Archive for March, 2012

I normally keep to state and local topics.  When I stray to national issues, they usually involve tax policy.

I can’t avoid sharing my thoughts on what could be the constitutional issue of a lifetime – whether the federal government can compel a citizen to purchase a product or service.  I’m referring to health care, of course.

However, it is also a tax issue.

The Sixteenth Amendment of the Constitution empowered Congress to levy taxes on income.  There are fringe groups who claim otherwise, but court decisions have tossed their arguments time after time. 

The power to tax is overwhelming accepted as the law of the land.  To the protestors I say:  if you cannot deal with it, start your own constitutional amendment process.  Regardless of how responsible or irresponsible the government is in spending our tax dollars, in the words of former Chief Justice Oliver Wendell Holmes, “Taxes are what we pay for civilized society.” Another way of putting it is, “You don’t get something for nothing.” Try defending the country without taxes.

We are obligated to pay taxes.

So, are the financial penalties imposed by the individual and employer mandate provision of the Patient Protection and Affordable Care Act a tax or a forced purchase of a service?

Given the  financial assistance (direct or indirect), the federal government provides hospitals to help cover unreimbursed costs, I would classify the penalties as a tax – they help in the recovery of costs from those who use medical services free of charge.

The penalties are one of the few facets of legislation I actually liked.  

No tax could recoup the free ride some segments of illegal immigrants receive for emergency services (there are some who do pay in full, and others to a limited extent), or from the scofflaws who willfully do not file tax returns; therefore, would avoid the mandate. There are other remedies for dealing with these groups, none very effective, but that is a whole other topic. 

It is not as if other areas of health care did not deserve attention, it is just that Congress and the President bit off more than they could chew. They created a divisive firestorm which will serve as the proverbial bloody shirt for years, maybe decades, to come. It’s not the first time that has happened. And the consequences have always been brutal.

Many pundits and politicians love to ask the question, “What was the intent of our Founding Fathers,” when it comes to any interpretation of a law’s constitutionality.

Health insurance did not exist in the Eighteenth Century.  It is highly unlikely the original signers gave the concept any more thought than the ramifications of the internet on freedom of speech. Even Ben Franklin was not thinking about electronic social media when he was flying kites in lightning storms.

In those days, people accepted death.  You might say they lived with it; were surrounded by it.  By today’s standards, life back then was the equivalent of surviving a plague. If you read the biographies of our greatest leaders, almost all of them would be filled with the tragic loss of loved ones, many of whom were young, from horrible deaths due to yellow fever, typhoid, smallpox, etc.

If they had a fraction of today’s medical technology, they may have included a right to health care in the Bill of Rights.

But that is speculation.

We are on our own to make the right decision. The Supreme Court will not be the ultimate judge even if they vote in favor of it.

The Health Care Act will be revisited over and over again as the inevitable financial ramifications, unintended consequences and loopholes become apparent. We will also identify the provisions we like.  The Act will be modified over the years as often as tax laws are, with occasional overhauls, too.

In the end, that might be the best we could hope for.

Because, then, we might have a decent system, not a super sized law.

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Herb Wesson has been accused by many of  manipulating the City Council redistricting process.

Allow me to say a few words about that before moving on to the main subject of this post.

City Council President Wesson denied participating in any nefarious, behind the scenes deals regarding the maps ultimately approved by the  City Council.

The new boundaries resulted in significant realignments of the districts represented by Bernard Parks and Jan Perry that were adverse to the incumbents.  These changes would not have been noteworthy, except that Parks and Perry just happened to be the only council members who opposed Wesson’s selection as Council President.

Throwing salt on the wounds, Wesson removed the two from their powerful committees.

Wesson’s appointment of Andrew Westhall, his former Assistant Chief Deputy, as the head of the Redistricting Commission, created intrigue among the activist community. Many saw Westhall as Wesson’s tool.

Westhall’s presence probably benefitted  Toluca Lake’s bolt from the proposed boundaries of the Valley’s CD2. He is the President of the Greater Toluca Lake Neighborhood Council .

Taken as a whole, these instances pushed the envelope of coincidence to the bursting point….and perhaps ripped it open.

As bad as these machinations appear to be, the redistricting process reaffirmed an uglier, longstanding practice of Los Angeles politics – representative Balkanization.

Whites and Latinos comprise about half the population.  There is a degree of overlap between the two groups in the statistics, but neither represents a majority of the total population.  Asians and Blacks account for around 10% each.

