Download - Blueprint to Renew CA
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A Blueprint to Renew California:RepoRt and Recommendations pResented by the
think Long committee oR caLioRnia
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Think Long Committee or Caliornia
Nicolas Berggruen
David Bonderman
Eli Broad
The. Hon. Willie Brown
The Hon. Gray Davis
Maria Elena Durazo
The Hon. Matthew Fong*
The Hon. Ronald George
Antonia Hernandez
The Hon. Robert Hertzberg
Gerry Parsky
The Hon. Condoleeza Rice
Eric Schmidt
Terry Semel
The Hon. George Shultz
Dr. Laura DAndrea Tyson
*We were honored to have Matt Fongs active participation until his passing
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Reducethepersonalincometaxacrossthe
r wl r clr rrv
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Fundeducationbyanadditional$5billion
wl r rr
Provide$2.5billiontotheUniversityofCaliforniaandCaliforniaStateUniversity
r u w r
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l u
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LOCAL EMPOWERMENT. Returning decision-
making power and resources when appropriate
from Sacramento to localities and regions where the
real economy functions and government is closer to
the people and thus more responsive, exible and
accountable. Bygenerating$1.5billionannuallyfor
u l vr rl ul
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w ur r. o
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AN INDEPENDENT CITIZENS WATCHDOG. Creating
an independent watchdog for the long-term public
interest as a counterbalance to the short-term
mentality and special interest political culture
that dominates Sacramento. t rl
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Rebooting Californias Democracy:
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A MODERN, BROAD-BASED TAX SYSTEM. Updating
Californias tax system to mirror the real composition
of our modern service and information economy
and provide a stable, broad-based tax system that is
sustainable over the long term.
Wl clr rrv
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andreducethesalestaxongoodsfrom5%to4.5%whilebroadeningthesalestaxata5%ratetoapply
rv, w r r rr. eu
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rebate.Thoseearning$45,000andunderwould
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pay7.5%.Becauseofthe1%surchargeformental
l llr, wul r
8.5%.
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havepaid$1,449inpersonalincometaxesunder
thecurrentsystem,wouldnowpay$832amore
than40%reductionintheirstatepersonalincome
x. ovrll, rr wll clr
rrv x . hul w aju
GrossIncomeoflessthan$20,000peryearwouldpayanaverageof$71moreindirectandindirect
statetaxes,whilethoseearningmorethan$1million
wouldpayanaverageof$11,478.
t u rl x
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$10billioninnewrevenuesannuallytostartpaying
w wll , rv u
forK-14schools,forCalStateandtheUniversityof
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currentsystemwillpay$33,114undertheproposed
.
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I. EMPOWERING LOCALGOVERNMENT AND REGIONS
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brw llur, w lu:
Developlocalfundingallocationformulaswithan
wr l-r
Simplifythestructureoftherealignment
u rv l fxl
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Enactstatutorychangestoprovidecountieswith
rr rr fxl
Ensurethatlocalscalincentivesarealignedwith
w l
Promotelocalaccountability
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Avoidstate-reimbursablemandates
a l ur x rr l, w r
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rl, rulrl w r ul
rruur. i l, ur l
wouldgenerate$1.5billionannuallyforcountiesto
vr ul rl. o ll llr
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II. THE CITIZENS COUNCIL FORGOVERNMENT ACCOUNTABILITY
California is caught in a downward spiral. According
to the California Deliberative Poll conducted in June
2011, the public believes that nearly 40 cents of every
dollar is wasted because government performance
is not evaluated or accountable. The public therefore
understandably resists investing public resources in
the future if it cannot be assured its hard-earned tax
dollars are being used to improve Californians lives. As
a consequence, the world is moving on and California is
being left behind.
California desperately needs a return to good
governance. This means, above all, restoring the publicstrust in governments ability both to act eectively,
responsively and accountably in the long-term interests
of all Californians and to move away from the short-
term politics of Sacramento.
The Think Long Committee believes it is not enough for
elected political gures to pledge they will pursue good
governance. To ensure accountability and to balance
the short-term politics of Sacramento, good governance
should also be entrusted to a body of citizens invested
with the power to demand performance from their
elected ocials as well as the power to place initiative
proposals, addressing reform in areas such as jobs and
education, directly before their fellow Californians for
approval.
