San Benito County’s State Sen. Anthony Cannella, R-Ceres,
recently sat down with the Free Lance for a Q
&
amp;A. Find out what he had to say about his first seven months
in office, the budget crisis, his proposals in the legislature,
pension reform, the future of local redevelopment and more.
Free Lance: What surprises have you encountered since taking office?
Cannella: I’ve taken a very unique path. I’m elected in November, sworn in in December, and a new governor’s sworn in in January, and right way I’m involved in budget discussions, which is very unusual. The typical model is, the Republican and Democratic leaders in the Assembly and Senate, and the governor, what they call the big five, they negotiate.
That structure completely broke down this year because of Prop 25. I had the opportunity with four of my colleagues in the Senate to try to negotiate on a budget. Not necessarily the nuts and bolts of the budget, but some reforms to put on the ballot. That was interesting. That was a unique experience. That was surprising. Everything else I think I expected.
FL: What would you like to share about your first seven months in office?
Cannella: As part of our budget discussions we were really focused on reforms. The governor wanted to put taxes on the ballot. We wanted to put reforms. We wanted a package. We wanted reforms that would fix the state.
We would put the governor’s request for taxes on the ballot because that would pay off the bad government we’ve had over the last 10 years. We worked very hard. Unfortunately we weren’t able to get it there because we couldn’t get an agreement on the reforms. But we felt we put a lot of work into this. We thought this was a good product we wanted people to see and talk about in the legislature. We did submit these four bills, which are kind of the summary of our work. They include a state spending limit or a spending cap, they include pension reform, they include regulatory reform and they include CEQA reform. I think it shows that we have a very thoughtful approach to what we feel are structural problems at the state, so we’re very excited about these.
The spending cap, in general, it would be a hard spending cap, locked in to CPI, about a 3 percent growth in spending per year, until we’ve paid off our budgetary debt. I think we’ve identified about $45 billion or so.
They include education referrals. We have about $20 billion we think is owed to education. We have to pay off our economic recovery bonds.
FL: There’s no money set aside for this?
Cannella: Currently, no. At some point these schools are doing a lot with a lot less than they’re entitled to, based on Prop 98. With a spending cap we would pay off all that debt. Then it would transition to a softer cap, which would be a 20-year aggression in revenue. You plot all of your revenue for the past 20 years and you spend along that projection. When you have your boom cycles and it goes above that you take that money and you put it into a rainy day fund until you reach about 10 percent of your rainy day fund. When we have another downturn then you have $10 billion in reserves to weather it.
Pension reform would be for new employees. What it would be is a mandatory hybrid, which would be roughly half the defined benefit of what the employees currently have and half of the defined contribution, which would be the 401K. It would be a two-tiered system. The goal with new employees would be a 75 percent wage replacement, which is pretty reasonable. It’s loosely based on the State of Washington’s model, which works very well.
It deals with all the abuses like the pension spiking and the pension holidays and double dipping and all that stuff. But mostly it’s the defined, mandatory hybrid. I think it’s a good approach. It takes care of the employees but it also protects the taxpayers.
Two last ones: One’s CEQA reform, which is the California Environmental Quality Act. It doesn’t change CEQA because CEQA is just a disclosure document. When people are making decisions on projects the public understands exactly what’s happening. What our proposal deals with are the abuses in CEQA. For example, we currently have a 45-day comment period for an EIR. What happens is they’ll go to that 45-day comment period and they won’t do anything, and the night of the hearing they’ll drop 20,000 pages of documents. A person may not like the project but it should go through a fair process as defined by law.
Lastly, it’s regulatory reform. This is not a rollback in regulations.
It’s really looking forward. If a regulation has a $25 million impact on the economy then it has to be a little more robust process to develop and accept regulations. Basically what it would do, you have to have the proposed regulation by the regulatory agency, plus alternatives. They would have to come up with alternatives. They would do an economic analysis of the one they want in the alternatives. If they choose not to do go with the least impactful to the economy, then they have to do a benefit-cost analysis of the proposed regulation. Maybe the benefits to society outweigh the costs to society. It still gives them the ability to go with the one that costs more but there just has to be a rationale for it.