Regardless of the guidelines contained in the Voting Rights Act covering the consideration of race in the configuration of  political boundaries, the relentlessness with which the Commission pursued the creation of districts dominated by  racial or ethnic segments is an embarrassment.

While so many national, state and local leaders tout diversity as a stabilizing influence on the country, the reality at the local level is quite the opposite.  Our City Council, in particular, preaches inclusion, but practices exclusion.

By focusing on safe seats for specific races or ethnic groups, not to mention pockets within other districts for religious sects, our City Council is encouraging divisiveness.  At that, the Redistricting Commission and Council were not fair – Asians did not rate treatment comparable to the other groups. Maybe they do not contribute enough cash; if they do, they are certainly being shortchanged.

Imagine how the residents of other nations would react if they followed the news of LA’s redistricting process?

They would label us hypocrites, and rightfully so.

Lacking an ethnic or racial majority, Los Angeles could easily have defended against charges of stacking, whereby a group is concentrated to create an overwhelming majority in a single district, which would create a wasted vote in a jurisdiction with several seats; or cracking , which dilutes a minority by spreading its members over multiple districts in order to dilute their votes. 

By following Neighborhood Council boundaries and natural or manmade barriers, instead of focusing so much on race and ethnicity,  there would have been a  few districts with a minority pool in excess of 50%, but many would have been comprised of super minorities in the range of 30% to 40% of those eligible to vote – also known as influence districts.

If a large (but less than a majority) group cannot elect a representative sympathetic to the needs of its members, voter apathy would be the culprit – not discrimination.

I do not think the purpose of the Voting Rights Act was to deal with apathy.

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My issues with the Mayor’s Budget Survey are not new.

Since the mayor rolled out the first one several years ago, it has become increasingly apparent that the survey was designed purely as a political tool and not a reform measure designed to introduce accountability.

I recall a budget day speech by the mayor a few years ago. He used all of his time to credit the city’s declining crime rate to the budget survey.  He stated the improvement was achieved because the responders ranked public safety as their number one priority, giving him the green light to keep the LAPD near the 10,000 officer level. He said nothing about the city’s structural deficit nor even hint at a plan to resolve it.

That’s typical of Villaraigosa’s cafeteria style management – pick the popular issues and ignore the difficult ones.  And besides, was a survey really necessary to  determine that residents prefer public safety over all else?

The Neighborhood Council Budget Advocates have played an increasingly important role in the survey over the years.  The members are extremely competent stakeholders who have unselfishly devoted free time to analyzing the budget, learning about city services and summarizing the survey results.

But what is there to show besides the sweat and blood of their efforts?

Has anything changed in how the city confronts its financial difficulties?  Has a truly balanced budget ever been produced? Is there a plan to produce a sustainable, structural budget in the future?

I think all of you know the answers. Deep down inside, our officials also know, but they are in denial for the sake of maintaining their bases of political support.

Yet year after year, the budget survey has been waved in our faces as if it is a civic responsibility to respond. To a degree, it is a responsibility. However, the mayor and City Council have not exercised their civic responsibility to reform the budget process. To be frank, you do not need a survey to accomplish that; only sound management.

The city’s budget strategy has always been about deferring current costs to future periods and hoping for a revenue enhancing recovery.  That’s not really a strategy.  It is gambling. All the surveys in the world will not change that.

We are at a point where change will only occur by pushing back against Team Villaraigosa.

NCBA Co-Chair Jay Handal prefers collaboration even though it has produced no change in how the city manages its finances. If anything, the situation has deteriorated to the point where there is no less than $70,000,000 in deferred costs our next mayor will be forced to deal with in the first year of the new term alone.  

The budget advocates have been more than fair to the mayor and have shown incredible patience with him. How many more budget surveys will it take before Handal directs the efforts of his group to openly challenge the mayor and publicly admonish him and the City Council for neglecting their fiduciary responsibilities?

Rather than focus on educating the public about the mayor’s and City Council’s irresponsible financial management, Handal suggests we should all check the NCBA website for developments about the survey.  That’s nice, but really not necessary. It should be clear to anyone who follows the news that the city’s budget situation is becoming increasingly grave.

It would be nice if Handal would openly and assertively acknowledge the problems rather than play up the survey; perhaps send e-mail blasts to all NC members spelling out how bad things are and engage the media.  Even mayoral candidate Austin Beutner stated his concern over the public’s lack of information about the dire state of the city’s finances. It is ironic that Handal’s only mass e-mail distribution about the budget (other than  perhaps meeting notices) was in response to my article.  Oh, he is good about sending mass e-mails – quite a few NC members receive messages from him promoting his restaurant (an excellent establishment from what I here). If only he can be a little more proactive about the city’s fiscal affairs.

