Redesigning California

Most clichés about California are true: we are both America’s most urban state and its most agricultural. We are home to more national parks, more immigrants, and a better public university than any other state. We have Silicon Valley, Hollywood, and Yosemite. We fashion ourselves seekers of talent, lovers of risk, and inventors of the future, gamely shrugging off earthquakes, fire, and drought. My family has been here for a century now — and we won’t leave.

We take for granted that California is the Golden State. When our comically dysfunctional state government cannot agree on a budget, we mutter about idiot politicians, shake our heads, and chalk it up to local color.

But our problems today are no laughing matter. The complete failure of state government now threatens everything we love about California. Today’s special election would extend temporary taxes, free up some spending categories, and borrow against future lottery proceeds but would not solve our problems and is unlikely to pass in any case.

Tomorrow morning, Californians will confront their failed state. There will be blame and recrimination enough for everybody. Increasingly however, citizens will contemplate the conclusion reached this week by the Economist: our governance process is broken and in need of fundamental reform. A new batch of politicians will not do the trick. The evidence of failure is not hard to find:

Taxes. The home of the property tax rebellion is now a high tax state. Californians famously limited property taxes by passing Proposition 13 in 1978 but now lead the nation in sales taxes, car taxes, and gas taxes. Personal income taxes are the second highest of any state, corporate income taxes are the highest in the West, and capital gains the fourth highest in the nation.

Spending. State spending has skyrocketed. State employment is up from 719,000 in 1997 to 895,000 in 2007 – an additional 176,000 employees. That means the state created more than 60 new positions every working day for ten years. Adjusted for inflation, state government spending per person is up nearly 20 percent. We have the nation’s seventh highest GDP/capita but our unionized prison guards, teachers and nurses are the highest paid and among the most powerful in the nation.

Services. Our public service needs have exploded. California currently has the fourth highest unemployment rate in the nation – a shocking 11.5%. We are home to the nation’s two largest traffic-jams – Los Angeles and the San Francisco Bay Area. Our desert economy depends on a creaky water system with a 75 percent chance of catastrophic failure in the next few years and Sacramento’s ancient levees expose that city to greater danger of catastrophic floods than New Orleans. State prisons are so overcrowded that a federal judge has ordered the release of 10,000 inmates. The University of California, an engine of mobility for generations, is being ravaged. 20% of all residents of Los Angeles County receive public welfare of some kind. This is a big deal: with 10 million people, LA County would be America’s eighth largest state and the world’s twentieth largest country by GDP.

Talent is leaving. In the past ten years, 1.4 million more Americans moved out of California than moved in. The loss of talent is much worse than the net numbers suggest, since most who leave the state are employable taxpayers while many who arrive are immigrants with fewer marketable skills. Out-migration has slowed in the past year mainly because Californians cannot afford to sell their homes for an enormous loss.

Combine the above with a devastating economic downturn, and California now has the lowest bond rating of all 50 states. We face a $42 billion gap between revenue and spending. The state has halted income tax refunds, public works projects, federal stimulus spending, and may kill 20,000 state jobs.
How did the Golden State come to political and fiscal ruin and where to from here?

California’s problems go beyond lousy politicians. It is true that most of California’s Democratic leaders are craven, unimaginative, and unable to prioritize or restrain spending. And yes, many of our state Republicans are Paleolithic knuckle-draggers. But most states get by with lousy politicians and historically California did too. The sources of our current failure run deeper than that.

California’s government is dysfunctional because we accidentally engineered it to fail. More than any other state, we have embraced a series of reforms that inadvertently designed sectarianism, paralysis, and waste into our state government. None of the reforms were by themselves terrible, but in combination with each other and with a deep economic crisis, they are devastating. Before we fix them, we need to understand the three design features of our government that build sectarianism, paralysis, and waste into our system.

  1. We Let Politicians Select Voters, not Vice Versa

GerrymanderThe central and unyielding promise of any democracy is that voters elect their leaders. California stands this core principle on its head: we let politicians select their voters with a system of bipartisan gerrymandering.

