Battle over sports betting in Calfiornia shapes up

More than two dozen states have already legalized sports betting following a 2018 Supreme Court ruling that struck down a federal ban, and now California gaming interests are stepping into the arena for a heavyweight fight.

Native American tribes have qualified an initiative for the November 2022 ballot that would legalize on-site sports betting at tribal casinos and horse-racing tracks. However, other types of licensed gambling businesses, such as card rooms, would be prohibited from offering sports betting, and the initiative authorizes private lawsuits to enforce the law.

That didn’t sit well with the card rooms. Joining with city officials, they filed their own initiative in August, now called the “California Solutions to Homelessness, Public Education Funding, Affordable Housing and Reduction of Problem Gambling Act.” The measure calls it “unconscionable that illegal operators are reaping hundreds of millions of dollars in profits from California consumers without providing any tax revenue to support the needs of our state residents for public services and improving our economy.”

The card rooms’ initiative promises a “safe, legal online and mobile sports wagering market that is honest, regulated and taxed” at the rate of 15% plus 1% of the gross, plus a hefty licensing fee. Eligible operators would include “but are not limited to” racing associations, federally recognized Indian tribes, licensed gambling establishments and professional sports teams—Major League Baseball, National Hockey League, NBA, NFL, WNBA and Major League Soccer teams would be allowed to offer online or mobile wagering.

Now a third initiative to legalize sports betting has been filed. Backed by major gaming companies including DraftKings, BetMGM, FanDuel, and Bally’s, it’s called the “California Solutions to Homelessness and Mental Health Support Act.” The proponents say it complements the initiative from the Native American tribes by legalizing online wagering, but only if the operator has partnered with a tribal casino or horse-racing track. The measure sets up a new fund in the state treasury to collect the tax revenue and split it 85-15 between the “Solutions to Homelessness and Mental Health Support Account” and a “Tribal Economic Development Account.”

You can bet on this: if the state’s experience with legalizing marijuana is any guide, high taxes and excessive regulation are sure to keep the illegal bookmakers raking it in.

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Legislature shouldn’t budge on $4.2 billion funding request for bullet train

Former Governor Jerry Brown once defended the cost of the bullet train project by citing the need to sacrifice for the future. It took generations of sacrifices, he said, to finance medieval cathedrals.

In 2008, Californians voted for future generations to pay back $9.9 billion in debt to build the bullet train. It’s 13 years later, and a medieval cathedral still travels faster.

Not all of the money voters authorized has yet been appropriated by the Legislature, and the California High-Speed Rail Authority wants the remaining $4.2 billion right now. Gov. Gavin Newsom supports that request, but lawmakers in the state Assembly have other ideas. Speaker Anthony Rendon and others would like to move those funds to rail projects in the Bay Area and in Southern California. Talks between the two sides broke down recently, and it appears that nothing will be decided until January at the earliest.

This argument is less about California’s funds than the money that could come from the federal government as part of the multi-trillion-dollar infrastructure legislation. President Joe Biden, who helped to get $8 billion for high-speed rail into a federal stimulus bill when he was vice president during the Obama administration, is friendly to rail funding, and Democrats narrowly control both houses of Congress. Advocates think the window is open and the spigot should follow.

But that may not happen. California’s boondoggle project has lost the support of key state lawmakers including Assembly Transportation Committee chair Laura Friedman, D-Glendale, who has argued that high-speed rail funds should be re-routed from the Central Valley’s bullet-train construction site to commuter rail in Southern California.

If California lawmakers pull money away from the bullet train, it’s less likely that congressional appropriators will commit significant federal rail funds to the project.

If Democrats lose control of the House of Representatives or the Senate in 2022, it’s likely that the chances of federal funding for the bullet train will decrease.

And if Gov. Gavin Newsom is recalled, his replacement could move to cancel the high-speed rail project entirely.

So the race is on. In August, U.S. High Speed Rail Association president and CEO Andy Kunz called California’s bullet train “visionary” and predicted, “As soon as trains are operating, the criticism will quickly fade away like yesterday’s news, and everyone will be thrilled to have such a fast, easy, reliable mode of transport—not seen in America yet.”

