No Angels in New Jobs Vs. Schools Fight

When you hear two of the state's most powerful interest groups claim to be on the side of the angels, remember this: the only Angels in this state play baseball in Anaheim.

Two of California's most powerful interests -- its largest teachers union and the state chamber of commerce -- are about to engage in a big war over a ballot initiative to reverse $2 billion in corporate tax cuts negotiated last year during the heart of the economic process. You'll hear plenty of moral claims -- the union, the California Teachers Assn. (CTA), will talk about how it wants to restore cuts to schools, and the chamber of commerce will talk about how reversing the tax cuts will cost the state jobs.

The fight starts now as CTA turns in signatures on an initiative, likely to qualify for the November ballot, to reverse the corporate tax cuts. The CTA can make a case that it's a little strange to be cutting taxes at a time when the state is broke. This corporate tax cut also has a strange providence. It was not part of a full budget review. Instead, it was a demand that minority Republicans, using their own under the two-thirds supermajority requirement for budget bills, made in the final hours of the February 2009 budget deal. (As such, it's an example of how the 2/3 requirement costs the state money).

It's clear that these corporate tax cuts would be good for companies' bottom line. It's far from clear that the tax cuts will produce jobs.

The cuts are not targeted incentives to hire. Instead, the cuts consist of three changes in policy -- one that allows companies to pick one of three formulas for how they should be taxed; another that allows companies to transffer credits, and a third that allows them to "carry back" today's operating losses to previous tax years (and thus claim new refunds on their old taxes) -- that make balance sheets look better.

By the same token, it's far from clear that any money recovered by reversing corporate taxes will restore arts programs, sports and other extras that have been hit hard in budget cuts. Over the past decade, all new money that goes to schools has been gobbled up by teacher salaries. In fact, nearly every category of education spending in California is down in this new century -- except teacher pay. It's fine to pay teachers more, but higher pay doesn't produce better results, at least in California, because the law prevents tying higher pay to results. Another problem: when money goes to teacher pay, such money creates new long-term costs, in the form of pension and retirement obligations.

So for all the talk you'll hear during this fight about kids and jobs, this campaign is a fight over where the money goes -- either to corporate bank accounts or teacher bank accounts.

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