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The original documents are located in Box 4, folder "Research on Ronald Reagan" of the
Foster Chanock Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
GERALD R. FORD LIBRABY
November 24, 1975
MEMORANDUM FOR:
JERRY JONES
FROM:
DICK CHENEY
D
You should be aware of the attached.
Attachment
November 3, 1975
SERALD
R.
MEMORANDUM
FORD
This is intended to be the report on my activities with
reference to the project stated above which is underway
by our mutual agreement. At the outset of my commitment
I indicated my desire to make a report which would outline
what I perceived to be the priorities of the research as
they emerged from the first months' sorting of available
information and sources of information.
I. The following seems to be the best priority for the
research and I am proceeding on this basis unless either of
you have some radical objections:
1. The Economy- I think we have all agreed that this
is the area where the President will make it or
break it nationally. In addition, it is the area
where Reagan's "record" of the conservative philos-
ophy falls apart easiest. Examples:
A. Statistics on the Reagan era budgets will
show that eight years of "cut, squeeze and
trim" yeilded a budget increase from
4.6 Billion dollars to 10.2 Billion dollars.
That is hardly what a conservative should
be doing. In addition, it is good to use if
he attacks with the growth of the national
budget.
B. While Governor Reagan was responsible for the
largest tax increase in California history.
Again, hardly "cut, squeeze and trim."
C. While trying to sell the public the concept
that tax reform had been accomplished the
facts show that only tax shifts occured while
Reagan was Governor.
D. If the Ford Tax Cut program can be pushed through
the Congress or any reasonable compromise, then
Ford Project
Page 2
the dicotomy of Reagan Tax increase
(the biggest in California History) can
be made with the Ford Tax Cut--at a time
when the economy needs the infusion of
dollars that the tax cut will provide.
E. The entire tax cut program is probably the
R.
BIALD
FORD
single most important thing on the legislative
front with large legislative/political impact.
Lou Harris says that 72% of the American
COUNTY
public says that they no longer get good
value from their tax dollars. When the cut
is successful, it would be well to emphasize
that it is an effort to help bring more value
for the dollars expended.
F.
Included in this entire area of the economy
will be the employment question. We believe
that statistics in California over the Reagan
years will have the effect of showing increased
unemployment while Ford will be able to point
to reduced unemployment while he has been Presi-
dent.
G. Reagan recently proposed a Federal Budget Reduc-
tion of some $90 Billion. We believe that
this can be shown to be nothing short of a tax
shift from the Federal Government to the
State and Local governments at a time when
local governments are already squeezed financially
and a shift of this magnitude could force even
more bankruptcies with New York being the
current example and Illionois being a probable
if such a massive shift were to take place.
2. Crime--We are exploring the possibility that we can. charge
Reagan with being soft on crime specifically liberal on
the parole of felons.
A.
During the central period of the Reagan Administrati
(1968 through 1972) the number of male felons
in California prisons declined more than 7,000,
from 23,405 to 16,061.
B. While it is true that part of that drop can be
attributed to the "probation-subsidy" program
enacted by the 1965 Legislature to keep so called
lesser criminals (burglars, check forgers, etc.)
out of state prisons, Reagan's administration
developed a very liberal parole policy. The
Ford Project
Page 3
number of male felons on parole increased
from 10,524 in 1968 to 14,533 in 1971.
C. During that period of time the Reagan
administration praised itself for its many
corrections reforms.
D. In 1973 Reagan's liberal parole policies came
to and end largely due to pressure for change
from law enforcement officials. Thus in
1973 and 1974 the prison population in
terms of male felons began to rise again
to the point of 21,547 when Reagan left office.
E. Going hand in hand with the above problem
are the following statistics on felony arrest
dispositions in California during the 1973
time frame:
R.
(1) Of the 233,000 persons arrested in
GERALD
FORD
1973 for a felony only 186,000 had
a complaint filed against them and
of those only 85,000 persons were
prosecuted. Of those only 42,000
were convicted of a felony. Worse yet,
of the 42,000 convicted felons only
5,000 were sent to state prison with
another 1,000 being sent to the Youth
Authority. 14,000 were granted
straight probation and another 16,000
were granted probation and served less
than one year in a county jail. Thus,
in California in 197,3 only 2.6% of
those arrested by the police for a
felony went to state prison.
3. Welfare--The Reagan Administration trumpeted its Welfare
Reform measures around the nation as an unheralded break
through in welfare costs. We believe that far from that
the decline in both welfare caseload and cost can be
dircetly related to the drop in unemplovment which corres-
poned almost directly with the drop in caseload and cost.
A. In April 1971 unemployment in California was 7.4
% adjusted seasonally and the welfare caseload
was 2,266,808. In September 1972 when the Reagan
crowing about reform was the loudest, the caseload
was 2,062,411 and the unemployment rate was only 5.9
B. Moreover, those categories which most directly
relate to employment were the areas where the
drops were registered. The AFDC unemployed
father caseload in the same time frame as above
dropped from 330,257 to 184,996. The general
Ford Project
Page 4
home relief category was down in the same
time frame by 87,586 to 52,331. Thus, of the
caseload reduction of 204, 397 for the time frame
examined, 180,516 reductions are directly
related to the improving economy.
C. The political use of this can again be to show
the difference between what Reagan says he
did and what the fact actually was.
4.
Energy-- I believe that this is a sleeper for the New
Hampshire primary since the state is so dependent on
energv to keep it moving through the severe winter months.
A. Mv plan here is to explore the Reagan PUC
appointments and their decisions. I beleive that
we can build a case for industry favoritism while
the consumer got screwed.
DEPALD
R.
FORD
B.
Politically, this could be used by saying that
while Reagan mouthed the line on energy just
like everyone else, he was busy screwing the
California consumer.
C. I am anxious to get at the Unruh files on this
one. This is a prevalent view of the Unruh
campaign as I recall it now.
D. In addition, I hope that we will have time to
explore the action or inaction of the State
Lands Commission where the Governor's Director
of Finance was a member.
E. The entire question of off-shore oil drilling
on state lands is a question which relates. to
the California energy scene and might yield some
surprising results which can be generalized into
Reagan's willingness to search for new petroleum
sources.
F. A review of the State Division of Oil and Gas
might turn up additional information of interest
if it doesn't fall out the bottom of our project
on the basis of how rapidly we can cover higher
priority items.
5. New York City--Once a fuller analysis of the Reagan
Federal Budget Reduction Proposal is available we may
find it useful to relate that analysis to New York by
showing how the proposal will only serve to worsen the
problem of State and Local entities by forcing more costs
on them without a corresponding increase in revenues.
I should think that this line of logic would really sell
in New Hampshire.
Ford Project
Page 5
6. Land Use and the environment-- This is a tough one
but may have some importance in New Hampshire. Reagan
signed legislation by Leo McCarthy in 1971 which made
selling of unimproved property and subdividing very
GERALD
R.
expensive and difficult because it caused the private
FORD
owner to have to have prepared environmental reports
and improvements not unlike public entities.
LIBRARY
A. There are questions of private property rights
here which might sell in the New Hampshire
neck of the woods especially the northern
parts of the state from what little I understand
about the demographics of the state.
7. Reagan signed into. law Cal-OSHA which has really
gotten the conservatives uptight over the last few years.
Since one of the big things we hear people on both
sides of the party fense saying these days is in essense
"government is regulating everything that I do and I don't
like that, " maybe we could use this as an anti-regulation
stand for Ford. (ie. the Federal law was bad enough but
why did Reagan have to make it even tougher for California
businessmen)
II. Strategy Thoughts
1. After discreet talks with a number of people ranging
from Reagans former opponents to some of his friends
it appears to me that the anti-Reagan attack with whatever
information we eventually produce should be carried on
as a second level campaign by those within the campaign
structure other than the President himself.