In politics, if you draw the map, you control the election. After the 2000 census, the legislature set new boundaries for both for state Assembly and Senate districts and for federal congressional districts. Democrats and Republicans agreed to gerrymander the boundaries to preserve the balance of political power. They assigned voters to districts that were dominated by one or the other party, with few districts that could be considered competitive.

The electoral result was exactly as planned. In 2004, 2006, and 2008 all incumbent parties were returned to power. Not one of eighty Assembly seats, 40 Senate seats, or 53 Congressional seat changed parties. In nearly all of these 172 districts, the margin of victory was at least ten percentage points – a landslide. Incumbents frequently ran unopposed.

The less obvious result of bipartisan gerrymandering is that it elects partisans. In a solidly Republican District, I win if I appeal to the average Republican, not the average voter. We exaggerate partisanship with a second feature: the closed primary. Only party members may vote in primaries (which dampens turnout to partisans so much that candidates have been nominated with the support of fewer than 7% of the registered voters in their district).

We engineer swing voters out of the system. The paradox is that parties imagine that they will be stronger if they design partisan districts. In fact, they are often weaker because local candidates do not need their parties. In Oakland, “Barbara Lee Speaks for Me” is a bumper sticker designed not to reach out to Republicans (who are utterly irrelevant here) but to taunt moderate Democrats.

California was not always this way. In 1938, California had open primaries. That year a young Oakland District Attorney entered the California Republican primary to run for State Attorney General. To cover his bases, he also entered the Democratic Party primary and the Progressive Party primary as well. He won all three primaries and was nominated by all three parties. Naturally, he was elected in a landslide.

Eight years later, the Attorney General decided to run for governor as a Republican. But again he entered the Democratic and Progressive Party primaries. And again he was nominated by all three parties. To this day, Earl Warren remains the only person ever elected three times as governor of California. He presided over a huge and bipartisan infrastructure boom, including the expansion of the University of California, which has been an engine of California social mobility for decades.

2. We Paralyze our Legislature with Minority Rule
Upset by property taxes that increased with skyrocketing home values, California voters passed Proposition 13, which required that a two-thirds majority in both legislative houses approve all future increases of state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds majority in local elections for local governments that wish to raise special taxes. The result: we reduced our property taxes by an average of 57% but we also enabled a political minority to block any state or local economic initiative.

Prop 13 was partially copied by Rhode Island and Arkansas, which require a two-thirds vote to increase state spending. Twelve other states require a two-thirds vote to increase taxes. But according to the Economist, only California requires both. As a result, no legislative majority can govern this state. When you marry this requirement to a legislature that is engineered for partisanship, agreement on a budget will produce political paralysis even in normal times. In an economic crisis, it is governance designed for disaster.

Minority rule fails California’s direct democracy as well. California is one of 24 states that allow referendums, recalls and ballot initiatives but the only state that does not allow its legislature to override successful initiatives. California’s cherished right of referendum and recall date from 1911 when Governor Hiram Johnson wanted to ensure the ability of citizens to challenge large corporate trusts – especially the powerful railroad interests. It made sense. Direct democracy always holds out the possibility that it will provide a check on a captured legislature as it does in Switzerland and other countries.

In modern times however, referendums are purchased by interest groups. Hiram Johnson could not have imagined an industry devoted to paid signature gathering that permits any group with money to place a proposition on the ballot. He could not have foreseen propositions so convoluted that educated citizens debate not their view of a proposition -– but what the text actually means. Californians now vote for an average of ten initiatives each year – nearly all thanks to paid signature gatherers. Most fail, several have been overturned by the courts, and none have addressed the state’s fundamental problems. The abuse and overuse of initiatives further weakens a paralyzed legislature and contributes to our reputation as the land of fruits and nuts. In July, 2003 a millionaire Congressman paid for enough signatures to initiate the recall of a governor who we had elected nine months earlier. The recall succeeded – only the second in US history – and brought Arnold Schwarzenegger to office.

