Office Hours: Jennifer Imazeki, economics

by Leonardo Castaneda

This week, The Daily Aztec is starting a new series called Office Hours, featuring interviews with San Diego State professors discussing current news topics. These experts explain everything from local elections to international policy. The Daily Aztec spoke with economics professor Jennifer Imazeki about California’s economy and the benefits and shortfalls of Propositions 30 and 38. The interview has been edited for size. Visit thedailyaztec.com for the full transcript.

The Daily Aztec: What do you think the biggest challenge facing the California economy is right now or in coming years?

Jennifer Imazeki: California has, for whatever reason, developed this culture of direct democracy, right, (with) the propositions. And because of Prop 13 decades ago, it is very difficult to increase taxes in this state. It is very easy to increase spending, especially when you are going to the people and asking them, “Do you want this good thing, or that good thing.” It’s really easy for the public to say, “yes, we want all these good things” and they rarely want to pay for them. It’s just human nature but unfortunately, it is the way things get done in California.

DA: Do you see California’s economy improving?

JI: I don’t necessarily think California is in a worse position than a lot of other states in terms of potential for growth and things like that. There’s always this argument about if we increase taxes, businesses will flee and all that kind of stuff. I work in educa- tion and the conversations I have with people tend to be not around anybody leaving the state … so much as employers elsewhere hoping to lure Californians away from California

… Not necessarily because of the tax burden or anything like that, but because our schools have so many problems.

DA: Do you think either Proposition 30 or 38 will do enough to reinvest in education?

JI: Both of them are good from the perspective that they raise revenue that is sorely needed … What surveys have shown repeatedly is that people are willing to pay higher taxes to fund schools. When you ask the question that way: “Are you willing to put more money into schools?” they say yes. “Are you willing to put more money into schools even if it means higher taxes for you?” Yes. Surveys repeatedly show people are willing to pay more if it means the money goes to schools. So, the big issue is: How do we ensure that the money actually gets to schools? Because, in California, even though people are willing to pay more for school, they don’t believe that the money will actually get to the schools. So both Props 30 and 38 make these claims about the money going to education and the biggest argument going for Prop 30 is that the budget was passed assuming Prop 30 would.

And to me the strongest argument if you’re a proponent of education, regardless of everything else in it, is that that we know if it doesn’t pass, these things will happen, these cuts will happen … Basically they made a budget expecting a certain amount of money … Prop 98, which passed decades ago, determines how much of the general fund goes to K-14 (kindergarten through community college) education. Unless the Legisla- ture votes to specifically put Prop 98 aside, they don’t have a say over how much money goes to pay for K-14. But that is also why the UC and CSU have gotten hit—because our budgets are still discretionary. There is still wiggle room for the legislature

… Prop 38 doesn’t really have any impact on the CSU at all because the money from Prop 38 goes into a fund that can only be used for K-14.

The only impact that it might have is that there is this provision in Prop 38 to use some of the money for general obligation bond payments. And that is something that would otherwise come out of the general fund so it does kind of supplement that one piece, one item that is in the general fund.

DA: And in theory those savings could be passed on to…

JI: Other parts of the budget; no guarantee what parts of the budget it goes to. There’s nothing in Prop 38 that specifies about the CSU or UC, or anything about what the impact had, was that it wasn’t guaranteed money for education.

JI: It does say that the money raised from Prop 30 goes into a fund that can only be used for education. At least this is my understanding and I could be wrong, but if I understand correctly it essentially, even though it is earmarked for education, it’s technically part of the general fund. There is an article in The Sacramento Bee and there is an analogy they use, and I think it’s accurate. Suppose you got your monthly expenses and you’ve been paying $400 a month for groceries and your mom just suddenly, on a perpetual basis, gives you a $200 gift card that can only be used for groceries. Because money is fungible, you spend that money on groceries but that frees up $200 that can be used for other things. It doesn’t mean you’re spending more on groceries.

DA: You’re not going to spend $600 on groceries, you’re going to move that money out to other expenses.

JI: People who argue (Prop 30) isn’t new money for education—my understanding is that’s basically what Prop 30 is doing. It’s bringing money that is earmarked for education but it doesn’t say you can’t reduce what was already being spent.

DA: It counts toward the mandated amount of funding.

JI: That’s true this year, but going the general fund. If we get $5 billion from Prop 30, then the $5 billion that was going to be spent on education can now be used somewhere else. It doesn’t guarantee that the amount going to education is going to expand.

DA: So if Proposition 30 passes, it could maintain the status quo with the current level of funding. If it fails, then it automatically leads to cuts.

JI: Right. The other thing that gets even more complicated is Prop 98. (It) says that if the general fund increases, spending for education increases.

DA: Because it’s based on a percentage of the whole.

JI: Going with the gift card analogy, the gift card could technically be con- strued as an increase in your overall income of $200. The analogy in the newspaper was: Say you got an agree- ment with your landlord that if your income increases, he gets 50 percent. So he’s expecting you to give him $100 of that extra $200 that you got as a gift card. That’s the argument for why there would be more money for education. Prop 98 says that if the general fund goes up, money for education goes up.

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