2. The President should continue (with refinements) his
current ploy of "As President I am doing these great
things
"
and "The Congress is failing to do
"
His should be the positive efforts with only allusions
to past Reagan sins.
3. A thought that strikes me with the size of New Hampshire
is that maybe we ought to think small. Bv that I mean
handle the entire thing (other than personal swings by
the President) as though it were a Congressional campaign.
At least from the standpoint of maybe mail. I can
foresee special interest mailings critical of Reagan
or positive on Ford based on what is turned.
III. Questions
1. Should we try to put togeter some of the famous Reagan
quotations that drive some folks right up the tree? (i.e.
" A tree's a tree. How many more do you need to look at?"
2. Do we want to review all Reagan's budgets and the bills
he signed in order to prepare a list of horrors that he
Ford Project
Page 6
forced on the good citizens of the state of California?
This could be useful in three above. My own feeling is
that this is probably substantially down the road.
IV. Sorry for the rough typing. I'm being so secretive about
all this that I'm scaring myself coming around corners.
Seriously, as you can tell, those areas that I feel are of
highest priority I have already pulled together enough things
to draw a more elaborate picture of the possibilities. I'll
look for you guys to push or shove in different directions.
Assuming funding I think our original time line is still OK.
BERALD
R.
FORD
LIBRARY GERALD R. FORD
The material which is assembled herein is a detailed
followup of the first three issue areas outlined in my
Nov. 3, 1975, memo. In addition, we have presented other
information which we felt we were able to put into a
usable format.
For each issue area there are three specific categories
of information provided.
First, there is a quick sketch of what we perce ve
is the popular concept of Ronald Reagan. Secondly,
we present Ronald Reagan quotations on the issue matter
at hand. These are usually older quotes since we felt
newer ones are more readily available to the committee
from other sources and because time would not allow a
total search. Thirdly, we present research data which
show that reality was often at wide variance with what
Reagan expected to accomplish as governor.
As is always the case, the task of making large
volumes of material into smaller and more usable volumes
is hazardous at best. However, we believe the material
presented is in its most flexibly usable format accepting
the time constraints involved. Naturally, we stand
willing to update and help implement if and when you desire.
We have a file of all Unruh press releases from the 1970
gubernatorial campaign which we have judged to be pertinent
to issuses which the Ford Committee may wish to raise. My
material.
2
ECONOMY
BERALD FORD LIBRARY
I. PERCEPTIONS
Reagan is perceived by many to have reduced spending.
Others believe, because Reagan said it to be true, that
the number of California state employees was reduced.
A quotation from his first inaugural address that he
would "cut, squeeze and trim". is a philosophy which
many people believe was implemented. Reagan talked
a great deal about putting government on a sound business
footing and establishing a climate in which business
and the free enterprise system could prosper. We believe
that it is possible with factual information to severely
damage the credibility of these popularly-held perceptions.
II. RONALD REAGAN ON THE ISSUE
"There is only one cause of inflation -- the government. =
Speech, Detroit Economic Club
Detroit News, March 29, 1966
"We are going to squeeze and cut and trim until we
reduce the cost of government. 11
Inaugural Message
Jan. 5, 1967
"Outside of its legitimate function, government does nothing
as well or economically as the private sector of the
economy."
Sacramento Bee, May 16, 1967
3
"We must reduce the government's supply of money and
FORD i GERALD LIBRARY
deny it the right to borrow."
Encroaching Control in "Vital Speeches"
Page 680.
"We have a government that is unfriendly to business. "
San Diego Union, May 29, 1966
"As long as California continues to grow in population,
and as long as federal policies keep us in an inflationary
spiral with wages and prices going up, we will have a
record breaking budget every year, meaning the budget will
or should increase by an amount equal to the increase
in population plus the percentage of increase in the cost
of living --- and that is roughly eight percent.
TV Report to the People,
July 9, 1967
"This administration has been accused of being business-
oriented. It is, but not in the sense of offering
special favor to any segment of society over others. It
is business- oriented in the application of sound
business principles to the solution of public problems. "
Speech, Governor's Conference
on Planning for Housing and Home
Ownership luncheon,
February 1, 1968
"Q. How is it for a man who is so economy minded that you
are about to spend more that any other governor in
California history?
"A. Well, I don't think there is any way that any
4
governor -- I have said repeatedly, publicly and to all
of you that every year so long as California increases
FORD 2. DERALD LIBRARY
its population and as long as inflation increases the
price we must pay for things we buy and the salaries we
must pay to our employees, there is going to be a record
budget for California."
Press Conference, Sacramento
Feb. 6, 1968
(Re: Reagan's comment that he balanced California's budget
without new taxes)
"We raised the old ones about $1 billion."
GOP fund raising trip, Milwaukee
Los Angeles Times,
Oct. 2, 1967
"We do not intend to balance future budgets by increasing taxes.
Instead we intend to balance them by making governments
more economical, by streamlining it. Like this year,
next year ---- and the years following - will be years
where we do not intend to spend one dollar more than
necessary of the people's money to conduct the people's
business. "
Speech, California Republican Assembly
Long Beach, April 1, 1967
"Funds needed to finance the deficit, state operations and
the continuing programs of assistance to local governments
are still greater than I had anticipated. I wish the sum
could be smaller, but the responsibilities which we share
for sound financial management of this state's government
5
demand that we confront and solve the fiscal problems
now.
Tax message to Legislature
March 8, 1967
"Government, to start with, cannot compete in the market
for talent with private business, but there is a way that
government can compete and that is by asking private
business to take a hand in government. "
Speech, National Automobile Dealers
Association Convention, Las Vegas
Jan. 29, 1968
"California has some needs and some problems that are
greater than almost any other state and yet in every
instance where there is federal aid connected with these
problems, California is not only financing its own, even
though it comes by way of the federal government, but we
are helping to finance lesser problems in other states. "
News conference, Sacramento
Oct. 8, 1967
"Q. Do you support the idea of unemployment coverage for
governmental workers?
"A.
I don't think that we like a private employer are
in a position of laying people off and telling them to
wait at home until we tell them to come back to work again,
which is usually considered with regard to unemployment
insurance. "
News conference, Sacramento
March 21, 1967
6
"Once upon a time, it was easy for a teenager to get
a part-time job because it was easy for a merchant or a
manufacturer to hire him. But that's no longer true.
Rigid minimum wage laws, high union scales and the mass of
paperwork involved in the withholding taxes, social
security, insurance and the rest make it difficult to
hire anyone on a part-time basis. This is largely a
GERALD R. FORD LIBRABA
federally-made problem and it's one we 11 be lucky if
we live long enough to see the federal government solve. "
Speech, Merchants and Manufacturers
Association, Los Angeles
May 16, 1967
"A big brother government can solve many problems for the
people, but it's doubtful that we'll like the price it
charges
The first order of business in Sacramento
should involve an all-out effort to utilize tax monies as
efficiently as possible. 11
1966 Campaign Speakers' Manual
"Our goal will be to cut the budget consistent with good
business practices. My purpose is to make government,
once again, a servant of the people at a cost the people
can afford to pay. 11
1966 Campaign Speakers' Manual
"Local or state taxes should not be used to redistribute
the earnings of the citizenry. The federal government has
pre-empted that field. The state's concern should be to
see that each citizen pays the same percentage of his
7
income in state and local taxes after payment of his
federal taxes. "
GERALD
A.
FORD
State of the State Message
Jan. 8, 1968
LISHAMA
"The entire (graduated income tax) structure was created
by Karl Marx. It has no justification in getting in the
government needed revenue. "
"A Time for Choosing,' speech before
Second General Session of the 71st
Annual Session of the US Savings and
Loan League, San Francisco,
Jan. 7, 1963
(Ronald Reagan sponsored a 1967 bill doubling, and in
some cases tripling, the state progressive income tax and
making it even more progressive by narrowing the tax
brackets.)