To this end, the Think Long Committee proposes
to establish a Citizens Council for GovernmentAccountability. As this would involve amending the
California Constitution, the Committee intends to
qualify an initiative measure.
1. PURPOSE: t cz cul r gvr
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2. ROLE AND POWERS: a rl l
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Settingstandards,oversightofperformance
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Long-termstrategicconcerns
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Placinginitiativesdirectlyontheballot
The Council would be empowered to develop and
place initiative proposals directly on the ballot.
This would assist the residents of California indeveloping a more active voice regarding the long-
term future direction of the state, rather than be
faced, as is currently true, with only disconnected
single-issue or special interest choices. The Council
would also work with elected ocials, receiving and
monitoring information, and proposing legislation.
AuthorizationtodirecttheSecretaryof
s ul cul
rlv r v
rru l ll
The Council would be authorized to comment on
relevant initiative proposals with respect to their
long-term impact on the states strategic priorities.
Subpoenapower
The Council would be granted the same subpoena
power currently held by the Little Hoover
Commission i.e., to issue subpoenas to compel
the attendance of witnesses and the productionof books, records, papers, accounts, reports and
documents.
a u, cul wul lr
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3. MEMBERSHIP/TERMS/VOTING RULES:t
Councilwouldbecomposedof13voting
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a r cul ul rv
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4. QUALIFICATIONS: a-lr wul
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xr u r lr, rr
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Canon5oftheCaliforniaCodeofJudicialEthics.
t ll rll l
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orinexcessofanaggregateof$1,000inany
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5. PUBLIC PARTICIPATION: t cul wull rulr r ul u
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In short, the residents of California would have
direct input in the Councils policy-making and thus
in the Councils decisions regarding which of the
Councils initiative proposals would be placed before
the electorate.
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6. STAFF: t cul wul l w
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7. FUNDING: t cul wul v uu
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x f r, u
wul lu r gvrrr u. t u
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-qul rl . cul
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8. Integrating Foresight The Golden State
Strategic Agenda: clr ur w
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r r l. t r
r u l,
rv -, u r
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t cul wul rr r w
rvw rl w l
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rrz l r r
r Golden State Strategic
Agenda.
t cul wul l rw
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c r llw
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a:
Infrastructure.TheCouncil,withthesupport
dr , wul v
rl r r clr
irruur pl w vrll
r l.
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EnvironmentalGoalsandPolicy.TheOce
pl Rr rqur
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vl, rl
wul r w cul
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Workforce/HumanCapital.TheCouncil
wul r w rlv u wrr vl
wrr ur,
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r r .
Energy.TheEnergyCommissionisrequired
vr w r ru rv
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cul ul r r
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Water.TheDepartmentofWaterResources
rqur ru wr l
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cul, cul ul r
r l.
Transportation.TheDepartmentof
trr ru rv
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r rz. clr ul vl
l r w cul,
cul ul r
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StrategicGrowthCouncil.Thiscabinet-level
r xuv r v
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rv l ur ll
vr. i wul v cul r vrll r l.
9. Integrating Oversight:t cul wul
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buru s au l
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LittleHooverCommission.TheCommissions
urz u wul
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rvw, v
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BureauofStateAudits.TheBureau,aspart
u, wul ur
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cul r .
III.A BROAD-BASED TAXSYSTEM FOR THE FUTURE
Purpose
t v clr r
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rv u l, r u l
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l-r rw.
Problem
tr r u r clr r u
rll. s r rl
l r, u rl l u l
rur rul r ul. s
vr l, wvr, r l
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tr rl l r --
u u l rl r, v
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ovr 60 r, clr v
r w ul rulur
uur rl rv
rv. a urr, ur x rvu
l rl l u x r rv
byPersonalIncomeTax.In1950,SalesandUseTax
r l 60 r ll rvu;
today,itaccountsforabout25percent.Personal
i tx u r ll r 10
percentoftotalstaterevenuesin1950;today,it
accountsformorethan50percent.
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Figure 1
clr s Rvu sur
SOURCE:CaliforniaDepartmentofFinance
Thiscametoaheadinscalyear1999-2000
w - rul v, u
rr, r l
. i vr, x vrl
rl vll
- rr u rvu soarby23percentinasingleyear.
s l r
r u rr
ur rvu rl x
urr rrw x .