It will be more transparent. They understand what the cost of regulation isIf we adopt something in the legislature we would understand the impact to the economy, and the benefits. … I just think it’s a more thoughtful approach. That’s in a nutshell where our proposals are and they’re in bill format and we look forward to discussions with various committees.
FL: Is the regulation, cutting back on the regulation, is that your primary approach at this point for the revenue side, to get that stirred as well?
Cannella: There are two main goals. One is common sense government reform so the state can stay solvent. We can do that by controlling our spending a little bit through a spending cap and also through pension reform. We have an issue with pensions. We have a large unfunded liability in the range of between $60 billion and $500 billion. The second part is regulatory reform. The goal is to get people back to work. Ultimately, only through a robust economy, people working, people paying taxes, people spending money, more money flowing through the system through local government, county government and state government, will we ever be able to get the sufficient revenue to provide the very important programs we provide. The jobs component has to be a part of that and that is missing in the governor’s budget. There’s no jobs component. There’s no getting people back to work.
FL: California has a reputation for driving businesses out of the state.
Regulation is one end. Do you have any other ideas to pump the economy, especially in light of the RDA cancellation?
Cannella: I would argue that the restrictive regulatory environment, and again everybody hates regulations until you’re on a cruise that doesn’t have enough life preservers. I don’t know if it’s the regulations themselves or the way we develop regulations and enforce regulations For example, as the mayor of Ceres, we had regulations. As a council we would meet. It’s a thoughtful approach. We’ve studied it. We’ve hashed it out. We’ve had public hearings. We’ve talked about it and we decide this is a course of action. When we decide that course of action now the goal is compliance. We want to work with our businesses. We want to work with our citizens to understand. Whereas with the state of California, it’s almost punitive. There’s not working with the public. In fact, go to a hearing in the state Senate about a bill that’s going to affect your life and you probably won’t even get a chance to talk. You may get to stand up and say, ‘Hi, I’m so and so and I oppose this bill.’ If it’s your bill and you’re the sponsor, you get two minutes to talk. We’ve got to have a more thoughtful way of developing regulations. Then we have to have a way of educating the public and the goal should be compliance. The businesses, what they’re suffering from, there’s no predictability …
FL: How big of an uphill battle is that considering the politics in California?
Cannella: To get everything I want is not going to happen. This is a state where we talk about things. We’ve laid our proposal across the table. I think they’re very much common sense. I don’t think they’re over the top.
If my friends on the other side of the aisle disagree with my pension reform, they can’t disagree there’s a problem. If they don’t like my approach, help me understand why. It’s a proven model in Washington.
Maybe we have some unique experiences here.
FL: With pension reform, you set the tone for local governments, as we saw in the Wisconsin debate. What’s your take on not just your responsibility directly with state employees, but the larger impact it has on the entire state, the trickle-down effect?
Cannella: You’re right, it does set the model. You mentioned Wisconsin; this is nothing like that. First of all Wisconsin went after existing employees and took away their collective bargaining rights. It does nothing like that at all. No. 1, it only affects new employees, not existing employees. No. 2, how they work it out will be done at the table.
We set the guidelines and they figure out at the table how it all works through negotiations, so it’s nothing like Wisconsin at all. Local governments are actually in tougher shape than state government. As the mayor of Ceres, 90 percent of our budget was public safety. If you look at the budget, about 85 percent of the budget was for personnel. … Someday when these unfunded liabilities continue to grow it’s going to be a big deal. We’ve got to look at it. Otherwise everything state government does is pensions. There will be very few people actually working for state government.
FL: Cuts to higher education came up for the UC system and CSU system. How do we solve this problem as far as the continuing cost for the students, and what impact do you believe it might have down the road on the economy?