"As Governor I will
work to increase the state's
contribution to local school districts, to relieve the
growing burden on local property taxpayers
"
Mailer, published by Reagan for
Governor Committee, 1966
(Reagan has presided over a reduction in the state
percentage of school financial support from 38.4 percent
in 1966 to 34.8 percent in 1970, thus increasing the pressure
on property taxpayers.)
Reagan promised he would consistently oppose any effort
to provide for a withholding system for state income taxes.
"I think paying taxes should hurt."
Los Angeles Chamber of Commerce and
Junior Barristers Club, Los Angeles
Times, Oct. 25, 1966
8
(In 1970, Reagan endorsed withholding and included
it as an integral part of his tax program.)
BERALD
&
FORM
"Taxes in California have reached the breaking point.
They are the highest in the nation and $100 per person
above the national average."
"A Plan for Action, televised
announcement of candidacy,
Jan. 4, 1966
(In 1967, Reagan sponsored and signed into law the
largest state tax increase in the nation's history,
totaling $1 billion.)
Reagan said that government is interfering in people's lives
to the point that it has set limits on what businessmen
can deduct for gifts and other items when they pay their
income tax. "Business should have said so long as we
are legitimately spending the money in the belief that it
is producing profit, it isn't any business of the
government how much we spend. "
Speech, Chicago business leaders
San Francisco Chronicle,
Oct. 28, 1967
Ronald Reagan said Californians will not have to pay a
bigger tax bill on the state level nest year if he is
elected governor. "I am convinced that I can say to you
there will be no new tax increase next year ... There will
be some efforts made at economies in the present running
of this state. The total tax burden will not be increased."
Rally, Bakersfield, Los Angeles
Times, Sept. 18, 1966
9
"We pledged local property tax relief and I intend to keep
that pledge. "
Report to the People, Sacramento
March 31, 1968
"I'm the stingiest fiscal conservative you ever saw."
News conference, Sacramento
BERALD A. FORD
March 7, 1967
LIBRARY
III. RESEARCH DATA
A. State Employment
The California State Employees Association records
show that the following totals for the number of state
employees are accurate for Reagan's tenure as governor:
1967 -- 113,779
1968 - 114,036
1969 ---- 116,562
1970 --- 118,072
1971 -- 117,372
1972 -- 116,774
1973 -- 120,299
1974 --- 123,205
1975 -- 127,929
B. "The Economic Report of the Governor for 1974,"
transmitted to the California Legislature in March, 1974,
contains a number of Governor Reagan's own tables and charts
which, when digested, show some interesting statistical
information about changes in the California economy under
10
GERALD
A
FORD
Governor Reagan's leadership.
LIBRARY
1. General fund tax collections under Reagan jumped
astronomically in his eight years in office compared to
the two previous administrations in California. The summary
of state tax collections per $100 of personal income total
on page 84 of that report reveals that for the period from
1953 to 1959 (former Gov. Goodwin Knight) tax collections
per $100 or personal income rose from $2.99 to $3.14 ---
a 15-cent jump for six years.
For the period 1959 through 1967 (former Gov. Edmund
Brown Sr.) the taxes rose from $3.14 to $3.73 -- a 59-cent
jump.
For the period 1967 through 1975 (former Gov. Ronald
Reagan) the taxes rose from $3.73 to $6.17 -- a $2.44
jump in Reagan's eight years.
2. The same report shows that real spendable earnings
for a manufacturing worker with a family of three went from
$114.39 per week in 1966 to $115.10 in 1973, or a 71-cent
increase per week in seven years. During the previous
seven years, from 1960 through 1966, that same figure rose
from $103.34 to $114.39, or an increase of $11.05 in spendable
income per week.
3. Total state tax collections in California increased
from $3.4 billion in 1967 to $8.9 billion in 1975. In
the previous administration the increases had been from
$1.7 billion to $3.4 billion, a mere doubling of the
11
total collections. In the six years of the Knight administration,
total tax collections for the state increased from $1.1
to $1.7 billion. Interestingly enough, Reagan tries to
GERALD A FORD
cop out by saying that during his years as governor the
population was higher than it had ever been. While that
LIBRARY
is true, the facts as outlined in charts of his own 1974
economic report show that during the 1953 to 1967 time
frame California's growth per year on a percentage basis
was, in most years, three percent more. During the
Reagan years, that growth had slowed to the one percent
level. (Figures attached.)
4. Perhaps the most damning tax statistic is the
comparison of property tax levies on average dollars per
assessed value basis when considering the Reagan years
as opposed to the Brown Sr. and Knight years. During
the Reagan administration, the average tax rate per $100
of assessed valuation rose from $8.84 in 1966-67 to
$11.15 in 1973-74. The four highest percentage increases
in these levies all occurred in the Reagan administration.
By contrast, the average tax rate in dollars per $100 of
assessed value in the six years of the Knight administration
increased from $5.94 in 1953-54 to $6.96 per $100 in
1958-59. And, in the Brown Sr. administration, from $6.96
to $8.84 in fiscal year 1966-67.
5. California's personal income tax as a percentage
of the United States total income tax decreased during
the Reagan administration from 11.09 percent to 10.83 percent.
12
During the Knight and Brown Sr. administrations, the
percentages had increased. While Knight was governor
they went from 9.37 percent in 1953 to 10.68 percent
GERALD A. FORD
in 1959. While Brown was governor they went from
10.68 percent in 1959 to 11.09 percent in 1967.
C. Unemployment
As shown by the Reagan unemployment insurance quotations
in section II of this report, Reagan has a very low opinion
of the priority for solving unemploymnet problems.
1. According to statistics provided by the Department
of Employment, the seasonally adjusted rate of California
unemployment in January of 1967 when Reagan became
governor was 5.6 percent. In January of 1975, the
seasonally adjusted rate was 8.8 percent.
2. While unemployment was rising, California under
the Reagan administration was reducing its spending for
manpower development programs from $15.1 million in 1967
to $9.8 million in 1973. (This is the last year for
which spending figures are currently available.)
D. State Spending
Overlaid against Reagan's 1966 campaign promise to
"cut the budget consistent with good business practices,"
is the fact that Department of Finance records show
actual state expenditures rose every year of the Reagan
administration. The proposed state budgets for the
13
Reagan years are as follows:
1967-68 - $3.8 million
1968-69 -- 5.6
1969-70 -- 6.2
BERALD
A.
FORD
1970-71 -- 6.4
1971-72 -- 6.7
1972-73 --- 7.6
1973-74 --- 9.2
1974-75 -- 9.8
1975-76 -- 10.1
E. Business Climate
Based on Reagan's quotations to put government on a
more business-like basis and to encourage the free
enterprise system, the following information about how
the climate for business development and expansion changed
in the State of California during his administration is
pertinent.
1. According to the U.S. Department of Commerce,
between 1969 and 1973 California ranked 44th of the 50
states in the percentage increase of non-farm income.
Here is the toll of the statistics:
CAL-TAX NEWS
NOVEMBER 15, 1975
California Nonfarm Income
Growth Is Below Average
BERALD A. FORD
TRUBTY
One of the major indices of the econ-
1969-1973 NONFARM INCOME
omy is growth in income, particularly in
% INCREASE
nonfarm income.
California, in this respect, ranks 44th
%
of the 50 states, according to statistics
State
Rank Increase
from the United States Department of
Fast growing states:
Commerce. During the four years from
Arizona
1
68.3
1969 to 1973, California's non-farm in-
Florida
2
66.5
Source: U.S. Department of Commerce
15
2. According to figures from Tax Foundation, Inc.,
GERALD A. FORD
as presented in the April, 1975, newsletter of the California
LIBRARY
Taxpayers Association, only two states in the country
have average statewide property taxes per person which are
higher than California's. Property tax levies per person
range from $46 to $358. California's average is $348.