W vl r , rr
- x, rrw
r rll lu clr r
rr , r l r
w gvrr brw r wll
l-r ruurl u .
Betweenscalyears2007-08and2008-09,justas
l r w r l,
, ur prl i, rw
atananemic3percent,butGeneralFundrevenues
plummetedby19percent.Thiswastheipside
rvu vll w x
vrl rl .
b l rl ,
clr rvr r r
rr x r
r u ur r
u ruurl . t,
clr rr x r w
r x r r wr
. i lr r, rw l
l qu u rv
u u ul .
Figure 2
cr t mrl crr tx R
SOURCE:FederationofTaxAdministrators,February2011
Solution
t w ru wll , ru
ur vll rv
u l wl r rvu ur
rur l qu u rl
rv, t L c lv w rr u r x .
Californias$2-trillioneconomyisnolonger
uur rulur, u
rrl rv r
v. y, clr x u
nearly$1trillionthatis,roughlyhalfofthestates
uu x.
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Wl w x l u
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ul, u r rurl rv. i
, w ru u u
r r r uz w ru
rv r.
t r u, c r
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rr r w v lvl l
w r . hwvr, w x wll
v ru u r rvu
ru ur lr
r rv l rw u r
rv r l l-r
rw u u, ul
v rruur.
W l , t L c
r llw rr:
Broadenthetaxbasetoincludeservices.
t w l x rv wul
atarateof5to5.5%andwouldapplyto
ll rv, u wll
ur, x r l r
ul rv. curr rj
showthattheratewillneedtobe51/8%to
v rvu r
v. i rvu r ur u
r ru , r
couldendupbeinglessthan5%.
t r w x ,
x r wul vr w-
r r llw:
3%eectiveJuly1,2013,allowing7
r
v nvr 2012
ll r x l, u
ur rr r w x.
4%eectiveJanuary1,2014,butthe
ratecouldbeashighas4.5%.
5%eectiveJanuary1,2015,butthe
ratecouldbeashighas5.5%.
Broadenthetaxbasebyreducingdeductions
fromthePersonalIncomeTax(PIT)and
loweringtaxratesonthePIT,thecorporation
tax(Corp)andthesalestaxongoods
t ur wul l r
ll z u x r
r r, rr x, rl
ru R&d. txr wulrv x r u,
equalto$45,000forjointlers($27,500for
l lr).
i wul l r u
l l r rul r
ul- rr r.
ReducemarginaltaxratesinthePITwhile
simplifyingthecode,reduceratesimposed
underthecorporationtaxandthesalestaxon goods.
t urr x r ruur wul
rl, w ur x r
ru w.
Undertherevisedstructure,beginningin
2014therewouldbenopersonalincometax
onjointlerswithincomesupto$45,000
becauseofthestandarddeduction($45,000
joint;$27,500forsinglelers).Ataxrateof2r wul l j
lersupto$95,000,anda7.5%ratewould
l v u. t
1%surchargeformentalhealthonthose
withincomesover$1millionwouldremain,
makingthateectiverate8.5%.
Lw- ul wul rv
l x r r
r w l x
rv vr ul w
lr .
t x r rr wul
bereducedfrom8.84%to7%belowthe
l vr.
t ru pit r wll v v
ll -z u, w
r rz rrr r -ru
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u, u s-cr LLc u
rl x rr x.
Wl ru ll x r, wul
r pit rrv ur. ovrll,
rl wul lwr pit r ll
ru xr. t l x r
wouldbeloweredfrom5%to4.5%.
all, w wul ul wr
propertytaxexemptionfrom$7,000to$14,000with
quvl x rr r.
o vr, ul w ju r
incomesupto$1millionwouldpayadditionaldirect
andindirecttaxesrangingfrom$71to$806per
household.Householdsearningmorethan$1million
wouldpayanadditional$11,478.
t c rl wul progressivetaxstructurewiththetop5percentof
rr 62 r ll rl x
ll .