What we have seen does not inspire confidence. The High-Speed Rail Authority is currently spending $500 million per year on building a bullet train from Merced to north of Bakersfield, and if there is a significant market for a 200-mile-an-hour trip between those Central Valley cities, it was not mentioned in the ballot measure that voters approved in 2008.

Something else that wasn’t presented to voters is the high-speed rail project’s current major funding source, which is 25% of the revenue that comes into the state’s Greenhouse Gas Reduction Fund from the cap-and-trade program. Cap-and-trade is effectively a hidden tax that raises the price of gasoline and diesel fuel as well as electricity.

Current plans project that the Merced-to-Bakersfield segment can be completed in 4-5 years for $22.8 billion. That rests on the hope that there will be no delays or cost increases. Perhaps negotiators should hold their next meeting in a medieval cathedral.

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Justice Thomas rightly questions federal marijuana authority

Last week, the U.S. Supreme Court decided not to hear an appeal from the owners of a Colorado marijuana business, not because they didn’t have a good case, but rather, because they did.

We know this because Justice Clarence Thomas chose to write a statement about the court’s denial of the petition for a writ of certiorari. “A prohibition on intrastate use or cultivation of marijuana may no longer be necessary or proper,” he concluded.

The owners of Standing Akimbo Medical Dispensary were challenging a provision of the federal tax code that limits tax deductions for companies that deal in controlled substances prohibited by federal law. Under the federal rules, marijuana businesses may deduct from their taxable income only the cost of goods sold, not ordinary business expenses such as rent, utilities and employee salaries. The business owners argued that this makes the tax unconstitutional.

Thomas wrote in a footnote that their argument “implicates several difficult questions, including the differences between ‘direct’ and ‘indirect’ taxes and how to interpret the Sixteenth Amendment.” He said he agreed with “the Court’s decision not to delve into these questions.”

But the constitutional amendment that sheds the most light on this case isn’t the Sixteenth, which established the income tax. It’s the Eighteenth, which enacted a federal ban on the manufacture, sale or transportation of intoxicating liquors.

The Prohibition amendment, and the 21st Amendment repealing Prohibition in 1933, stand as witnesses to the fact that the federal government did not have the power under the Constitution to ban alcohol. The states had to approve an amendment to the Constitution to enact it, and to reverse it.

Why is marijuana different than alcohol?Ducking this question, the Supreme Court relied on complicated and disputed reasoning in the 2005 case of Gonzales v. Raich. A divided court held that Congress’ power to regulate interstate commerce gave it the power to prohibit marijuana use within a state’s borders. The majority found that the federal prohibition on intrastate use of marijuana was “necessary and proper” to avoid creating a “gaping hole” in Congress’ “closed regulatory system.”

Justice Thomas has now pointed out that this “closed” system is full of openings. Thirty-six states allow medicinal marijuana use and 18 states allow recreational use as well. In 2009, Congress itself allowed Washington D.C.’s government to decriminalize medical marijuana under a local ordinance. Further, Congress has prohibited the Department of Justice from “spending funds to prevent states’ implementation of their own medical marijuana laws” every year since 2015.

“The federal government’s current approach to marijuana bears little resemblance to the watertight nationwide prohibition that a closely divided Court found necessary to justify the Government’s blanket prohibition in Raich,” Thomas wrote.

The manufacture, distribution or possession of marijuana remains a federal criminal offense as long as it is listed as a prohibited Schedule I drug under the Controlled Substances Act. Congress could change that, but so far has not.

Justice Thomas’s statement hints at the possibility that the Supreme Court would hear a case that tees up the constitutional issue for a landmark decision. Quoting from Justice Sandra Day O’Connor’s dissenting opinion in the Raich case, Thomas wrote that the federal government “might no longer have authority to intrude on the States’ core police powers…to define criminal law and protect the health, safety and welfare of their citizens.”

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Obamacare survives SCOTUS, but can it survive mathematics?

For the third time, the U.S. Supreme Court has issued a ruling that finds a way to allow the Affordable Care Act to survive.