The U.S. average is $216.
3. "The Economic Report of the Governor 1974'
indicates that between 1966 and 1971 (last year for which
statistics are listed), net profits for California
corporations dropped from $5.6 billion to $4.8 billion.
By contrast, during the six years of Governor Knight's
administration, corporate profits rose from $2.5 billion
to $3.6 billion (1953-59). In Governor Brown's
administration, corporate profits rose from $3.6 billion
to $5.6 billion (1959-66).
4. In May, 1975, the California Taxpayers Association
reported that taxes per capita rose from $183.63 in the
first year that Reagan came to office to $401.52 in 1975.
5. The large California business inventory tax
(50 percent) is still a major deterrent to many businesses
locating within California. In fact, many businesses
maintain warehouse locations in other states, such as
Nevada, in order to avoid bringing that business and those
jobs into California.
6. Maurice Fenton, president of Fantus Company, a
16
FORDO is GERALE
subsidiary of Dun and Bradstreet, recently wrote an
article for Pacific Business Magazine entitled, "Relocation
Why are Companies Rejecting California?" His study shows
that California ranks dead last behind Utah, Idaho,
Arizona, Oregon, Washington and Nevada in terms of its
total approach to attracting business. Among the 48
mainland states, California ranks 47th.
F. Inefficient Use of Government Dollars
A number of Reagan quotations cited in this report
indicate that as governor he could have been counted on
to establish an efficient use of tax dollars and to work
generally for an elimination of government waste. The
following are but some examples of why we believe that
did not take place.
1. The Office of the Auditor General in California
functions to research in a non-partisan manner questions
of fiscal integrity put to it by the Joint Legislative
Audit Committee. In an August, 1974, study entitled
"Department of General Services Report on Review of State
Office Space Leasing VS. Construction Costs," the Auditor
General found that "by using $3.6 million of funds already
contained in the state's budget for leasing 535,000 square
feet of selected high cost office space, the state could
finance construction of office buildings containing comparable
space." The Auditor General then recommended that the
17
CORALD
R.
Department of General Services (headed by Reagan appointes
FORD
with the governor as policy setter) request that monies
currently appropriated on an annual basis in the state's
budget for leasing high cost office space be used instead
to finance construction of office buildings. The report
went on to say that "based on current lease rates in the
size of buildings discussed in this report, proper
implementation of this recommendation will result in
estimated cash savings to the state of approximately
$66 million over the remaining useful life of the buildings
after fulfillment of the construction and interest costs.
Further, the state will have full ownership of these
buildings."
Therefore, by using money which currently is expended
to lease property from private business, Governor Reagan
could have saved the taxpayers $66 million.
2. The Auditor General also prepared a report in
March of 1973 entitled "Veterans Farm and Home Building
Fund Report on Review of Operations." The purpose of this
fund is to make loans available to California veterans for
the purpose of purchasing homes or farms. In the 2½ years
by the end of 1970 and 1972, there was a curtailment in
the number of loans available to veterans. This curtailment
of loan funding produced the following results:
a. "An excess amount of cash has been accumulated from
bond sales loan repayments. From the year 1972, the balances
increased from a monthly average of $148 million compared
18
TOERALD
R.
to a $33 million average for the seven years prior ro 1971.
FORD
In November, 1972, a high of $168 million had accumulated.
LIBRARY
The June, 1973, balance was $129 million.
b. "Most of the excess cash was invested by the state
treasurer in the surplus money investment fund which
recently has yielded an average of 5.01 percent. A
July of 1971 bond issue of $50 million was sold at an interest
rate of 5.31 percent. Since July of 1971, investment of
this $50 million of excess cash has cost in excess of
more than $350,000.
C. "Proceeds from the sale of veterans bonds have not
been used to finance Cal-Vet loans.
d. "Veterans have been required to delay purchases
of new homes or obtain interim financing from commercial
sources.
e. "Funds now available for loaning exceed the
capacity of the administration to process loans. "
Criticism here is that while governor and during the
time when a number of men were returning from Vietnam and
desiring to use their Cal-Vet home purchase benefits that
Governor Reagan's department of Veterans Affairs failed
to use money from the sale of bonds to finance Cal-Vet
loans. In failing to do this, veterans were required to
not purchase new homes or obtain interim financing from
commercial sources at higher rates. Is this any way to
treat the California veteran?
In October of 1974, the Auditor General's office issued
19
GERALD
R.
FORD
a report entitled "Review of Operations of the Department
of Corporations. " The report found as follows:
"The Department of Corporations performs various
functions which are similar to functions performed by
the Secretary of State and the Department of Consumer
Affairs. This results in duplication, confusion to
the public and unnecessary expense.
"The fees charged by the department in administering
the Industrial Loan Law, Escrow Law, the Retirement
Systems Disclosure Law, the Tax Sellers and Cashiers Law,
Franchise Investment Law and the Trading Stamps Law have
resulted in a deficit averaging $210,440 over the last
five years.
"Authorized staff of the Department of Corporations
has exceeded its staffing requirements by 22 positions.
The issue here is Governor Reagan's failure to act
to reduce government expense, duplication and an overly
large staff.
d. In April of 1974, the Office of the Auditor
General prepared a report entitled "Department of Health
Pre-Paid Health Plans" which analyzed implementation
of Ronald Reagan's pre-paid health plan delivery system
for the delivery of health care to Medi-Cal recipients.
The review of. the program was startling. Between Jan.
1, 1971, and Dec. 1, 1973, the Department of Health made
payments to 15 Pre-Paid Health Plan (PHP) contractors
in the State of California totaling $56.5 million.
20
GERALD R. FORD
Of this amount only an estimated $27.1 million or 48
percent was expended for health care services for
LIBRARY
Medi-Cal recipients. The balance of $29.4 million, or
52 percent, was expended by the PHP contractors and
sub-contractors for administrative costs and resulted
in net profits for these companies.
As one example of such administrative costs, a
salary of $120,000 plus expenses was paid by one PHP
contractor to a physician to serve as a plan administrator.
"The Auditor General has concluded that the Department
of Health, in pouring out $56.5 million. to 15 PHP contractors
and receiving only 48 percent of that amount. in actual
health care services, has administered the PHP program
in an ineffective manner.
"The Department of Health has not properly discharged
its statutory authorities in instituting and requiring
uniform accounting procedures, complete financial reporting
and routine auditing of PHP contractors.
"Officers and directors of eight of the non-profit
PHP contractors have formed firms or affiliated with
profit-making sub-contractors who derive certain services --
including administration of health care -- for the PHP
contractors."
(It is my understanding that Gov. Edmund Brown Jr. 's
administration plans to drop the PHP program as a means
of delivering Medi-Cal benefits.)
e. In June of 1973, the Auditor General developed a
21
BERALD
R.
report on the California State Exposition and Fair.
FORD
Prior to Reagan's administration, it had been
determined that the existing California State Fair facilities
were unsuited for expansion and that the State Fair did
not reflect the changes of interest of the people or the
economy of the state. In addition, it was thought that
the expenses at the old site were excessive. Therefore,
in the early 1960s, it was decided to build a new
operation which would promote the heritage, culture,
industry and resources of the State of California. In
addition, it was determined the facility should be
financially self-supporting. The operation of the facility
was to be the responsibility of a non-profit corporation.
After the initial fair had been held in the new facility,
the California Exposition and Fair Executive Committee
terminated the contract with the non-profit corporation
in 1968. Subsequently, there were four years of direct
operation by the executive committee. Currently the
director of the Deaprtment of Parks and Recreation has
been delegated the operational responsibility for Cal-Expo.
With that background, the Auditor General's report
noted:
a. "The revenue derived from operations of Cal-Expo
is less than realized at the old State Fair site.
b. "Provisions of the long term amusement, food and
beverage contracts are the primary cause for the revenue
decrease.