3. We Outlaw Legislative Experience

It is very difficult to pass a budget in a legislature designed for paralysis unless you have senior lawmakers with the power to make deals and enforce legislative discipline. Anyone who served in the State Assembly under Willie Brown knows exactly what this sort of head-knocking looks like. It is not the attractive part of the sausage-making, but especially in a legislature of officials who are guaranteed reelection, it is a critical element of a productive legislature.

California has outlawed senior legislators by mandating term limits on all elected officials. Term limits, like partisan redistricting and partisan primaries, look progressive at first because they appear to strengthen activists and weaken incumbents. But frustrating the will of voters does not improve the quality of democratic decision-making. Outlawing legislators with the skills, experience, and relationships to pass laws and enforce bipartisan compromises is not simply undemocratic, it is profoundly unwise. (Term limits on the executive appear to cause fewer of these unintended consequences).

Few voters appreciate how complex and specialized modern lawmaking has become. I once had the honor to join a small legislative strategy session between Teddy Kennedy and Robert Dole, then the ranking members of their respective parties. The topic was labor legislation that touched on a variety of issues of concern to both parties and to Kennedy’s Ed and Labor Committee. The two men, who would bash each other publicly without hesitation, spoke a language that few in the room could follow. In minutes, they agreed on what could get done. They outlined the scope of the legislation, what procedural tactics would enable which Senators to vote which way on different amendments and parts of the bill. They sorted out the likely time line and Congressional reconciliation issues, decided what amendments would be permitted at each stage, and what pieces of the opening bill would likely be traded off to secure the support of key Senators. My simple Aristotelian universe plotted the shortest distance from A to B as a straight line but Dole and Kennedy understood how mass distorts the space time continuum and how the instruments given to them were large and unbelievably blunt. In decades of practice, they had learned how to get legislation done.

Whether this is craftiness or craftsmanship is a longer debate — but is unquestionably how work gets accomplished in an effective legislature. Personally, I was awestruck to see legislative architects at work. It is unbelievably dumb to outlaw the expertise and relationships that take years to build and enable deals between adversaries. Voters can and do decide whether the cost of an incumbent is worth the benefit — that’s why we have elections. But Californians banned experienced legislators outright, so today we have no Teddy Kennedys or Robert Doles and we are much worse off for it.

What is to be done?

California needs both short and medium term fixes — and splitting up the state is not a silly idea either. Near term, eliminating bipartisan gerrymandering and partisan primaries is a big step forward. Fundamentally however, California needs a constitution that will nourish the civic culture and political compromise that are the foundation of any effective government.

Redistricting. In 2008, California voters narrowly passed Proposition 11 over the objections of the California Democratic Party, Barbara Boxer, and Nancy Pelosi. Prop 11 shifts responsibility for drawing the new boundaries for Senate and Assembly districts from the Legislature to a 14-member commission made up of five Democrats, five Republicans and four independent or minor-party voters who would draw new maps every 10 years, corresponding with the census cycle.

This is a reasonable start that needs two improvements. First, the goal of the commission should be to create coherent and competitive legislative districts. The commission should strive for geographically rational districts with equal Democratic and Republican registration. In Oakland or Orange County this is not going to happen, but in much of the state it can. The result would be a core of centrist legislators who are forced to work across party lines to get elected and to get things done. Second, the commission should have responsibility for Congressional Districts. No reason to leave those to party officials either.

Open primaries In order to pass a state budget earlier this month, lawmakers agreed to place before voters a constitutional amendment for an “open primary”. The proposal would allow any registered voter to vote for any candidate in a primary for legislative, statewide elected positions, and congressional districts but not presidential primaries.
The two candidates who receive the most votes would square off in the November general election even if they were from the same party. As a result, two Democrats or two Republicans would often end up in the run-off. In this case, if independent voters and voters from the minority party voted for the more moderate of the two candidates in the general election, it would tend to reduce the ideological polarization of the state legislature.

