen rural New York counties already have a similar adjustment policy in place.

As the Prison Policy Initiative details, two million prisoners nationwide are being counted in the wrong place, significantly distorting both political representation and planning decisions made based on demographic data. Ironically, this means that "communities that bear the most direct costs of crime are therefore the communities that are the biggest victims of prison-based gerrymandering."

New York is now the third state, after Maryland and Delaware, to take action to address this problem and pass legislation that counts incarcerated persons in their home districts.

Tax Limitation Rules Costing States Big Bucks in Downgraded Bond Ratings

Nathan Newman — Thu, 05 Aug 2010 16:28:56 -0400

When state governments make it nearly impossible to raise taxes to pay their bills, their creditors apparently get very nervous and increase their costs to borrow money. In the case of Arizona, whose dysfunctional tax cuts we've documented in the past, it means that last month, Moody's Investors Services lowered Arizona's debt rating for the second time in less than a year. And as analyst Lee Cokorinos notes:

When Moody's downgraded the state of Arizona's credit rating this past week, it pointed to "voter initiated spending mandates and a requirement for a 2/3 majority vote of the state legislature or vote of the people to increase revenues" as part of the reason. Such measures, Moody's said, "have introduced an above average degree of inflexibility to state finances."

Similarly, when Fitch Ratings cut California's bond rating last month, Reuters blamed the downgrade at least partly on the fact that, "The Golden State is one of just three states that require a two-thirds majority vote from each legislative house to pass budgets."

California and Arizona are not considered to share much beyond terrible current economies-- but the bond markets have noticed both share tax limitation rules that have made balancing their budgets in hard times nearly impossible. And both states are paying for those anti-tax rules with lowered bond ratings and higher costs for taxpayers to borrow money.

Senate Approves FMAP and Schools Funding -- But At the Cost of Food Stamp Cuts

Altaf Rahamatulla — Thu, 05 Aug 2010 16:24:40 -0400

This week, the U.S. Senate finally overcame a filibuster by conservative Senators to move emergency Medicaid funding through the first half of 2011 and provide key funding for education jobs. The legislation will provide a 3.2 percent increase in federal medial assistance percentages (FMAP) paid for Medicaid through the first quarter of next year, a 1.2 percent increase through the second quarter, and $10 billion toward state educational systems. This action is critical for state budgets and will protect both medical services and education programs in states across the country.

Budget Hysteria Pushes Misguided SNAP Cuts: Due to over-hyped long-term deficit concerns, the total cost of the package is offset by spending cuts and closing a tax loophole for multinational corporations. According to the Congressional Budget Office, the bill would reduce the deficit by $1.4 billion over the next decade.

Unfortunately, the bill cuts Supplemental Nutrition Assistance Program (SNAP) benefits, or food stamps, by $12 billion beginning in 2014. Lawmakers justified this reduction by asserting that the cuts will bring down benefits to pre-Recovery Act levels and the cost of food has decreased more than expected.

Yet, participation in the program has reached record highs, making this action an especially harmful approach. Further, the Senate's action is imprudent economic policy as families receiving food stamps readily spend their money on basic necessities, which boosts short-run demand and fosters market activity. Mark Zandi, chief economist at Moody's Economy.com, specifically finds that each federal dollar spent on food stamps creates $1.73 in market demand.

More Recovery Dollars Needed in States: Unemployment remains at 10 percent and according to a new report by the National League of Cities, National Association of Counties, and the U.S. Conference of Mayors, local governments may cut up to 500,000 jobs in the next two years, substantially degrading the amount and quality of essential service provision. Misguided and inflated deficit hysteria should not supersede supporting working families and job creation in hard-hit local economies.