22
C. "The long term contracts restrict the opportuni
to improve operations.
DERACOER FORD
d. "Both the state fair's operations and the ability of
19VHB17
the state to resolve the Cal-Expo development question
are adversely affected by a lack of stated obtainable
objectives.
e. "The state is losing from its general fund and
its State Fair Fund over $2 million a year on the extravagance
of Cal-Expo."
What happened to all the talk about government on
a sound business footing?
Some additional information:
1. While Reagan was governor:
A. State sales tax went from four cents on the
dollar to 6 cents on the dollar
B. The corporate income tax rate went from 5.9
percent to 9 percent
C. Top personal income tax levies went from
7 percent to 11 percent
D. The state budget more than doubled -- from
$4.6 billion to $10.2 billion
2. The Commerce Clearing House reports that California
in 1974 had the fourth highest tax-burdened population of
all fifty states.
State and local
State
taxes per capita
New York
$952
Massachusetts
767
Hawaii
765
California
739
National average
618
23
no
TABLE A-1
GERALD
R.
POPULATION a OF THE UNITED STATES AND CALIFORNIA, 1950-73
FORD
Percent change
California
Year
as percent of
(July 1)
United States
California
United States
United States
California
1950
LIBRARY
151.868.000
10.543.000.
7.0
1.7
3.0
1951
153,982,000
11.130,000
7.2
1.4
4.6
1932
156,393,000
11,638,000
7.4
1.6
4.6
1953
158,956,000
12,101,000
7.6
1.6
4.0
1954
161,881,000
12,517,000
7.7
1.8
3.4
1955
165,060,000
13,004,000
7.9
2.0
3.9
1956
168.088.000
13,581,000
8.1
1.8
4.4
1957
171,187,000
14.177,000
8.3
1.8
4.4
1953
174,149,000
14,741,000
8.5
1.7
4.0
1959
177,135,000
15,258,000
8.6
1.7
3.7
1960
179,979,000
15,863,000
8.8
1.6
3.8
1961
182.992.000
16,366,000
8.9
1.7
3.2
1962
185,771,000
16,905,000
0.1
1.5
3.3
1963
138,483,000
17,515,000
9.3
1.5
3.6
1964
191,141,000
15.021,000
9.4
1.4
2.9
1965
193,526,000
18,491,000
9.6
1.2
2.6
1966
195,576,000
18,851,000
9.6
1.1
1.9
1967
197.457,000
19,034,000
9.7
1.0
2.0
1968
199,399,000
19.513,000
9.8
1.0
1.5
1969
201,385,000
10.819.000
9.8
1.0
1.6
1070
203,810,000
20,025,000
9.8
1.2
1.0
1971
206,212,000
20,206,000
9.8
1.2
1.3
1972
208,230,000
20,518,000
9.9
1.0
1.1
1973
209,851,000
20,711,000
9.9
0.8
1.1
Includes members of the Armed Forces stationed in the area.
Source: U.S. Bureau of the Census, Current Population Reports, Series P-25, No. 501 (August 1973), and Department
of Finance estimates.
TABLE A-2
COMPONENTS OF CHANGE IN CALIFORNIA'S CIVILIAN POPULATION, 1950-73
Year
Civilian
Net
Net
Natural
Gains
(July 1)
population
change
migration
increase
from military
1950
10,472,000
311.000
155,000
146,000
+10.000
1951
10,754,000
282,000
268.000
149,000
-135,000
1952
11,194,000
440,000
284,000
163,000
--7,000
1953
11,681,000
487,000
307,000
181.000
-1,000
19:4
12,177,000
125.000
289,000
195,000
+12.000
1955
12,668,000
491,000
273.000
193.000
+25,000
1956
13,247,000
570.000
361,000
208.000
+7.000
1957
13,818,000
601.000
388,000
221,000
-8,000
1958
14,410,000
562,000
325,000
226,000
+11.000
1959
14,964,000
554,000
329.000
224,000
+1,000
1960
15,567,000
603,000
368,000
201,000
+4,000
1961
16.076.000
509.000
259.000
244,000
+6.000
1962
16,598,000
522.000
302,000
240.000
1963
-20,000
17.198.000
600.000
357,000
234,000
+9.000
1964
17,714,000
516.000
315,000
230,000
-29,000
1965
18,182,000
468,000
263,000
217,000
-12,000
1966
18,499,000
317,000
180.000
185,000
1967
-48,000
18,871,000
372,000
233,000
184,000
-45.000
1068
19.147,000
276,000
128,000
176,000
-28,000
1969
19,458,000
311,000
121,000
185,000
+5,000
1970
19,689,000
231,000
16,000
187,000
1971
+30.000
19,972,000
253,000
57.000
184,000
1972
+42.000
20,218,000
246.000
46.000
141,000
1973
+56,000
20,441,000
223,000
79,000
132,000
+12,000
Source: California Department of Finance.
45
24
GERALD
R.
FORD
TABLE A-11
AVERAGE GROSS AND NET SPENDABLE WEEKLY EARNINGS OF PRODUCTION
AND RELATED WORKERS IN MANUFACTURING, CALIFORNIA AND LOS
ANGELES-LONG BEACH, SAN FRANCISCO-OAKLAND, AND
SAN DIEGO METROPOLITAN AREAS, 1960-73
Net spendable earnings*
"Real" net spendable earnings
(current dollars)
(1967 dollars)
Gross earnings
Worker with
Worker with
Worker with
Area and year
Worker with
weekly earnings
3 dependents
no dependents
3 dependents
no dependents
California
1960
$104.28
$91.15
$82.43
$103.34
1961
$93.46
108.53
94.60
85.60
105.94
1962
95.86
112.44
97.56
88.31
107.80
1963
97.58
115.78
09.71
90.24
108.50
1964
98.19
119.29
104.52
95.15
111.70
1965
101.76
123.83
109.16
00.70
114.42
1966
104.60
128.93
111.30
101.64
114.39
1967
104.46
132.92
114.44
103.45
114.44
1968
103.45
138.63
117.98
106.02
113.33
1969
101.84
145.89
122.54
110.03
112.11
1970
100.67
150.48
127.40
114.73
110.88
1971
99.85
158.79
135.52
122.65
113.79
1972
102.98
170.02
145.37
131.72
118.09
1973
107.00
179.34
151.08
136.11
116.01
101.54
1972: March
166.40
142.71
129.31
117.26
June
106.25
170.05
145.30
131.75
118.69
September
107.55
173.26
147.87
134.01
118.77
December
107.64
177.02
150.03
136.82
120.55
109.28
1973: March
175.67
148.32
133.63
116.42
June
104.89
179.34
151.08
136.11
116.75
105.19
September
182.66
153.57
138.36
115.73
104.27
December
184.32
154.81
139.40
115.10
103.71
Los Angeles-Long Beach
1960
103.31
90.39
81.73
102.11
92.35
1961
107.74
93.96
85.01
104.87
94.88
1962
111.93
97.15
87.93
107.23
97.05
-
1963
113.93
98.21
88.86
106.75
96.59
1954
116.76
102.43
93.21
109.32
99.48
1965
121.99
107.44
98.18
112.27
102.59
1966
127.00
109.70
100.15
112.51
102.72
1967
131.78
113.50
102.50
113.50
102.59
1968
136.82
116.60
104.76
112.22
100.83
1969
142.51
120.02
107.79
110.31
00.07
1970
145.30
123.46
111.22
108.01
97.31
1971
153.64
131.37
118.87
110.86-
100.31
1972
164.02
140.82
127.60
115.14
104.33
1973
172.14
145.07
131.23
112.75
101.57
1972: January
158.00
136.44
123.69
113.70
103.08
February
158.80
137.05
124.23
113.92
103.27
March
160.79
138.55
125.56
114.41
103.68
April
162.81
139.03
126.79
115.45
104.61
May
162.41
139.63
126.52
115.11
104.30
June
164.03
140.83
127.60
115.81
104.93
July
162.80
139.92
126.78
114.03
103.33
August
164.01
140.82
127.59
114.67
103.90
September
167.26
143.24
129.78
115.70
104.83
October
167.27
143.25
129.79
115.62
104.75
November
169.32
144.83
131.23
116.52
105.58
December
171.37
146.41
132.67
117.69
106.65
1973: January
168.04
142.55
128.41
114.22
102.50
February
168.47
142.88
128.70
113.85
102.55
March
169.29
143.50
129.27
113.53
102.27
April
170.53
144.44
130.12
113.82
102.54
May
170.52
144.44
130.11
113.38
102.13
June
172.14
145.67
131.23
113.36
102.12
July
171.70
145.33
130.92
112.57
101.41
August
172.13
145.66
131.22
111.28
100.24
September
175.03
147.84
133.19
112.68
101.52
October
174.58
147.51
132.89
111.56
100.45
November
177.12
149.41
134.61
111.83
100.76
December
176.64
149.05
134.28
111.15
100.13
57
25
GERALD
R.