Last Thursday the justices handed down their decision in California v. Texas, in which a number of states and some individual plaintiffs contended that the law known as Obamacare is unconstitutional. The court did not rule on the merits of the claim. Instead, the justices concluded that the states and the individual plaintiffs did not have standing to bring the lawsuit because they had not been harmed by the law. That opens the door for a future lawsuit by different plaintiffs.

This case had its origins in the 2017 Tax Cut and Jobs Act, which lowered the penalty for failing to buy individual health insurance from $695 to zero. In 2012, a divided Supreme Court had upheld the ACA based on Chief Justice John Roberts’ characterization of the penalty as a tax, finding that Congress’ power to levy taxes gave it the constitutional authority to enact an unprecedented law that required Americans to buy health insurance.

Without the penalty, there was no tax, and that prompted Texas and other states to challenge the law again. A federal district judge agreed with Texas and found that the elements of the law were inextricably and financially intertwined: absent a penalty to enforce the individual mandate, the law was materially different than the law Congress had passed.

For example, the cost to businesses resulting from the mandate to buy employee health policies might be far higher than Congress anticipated when requiring it. The judge ruled that the entire law must fall along with the individual mandate.

The tax/penalty for not buying insurance was always the least popular part of the law, but Congress determined that without it, fewer young and healthy people would choose to buy insurance, resulting in a risk pool that was older, sicker and steadily more expensive to insure.

By ruling on the issue of standing, the Supreme Court has not guaranteed the survival of the law. Another challenge is possible, and the risk-pool problem remains, hiking costs to businesses and taxpayers.

But the Affordable Care Act has gotten by the Supreme Court again. Now it just has to get past the laws of mathematics.

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School closures were rough for everyone, let’s do better

It’s no secret that the great majority of California students and their parents aren’t happy about anything at all concerning the last 15 months of their education.

The shutdowns surely saved lives — but they also made it extremely hard to learn for those who thrive in the classroom environment and were suddenly trapped at home trying to take Zoom classes, a change for which no one was prepared.

Only time will tell the long-term deleterious impact the past year and a half has had on California’s students, but one can be sure that lower-income students will have been disproportionately impacted.

To the extent that there is any silver lining, it’s that the pandemic underscored the importance of school choice and freeing parents, students and teachers alike from the constraints of any particular educational system.

Some students who learn differently actually did well with no classroom distractions, and knowing how to incorporate that fact in their future studies will be one benefit.

But many Californians are mad as hell about what just happened. Zocalo syndicated columnist Joe Mathews, father of three school-aged boys suddenly under his tutelage the last year and a half, told KCRW’s Chery Glaser Thursday he’s so angry at California officials that he wants to see a 9/11-style commission formed to investigate Sacramento for what he calls the great political scandal of our time.

OK — but what about the teachers? How are they holding up?

Not so well, reports John Fensterwald in EdSource. And it was actually those who were forced into “hybrid” schedules with their students — sometimes online, some days in school — who did the worst. “They characterized their experiences as ‘exhausting,’ ‘stressful,’ even ‘discombobulating,’” he writes. “Said a middle school teacher with 94% low-income students in the Inland Empire, ‘The task of simultaneously teaching students in-person and online has been extremely difficult. I have never felt this stressed or worn out while teaching.’”

During the lockdowns, an odd fib was told by some: California teachers “weren’t working” because they weren’t commuting to their campuses every day.

Who truly thinks trying to herd 30 elementary-aged cats through a laptop five days a week isn’t work?

Some Californians conflated contrary attitudes expressed by union leaders with hard-working teachers’ opinions.

Almost worse, when Los Angeles Unified teachers were ordered back into the classroom last month, some report it was mostly a charade: They met with a couple of “counselees” they’d never taught before while their regular classes stayed online.

The prolonged shutdowns of California schools were one of the great travesties of the past 15 months.

Frustration should rightly be aimed not at teachers, but at school district officials who dragged their feet and teachers’ unions that stalled longer than was reasonable.

Parents, students and teachers alike who tried their best to make an extraordinarily difficult situation work deserve our respect.

