Jack Guerrero

We cannot afford more job-killing legislation, especially when California’s economy is facing recessionary headwinds. Speaking as an economics researcher and a one-time university lecturer in statistics, I can confirm that empirical research over the past 70 years reveals that minimum wage increases reduce employment. By arbitrarily raising wages, the net effect is a widening gap between the supply and demand for workers at the new price point. If we really want to reduce poverty and improve living standards, we should focus policy on skills development for the modern workforce, and on creating a favorable environment for businesses and employment opportunities to thrive.

Sadly, state government policies are further widening the income gap between rich and poor. Out-of-control gas prices and taxation schemes disproportionately affect working families who direct a greater share of their disposable income to consumption. The shutdown of government schools short-changed working class communities and exacerbated the education gap. State policies routinely cripple small businesses (the backbone of our economy and the source of employment in disadvantaged communities) by raising taxes, subverting jobs and over-regulating businesses. Rampant government corruption cheats residents, encroaches on their wages, and diminishes quality of life. We need serious education reform, lower taxes for working families and an end to government corruption.

The tax burden in California is the worst in the nation, all aspects considered. Many of these schemes (like California’s notorious gas tax) are regressive because working-class families spend a greater share of their disposable income on consumption. The highest sales tax and property tax rates in the state are also located in the most disadvantaged communities. This is unacceptable and only furthers the burden on small businesses and working-class families. I support lower tax rates across the board, to reduce the burden on families and to mitigate California’s destructive environment for jobs and businesses.

The top 1% of income earners in the state of California contribute 50% of California’s personal income tax. Their top marginal tax rate is 13.3%, which for 2022 is the highest in the country. While progressive tax structures based on income level are appropriate, the excessive rates across the board are generating pernicious consequences for our economy. Business owners and high-wage earners, including innovators and job-creators, are fleeing the state at unprecedented levels. The solution is to cut tax rates across the board, and to create a favorable business climate to unleash the full wage and employment potential of the private sector.

The state’s unfunded pension liability presents the single greatest threat to the long-term fiscal stability of the state. According to Stanford University economists, the unfunded pension liability for CalPERS, CalSTRS and the University of California combined stands at a staggering $1 trillion! As a former pension auditor and university lecturer in statistics, I can confirm with mathematical certainty that the system will fail. It is completely unsustainable. The solution begins with telling the truth and then coming together as stakeholders to reform the plan for future employees, and for all unearned deferred compensation across the board.

I believe the state should divest from companies that operate in turbulent markets (particularly those with unstable government regimes) and those companies that follow less-than-transparent financial reporting. Many Russian companies operate with limited disclosures or unreliable accounting standards, for example. In any case, the decision to divest (or invest) in any sector or geography should be based on return on investment, risk assessment and economic analysis pursuant to the fiduciary responsibility to maximize return for taxpayers and constituents.

Investment policies should conform with the fiduciary responsibility to maximize return and minimize risk. Regrettably, the unrealistically achievable discount rate (7.0%-7.5%) used by the pension fund boards (and by fuzzy math politicians) creates perverse incentives for the funds to invest in risky assets. A greater share of investments for CalPERS and CalSTRS is now directed to private equity funds, which do not subscribe to the same standards for financial transparency. Similarly, the funds are also investing in foreign companies, which operate in turbulent markets with unstable governments. Investment policies should focus on maximizing return, demanding financial transparency across the boards and upholding the highest accounting and disclosure standards.