Open primaries also eliminate the nasty tendency for elections in heavily Democratic or Republican districts to end with the primary. Together with redistricting, the competitive intensity of political races would go up, with significant benefits for citizen involvement and a meaningful penalty for extremists of either party. Naturally, both political parties oppose open primaries. Explain it to Earl Warren.

(Open primaries are a complex topic because those that get past voters often do not get past the courts, which have a rich case history in this area. California voters narrowly defeated another open-primary measure in 2004 and the Supreme Court invalidated an earlier, different California open-primary law in 2000.)

Term limits for programs, not legislators. Instead of limiting the terms of legislators, we should limit the term of the programs they create. Otherwise our constitution ends up chock full of agencies, boards, and commissions that have outlived their usefulness or overlap with each other or with local agencies. Texas actually has a Sunset Commission which automatically abolishes nearly all of the state’s 150 agencies after 12 years unless legislation is enacted to continue them. It analyzes and proposes solutions to overlapping programs and jurisdictions.

This is smart because legislatures are poorly equipped to eliminate or rationalize programs. Commissions are a proven device to give lawmakers the political cover they need to close military bases, consolidate overlapping jurisdictions, or eliminate obsolete programs. Without a commission or its equivalent, parochial interests override public interests every time. Change becomes impossible, as Obama learned last week when he hit a Congressional buzz-saw after proposing cutbacks in useless federal programs.
Constitutional Convention

Cal groupThe Bay Area Council, a coalition of Bay Area companies impressively led by McKinsey Director Lenny Mendonca, has put forward a public case for a California constitutional convention. They note that our current constitution is a sclerotic document with more than 500 amendments and recently compared it to San Jose’s “Winchester Mystery House – with rooms and stairways leading nowhere”.

The risk of a constitutional convention of course, is that it attracts wingnuts who hijack the process. To address these concerns, the Council proposes that delegates to the convention be chosen through the general jury pool to ensure that the constitution is revised by representatives of the population, not organized interest groups. Second, they suggest that the scope of the constitutional convention be explicitly limited to governance issues and the budget mechanism and exclude all others. These are both splendid ideas.

This process would enable reform of the two-thirds requirement for budgets and taxes. It could mandate two-year as opposed to annual budget cycles, give local governments more access to local revenues, enforce competitive redistricting, normalize rules about signature collection for ballot initiatives, and introduce a Texas-style “sunset” commission. It is a fine and timely idea — we need to make it work. At present, both Democrats and Republicans are getting on board.

Break up California
American states are designed to be laboratories of democracy where small groups of citizens can have a meaningful impact on their government. No group of 33 million people can possibly operate as our founders expected an American state to operate.

California today is larger than most large countries, including Canada and Australia. We are larger than Belgium, Portugal, and Greece combined. And we are not an especially coherent state: Northern California is green, technological, and vaguely European. Los Angeles combines massive immigrant communities with Beverly Hills. The region from Orange County to San Diego looks, feels, and votes like Arizona. Central Valley farmers have more in common with those in rural Nevada or Texas. We should pick a commission, set a timeline, and run smaller states that give more people a voice. Even if we broke California in five, each state would be bigger than the entire country at the time consititution was written.

At one level, California has always been too big, which is why proposals to divide the state began before we were admitted to the Union in 1850. In the first 150 years of statehood, there have been 27 serious proposals to split the state. Although Article IV of the Constitution allows the creation of new states so long as the state legislature and Congress approve, only Maine and West Virginia have actually done this. (Maine separated from Massachusetts at the time of the Missouri Compromise. West Virginia cheated — it seceded from Virginia during the Civil War and was admitted by Lincoln without congressional consent. Oops.) Both Carolina and the Dakota Territories divided before they became states.

Dividing California is a good idea. Indeed dividing any state that reaches a threshold of ten or fifteen million residents makes sense. But it is a formidable political challenge and not a solution to our immediate crisis. Our focus now should be to fix the state we are in.