FORD
V
TABLE A-14
LIBRARY
PERSONAL INCOME IN CALIFORNIA, TOTAL AND PER CAPITA, 1950-73
Total
Per capita
Percent
Amount
Percent
Percent
Percent
of U.S.
Year
(In millions)
change
of U.S.
Amount
change
average
1950
$19,774
10.6
8.69
$1,858
7.1
124.20
1951
22,756
15.1
8.90
2,045
10.1
123.79
1952
25,214
10.8
9.25
2,167
6.0
125.04
1953
27,002
7.1
9.37
2,231
3.0
123.67
1954
27,682
2.5
9.54
2,212
-0.9
123.92
1955
30,378
9.7
9.77
2,336
5.6
124.52
1956
33,177
9.2
9.96
2,413
4.6
123.70
1957
35,497
7.0
10.11
2,504
2.5
122.44
1958
37,321
5.1
10.33
2,532
1.1
122.44
1959
40,955
9.7
10.68
2,679
5.8
123.97
1960
42,913
4.8
10.70
2,705
1.0
122.07
1961
45.601
6.3
10.94
2,786
3.0
123.00
1962
48,948
7.3
11.06
2,895
3.9
122.15
1963
52,522
7.3
11.28
2,998
3.6
121.97
1964
56.471
7.5
11.35
3,134
4.5
121.00
1965
60.104
6.4
11.15
3,250
3.7
117.33
1966
65,002
8.1
11.07
3,448
6.1
115.43
1967
69,807
7.4
11.09
3,629
5.2
114.48
1968
76,720
9.9
11.14
3,932
8.3
114.44
1969
83,067
8.3
11.06
4,191
6.6
113.03
1970
$9,312
7.5
11.12
4.460
6.4
113.11
1971
94,412
5.7
11.00
4,652
4.3
111.72
1972
102,099
8.1
10.92
4,976
6.9
110.77
1973 P
112,000
9.7
10.83
5,400
8.5
110.09
Per capits figures derived using population estimates of the California Department of Finance.
Preliminary.
Source: U.S. Department of Commerce, Office of Business Economics, and California Department of Finance.
TABLE A-15
PERSONAL INCOME BY MAJOR SOURCES, CALIFORNIA, 1950-73
(In millions)
Proprietorship
Less: Social
Wages
Other
insurance
and
labor
Property
Transfer
contri-
Year
Total
salaries
income*
Farm
Otherb
income
payments
butions
1950
$19,774
$12,372
$276
$751
$2,488
$2,724
$1,439
$277
1951
22,756
14,823
355
1.007
2,708
2,963
1,232
333
1952
25,214
16,718
414
1,089
2,846
3,228
1,298
379
1953
27,002
18,113
471
973
2,931
3.529
1.402
417
1954
27,682
18,295
518
916
2,918
3.965
1.559
490
1955
30,378
19,998
614
1.007
3.291
4,325
1.703
561
1956
33,177
22.207
732
1.072
3,452
4.513
1.840
638
1957
35,497
23,664
846
968
3.622
5,001
2.141
745
1958
37,321
24,673
SS2
955
3,722
5,304
2.600
816
1959
40,955
27,381
1,026
1,048
4,070
5,648
2.727
944
1960
42,913
28,975
1,103
951
3,049
5,962
3.073.
1.100
1961
45.601
30,535
1,220
894
4.185
6.405
3,536
1.173
1962
48,948
32,978
1,335
954
4,416
6,883
3,723
1.291
1963
52,522
35,355
1,482
913
1,631
7,566
4,089
1,513
1964
56.471
37,908
1,654
1,063
4,930
8.133
4,402
1,619
1965
60.104
40,353
1,814
940
5,120
8,719
4.899
1,742
1966
65,002
41,370
2,006
1.018
5,208
9,258
5,367
2,257
1967
69,807
47,491
2,225
964
5,450
9,865
6,352
2,540
1968
76,720
52,196
2.508
1.159
5,770
10.569
7,274
2.758
1969
83,067
56,996
2,791
1,089
5,879
11,411
8.127
3,226
1970
89,312
60,142
3,161
999
5,725
12,908
9,822
3,445
1971
94,412
62,664
3,502
1.055
5,782
13.522
11.493
3,607
1972
102,009
68,410
3,877
1,341
5,968
14.118
12,421
4.067
1973P
112,000
75,570
4,330
1,460
6,350
15,525
13,655
4,990
Employer contributions to private pensions, pay of military reservists. directors' fees, etc.
Income of unincorporated businesses and professions.
Interest. dividends, rents and rovalties.
Retirement programs, unemployment insurance. disability payments, public relief. etc.
Preliminary.
Source: U.S. Department of Commerce, Office of Business Economics, and California Department of Finance.
60
26
TABLE A-30
CORPORATE PROFITS FROM CALIFORNIA OPERATIONS, 1950-1971
Net profits
Number of corporations*
(in millions)
With
With
No income
Net
Net
Yearb
Total
net income
net loss
or loss
Total
income
loss
50
42,377
21,987
11,560
8,830
$2,264
$2,432
-$168
51
44,583
24,538
11,008
9,037
2,598
2,766
167
52
47,864
25,646
12,385
9.830
2,284
2,522
-238
53
52,041
27,561
13,718
10,762
2,519
2,758
-239
54
56,652
29,489
15,910
11,253
2,551
2,892
-341
55
65,345
35,020
16.365
13,960
3,162
3,430
-267
56
74,260
40,713
17,418
16.129
3,331
3.657
-326
57
81,150
44,527
20,313
16,310
3,286
3,664
-377
58
87,577
46,414
24,235
16,927
3,168
3,630
-461
59
94,161
53,456
24,069
16,637
3,634
4,155
-522
60
101,081
56,987
28,843
15,351
3,517
4,182
-665
61
105,645
59,746
31,802
14,097
3,718
4.509
-792
62
110,294
63,400
31,954
14,940
3,970
4,754
-784
63
114,667
66,496
33,667
14,504
4,283
5,092
-809
64
118,860
69,555
34,254
15,051
4,626
5,526
-900
65
122,399
71,484
35,625
15,290
5,126
6.007
-881
66
124,690
73,076
35,664
15.950
5,643
6,638
-995
67
125,677
73,433
38,188
14,056
5,252
6,456
-1,203
68
128,505
77,238
36,754
14,513
6,003
7,255
-1,251
69
136,695
80,348
38,627
17,720
5,643
7,477
-1,834
70
145,352
81,340
44,318
19.694
4,386
6.711
-2,326
71
151,216
83,664
47,621
19,931
4,804
7,249
-2,445
Includes a slight amount of duplication as a result of mergers. consolidations. changes in corporate names and changes
of income year which necessitated filing more than one state franchise tax return during the year. In 1961 this dupli-
cation amounted to approximately 205, or 0.5 percent of the total.