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EDD kicks Californians already down

In many countries around the globe, especially in the Third World, with government agencies both deeply corrupt and wildly inefficient, private brokers often hire themselves out to fellow citizens as go-betweens who can jump the line and get things done in a timely manner.

That’s not supposed to happen in the United States.

And yet right here in California, people who have been put out of work by coronavirus shutdowns are so desperate to contact the state’s Employment Development Department about unemployment benefits “that a cottage industry has sprung up of intermediaries offering to help desperate jobless people reach the agency — for a fee,” the San Francisco Chronicle reports.

“With EDD’s phone lines perpetually jammed, thousands of people are paying $20 to $80 per call to private companies that connect them to EDD by robo-dialing it — which in turn adds to the congestion,” Staff Writer Carolyn Said writes.

The state agency, so critical a resource for so many Californians during these hard times, has already monumentally failed the state’s citizens through the disastrous scandal in which it has paid out something on the order of $31 billion to scammers — including prison inmates; including someone cutely identifying themselves as “Dianne Feinstein.”

As many as one out of three of the claims made to the department during the depths of the pandemic may have been fraudulent, the department itself admits.

Nothing in recent bureaucratic memory could beat that outrageous wrongdoing.

But for Californians with legitimate rights to unemployment benefits not being able to get through on the phone to the agency to even begin applying for benefits, so that they have to hire robo-callers to do it for them with money they clearly barely have, is kicking members of the citizenry when they’re already down.

And Chronicle reporter Said says there’s another related problem for some seeking access to the EDD. Taking on clients who don’t speak either English or Spanish — over 2 million adult Californians — a different kind of broker offers to fill out the EDD paperwork, for a price. That can be helpful, just as the robo-calling can be, but these brokers often refuse to turn over log-in information and keep their clients, many of whom don’t have access to computers, paying them every two weeks when claims have to be updated.

As the call volume to the EDD continues to rise, the agency is unable to pick up way too many times.

According to the department’s own records, on one day in April, over 37% of calls were simply not answered. And here’s the thing — once you do get through, you will be placed on hold for an excruciatingly long time. After a Brea bartender forked over $20 to one of the companies doing the automatic calling, she did get through within 15 minutes — and then waited two hours on hold before being able to speak with a live person, who solved her problems.

“We never encourage folks to pay for services they can get for free,” an EDD spokeswoman told the Chronicle.

Such an attitude toward the beleaguered public is an (almost) unbelievably callous attitude from a state agency currently setting records in delivering very cold comfort indeed to Californians who have been put out of work by a global pandemic. Who among the state’s political leaders will step forward to bring reform to these apparatchiks?

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President Biden’s expansive and expensive vision for government

President Joe Biden’s spending binge is far from over. On Thursday, the president outlined his vision for a larger, costlier government fueled by higher and costlier tax increases. The president regrettably affirmed his idea of turning “crisis into opportunity” is to ram through a partisan agenda solely aimed at growing power of the federal government.

Since taking office, the president has called for $6 trillion in new spending. This is in the context of a federal government that, pre-pandemic, was already set to spend $1 trillion per year more than it was projected to take in for the next decade.

After passage of the $1.9 trillion spending package presented as pandemic relief, the president pitched the $2.3 trillion American Jobs Plan, which he spoke about at length on Thursday.

The plan, which cobbles together some infrastructure spending with a grab bag of miscellaneous spending and crony capitalist giveaways to select industries, was described by the president as “ a blue-collar blueprint to build America.”

It’s less a serious blueprint and more of a wish list. And worse than that, it’s mostly unnecessary. The federal government does not need to be doling out hundreds of billions of dollars to the manufacturing sector or electric vehicles sector, for example.

And most of the infrastructure spending proposed in the plan could be better handled at the state-level or by the private sector.

But, to bolster his supposed blue-collar bonafides, Biden used both the American Jobs Plan and his speech Thursday to reiterate his call for federalizing California’s Assembly Bill 5 by calling on Congress to pass the Protecting the Right to Organize Act.

He also called for raising the federal minimum wage to $15 an hour, despite the nonpartisan Congressional Budget Office estimating that doing so would put 1.4 million people out of work.

The president also took the opportunity to unveil yet another wish list bill, the so-called American Families Plan, which comes at a $1.8 trillion price tag.

