Sally Pipes, Pacific Research Institute

The Philadelphia Society Regional Meeting

October 16, 1999, Los Angeles, California

"As California goes, so goes the nation." You've all heard that saying, which I think is generally true, in culture, in fashion, and in politics.

Back in 1978, Proposition 13 launched something of a national tax revolt, and than Governor Jerry Brown, a downwardly mobile politician who is now mayor of Oakland, first opposed the measure, then took credit for it.

More recently, in 1996, Californians overwhelmingly approved the initiative making it illegal for government to give preferences to people based on their race or gender, the same concept we find in the 1964 Civil Rights Act.

In Proposition 209, California gave voters their first chance to veto measures that had been imposed upon them by politicians and faceless bureaucrats. The measure survived both frontal and back-door assaults by the race-preference lobby, including the ACLU. It has inspired similar efforts in other states, such as Washington State where I 200 passed in spite of efforts by Eddie Bauer, US West, Starbucks, etc. to defeat it. It even sparked an effort in Congress.

Ward Connerly, who led the initiative to victory in both states, has become a national figure.

California's Prop 227, passed in 1998, practically eliminating bilingual education in the state, and has inspired those attempting to do likewise in New York and elsewhere.

Ron Unz, who launched 227, is now talking about seeking the Republican nomination to run for the U.S. Senate against Dianne Feinstein. If elected, he promises a federal measure to eliminate bilingual education.

It would be comforting to think that the west-to-east flow is always for the good. But it would be a mistake. We can only hope that some California trends here do not pack their bags and head for Washington and other states.

For unfortunately, California leadership now shows a profound distaste for democracy itself.

As you may have noted, California is currently a one-party state, with a Democrat in the governor's office and Democrats holding sway in the Senate and Assembly.

This is a party controlled by the same special interests that resisted Proposition 13, Proposition 209, Proposition 227, the three-strikes law, and other measures. It is a party still smoldering from the years when Governor Pete Wilson held sway in Sacramento. The Democrats are now eager to turn back the clock to the days when special interests of the left got everything they wanted, and more.

In Governor Gray Davis they have a man willing to go along with them on key issues. What inspires special interests is the Governor's profound antipathy to the state's voters.

So in California, as we approach the year 2000, "Democrat" is something of a misnomer. Our initiative process is one of the few examples of direct democracy. But inside dealing has been used to quash direct democracy in California.

Worse, the governor is both willing and eager to blunt a cutting-edge issue.

Lady Margaret Thatcher saw the damage statism could do in the West and launched a revolution of privatization, trimming the "nanny state" down to size. The concept is simplicity itself. Many services provided by the government could be accomplished better and cheaper by private entities.

Formerly socialist regimes have made the same discovery since the end of the Cold War. But as they go forward, California goes backward.

Former California Governor Pete Wilson did not always find favor with conservatives, but he did a decent job at holding the line on the growth of government, resisting the greed of public-sector unions, and privatizing some state services.

Governor Gray Davis has now reversed that dynamic. He created a new office on government innovation -- how's that for a contradiction -- and to head it picked a lawyer, exactly the sort of person who has a stake in a bigger and more expensive government. That seems to be the type of "innovation" the governor has in mind.

Davis quickly agreed to raise the wages of state workers and appointed union leaders to key jobs where they had little expertise. More important, he began to reverse privatization.

One area Wilson privatized was janitorial services in state buildings, sending these out to bid. This worked well. It expanded private-sector jobs, many of them entry-level positions, and saved the taxpayers money.

Davis unilaterally ended that practice and will hire new state workers to clean the buildings, at approximately twice the cost.

Union workers only represent about 14 percent of the work force today. Any growth in membership is limited to the public sector. For example, in a huge setback, strawberry pickers recently rejected a bid by the United Farm Workers to organize them.

So the Davis action, along with his nullification of Prop 187, represents a kind of minority rule. The same principle applies on another cutting-edge issue: education.

In spite of what you may have heard, education in California is a for-profit industry. Textbook publishers, food services, bus companies, paper manufacturers, building contractors, all rake in billions of dollars from California's massive government school system. By law, education is the state's largest expenditure, more than $40 billion every year.