Includes corporations with fiscal years ending in the calendar year shown.
Source: California Franchise Tax Board.
27
GERALD
R.
FORD
TABLE A-48
SAVINGS CAPITAL OF INSURED CALIFORNIA ASSOCIATIONS
BY TYPE OF ASSOCIATION, 1972 AND 1973
LIBRARY
(Amounts in million:
All
State
Federally
insured associations
chartered associations
chartered associations
Amount
Amount
Amount*
Percent
Month
1972
1973
change
1972
1973
1972
1973
January
30,652.8
36,161.3
18.0
20,156.1
24,382.1
10,496.7
February
11.779.2
31.116.2
36,389.0
16.9
20,498.6
24,528.8
March
10,652.6
11,860.2
31,910.9
36,969.6
15.9
20,987.3
24,921.8
10,923.6
12,017.8
April
32,092.9
36,935.7
15.1
21,110.5
24,886.2
10,982.4
May
12,049.5
32,512.1
37,231.7
14.5
21,384.0
25,067.1
11.128.1
June
12.164.6
33,177.0
37,698.8
13.6
22,360.9
25,362.0
10,816.1
12,336.8
July
33,595.0
37,505.9
11.6
22,643.9
25,228.5
10.951.1
August
12,277.4
33,916.6
37,110.5
9.4
22,861.1
24,963.6
11,055.5
September
12,146.9
34,592.8
37,330.3
7.9
23,321.7
25,123.1
11,271.1
12,207.2
October
34,980.7
37,378.4
6.9
23,576.5
25,122.1
11,404.2
November
12,256.0
35,257.5
37,493.5
6.3
23,767.6
25,194.0
11,489.9
December
12,299.0
35,659.6
37,836.0
6.1
24,049.3
25,425.2
11,610.3
P12,410.2
Commencing with the month of June 1972 dollar values shown reflect the conversion of 3 Federally Chartered Asso-
ciation (with savings capital of $523.5 million as of May 31, 1972) to a State Chartered Association. Accordingly.
comparative data shown commencing with the month of June 1972 are not indicative of growth rates for type of
associations shown.
D
Preliminary.
Source: Federal Home Loan Bank of San Francisco.
TABLE A-49
SUMMARY OF STATE TAX COLLECTIONS, 1950-75
(Excluding departmental, interest and miscellaneous revenue)
Taxes per $100
State tax collections
Taxes per capita
of personal income
General
Special
fund
funds
Total
General
Special
General
Special
Fiscal year
(thousands)
(thousands)
(thousands)
fund
funds
Total
fund
funds
Total
Cash Basis
1950
$524,423
$268,177
$792,605
$49.99
$25.57
$75.56
$2.94
$1.50
1951
$1.41
647,992
295,542
943,534
50.52
27.15
$6.67
3.28
1952
1.49
4.77
709.245
322,699
1,031,944
62.30
28.35
90.65
3.12
1.42
1953
4.53
754,048
346,480
1,100,528
63.53
29.10
92.72
2.99
1.37
1954
4.36
772,250
442,538
1,214,755
62.74
35.95
95.60
2.56
1.64
4.50
1955
831,899
467,814
1,200,713
65.20
36.66
101.86
3.01
1.69
1956
4.70
972,828
524,765
1,497,593
73.18
39.45
112.67
3.20
1.73
1957
4.93
1.042.773
554,713
1,597,485
75.13
39.97
115.10
3.14
1.67
1958
4.82
1,069,809
572,490
1.642,299
73.99
39.59
113.58
23.01
1.61
1959
4.63
1,170,590
594,587
1,765,477
77.99
39.60
117.69
3.14
1.59
4.73
1960
1,443,296
633.492
2,076,758
92.66
40.67
133.33
3.52
1.55
5.07
1961
1,537,347
656,815
2,194,162
95.40
40.76
136.16
3.58
1.53
5.11
1962
1,645,300
669,267
2,314,567
98.00
40.23
130.13
3.01
1.47
5.08
1963
1,791,038
711,185
2,502,223
104.06
41.32
145.35
3.66
1.45
5.11
1964
2,057,962
813,937
2,871,900
115.81
45.80
161.62
3.92
1.55
5.47
1965
2,161,157
931,958
3,003,115
118.38
51.05
169.43
3.83
1.65
5.48
1966
2,398,958
971,625
3,370,552
128.49
52.04
150.52
:3.99
1.62
1967
5.61
2,422,275
993,277
3,415,551
127.21
52.16
179.37
3.73
1.53
5.25
Accrual Basis'
1967
2,746,858
1,091,387
3,835,275
144.25
57.31
201.57
4.23
1.68
5.90
1968
3,557,610
1,118,311
4,675,921
183.63
57.72
241.35
5.10
1.60
6.70
1969
3,962,520
1,210,229
5,172,748
201.49
61.54
263.03
5.16
1.58
6.74
1970
4,125,607
1,283,258
5,408,565
207.09
64.41
271.50
4.97
1.54
6.51
1971
4,290,263
1,308,150
5,595,413
212.80
64.89
277.69
4.80
1.47
6.27
1972
5,212,693
1,385,863
6,598,555
255.44
67.91
323.35
5.52
1.47
6.99
1973
5,758,206
1,470,905
7,229,171
250.64
71.69
352.33
5.64
1.44
7.08
1974
6,157,127
1,490,198
7.647.325
296.86
71.85
368.71
5.50
1.33
1975
6.83
7,408,395
1,503,715
8,912,110
353.52
71.76
425.28
6.17
1.25
7.43
Estimated.
Source: Department of Finance.
84
28
GERALD
R.
TABLE A-51
FORD
ASSESSED VALUE OF TANGIBLE PROPERTY, TANGIBLE PROPERTY TAX LEVIES
AND AVERAGE TAX RATE IN CALIFORNIA, 1951-1974
LISHARY
Assessed value
Tax levies*
Average tax rate
Percent
Percent
Dollars
Percent
change from
change from
per $100
change from
Amount
preceding
Amount
preceding
assessed
preceding
Year
(in thousands)
year
(in thousands)
year
value
year
1950-51
$13,618,915
$791,353
$5.81
1951-52
14,736,439
8.2
845.750
6.9
5.74
-1.2
1952-53
16,107,000
9.3
933,253
10.3
5.79
0.9
1953-54
17,170,270
6.6
1,019,956
9.3
5.94
2.6
1954-55
18,228,961
6.2
1,121,911
10.0
6.15
3.5
1955-56
19,093,440
9.7
1,253,243
11.7
6.27
2.0
1956-57
21,819,002
9.1
1,416,225
13.0
6.49
3.5
1957-58
24.308.207
11.4
1,634,413
15.4
6.72
3.5
1958-59
25,966,688
6.8
1,807,932
10.6
6.96
3.6
1959-60
27,431,577
5.7
1,990,498
10.1
7.26
4.3
1960-61
29,600,832
7.9
2,195,588
10.3
7.42
2.2
1961-62
31,549,530
6.6
2,414,617
10.0
7.65
3.1
1962-63
33,326,914
5.6
2,605,131
7.9
7.82
2.2
1963-64
35,066,088
5.2
2,805,152
7.6
8.00
2.3
1961-65
36,743,364
4.8
3,058,579
9.0
8.32
4.0
1965-66
39,464,013
7.4
3,367,736
10.1
8.53
2.5
1966-67
42,522,355
7.7
3,760,508
11.7
8.84
3.6
1967-68
46,186,881
8.6
4,110,742
9.3
$.90
0.7
1968-69
48,653,400
5.3
4,569,986
11.2
9.39
5.5
1969-70
$52,115,409
7.1
4,935,475
8.0
9.92
5.6
1970-71
$55,550,735
6.6
5,716,550
15.8
10.85
9.4
1971-72
58,785,243
5.8
6,372,331
11.5
11.43
5.3
1972-73
62,790,656
6.8
6,819,509
7.0
11.44
0.1
1973-74
$67,277,649
7.1
*6,645,000
-2.6
11.15
-2.5
Excludes special assessments levied on limited categories of property to finance activities from which such properties
derive special benefits. In 1973-74 these assessments totaled approximately $165 million.
