Monday, May 26, 2008

Tax Myths Debunked

Readers add their 2 cents to California tax and spend debate
George Skelton
Capitol Journal, Los Angeles Times
May 26, 2008

SACRAMENTO — This seems like a nice, quiet day to answer e-mail -- at least some of the civil comments that have been rolling in about state taxes and deficit spending.

Readers have been reacting to columns I've written contending that until Capitol politicians summon the courage to raise taxes to pay for services the public demands, the state will continue to wallow in red ink.

Sure, programs should be prioritized and some pared or even eliminated. But this addiction to borrowing to meet daily expenses keeps digging the state into a deeper hole.

Gov. Arnold Schwarzenegger, the all-time state borrowing champ, recently projected a $15.2-billion deficit for the next fiscal year -- roughly 15% of the general fund -- even after he and lawmakers already narrowed the gap by $8 billion.

Here's a representative sample of printable reader e-mail:



"Balancing the budget for California is very easy. Eliminate all handouts for illegal immigrants. Capture, convict, then deport those here illegally. . . . Saves us oodles of money."

--

Jeff

Jeff, illegal immigrants don't get many government handouts: no welfare, no food stamps, no Medi-Cal healthcare. Federal law does require that they be cared for in medical emergencies, including baby delivery, and be educated in public schools.

They're a drain on the state treasury, but not as huge as many believe.

Besides, there's very little Sacramento can do about illegal immigration. That's the feds' responsibility. State and local governments just get stuck with the bill.

"We have way too many government employees making way too much money. Cut salaries to match the private sector."

--

DW

Let's put it this way, DW: You could eliminate the pay of every state worker under the governor's control -- nearly 200,000 -- and still not erase the deficit. If you also fired every legislator and legislative staffer, you'd still fall short. You'd have to additionally ax all the personnel on state university campuses.

Why is that? Because roughly 75% of the state general fund flows out to local governments and schools. It's one of the unintended consequences of Proposition 13 that dramatically cut the property tax 30 years ago. Schools used to rely on the property tax. Now they rely on Sacramento.

As for matching state pay to private sector compensation: There aren't a lot of CHP officers and prison guards to compare with in the private sector. I doubt we want to emulate private companies and offer salary bonuses to civil servants -- say, for recruiting more welfare recipients. And multimillion-dollar severance packages for fired executives isn't anything government should copy.

"Get rid of commissions that have no use."

--

Jeff

OK, Jeff. Former Gov. Pete Wilson once suggested that and was told facetiously by his finance director: "The state will save thousands and thousands of dollars."

Fact is, non-salaried advisory commissions operate on shoestrings and are politically popular. Regulatory boards are funded by the industries they regulate, are self-sustaining and don't affect the deficit.

From a lot of people, in summary: When "the governator" came to office he had a $78-billion general fund budget. Currently, it's around $102 billion. That's roughly a 30% increase. Where'd the spending go?

People, one place it went was for Schwarzenegger's car tax cut. Yes, that tax cut counts as spending -- about $6 billion annually. It's because revenue from the car tax -- the vehicle license fee -- had gone to local governments, not the state. The governor generously agreed to replace the locals' lost revenue with money from the state general fund. But he never replaced the tax he grandiosely whacked. Big hole. Big mistake.

Another reason spending has climbed is because of aggressive borrowing. In Schwarzenegger's first year as governor, the state paid out $2.5 billion on general fund bonds. Soon that will be up to around $6 billion -- on bonds approved by voters.

Also, prisons have been gobbling up tax dollars because of tough sentencing, court-ordered healthcare reforms and big pre-Schwarzenegger raises for guards.

"The people of California are overtaxed already."

--

Kevin

Actually, Kevin, we're paying only slightly above the national average. Based on Census Bureau data, California ranks 17th in state and local taxes as a percentage of personal income. New York is third, Oregon 16th, Arizona 43rd. We're high in income and sales taxes, low in property taxes.