Figure 3
e pr prl i tx t
WouldBePaidbyTop5PercentofFilers
SOURCE:ThinkLongCommittee
W vll w rvu w w x
toreach$10billionwhenfullyphasedinwe
r v llw u:
i r r, rvu ul l u
r ur w
r:
In2005,thepeopleauthorizedEconomic
Rvr b (eRb) w r
thedebtfromtheprioryears.Ultimately
thestatesoldtheentire$15billionofERBs.
t u l wll w
about$4.3billionby2013-14andtherst
rr r r x rvu r
v wll rr r
l ur .
i u -fw r l
fewyears,thestatedelayedpaymentstoK-14
schools,requiredbyProposition98,fromone
yeartothenext,totalingover$10billion.
t x rr r rvu r
v wll r u
forschoolsby$5billionannually,withthe
r r l ru
u rr .
Beginningin2014-15,theadditional$5billion
goingtoK-14educationwillbeprovidedin
x r l r jr
ur , pr
98maintenancefactor.Whilethemaintenance
r rr l rlincreaseK-14educationfundingbyabout$10
ll, v x l-r
ur uur l r r-r,
r, rr r u r
l. t u wll rw vr
rv r rvu r
w l x rv.
Beginningin2014-15,theremaining$5billionin
w rvu wll ll llw:
Upto$2.5billionforhighereducation.
Upto$1.5billiontocountiesfortherecently
pul s rl.
Upto$1.0billiontocitiesasunrestricted
rvu
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Figure 4
sur al u
(Total:$10Billion)
SOURCE:ThinkLongCommittee
t rr r rvu wll
rvu l rul r
x rr.
IV.BUDGET AND OVERSIGHTREFORM
Californias budget and budget process no longer
operate reliably to support critical public programs. The
general fund budget, which is over-reliant on personal
income tax and capital gains, is notoriously volatile. As
Californias economy swings from boom to bust with
the national and international economies, the states
budget swings from being ush to multi-billion dollardecits. Health, social service and education programs
funded in good times have to be cut back in bad times
when they are needed most.
Instead of adopting common sense reform like a
rainy day fund reserve already in place in many states
California lawmakers have exacerbated budget
problems through poor planning in good times, and
through smoke and mirror gimmicks or borrowing in
bad times.
Further, the review or oversight of state programs is
insucient to ensure that California taxpayers are
getting the results promised by their representatives.
The Legislature spends little time engaged in a
constructive dialogue with the Executive Branch over
the goals of state programs and how to ensure that
programs are achieving those goals.
The Think Long Committee has developed a set ofbudget reforms that aim to change the budget culture
in Sacramento to focus on long-term results and
performance.
1. RainyDayFund. t u l
clr rvu r l
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l rv, l v w u
u. t ru wll
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r r al r s r
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V.INITIATIVE REFORMt v ulur x clr rl J m wr r.
p r f rr l.
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(l r) l r w
rivalinitiatives.In2009,RonaldGeorge,atthetime
clr ju, wrr ull u
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-TheEconomist,April23,2011
Abuse of the initiative process undermines the capacity
of representative democracy to function eectively.
The following proposals for reform are targeted at
curbing these abuses to ensure that the initiative process
remains a vital recourse of the public will not a tool
of special interests or an unwieldy blunt instrument for
budgeting at the ballot box. Set forth below are a series
of reforms to the initiative process intended to improve
the process and restore it as an instrument that can
be used to serve the broadest interests of Californians.
The Citizens Council for Government Accountability,
proposed elsewhere in this report, provides for an
innovative use of the initiative process also designed
to further ensure that the initiative process remains a
mechanism of good governance in the public interest.
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2. Indirect Initiative/legislative review when
qualied. gv lx u
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voters registered in the last general election.
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4. Allow ballot measures that amend theConstitutioningeneralelectionsonly.
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VI.JOBS,HIGHEREDUCATIONAND ECONOMIC GROWTHThe Committee believes that restoring economic vitality
and job growth to California requires both streamlining
burdensome regulations on business and facilitating
public investment in a well-educated workforce
and infrastructure, from smart energy grids to the
broadband information highways of the future.
A guiding objective of the states long-term strategy
should be to build a vibrant, job-creating business
climate that can sustain a solid middle class while
continuing to make California a welcoming place where
families and individuals will want to reside.
As it continues protecting Californias environment and
working conditions, our state government must also
be a proactive facilitator and partner for job-creating
businesses, laying out the red carpet, rather than, too
often, tying up potential growth with red tape.
Such an approach is essential to re-establishing a
manufacturing base in California and for expanding
exports in the coming decades when most growth will
take place in emerging economies led by China.
