GETTING CALIFORNIA'S HOUSE IN ORDER

As campaigns begin in earnest for the June primary and November
election, the editorial writers offer nine ways to put California on
a sound financial footing, yet at the same time protect and enhance
individual liberty. We'll be sizing up the candidates for their approaches.

Spending Limit

The state Legislature operates on the apparent notion that it should
spend as much money as politicians want to spend, or at least as much
as their constituents desire to have spent on them. That is a
bankrupting philosophy, rooted in the idea that government is the
granter of wishes, instead of the protector of rights.

Ideally, government would never spend a dime on anything except those
things that protect the peoples' God-given rights from those who
would abuse them. Alas, we don't live in an ideal world.

That's why it's necessary, at the very least, to impose restrictions
on government spending. Otherwise, the foxes are in the chicken coop.
In the 1980s, California enjoyed such a cap on spending, provided by
the Gann initiative, a constitutional amendment approved by voters in
1979. Unfortunately, some chaffed at the idea spending should be
limited. Transportation interests promising to end freeway congestion
buried in a subsequent ballot measure a reconfiguration of how the
limit was calculated, essentially rendering the limitation toothless.

It's past time to revisit the idea of capping government spending. A
new, bullet-proof Gann-type limitation based on inflation and
population growth might do the trick.

Change Government Pensions

One of the consequences of an ever-expanding state government is that
the ever-greater workforce to sustain it is always growing in
influence over it. In a nutshell, that explains how government
employees enjoy retirement benefits that in many cases put to shame
nearly all private-sector systems.

As public employees' numbers increase, their political clout has,
too. Consequently, state legislators elected by this powerful lobby
return the favor by lavishing benefits on the government workforce.
These benefits are legally locked in as contractual rights, and most
likely cannot be undone or even scaled down, even in the event of
looming fiscal insolvency.

So, the state is sitting on a ticking time bomb of unfunded benefits
due tens of thousands of government employees once they retire. To
perpetuate this system is fiscal suicide. We recognize the legal and
moral constraints that prohibit Californians from reneging on
agreed-to terms for existing and retired government workers.

But there's nothing written in stone that every newly hired
government worker should receive similarly plush benefits. To disarm
the time bomb, California should switch to a defined-contribution
system of retirement benefits for new hires, similar to 401(k)s in
the private sector. Guaranteeing a fixed level of retirement
benefits, as is the case for current employees, ultimately will only
be an explosive disaster.

End Preferential Tax Treatment

When you see an advertisement promising "20 percent off" at a local
store, does it cross your mind that the merchant may have marked the
item up 20 percent before he marked it down? That's something like
what politicians do to trick taxpayers with "tax credits" and other
selective tax reductions.

Ask yourself: "If they want to give me some of my tax money back,
why'd they take it in the first place?" The answer is, so they can
use your own money to bribe you. Nevertheless, gullible taxpayers see
tax credits and the like as government being gracious, even generous.

These preferential tax treatments only tighten government's grip on
private pocketbooks. Selectively "rewarding" certain taxpayers,
usually for certain government-approved behavior, is nothing more
than bribing them with their own money.

Buy a "green," car and get some of your taxes back. You want an
ungreen car? Sorry, no tax credit. Operate a business the government
prefers, like selling windmill blades, and get a tax credit. Operate
a gasoline station? Sorry.

Taxpayers not favored with such treatment should be hopping mad.

Here's the solution. If government intends to return tax money to
taxpayers, don't take it in the first place. Add up the value of all
tax write-offs and credits, then reduce taxes by that much.

Align State, Federal Labor Laws

California labor laws need to be updated, which should be one of the
first priorities for state lawmakers. If businesses are increasingly
taxed out of the state, the job market will look bleaker and the
state jobless rate, already at 12.5 percent, will increase. A
commonsense reform would be to bring California labor standards in
line with federal standards. That would make California more
competitive with other states and give businesses the breathing room
they need to hire more people. For example, state overtime
requirements require companies to pay overtime to workers who work
over eight hours a day while the federal standards require overtime
to be paid to workers who work 40 hours a week. The federal rule
gives companies the flexibility of allowing workers to work 10 hours
a day for four days a week without paying overtime, a tactic needed
in globally competitive career fields like technology. California
likes jobs but its current labor laws punish employers.

Repeal AB32, Global Warming Solutions Act

Out-of-control state government has spread to places government has
no business going, funded with money government has no business
taking and has led to a government by administration, in place of
government by representation.

The epitome of the administrative state is the hubris that gave
California the 2006 Global Warming Solutions Act, a monstrosity of
government regulation and taxation that literally seeks to regulate
the very stuff people exhale: carbon dioxide.

Operating on the arrogant assumption that they can change the global
climate, which has had no trouble changing itself for countless
years, state bureaucrats are using this nearly boundless legislation
to justify writing countless rules for everything from what kinds of
products can be sold to what kinds of businesses can operate.

The enabling legislation, Assembly Bill 32, is the forerunner of
touted federal cap-and-trade legislation, the implications of which
so far have scared members of Congress enough that they are afraid to
implement a national version.