"Nothing could be simpler than balancing the California budget. Just raise the marginal rate on individual and corporate income taxes. It's the fairest possible way."

--

Michael

Michael, you should run for the Legislature.

"The political thinking in this state lacks any imagination. A sales tax [hike] will just send business out of state. A [new] fuel tax would accomplish our CO2 reduction goals and shift most of the negative impact out of state. We don't produce Hummers and SUVs."

--

Dallas

Right, Dallas, that's just what we want to do: Slap on another gas tax when motorists already are paying $4 per gallon, including around 70 cents in taxes. Pity the politician who tries that.

"I know personally of four families in the last two months who have decided to move to Oregon. They say California is just not a very good place to live anymore."

--

Raul

Raul, then they should head on up the road. That'll leave more room on the freeways for the rest of us and reduce property demand, making homes more affordable. I'll send them a road map.

"I do not live in California, but I am fed up with every politician who says that she/he will not raise taxes. I take this as a direct insult to my intelligence. . . . I have vowed to not vote for anyone who says taxes will not be raised."

--

June, in Illinois

June, you should move out here. A road map is on the way.

Thanks for reading and writing.

george.skelton@latimes.com
http://www.latimes.com/news/local/la-me-cap26-2008may26,0,17046.column

Sunday, May 18, 2008

The University of Raising Big Money

By JOE NOCERA
October 21, 2006
Correction Appended

Last week, Stanford University unveiled its new capital campaign, called the Stanford Challenge, which aims to raise $4.3 billion by 2011. That stunning amount is a record for a university fund-raising campaign, but not by much. It overtook Columbia, which just a few weeks earlier had announced a $4 billion campaign of its own.

Then there’s Yale University, which has just begun a $3 billion campaign. The University of Virginia is also raising $3 billion. Brown University is trying to raise $1.4 billion; Johns Hopkins, $2 billion; New York University, $2.5 billion; the University of Chicago, $2 billion. Back in 1987, Stanford was the first school to raise $1 billion in a capital campaign.

Today, according to the Chronicle of Higher Education, more than 25 universities are conducting campaigns of $1 billion or more. Indeed, just about the only school conspicuously missing from the list is Harvard. But that is highly unlikely to remain the case; no one in higher education expects Harvard to stand pat while all of its peers are raising gigantic sums of money.

These are, of course, America’s elite educational institutions — brand names in their own right. They are the schools the very best high school students vie to get into — and are bitterly disappointed if they fail to do so. They are also very wealthy institutions, with endowments that in most cases run into the billions. Stanford, for instance, has an endowment of around $15 billion, making it the third largest among universities, behind only Yale and Harvard. (Harvard’s astounding endowment is now nearly $30 billion.) And of course if you’ve ever visited Stanford —with its fantastic medical complex, its professional-quality athletic facilities, and its gorgeous campus — you know that what is most striking is not how much Stanford seems to need, but how much it already has.

All of which made me wonder: does Stanford — and Yale, and Brown and N.Y.U. — really need to raise ever more billions to add to the billions it already has? Or is this an example of fund-raising run amok, a case of the rich getting even richer — just because they can?

“I like to say that if this campaign ends up only being about $4.3 billion, we will have failed,” said Martin W. Shell.

Mr. Shell is the vice president for development at Stanford — i.e. the chief fund-raiser — and he was making the case that the sum of money the university was trying to raise, eye-popping though it is, was far less important than the way the school planned to spend that money.

The list of goals for the Stanford Challenge is undeniably impressive. Stanford plans to spend $500 million on “The Initiative on Human Health” which will focus on research “that speeds the conversion of fundamental discoveries into new approaches for diagnosing and treating human diseases.” It will undertake expensive new initiatives on the environment and K through 12 education. It hopes to use some of the money to “reinvent graduate education.” It has many other purposes as well, all of which tend to revolve around the school’s graduate programs. Like most of America’s great universities, Stanford views itself as an important research institution as well as a teaching institution, and that is reflected in the campaign.