The Think Long Committee proposes the following
recommendations, drawn from its Jobs, Infrastructure
& Workforce report (see Appendix), to start us down this
path:
1. Streamlining / improving customer service.
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2. Accelerating the CEQA permitting process.
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statePublicUtilitiesCommissionarehandled
(Calif.PublicUtilitiesCode section1759).
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andSB292(Padilla),whichcreatesimilarCEQA
x r r u r lr
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rwl r rj ru
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3. Aligning workorce skills with uture jobs.
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Establishingajobsconsortiumofcutting-edge
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4. Renewing the commitment to higher
education as a oundation or growth. r
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Guaranteeaordability.Californiashould
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forgraduation.(Itis50%inNorthCarolina.)
5. Addressing the $765-billion inrastructure
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localvotersbya55%majorityvote,ratherthan
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CONNECTIONRENEWABLEENERGYPRODUCTION.
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VII.K-12 EDUCATION REFORMQuality K-12 education is the foundation of any solid
middle class society, providing opportunities for upward
mobility. This is especially so in a knowledge economy
that faces sti competition globally and where students
in other countries from Singapore to South Korea to
China outperform Californias students. To ensure the
states long-term competitiveness, California schools
must be brought up to global standards.
However, the issue of the states decaying educational
system goes far beyond economic and business
concerns. At a moment when some argue that the poor
quality of Californias public schools is the civil rights
issue of our time, serious, systematic and signicant
reforms are needed. Without improvements to learning
outcomes, students in many of the poorer communitiesof California will remain on the wrong side of the
Achievement Gap, trapped in some of the countrys
worst schools.
The Think Long plan would provide for a steady and
growing ow of revenue to education over the coming
decades $5 billion annually for K-14 schools and $2.5
billion annually for higher education at California State
University, University of California, and Californias
community colleges. We believe such new fundingshould not be automatically given to a system that is
failing to educate millions of Californians. It instead
should be tied to improving performance of K-12
schools, as a result of rigorous evaluation of teachers, as
well as curbs on automatic teacher tenure and seniority.
We further believe that new nancing for education
should be designed in such a way as to provide parents,
especially the working poor, with the maximum choice
over how and where their children are educated.
In addressing these issues, the Committee spoke witha number of education leaders who provided their
expertise and perspectives. They and many others have
spent their careers researching ways to improve the
educational system, and their collective knowledge
provides the scaolding upon which the Committee
bases the following key reform priorities:
1. Teacher and principal efectiveness. mrz
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rl. pl ul lu:
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ofLastIn/FirstOuthiringandring).
Earnedtenure(i.e.,basedoneectiveness
andmovingfrom2to5years).
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l (.., qul ru r
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4. Improvingaccountabilitysystemswl
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VIII.PENSION AND HEALTHBENEFIT REFORM
Given the complex issues of long-term public pension
and health benet liabilities, it was beyond the
scope and time frame of the Committees year-long
deliberation to address this critical public policy
matter. While pension systems are in various states of
under-funding in dierent jurisdictions, they represent
an unsustainable burden on many of these budgets,
competing for funding with education, infrastructure,
job creation and social services.
Estimates of the total unfunded liabilities range as high
as $500 billion. Unless resolved through negotiations
between state and local ocials and public employee
unions all other reform progress is at risk.
On October 27, as this report was being nalized,
Governor Brown proposed a package of pension reforms
including a hybrid 401k system, extension of the
retirement age to 67 and increased contributions from
employees that he indicated would save taxpayers
about half of the projected costs of pensions and retiree
health care benets in the long run. We recommend
that the Governor, Legislature and local government
ocials make it the highest priority to work with publicemployee unions to nd ways to address the long-term
costs of pensions and the unfunded liabilities that have
already been built up.
These proposals are the result o a consensus by the members o the Think Long Committee
or Caliornia. Having in common the ambition o a unanimous position, this report is thereoreapproved without implying that each member completely agrees with every individual proposal.
However, what we all agree on is that, as a whole, these reorms, i implemented, will go a long
way toward restoring good governance to Caliornia. Maria Elena Durazo abstained on the fnal
recommendations. Matt Fong passed away during the course o the year.
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A Blueprint to Renew California:RepoRt and Recommendations pResented by the
think Long committee oR caLioRnia