Clearly, the president is not letting the now-fading crisis of the pandemic go to waste.

The president’s approach to governance was well-described by Reason Magazine’s Peter Suderman: “Point to the pandemic. Declare that it’s an emergency, and that something must be done. Then insist on an expensive, expansive policy overhaul that Democrats have pushed for years—first, in some cases, as a temporary measure, and then, inevitably, for much longer.”

Sen. Tim Scott, R-South Carolina, offered a necessary counterpoint to Biden’s vision.“Our best future won’t come from Washington schemes or socialist dreams. It will come from you — the American people,” he said.

He’s right.Americans do not need more interventionism, more spending, more taxes or more debt out of Washington, D.C.

Biden should pump the brakes on his expansive vision for big government.

It’s only a matter of time before more Americans begin realizing the costs and deleterious trade-offs of the president’s agenda.

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As people vote with their feet, California to lose a representative

Every ten years the Census Bureau counts the residents of the United States and determines the number of representatives in Congress that each state will have, based on its population. The total number of representatives will continue to be same, so states that gain population relative to the others gain additional representatives at the expense of states that have lost population.

This year for the first time in California’s history, the state has lost a representative. It is hard evidence of the lack of growth, even the exodus, of the state population. This cannot be dismissed as political spin or a talking point. The Golden State is flaking off.

In all, seven states lost a representative in the reapportionment, while five states gained one and Texas gained two.

Where did everybody go, and more importantly, why?

Along with California, the states that lost population relative to the others are New York, Illinois, Michigan, Ohio, Pennsylvania and West Virginia. The states that gained, along with Texas, are Florida, Colorado, North Carolina, Montana and Oregon.

From the perspective of residents, the success or failure of a state government’s policies may be indicated by factors such as tax rates, unemployment and housing starts.

The top marginal income tax rate in California is 13.3%, the highest in the nation. In New York, it’s 8.82%; in Illinois, 4.95% (flat rate), in Michigan, 4.25% (flat rate), in Ohio, 4.797%; in Pennsylvania, 3.07% (flat rate); and in West Virginia, 6.5%.

Among the states that gained population, Texas and Florida have no income tax. Colorado’s state income tax rate is a flat 4.55%; North Carolina has a flat rate of 5.25%; Montana’s top rate is 6.9% and Oregon’s is 9.9%.

California’s top tax rate applies to incomes above $1 million, but the state isn’t shy about grabbing money from people who are barely surviving. Taxable incomes above zero and up to $8,932 are taxed at 1%, then 2% up to $21,175, 4% up to $33,421, 6% up to $46,394, and it just gets worse from there. Relative to California, the tax rate of zero in Texas and Florida is highly attractive.

Texas and Florida are also building more new housing than California. In November 2020, for example, Texas issued nearly 20,000 building permits for new housing, while Florida issued about 11,000. California, despite a significantly larger population, issued just 9,000 building permits for new housing. Scarcity drives price increases, which helps to explain why the median home values in Florida and Texas are about $215,000 and $173,000 respectively, while in California the median home value is now above $500,000, according to data from Zillow.

Of the 50 states and the District of Columbia, California’s unemployment rate in March was ranked 47th at 8.3% tied with Connecticut and New Mexico, and New York was even worse at 8.5%, according to the U.S. Bureau of Labor Statistics. Florida, at 4.7%, ranked 19th.

While no single factor explains why people leave one state for another, California ranks badly in category after category, including the Census Bureau’s ranking of the highest poverty rate in the nation when the cost of living is taken into account. State residents are paying the highest taxes and the highest prices, and struggling with high unemployment. It’s long past time for state lawmakers to recognize that California is competing with other states for businesses and residents, and it’s losing.

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California teachers unions go all in on tax increases

“It all belongs to us” could be the mission statement of some public employee unions in California as they seek legislation to raise taxes in midst of the economic devastation wrought by the COVID-19 pandemic and response.

The Education Coalition, a group of nine statewide K-12 associations that represent teachers, administrators and other school employees, called on state lawmakers this week to “adopt additional revenue streams” to close what the groups say is a $20-billion budget shortfall for education.