It is hard to criticize any effort to raise money that might help cure disease, and far be it from me to try. “To equip a modern scientific lab is hugely expensive,” said William G. Bowen, the former president of Princeton. “If you are Stanford and have a major commitment in science you are going to have to go out and raise substantial resources.” One thing Stanford officials point out, for instance, is that the university plans to use some of the money to build a laboratory for stem cell research.

One thing that struck me, as I listened to Mr. Shell and others, was the extent to which at least some of these initiatives dovetailed with issues that were already on the minds of potential donors. For two years before the introduction of the capital campaign, Stanford was raising money during what’s called the “silent phase,” talking to donors, gauging the market and getting a sense of what alums and others might be willing to fund.

Although Mr. Shell insisted that Stanford was focusing on areas “where we are already strong,” he also told me that “we had long conversations with our donors” during the silent phase. Stanford had already decided to focus on the environment, but that is also a very popular cause among its alums. And the K to 12 initiative became part of the Stanford Challenge because it was something potential donors kept coming back to as they spoke to university officials..

It also seems clear that a good portion of the money will be aimed at enhancing existing properties. Philip H. Knight, the founder of Nike, has already promised $100 million as the lead gift for a new campus for the business school.

But wait: does Stanford really need a new campus for the business school? Not in the sense that its business school students aren’t managing just fine with the campus they use now. But the truth is — and this is a lot of the underlying rationale for all these capital campaigns — Stanford isn’t just trying to save the world. It is also trying to keep up with Yale and Harvard and the other elite institutions with whom it competes for students and faculty.

“If your competitor has a swimming pool, then you have to build a swimming complex,” said Arthur E. Levine, the former president of Teachers College at Columbia, who now heads the Woodrow Wilson National Fellowship Foundation. And if Yale and Harvard have ever-more attractive business schools, then Stanford has to keep pace. John V. Lombardi, the chancellor of the University of Massachusetts, describes the current mania for capital campaigns this way: “It’s an arms race.”

It’s not just fancy facilities or high-end research, either. To compete with the other elite schools, Stanford wants to attract the best faculty possible — which means luring the stars at other schools, offering them huge raises, laboratory space and research assistance. Capital campaigns and big endowments have accelerated the amount of poaching that goes on and have significantly driven up salaries.

These competitive pressures among the elite universities have led to an odd result — or at least odd when you think how competition normally works. Competition normally causes prices to go down. But as Mr. Levine points out, in the case of the nation’s most prestigious universities, competition actually causes prices and costs to rise because the ever-upward spiral of bigger salaries and better facilities and all the rest of it makes the running of the university that much more expensive.

One thing that surprised me was that so few people in the world of higher education seemed bothered by this. Whenever I asked about the high cost of tuition — and why these campaigns and huge endowments didn’t stop the relentless annual tuition hikes — I was told that tuition only covers about 60 percent of the cost of education, and besides, a great deal of money raised in capital campaigns went to financial aid. (Stanford tuition is currently $32,994, with room and board adding another $10,367.) Those students who are paying full freight — and their parents — have certain expectations about the kind of facilities they will have access to, the professors who will teach them, the computers they will use, and the schools are raising money in order not to disappoint. “They are responding to market demand, in which parents and students select the fanciest, most luxurious, best-equipped schools — and everyone wants their tuition discounted,” Mr. Lombardi said. The money raised in capital campaigns helps the elite institutions market themselves.

There is no question that the rise of the elite American university is one of the great success stories in modern life. In their own way, they are global leaders. The competition among them have made them all better. But it has also drained talent and money — and made life more difficult — for all the hundreds of universities that do not rank, in the public mind, with Harvard and Stanford and Yale. These other universities are the schools that educate the vast bulk of American college students. They can’t conduct $1 billion fund drives. And so, ever so slowly, they are falling behind. That’s not Stanford’s fault, or even Stanford’s problem, but it can’t possibly be good for the country.