Although I respect the time and commitment Handal has invested, if he is unwilling to use his position as a bully pulpit to inform the public about lack of accountability and transparency with respect to the budget, he should hand the reins to another member.

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Jay Handel, co-chair of the Neighborhood Council Budget Advocate Committee, does not get it.

First, let me share his response to my article regarding the CAO’s announcement about the city’s inability to process approved raises without “dire consequences” to the budget.

Dear Neighborhood Council Member:  

In reading the article by Paul Hatfield focused on the City’s Budget crisis, we would like to offer some comments directly from your Neighborhood Council Budget Advocates.

Mr. Hatfield states that we, the NC Budget Advocates, had the wool pulled over our eyes regarding the salaries issue. To be clear, the NC Budget Advocates of 2011 dedicated an entire area of our white paper last year to this issue. It can be found at http://www.budgetadvocatesla.com.

Mr. Hatfield believes the NC Budget Advocates are not informed and unaware of the salaries, pension and healthcare issues. He should take note that as our committees continue to meet with city staff, union leaders, and the Mayor’s Budget team, the NCBAs continue to dig deep into the structural issues facing our city, and recognize and make recommendations about reducing pension, salary and healthcare costs.

We welcome all to visit our website where minutes of our meetings, and copies of our recommendations are posted.

Additionally, the Mayor’s Office and CAO have been clear with the public and the NC Budget Advocates that re-examining compensation costs has been a possibility, among all the various avenues being considered to close the deficit.  

In October 2011, at the Mayor’s Community Budget Day, the CAO made a presentation where he talked about the “Four Pillars” used to guide the City in its budgeting process.  The 4th Pillar referred to a “Sustainable Workforce” with one component focused on the importance of the City to “Align Compensation.”  The CAO provided the audience with printouts of his slides, with one printout explicitly saying that in “Pursuing a Balanced Approach – Budget Reductions” the “City is pursuing changes to the current compensation and human resource structure which require negotiations with unions.”

In December, the Deputy Mayor of Budget and Finance, Neil Guglielmo, met with the NC Budget Advocates, where he also specifically discussed the “4th Pillar” and the importance of looking at aligning compensation, in addition to all the other budgetary options.

In January, through the joint efforts between the Mayor’s Office and the NC Budget Advocates, the Mayor’s Budget Survey was released with a section devoted to a “Sustainable Workforce.”  The survey asked responders to “indicate whether [they] would support initiatives to help contain growing workforce costs.”  One of the listed initiatives was to “Freeze employee salaries at the current level until City’s financial health is restored (subject to labor negotiations).”

So, both the public at large and the NC Budget Advocates have been given the opportunity to weigh in on this issue.  And, it’s never been a secret that in these difficult economic times, with the size of the deficit faced by the City, the renegotiation of compensation costs is still on the table. 

Why the timing of the announcement by the CAO?  The CAO could not announce an initiation of such negotiations without going through the Employer Employee Relations Committee which took place this week.  The survey response period ended on February 27th because the Mayor’s Office needed to process the results in time for the Regional Budget Day. But again, the CAO announcement has been obvious to those paying attention.

I took the budget survey and I am well aware of the “choices” offered in the Sustainable Workforce section.  These were framed as possible options, without a sense of commitment.

That’s quite a contrast to Mr. Santana’s statement that the city cannot afford to honor existing contractual obligations without  “dire consequences.”

The CAO’s words clearly spell out the seriousness of the budget crisis – in so many words, his announcement is the equivalent of  threatening bankruptcy. There is nothing wrong with his frankness, but it is missing from the survey.

Let me put in another way – what would have been the reaction if the question had been preceded by a statement using Santana’s words?

“The city cannot afford to award agreed upon raises amounting to $105 million without dire consequences. Therefore we have requested that civilian labor contracts be renegotiated.”

This language provides a far more accurate picture of the problem as opposed to the what if approach used in the actual question. I dare say it would have evoked responses far different than would otherwise have been received.

Basically, what the survey has done is to understate the immediacy and importance of the problem.  A material piece of information was withheld from the responders.  It is similar to a company not disclosing a possible problem with meeting long-term obligations….and labor contracts are pretty serious business.