Before these dollars actually reach children in the classrooms, these billions must trickle down through four layers of bureaucratic sediment: federal, state, county, and local. After that journey, not much is left.

Those who operate the government system like it very much the way it is, with its low standards, advancement by seniority instead of merit, short school year, "whole-language" reading, "new" math, and social promotion.

Clearly, California leads the nation in junkthought.

That is why, in student achievement, California languishes near the bottom, in the neighborhood of states such as Mississippi and Arkansas.

State superintendent of public instruction Delain Eastin is a former assemblywoman and rabidly partisan Democrat. For her, it's all a question of money. She should know.

When state auditors discovered up to $50 million in fraud connected to adult education programs, instead of correcting the problem, she proceeded to fire those who brought the issue to light. The money went to left-wing organizations with ties to state politicians such as lieutenant governor Cruz Bustamante and speaker Antonio Villaraigosa.

Governor Gray Davis is also a partisan Democrat and he knows that money is not the problem in education. "My notion," he says, "is to lift the performance of every actor in the system by sheer will alone: the principal, the parent, the teacher, the student."

There you have the California creed. Good intentions will get the job done. Davis' actual plan includes intensive reading programs, a mandatory high-school exit exam, and more accountability for teachers.

Nothing in that list will disturb those responsible for the dismal state of education in this state. Of more interest is what Davis did not mention.

California was the second state to allow charter schools -- deregulated schools within the government system. These schools have proved popular with parents, particularly in the inner cities, where reform is most needed.

Charter schools have given a measure of control back to parents and local organizations, but teacher unions and education bureaucrats have fought them every step of the way.

Charter schools in California offered innovative home-schooling and distance learning programs. But recent legislation curtails or eliminates those programs, at the very time when they are starting to improve performance and expand access.

Charter schools, it should be remembered, came as a response to a ballot initiative that would have established parental choice in education. This measure (Prop 174) lost because of more than $10 million in spending by teacher unions, but the desire for choice has not departed. In fact, it has grown stronger, and the Governor knows it.

Listen to this amazing statement. If we do not fix the schools, Governor Davis said, "we're looking at vouchers or some other seemingly attractive concept that will be imposed on us by the voters."

Here again, in education policy, we see the open distaste for democracy and disrespect for voters. We saw the same thing with billionaire candidate for the Democratic nomination, Al Checchi, who called our initiative process "legislative vigilantism."

In this mindset, if Californians establish school choice by a vote they are imposing it, as though it were some kind of penalty. By this standard, the voters imposed Gray Davis and Delaine Eastin on the state and Bill Clinton on the nation.

And who is the "us?" Who will have vouchers "imposed" on them? It's the professional and reactionary class of politicians and bureaucrat.

This gang opposes all efforts to allow parents the freedom to choose the type of education their children receive. But Governor Davis may be more prophetic than he knows, because his plans will do little or nothing to improve education in California.

The state's non-partisan Legislative Analysts Office (LAO) has endorsed a pilot program of vouchers, and groups in the state are scrambling to put another school-choice initiative on the ballot. Much of the support comes from Silicon Valley, where high-technology entrepreneurs find that the state's government education system is not producing qualified workers, and who must increasingly look abroad for people who can get the job done.

More interesting, some state Democrats, even left-wingers such as Tom Hayed, are warming up to the choice concept.

You can see this in editorials in the Sacramento Bee, a kind of Democratic Party newsletter. Choice enjoys strong support in minority communities, where leaders see it as the new civil-rights issue. The bloated government education system is like the Soviet Union at its point of collapse. It still commands impressive power, but it cannot inspire belief. Its days are numbered.

So, yes, Governor Davis. We agree with you.

Voters may indeed be willing to "impose" school choice on the state, sooner rather than later. With Milton Friedman and other pioneers of educational choice, we support and applaud such a move. And we hope this inspires the other 49 states, so that all people have the ability to choose their schools as a matter of right.

Health care is another politically charged issue in this state, the birthplace of managed care.