One other thing about capital campaigns. Whenever I asked anyone involved in one whether they were trying to trump someone else’s campaign — whether, that is, the amount of money they were trying to raise was itself a form of competition — I was told that nothing could be further from the truth. Robert M. Berdahl, the president of the Association of American Universities, told me flatly: “You don’t have a capital campaign because one of your peers is having one. It is about the university’s need for resources.”

But then, a few days ago, something happened that made me wonder about that claim. Cornell got wind of what I was reporting, and a public relations executive sent me a series of e-mail messages trumpeting its own capital campaign, hoping that I would mention it in this column.

So here goes. The campaign will be announced Thursday in New York, and though the executive wouldn’t tell me its size, she strongly implied that it would be right up there with the big boys.

The Cornell campaign, she wrote me, would establish “a new Ivy lead in the ‘race for the top dollars.’ ” Competition, indeed.

Correction: Oct. 27, 2006

The Talking Business column in Business Day on Saturday, about the fund-raising efforts of large universities, misstated the room and board rates at Stanford University. The combined cost for room and board is $10,367 — not $4,796, which is the cost just for board.


Copyright 2006 The New York Times Company
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New phase seen in Mexico's drug war

The recent killing of the country's top drug cop has prompted a crackdown, but the cartels have struck back.
By H├ęctor Tobar
Los Angeles Times Staff Writer

May 18, 2008

MEXICO CITY — To strike back at narcotics traffickers suspected of ordering the assassination of Mexico's top drug cop, President Felipe Calderon dispatched 2,000 army troops and federal police to the gang's home base, the western state of Sinaloa.

The traffickers struck back themselves with a paramilitary-style ambush of a police station, and taunted the newly arrived troops with mocking signs on the streets.

Analysts say those moves last week show that the killing of Edgar Millan Gomez on May 8 has opened a dangerous new phase in the country's drug war.

Millan Gomez, the 41-year-old acting director of Mexico's federal police, knew he was a target, and he shuttled among three homes in a bid to outwit his nemesis: Arturo Beltran Leyva, the leader of one faction of the so-called Sinaloa cartel.

The police official lost that battle.

In the days since he was gunned down, officials have revealed that Millan Gomez's killers probably knew that he slept in more than one home. They even had the keys to his front door, a stunning illustration of the cartels' power to gather intelligence about government operations.

Officials and analysts argue that the assassination was actually a sign of weakness. Pressured by the government, they say, the Sinaloa cartel is in retreat and disarray, split into factions that have turned on each other. Several mid- and high-ranking members of the gang have been arrested, and army troops already deployed in the region have seized drug shipments, destroyed opium poppy fields and seized more than 100 airplanes believed to be used by traffickers.

Killing Mexico's No. 3 public-safety official was a reckless act committed by cornered criminals, the government says.

"We have damaged their financial and logistical operations," Calderon said Monday. "And this has apparently provoked these criminal acts of desperation in which they seek to recover the protected spaces they've lost."

Millan Gomez, who coordinated joint efforts of the army and federal police, had struck several blows against the Sinaloa cartel. The biggest was the seizure of 23 tons of cocaine in October at the Pacific port of Manzanillo.

But the investigation into Millan Gomez's killing has also revealed the power and reach of the cartel.

In Mexico City, Millan Gomez's bodyguards and several of his aides have been forced to take polygraph examinations. Investigators believe a top official close to Millan Gomez must have betrayed him to cartel hit men.

At least one federal police officer has been arrested in the killing: Jose Antonio Montes Garfias, a 14-year veteran assigned to the regional headquarters of the federal police in Culiacan, the capital of Sinaloa state.

Details also have emerged on the extent to which Mexico's drug organizations rely on former army soldiers and serving policemen.