I know the NC Budget Advocates are aware of the problems posed by salaries and benefits, and I did not say otherwise despite what Handel claims, just that the survey they helped produce did not convey the strategy the city had already chosen.  The question, therefore, was bogus.

Handel’s position that “the CAO could not announce an initiation of such negotiations without going through the Employer Employee Relations Committee which took place this week” is disturbing. He is saying it was OK to distribute the survey without a critical piece of information.

I am not blaming the advocates for the timing – after all, they didn’t know Santana was going to make the announcement. However, they should be irate with the mayor for not delaying the survey until the renegotiation strategy was made public. It would have been better not to have a survey at all than to produce one with a key question – the most important one in the survey – that was missing a critical fact. 

Handel believes otherwise. 

That’s too bad for us.

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You can’t get much more Irish than the Clancy Brothers (even without Tommy Makem).

This song was written to stir souls against England.  It recounts the sacrifice made by a young patriot, Roddy McCorley. 

Most Irish ballads are about death or drinking.  Some are about both, such as Finnegan’s Wake.

Perhaps one day someone will write a song that covers death, drinking and taxes, three topics that belong together.

However, let’s close this post with an angelic vocal rendering of Danny Boy by Judith Durham, formerly of the Seekers.

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Do you think it was an accident CAO Miguel Santana’s waited until today to announce that the city would not be able to honor the pay raises promised to 20,000 city employees?

According to the LA Times, Santana warned that the raises could have dire consequences if applied this coming July 1. The raises will amount to $105 million over the next two years alone.  The city is facing a budget deficit of over $200 million for next year, with more to follow.

Believe me, big numbers such as these do not creep up on financial executives and unexpectedly bite them in their rear ends.  You can be assured the mayor, Controller Greuel, the City Council’s Budget Committee (including former chair Parks) have seen this coming for a long time.

Imagine the responses they would received through the budget survey had this announcement been made prior to its public release?

I’m sure that scenario played through their heads and they did not want to deal with the crush of irate responses.

So they pushed what amounts to a bogus survey on the city’s stakeholders.  The mayor played the Neighborhood Budget Advocates like a bass fiddle (I would say a violin, but a bass fiddle has a deeper tone….and the mayor really went deep on them). They were drawn into playing along with him and his charade:  making it appear there were choices to be made in the formulation of next fiscal year’s budget.

I am not blaming the advocates.  I am well acquainted with some of them and know they are sincere. Although their belief in the process reflected a degree of naivety, the advocates truly felt something good would come out of the survey. 

Santana’s announcement is a game changer.  It exposed the disingenuousness of the mayor and others responsible for the city’s finances.

The advocates can seek moral restitution by confronting the mayor in upcoming budget discussions about the lies that have formed the basis for every budget the city has passed over the last several years.

Going forward, the advocates should consider their role as the citizens’ budget advocates, not collaborators with the mayor and his budget survey.

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Unable to attend last week’s mayoral forum sponsored by Southern California Grantmakers, I listened to a complete audio tape of the event.

Considering the sponsoring organization promotes philanthropy, I was not surprised the discussion revolved around the subject – specifically, why does Los Angeles lag behind other major cities when it comes to donations in support of civic projects and programs? As moderator Warren Olney pointed out, our city’s ranking is perplexing given the great concentration of wealth here.

While all of the candidates read from their resumes about projects they implemented or supported, only one candidate attempted to answer why potential donors are not as generous when it comes to opening their wallets to the City of Los Angeles.

Kevin James, who served as Assistant U S Attorney, co-chair of Aids Project LA and evening radio host, pointed to widespread corruption in the city as a possible reason donations are not as high as expected.

No one disputed his assessment, but neither did the other candidates mention specific instances of corruption as James did.

Austin Beutner did raise a good point.  He expressed concern over the city’s shoddy accounting as a factor that would discourage confidence in the ability of our officials to assure funds are used appropriately.

James also emphasized the need to attract business back to L.A.  He stated that businesses are important source of donations we can ill afford to lose. He cited an instance when the Aids Project Los Angeles lost a donor due to the departure of a company.

Garcetti and James racked up more minutes than the others, but Garcetti’s comments, along with Greuel’s, were the least substantive.

Beutner was very soft-spoken.  As a result, his message was muted.

Perry emphasized her personal confidence in the economic potential of the AEG stadium plan.

Overall, this forum was a warm-up….. and it was short. Core services were not discussed and little was said about the overall state of the city’s finances.

I believe James made the best impression.  Perhaps his skills as a practicing attorney worked to his advantage.

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