State Democrats are still smoldering over the rejection of Clintoncare, the massive imposition of government medical care which supporters in this state like to call a "single-payer system." Such a system was on the ballot here in 1994, Prop 186, but California voters turned it down by one of the largest majorities ever.

A single-payer system would be more accurately described as a health-care system operated by the Post Office or the Department of Motor Vehicles.

We already have this in Canada, and it works best when you stay perfectly healthy or when you wait so long for treatment that you get better all by yourself or you die!

Nationally, supporters of this system have been trying to smuggle it in through the back door, through policy for seniors and children.

Seniors on Medicare are forbidden to seek care outside of the system and children are now being told they need a "health home" in the form of school-based clinics.

More practically, California is now going through what we might call HMO-phobia. In this process, politicians imagine that they can help people by forcing private companies to provide certain services.

In late September, Governor Davis signed a 21-bill legislative package that requires HMOs to cover mental illness services, early cancer screening, and contraception. The bills also allows patients to sue HMOs for denying necessary services, and to challenge health-care decisions made by HMOs through an outside review procedure.

Davis is hoping that as California goes, so goes the nation.

He cited these measures as an example for a national patients' bill of rights and said, "It's time to make the health of the patient the bottom line of every managed-care company in California."

On the face of it, this sounds good. For example, if mental illness is real, then insurers should cover it, to the same extent they do physical ailments. But mental health parity legislation is not a civil-rights issue.

It is an issue of whether government should force private companies to do something that is against their business interests and which could have severe unintended consequences for all Californians.

Increased mental health coverage will cost money. This increases the cost of health-care premiums.

Academic research concludes that mental-health parity laws can increase premiums between 2.5 and 8.7 percent in the first year alone.

Increased premiums increase the number of uninsured to increase. As premiums go up, many businesses, especially small businesses, decide that they can no longer afford to offer medical benefits to their employees.

Higher premiums may also deter individuals who are not covered by their employers from buying policies for themselves.

A study by the Galen Institute found that states with aggressive health insurance mandates of all kinds, suffered a 25.6 percent increase in the number of uninsured between 1990 and 1996, compared to only 7.2 percent in states without aggressive mandates.

So for all its rhetoric and intentions, the current California plan will only make the health care situation worse. Plus, of course, it will provide a windfall for trial lawyers, a key special interest of the Democratic party. The real problem here is a double standard.

Health insurance is deductible for employers but not individuals. We have made a small victory in this respect in Sacramento.

(Davis' recent budget included full-deductibility of health insurance costs, phased in over several years, for the self-employed who purchase health care.) Tying insurance to employment creates group policies that are inflexible and which must try to please everyone.

The solutions are to remove health-care mandates, which drive up the cost of insurance for everyone, and to offer equal tax treatment for those who purchase health care on their own.

This will mean that more individuals will purchase insurance that meets their needs.

Medical savings accounts can also help individuals with out-of-pocket expenses, a much better plan than having insurance cover these costs.

We could go on. No industry is more cutting-edge than high-technology, a huge generator of jobs and wealth for the state.

But California politicians of both parties have done nothing as federal politicians target the Internet with taxes and regulation. We recently met with a California tax official who said that it was not a question of whether to tax the Internet, but how.

Governor Davis, who is supposed to be a centrist moderate, also signed a bill mandating that service stations provide free air and water.

Now we're all waiting for a state mandate for free hors d'oeuvres in every bar.

In the end, this is why we need think tanks. Too many people have ceased to think. But that is where we are, a counterrevolution determined to turn back the clock to the days when Big Government had its way.

It takes a special kind of mentality to reverse privatization, but California politicians are up to the task.

It is the people of this great state, not the leadership of a bloated, reactionary establishment, who will make California a cutting-edge state in education. They will do this when they approve -- not impose -- a system that allows them to choose the schools their children attend, just like those who benefited from the G.I. Bill.

While we fight for school choice, smaller government, an unregulated Internet, and health care based on family values and free-market principles, we are alarmed at the disdain for democracy shown by the California elite. We are doing all we can to ensure that, in this crucial area, the rest of the nation "does not go as California goes."

Thank you very much.