The Sinaloa cartel is one of the oldest in Mexico. Founded by a few close-knit families and once dominant in Mexico's drug trade, it has been challenged over the last decade by the so-called Gulf cartel, based in the northeastern border state of Tamaulipas. But the Sinaloa traffickers still control Pacific smuggling routes that U.S. officials say have become the most popular for shipment of Colombian cocaine to the United States.

Joaquin "Shorty" Guzman, the fugitive leader of the gang, is fighting for control of the group with his former top henchman, Beltran Leyva, officials say. The animosity between the factions may have led to the killing of Guzman's son, Edgar, on May 8, the day Millan Gomez was slain.

Millan Gomez was directing an operation against Beltran Leyva just hours before he was killed, officials said. His police officers had cornered the drug baron on a highway outside Cuernavaca, south of Mexico City. But they found themselves outgunned by a well-coordinated team of bodyguards, led by several former members of the 43rd Infantry Battalion of the Mexican army.

Two men on each side were killed, authorities said. Nine of Beltran Leyva's bodyguards were arrested.

But Beltran Leyva escaped. That evening, his plan to rid himself of the tenacious Millan Gomez moved toward fruition, authorities said. According to federal police, the cartel leader contracted Millan Gomez's killing to a criminal gang in Mexico City.

Millan Gomez's schedule was a closely guarded secret, known only to a few associates, officials said. But as he headed home accompanied by two bodyguards in an armored sport utility vehicle, four cartel hit men were waiting behind his front door.

The bodyguards dropped off Millan Gomez, who entered his home alone. Seconds later, they heard gunshots.

Though wounded by at least eight shots, Millan Gomez was able to grab one of the attackers, officials said.

"Who sent you?" he demanded. "Who sent you to kill me?" He died at a hospital, the third high-ranking federal police official killed in Mexico City in a week.

His bodyguards were wounded in an exchange of gunfire with the fleeing assailants. One man, a petty criminal with two convictions for auto theft, was arrested. At least three escaped.

Several analysts said Mexico was entering a new phase of the drug war. The government offensive, they said, had caused cash shortages and splits in the cartels.

Newspaper columnist Jorge Fernandez Menendez compared the Mexican traffickers' predicament with that of Colombian drug lord Pablo Escobar and his Medellin cartel during its decline in the late 1980s and early 1990s.

"The weaker Escobar became, the more enemies he made . . . and the less money he had, the more he resorted to violence to take revenge on his enemies and strike fear in them," Fernandez Menendez wrote in the newspaper Excelsior.

On Tuesday, Calderon's "security cabinet," including the Interior and Defense secretaries and attorney general, made a point of traveling to Sinaloa's capital for a meeting. Then, the troops were dispatched.

"If necessary, we'll bring even more troops," Defense Secretary Guillermo Galvan said. "Organized crime is not, and can never be, stronger than Mexico."

Officials quickly moved to close 20 of the 22 currency exchange houses in Culiacan and audit their operations. Such businesses often are used by traffickers to launder profits.

The drug traffickers responded with the guerrilla-style attack against the police station.

On Wednesday, as many as 40 cartel operatives launched an attack on a police station in Guamuchil, a city 60 miles northwest of Culiacan. They came in 10 late-model pickups, and wore jackets bearing the logo of a federal police agency.

As the half a dozen police officers inside scrambled for cover, the attackers sprayed the building with automatic-weapons fire and set off at least two grenades. Two officers were hurt before the attackers fled, leaving behind several hundred spent ammunition casings.

The traffickers have also posted signs on Culiacan street corners that taunt the government efforts.

"Little soldiers of lead, generals of straw," read one sign, painted on a sheet.

"This is the territory of Arturo Beltran."

hector.tobar@latimes.com
http://www.latimes.com/news/nationworld/world/la-fg-mexwar18-2008may18,0,5575316.story