Cannella: It’s unfortunate too that they grant a 25 percent pay increase (for the CSU president) the day before they raised tuition 12 percent. Ultimately again, a robust economy will help mitigate that.
There’s more money in the coffers. There’s more money going to education which will help soften the blow for the students as well. Part of the problem is they come in as a freshman and it gets worse every year, so how do you plan for education when it’s going to increase 15 percent every year. We need to, No. 1, get the economy going. We also have to dust off the educational master plan that was originally done. What is our goal? What are our desires as a state with higher education? We need to make it a priority in our spending and make sure that can happen. Let me give you an example. In a budget committee, which I’m not a part of, … they voted a unanimous vote, Republicans and Democrats, to cut the budget for the UC to the tune of $500 million. The next vote, my friends in the majority party voted on a party-line vote to give the AFSCME union workers for that college a 3 percent pay increase. What’s kind of a signal here?
You’re cutting the funding for the kids but then you’re rewarding the unions for some reason. Now I would argue a raise should be done at the table as well. It shouldn’t just be cutbacks at the table. We have to make higher education a priority. Otherwise we’re never going to recognize the true potential of the state. I think we do that with a strong economy and at least let the parents know what the increases are going to be so they can plan.
FL: You represent rural areas. Urban areas get more tax dollars. Here in this area there’s a common theme that we don’t get our fair share. How do you approach that?
Cannella: We are definitely locked in at a lower level. I constantly explain the dynamics of this district because it is a very unique district. We do have a lot of needs. I advocate to my colleagues in both parties and help them try to understand. They are elected to represent their areas but we also have a duty to represent the state in general. We can’t be just one part of the state that’s doing great and another part of the state that’s doing poorly because the social services that flow out of the state, they don’t flow based on 11 cents per dollar. They flow based on the need. I just try to make them understand if we don’t get our fair share it ultimately costs the state more.
FL: The prison release is a big issue lately, with around 40,000 getting released. It appears to be somewhat of a setback by necessity. How does the state address it from a wider perspective and how do you suggest local communities prepare for it?
Cannella: I’m concerned about the realignment. There are two parts really.
The early release which is really mandated by the (Supreme Court) that said the conditions aren’t good enough for these prisoners so you need to do something with them. The governor’s plan was AB109 which is the realignment proposal, which says we’re going to take these ‘non-non-nons’and push them back to the local level, and in concept that sounds good. I believe at the local level they provide the best services. They’re responsive to the citizens. The problem is I don’t think there’s adequate funding associated with this transfer. … For example in Monterey County the jail is set up for about 800 people and they have 1,200 now. So when they get their next 800 prisoners what are you going to do, especially with the higher recidivism rate? When I talked to those folks yesterday, I said, what’s your plan? If the state DAs and the state probation officers and the state chiefs and the state sheriffs all said, early release is going to happen because we have no control. Here’s the actual resources we need to make that happen. Then I will push very hard to get those resources.
FL: What do you think about the legislation to largely eliminate RDAs?
Canella: I thought that was very misguided. I’m a very big believer in redevelopment agencies. I fought very hard to not kill them. Could there have been reforms to clean them up? But to just kill them?
FL: What about the successor agencies that may happen?
Canella: You pay an extortion fee to maintain the current properties. In local government we have only so many tools to do economic development, build affordable housing. In Ceres, 90 percent of our budget was police and fire. We didn’t have a lot of money left over. Redevelopment and enterprise zones, those were the two tools we used for economic development. Enterprise zones, because it actually provides an incentive for businesses to come to our area. Redevelopment, we can use that for affordable housing. We can build infrastructure. We can control blight.
There are so many positive things. I would argue it’s redevelopment that’s kept people working in the state – now by an act of the legislature, with very little fan fare, is gone.
FL: You mentioned some mitigation aside from what you called extortion that could be done?
Canella: Yeah, you need to be very clear what you can use the money for. There are certain communities that probably don’t need redevelopment. Typically we have 20 percent unemployment (in this district). We have very challenging issues before us and we use redevelopment to mitigate those.