Let’s speak about “fungibility” – the financial idea that one unit of a commodity could also be interchangeable with one other.
That’s true if the commodity concerned is one thing like a bushel of corn or a barrel of crude oil. However in politics, the commodity is cash, and fungibility implies that a greenback is a greenback and if it’s spent on one factor, it’s not accessible for an additional factor, irrespective of the way it could also be spun to the general public.
One in all numerous examples is Meeting Invoice 11, which might recreate metropolis redevelopment packages that the Legislature abolished earlier on this decade. Redevelopment’s draw back, which led to its demise, was that incremental property taxes generated in redevelopment initiatives had been withheld from different native governments, comparable to counties, and faculty districts.
At its zenith, redevelopment was diverting about $5 billion per 12 months and beneath the state structure, the state needed to make up the property tax losses to colleges, about $2 billion a 12 months. AB 11, which is now on maintain, would direct the incremental taxes from redevelopment into low-income housing and the state, as previously, must make up tax losses to colleges by shifting funds from different state packages.
Measure EE, a extremely controversial parcel tax measure being proposed by Los Angeles Unified Faculty District, can be a splendidly deceptive instance of fungibility.
An early model of the measure prohibited utilizing its revenues for “funding long-term well being care or pension liabilities,” however the wording was modified to a much less particular prohibition on “funding authorized settlements and liabilities.”
Whatever the weasel phrases, “authorized settlements and liabilities” definitely embrace the district’s inescapable authorized obligations for pensions and different advantages. Furthermore, by underwriting different district bills, the brand new taxes would not directly pay for these fast-growing profit prices, due to fungibility. It’s only a semantic train to idiot voters.
Sacramento’s metropolis authorities can be within the throes of a terrific fungibility squabble.
Final 12 months, on the behest of Mayor Darrell Steinberg, metropolis voters handed Measure U, extending a half-cent gross sales tax that was attributable to expire and including one other half-cent to the levy.
Steinberg insisted that the additional half-cent, elevating maybe $40 million a 12 months, could be “an actual recreation changer” that may finance inexpensive housing, shelters, providers for the homeless, job coaching in low-income communities and small enterprise incentives.
Unbiased analysts, together with this column, identified, nonetheless, that by the town’s personal estimate, its obligatory funds to the California Public Workers Retirement System (CalPERS) are anticipated to extend from $81.6 million a 12 months to $129 million by 2023, thus consuming the extra $40 million a 12 months that Measure U would generate.
This 12 months, Metropolis Supervisor Howard Chan, in proposing a brand new funds, primarily stated that the cash needs to be accessible to deal with rising pension prices, incomes him a public tongue-lashing from Steinberg.
“If we maintain the second half-cent (of recent Measure U income) within the common fund, each penny will go to pension and salaries,” Steinberg stated. “All the cash will probably be gone, and so will the elevated public security that we promised on this funds.” Nonetheless, the mayor additionally acknowledged that if voters had been informed that the additional taxes could be wanted for pensions, they might not have accredited them.
Steinberg desires to pledge the additional income to repay a proposed $400 million group enchancment bond, however that may imply it will not be accessible as CalPERS calls for for greater pension funds, thus requiring cuts in different metropolis providers to make up the shortfall.
That’s fungibility. There isn’t a free lunch, regardless of politicians’ efforts to influence voters in any other case.
Dan Walters is a CalMatters columnist.