Monday, January 21, 2013

The Streets Should Fit the Trees.

I was visiting family in Houston last week. Driving around, I couldn't help noticing signs like the one on the left. The Houston Independent School District  went to their voters in the last election with a pretty big ask - just short of $2 billion. I had suspected the bond election had failed -- the generally accepted wisdom regarding education in Texas is that it's underfunded and lacks support. But I was wrong -- Houston came out 2-1 in favor.

$2 billion is a lot of money, but it's good to keep it in perspective.  HISD has over 200,000 students, while my little town, Sonoma, has about 4,600 in its school district.  So for Sonoma, that'd be around a $40 million bond measure.  Interestingly, Sonoma had a bond measure of about that size in 2010 -- Measure H -- and it received almost exactly the same support as the Houston bond.

OK John, so what?

Texas' unemployment rate at the time of the Houston bond measure was 6.1%. California's at the time of Measure H was 12.2%.

6% unemployment is right about what (monetarist) economists generally think is the (suspected) value of the NAIRU, or the non-accelerating inflation rate of unemployment. This is basically the level of unemployment that keeps a lid on inflation.  In the most simple terms, monetarists argue that some unemployment is a result of people doing things like switching jobs, and not because the economy is underperforming, and that if unemployment's at 6%, the economy's probably operating fairly normally.  Thus, there aren't a lot of politicians that get terribly excited (worried?) about 6% unemployment.

12.2% is entirely different.  12.2% is considered disastrous.  American Conservatives (well, at least the Wall Street Journal) argue, for example, that the French economy is in a severe crisis, with stagnant growth, steadily rising per unit labor costs, and chronically high unemployment.  However, France's unemployment rate has never been over 11.5% -- at the time the Wall Street Journal wrote those words, it was 10.1%.  You can imagine what those editorial writers think of California's economy.

Most people reading this will see where I'm going, but it never hurts to spell it out: Sonoma's voters approved their bond measure in the middle of an economic collapse. What would the voters support if the California economy was turning in a performance like that enjoyed by the Houston voters?

This segues into a broader issue, though.  While economics and education generally aren't linked in discussions in California, improving schools and reaching out to students can only help so much when the child's parents are out of work. In 2009, Ann Huff Stevens and Jessamyn Schaller of UC Davis published a study that examined the relationship between parental job loss and children’s academic achievement. In 2011, the Washington Post's Suzy Khimm drew attention to the story.  The research  carefully controlled for distorting effects, and after doing so, determined that parental job loss increased a child's chances of being held back a grade by 15%.  After properly excluding any other possible causal factor, the study determined that the effect completely disappeared if the parent had simply been able to get a new job. While the study's metric was solely students who failed a grade, I think it is safe to conclude that the decrease in academic performance is probably far broader.

I can hear Captain Obvious in the audience, thinking to himself "John just proved that a parent losing their job can screw up their kid's life!" So what's the point?

"Jobs Since the Recession"
Cal Facts 2013
California Legislative Analyst
A lot of people sense that the economy has problems, but they're unclear on the specifics. Why does the economy have problems?

In aggregate, the problems faced by California are really linked to a couple of sectors. Since 2007, California has lost nearly 900,000 jobs in construction, manufacturing, and transportation. Perhaps 100,000 of those jobs have come back since 2010 -- but none have been in construction or manufacturing.

Manufacturing's losses are significant but I think they're not as directly relevant to a place like Sonoma as they are to, say, Los Angeles. Los Angeles (surprisingly to many) is home to lots of manufacturers --  in everything from  clothing to aerospace to jewelry.  

LA's problem is not Sonoma Valley's problem. Sonoma Valley's problem is construction.

The easy rejoinder there is "well, there's been a collapse in real estate values, what do you expect? Nobody wants to build houses."

That argument might work for the State at large, but Sonoma Valley's home prices have done better than average, and there are substantial efforts to engage in new construction, particularly concerning facilities that cater to tourism (leisure & hospitality), professional services, health services, and agriculture.  There's even some home construction (especially remodeling) going on.  Businessmen and women are trying to get things done.

Instead, in nearly every single instance, the same set of issues are coming up over and over again. As a practicing attorney, I can tell you that each project that someone comes to talk to me about has (or, invariably, will have) the same basic problem, which causes intelligent and hard-working businesspeople to throw up their hands and oftentimes abandon the entire effort.

That issue is California's thicket of minor legislation.  The problem is not a new one. In 2004, The Economist newspaper (magazine) wrote an article on the condition of California's economy, after the dot-com collapse but before the housing implosion.  To summarize their conclusions, unlike some other states in the U.S., there are different layers of overlapping government in California, and often those governments work at cross-purposes. The survey noted that places like Texas offer businesses one-stop shops, but that California presents more of an obstacle course. The authors pointed out that while costs are a problem, the bigger problem is generally unpredictability, with the sudden imposition of new rules (and charges) causing projects to slow down or to stop altogether -- the destructive consequence of the thicket of minor legislation.

I see this going on nearly every day.  From urban infill to brownfield redevelopment to simple remodel projects ... even habitat restoration efforts run into a near-impentrable maze of agencies and authorities, whether local, county, state or federal in nature.  Guiding projects through this effort is, of course, what lawyers do, but from experience, I know that business depends on understandable rules, and our government generally fails us -- that we fail ourselves -- in that department.

No one wants to make Thneedville's mistake in Sonoma Valley, or indeed anywhere in California. Our natural endowment is why many of us are here in the first place.  That's not the issue. Reducing the impact of the thicket of minor legislation when we seek to maintain existing structures or reuse already-developed sites would substantially benefit our local economy, and start strengthening the economic base that can provide increased financial support for our schools.  I can tell you that the Economist is on to something when they point to the thicket of minor legislation as the problem holding back the State -- and ultimately, holding back our efforts to improve education.

Which really brings me to my final point.  In 2009, my City decided that nearly every single tree on my street should be cut down -- no joke! If there's one issue that can really get my (and my wife's) attention, it's someone who wants to chop down trees without a (very good) reason.  After looking at the plans the City put forward, I pointed out at the City's public meeting on the issue that the City was trying to make the trees fit the street, when what the City really should have been doing was making the street fit the trees.

The problem that both my Valley and my State have encountered is that the economy and education, like the streets and the trees, need to fit one another.  We should not forget that one is more important than the other -- but we also have to pay attention to both if we want to be able to take care of either.