But where Congress fears to tread Gov. Arnold Schwarzenegger, the
Legislature the state Air Resources Board plunge ahead full-speed.
Repeal of this utterly intrusive, economy-retarding administrative
power grab is necessary to reverse decades of creeping regulatory
control over more and more of Californians' lives. Otherwise, we're
in for much more of the same.

Fix Education

Meg Whitman says one of her three goals if elected governor is to fix
California's schools but, beyond making it easier to form charter
schools, she offers few specifics. A real fix would recognize that
any effective monopoly inevitably leads to lower quality and higher
costs (recognizing that even now some schools and many teachers are
quite good) and seek to induce more competition.

Making it easier to form more government-funded charter schools
(though recent research suggests they're no panacea), merit pay for
teachers (though some subjective judgment will always be involved),
and transfers at will would provide marginal improvement within the
context of the current system. But the current system deserves a more
thorough shaking-up. We need to think first of the needs of the
individual student, recognizing that they have different aptitudes
and enthusiasms and progress at different speeds.

The most obvious reform would be a voucher system, where parents
would have control of the money appropriated for each student, and
not just for a handful of poor and minority students but for
everyone. This would encourage more intense parental involvement and
intelligent "shopping" among government and private schools.
Philanthropists should also be empowered to contribute to a voucher
fund to increase the range of choices. The competition would tend to
improve quality over time.

Separation of school and state, the preferred solution, may not be
politically feasible anytime soon. But consider: An institution
funded by the state is hardly in a position to encourage independent
inquiry into whether taxpayer subsidization is the best way to
provide goods and services in any area, but such independent thought
is vital to the health of any polity.

Privatize Prisons

Although some philosophical questions arise about whether it is
appropriate for the state to subcontract its power to punish people
for crimes and violations of laws, at a practical level more
privatization of prisons is virtually a no-brainer. With some
exceptions, private prisons are run less expensively and more
humanely than government prisons, and with more experience we should
learn from mistakes and fashion contracts more carefully to make sure
quality is enhanced. Privatizing prisons would also break the
political strength of the prison guards union, which has generally
lobbied for criminalizing more acts, longer sentences, and higher pay
and more job security for guards.

Prison reform, however, should be accompanied by sentencing and
probation reform. Attitudes toward crime tend to swing back and
forth, pendulum-like, and since the 1980s we have been in a "tough on
crime" phase that has increased prison populations inordinately.
California's Three Strikes law, the harshest in the nation, is in
need of modification. More fundamentally, it's time to reconsider
whether some acts should really be treated as criminal (see below)
and whether longer sentences are always the answer.

Drill, Baby, Drill

Complete energy independence - no more reliance on foreign suppliers
- - is probably a pipe dream and might not be as desirable as some
people think anyway. But for the U.S., and particularly for
California, with its budget crisis and high unemployment, to keep
certain energy supplies off-limits to any utilization is simply unconscionable.

California has large reserves of petroleum in offshore fields, and
extraction methods have been improving steadily. Opposition to
exploiting them is almost entirely emotional and esthetic people
remember the 1969 Santa Barbara oil spill and the 1989 Alaska
oil-tanker spill and think a few drilling platforms just over the
horizon will spoil the sacred beach experience. It's time to extract
as much homegrown oil as is possible within firm environmental guidelines.

More alternative sources of energy should hardly be discouraged. The
temptation to subsidize wind power, solar power - or nuclear power -
even with the promise that it's just a temporary program to give them
a foothold, however, should be resisted.

Subsidies must come from tax dollars, which means narrowing choices
in other areas for consumers, and in the long run they are not
economically sustainable. So take a look at various regulations that
hinder the development of nuclear and other forms of energy and clear
away those that are not absolutely essential. Let the market
consumers decide which forms of energy production (it might be
radically decentralized power stations) will predominate.

Tax Marijuana

One of the most sensible ways to mitigate the government's budget
crunch is unlikely to come through the legislative process, though a
bill has been introduced and passed by one committee. But California
voters will have a chance to get ahead of their leaders in November
by approving an initiative to tax, regulate and legalize marijuana
use for adults. Doing so would also help our neighbor Mexico, given
that some 60 percent of the revenue of the Mexican cartels involved
in the current tragically deadly drug war are said to come from
marijuana. Legalizing marijuana in California would dry up a
significant part of that illicit revenue.

Although marijuana is not without its potential dangers, scientific
studies validate that it is less organically dangerous to human
beings - as in no documented overdose deaths over thousands of years
of use than the legal drugs alcohol and nicotine. In the form of
hemp, it is also valuable for food, fiber and fuel. Legalizing it
would invigorate California's agricultural sector.

The benefit to California's budget would be twofold. Police focusing
on the hopeless task of eradicating marijuana could focus on real
crimes, and enforcement costs would decline. Fewer lives would be
ruined by people being arrested for marijuana use, and the jail and
prison population would decline. And if marijuana were taxed it would
bring in considerable revenue. The state Board of Equalization
estimates that a $50-per-ounce excise tax would bring in $1.4 billion
to the state, and decreased costs of investigation, prosecution and
incarceration would be at least several billion. That wouldn't close
the budget deficit but it wouldn't hurt.