The 2021-22 education budget signed by the governor includes $12.5 billion in deferred payments, as well as a projected reduction in the share of revenue that goes to schools under Proposition 98

The unions want the Legislature to eliminate what they call “tax expenditures,” defined as any deductions, tax credits, exemptions or exclusions that reduce taxes. Never mind that some of these provisions were enacted to incentivize desired actions, or that some were negotiated in order to pass legislation that otherwise would have been defeated. The unions’ point of view is that the high tax rates in state law are the “fair share,” and any provisions in law that reduce taxes are “unfair” to the schools.

The unions also want the high tax rates to be even higher. “The Education Coalition looks forward to working with the Legislature and the Administration in identifying and securing these revenues,” the California Teachers Association said in a statement.

Some of the tax increases on the wish list have already been introduced as legislation. Assembly Bill 1253 would raise the state’s highest-in-the-nation top income tax rate from 13.3 percent to 16.8 percent. Another bill would enact a wealth tax that would impose an annual tax of 0.4 percent of a state resident’s “worldwide net worth in excess of $30,000,000, or in excess of $15,000,000 in the case of a married taxpayer filing separately.” This may sound like a document from the Kremlin archives, but it’s Assembly Bill 2088 in the Legislature.

Because of California’s progressive income tax, 0.5 percent of taxpayers pay more than 40 percent of individual income taxes in the state. That sounds like more than a “fair share,” but for some union leaders, nothing less than “all of it” will ever be enough.

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California still unprepared for online learning

Gov. Gavin Newsom last week announced that the state will not allow public schools on its COVID-19 “watch list” to reopen on their usual back-to-school schedule. The list, as the health department explains, includes “counties where coronavirus trends are getting worse.” All Southern California counties have been on that list for at least two weeks, which means disruptions this fall.

The California Teachers Association sent a letter earlier this month to the governor and legislative leaders that generally opposes a timely reopening. The union complained that districts “don’t have the necessary resources or capacity to maintain even the most basic prevention measures” to allow for in-person schooling.

Likewise, State Superintendent of Public Instruction Tony Thurmond last week held a virtual press conference, where he echoed these concerns. “We know most school districts are going to open in distance learning,” he said. “That means we have to really move quickly to make a dent in the number of folks without a computing device or a hot spot.”

Yet a new report from the Sacramento Bee found that school officials aren’t nearly ready for online learning. It found 20 percent of the state’s student population “didn’t have the technology necessary to participate in distance learning.” Districts lack 700,000 computers and 300,000 hot spots – even though the recently approved budget earmarks $5.3 billion for local schools to meet these distance-learning needs, the Bee reported.

That’s a shocking development, given that California’s schools systems have had months to prepare for the new school year. Schools shut down in March and nearly five months later they are as ill prepared for the classroom studies as a student who didn’t study for that long-expected final exam.

The state’s schools have seen their budgets increase significantly over the last few years, but they remain painfully unable to adapt to these unusual circumstances. We can understand why state officials want to be careful about reopening schools, but the Catch-22 is unfair for students. Officials don’t want to reopen classrooms, but they haven’t adequately geared up for distance learning.

By contrast, many of California’s private and charter schools have been more adept than the traditional public schools at preparing for web-based alternatives in the face of the coronavirus situation. In fact, some charter schools report a wave of renewed interest, given that they have effectively combined online elements in their curriculum for years.

Last year, at unions’ urging, the governor signed laws that severely limit charter-school expansion, with one measure even imposing a two-year moratorium on new online charter schools. During the current crisis, one teachers’ union has listed some potential policies, including further charter restrictions, as a way to free up classroom space and financial resources for traditional schools.

Whatever the problem, school officials point to a lack of public resources. But that’s not a credible reason why these well-funded districts can’t even get the online educational basics right. California’s public-school system is a bureaucratic enterprise, hobbled by union work rules and layers of administration.

Such a bloated system simply is incapable of responding adeptly to the unusual challenges posed by a pandemic.  It might be news to state education officials, but the answer is not to throw more money at this problem, but to increase the number of choices for students.

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