Because the State reimburses counties for the loss of revenue from the homeowners' and businessinventory exemptions
and tax rates are set on assessed values which include the values of these exemptions. they have been included in
assessed valuations. This treatment maintains the comparability of data in this series. Since the inception of these
exemptions their aggregate values have been:
Assessed value
Homeowners'
Business inventory
1969
$1,909,789,000 (at $750)
$475,375,000 (at 15%)
1970
1.910.243,000 (at $750)
905.503.000 (at 30%)
1971
1,955,217,000 (at.$750)
1,056,891,000 (at 30%)
1972
2,051,275,000 (at $750)
1,125,908,000 (at 30%)
1973
5,737,738,000 (at $1750)
1,923,315,000 (at 45%)
Estimated.
Source: California Board of Equalization.
86
29
TABLE A-57
MANPOWER DEVELOPMENT AND TRAINING ACTIVITIES a IN CALIFORNIA
1967 THROUGH DECEMBER 1973
Activity
1967
1968
1969
1970
1971
1972
1973
Initially enrolled
32,436
32,093
20,128
19,737
21,373
21,727
12,171
Youth 16 to 22 years
*12,422
11,956
7,824
7,489
6,719
6,588
3,924
Public assistance recipients
3,888
4,757
3,291
4,019
4,154
3,805
2,296
U.I. claimants
4.631
4,517
3,424
2,968
3,079
2,300
1,191
Completed occupational training
18,970
16,188
12,304
10,226
12,875'
15,140
10,312
Youth 16 to 22 years
6,652
5,314
4,481
3,632
3,822
4,480
3,615
Contacted following trainingᵇ
14,160
10,882
6,381
5,417
5,299
5,881
4,715
Employed-training related jobs
10,814
7,901
3,966
2,989
2,934
3,34
2,735
Employed-nontraining related jobs
1,013
908
731
647
550
650
578
Determined entitled to training allowances
d
17,713
21,938
20,071
23,437
23,049
17,423
12,175
Weeks of training compensated
269,156
339,490
251,891
256,815
201,941
278,538
185,963
Amount of training payments
$15,170,401
$17,580,060
$12,792,426
$13,051,981
$14,676,656
$14,014,963
$9,841,461
First institutional training course approved August 27, 1962. First on-the-job training course approved August 21, 1963. Jobs Optional and Displaced Worker Programs became operational and were
reported in 1971. These figures do not include Technology Mobilization and Reemployment Program activities, comparable data not available.
Number of trainees in completed classes for which at least one follow-up has been made.
These categories are not applicable to the Displaced Worker or Jobs Optional on-the-job training programs which began reporting January, 1971.
d
Cannot be directly compared to number of enrollments during month because of lag in computation and payment of allowances.
Revised.
Source: California Employment Development Department.
16
30
WELFARE REFORM
I. PERCEPTIONS
Chances are when a citizen is asked to respond to why
he thinks Ronald Reagan is a potentially viable candidate
for the presidency one of the two or three things he
would cite is that "Reagan did something about the welfare
mess. " Or he might be so bold as to suggest that where
Reagan actually reduced the welfare rolls. Still others
might boldly suggest that Reagan put into effect programs
which caused welfare recipients to actually go to work.
Reagan has fostered this with continual talk about the
fact that he reduced the welfare rolls in California.
II. RONALD REAGAN SPEAKING TO THE ISSUES OF HEALTH AND
WELFARE
"My position has always been this, very simply, that no
one in this country should be denied medical care because
of a lack of funds
"
News conference, Sacramento
May 2, 1967
Reagan said if be becomes governor "there will be no
welfare for the able-bodied unless they accept job training
that would fit them to take their places as productive
members of society."
Speech, Orange County
Los Angeles Times, Sept. 30, 1966
31
GERALD
A.
"A variety of (poverty) programs have deluded private
FORD
property rights so that the public interest is anything
LIBRARY
the planners decide it should be."
Speech, New Haven, Sept. 28, 1965
"Let's stop being our brother's keeper and start being
our brother's brother. Let him start keeping himself."
Speech, GOP fund raiser, Des Moines
San Francisco Chronicle, Oct. 26, 1967
"We must take care of those who are unable to care for themselves
but the able-bodied should be given a choice of earning a
paycheck rather than a dole by working in public facilities
or enrolling in a job-training program to make them
employable. They should not sit on their porch and get
a check for doing nothing."
San Francisco Examiner
Oct. 9, 1966
32
III. WHAT DID REAGAN'S WELFARE REFORM PROGRAM AS
FINALLY ADOPTED CONSIST OF?
Principal Provisions of the 1971 Welfare Reform Act
1. AFDC grant schedule. Eliminated confusing
tributions collected from absent parents. Required that
"maximum participating base" and set up a flat grant
a wife's community property interest in her husband's
schedule adjusted to family size. with provision for
income be used to support her children by a previous
annual cost-of-living increases beginning 1973-74. The
marriage, but deducted his prior support liability and
new schedule raised grants to recipients with no other
$300 per month before determining her interest. (Par-
income and reduced grants to those with other income.
tially in effect.)
(In effect.)
9. Eligibility elheck Permitted Director of Social
2. Gross income limit. Subject to federal approval.
Welfare to examine employment tax reports to verify
made any AFDC applicant with gross income equal to
entitlements of employed grant recipients and to re-,
150 percent of the need standard ineligible for assist-
lease lists of applicants and recipients to other public
ance. (Approval has not been received.)
agencies to verify eligibility. (In effect.)
3. Work expenses. Set a ceiling of $50. plus neces-
10. livent shering Provided that the state and
sary child care costs, on allowable income exemptions
counties share aid to the disabled payments equally and
for work-related expenses of employed AFDC recip-
that. effective July 1. 1972. the state take over full cost
ients. (Awaiting final court action.)
of all other "adult" assistance categories (OAS, AB.
1. Special needs. Eliminated state payments for
APSB).
special needs that are not common to the majority of
11. sharing. Required state to
welfare recipients. (In effect.)
pay 50 percent of administrative costs for eligibility
5. Verification of eligibility. Verification of eligibil-
and grant level determinations. and transferred all re-
ity of applicants for immediate assistance must be
sponsibility for these functions to the state. allowing
made within five working days; if not. the county must
the state to contract with the counties to carry them
bear the full cost of the payment to the applicant. (In
out.
effect)
12. Employment "It progrems. Appropriated $2 mil-
6. Exemption. Set maximum values for personal
lion to increase WIN public service jobs and S7 million
property exempted in determining an applicant's eligi-
to enable the State Personnel Board to increase job op-
bility. Reduced exemptions that can be claimed for
portunities in state and local government. Provided for
"lump-sum" income and "casual and inconsequential"
the termination of AFDC grants to employable recip-
income. (In effect.)
ients who refuse to siccept work. work training. or par-
T. Responsible relatives. Substantially increased re-
ticipation in a community work force.
quired contributions of relatives of OAS beneficiaries.
13. Day Appropriated $3 million to expand
subject to administrative reduction by Social Welfare
child care services and required every county to es-
Director. (Awaiting final court action.)
tablish a day care center.
8: Absent fathers and stepfathers Authorized at-
11. Femila vien Appropriated $1 million to
tachment of wages and property liens against absent
assure provision of family planning services to all for-
parents of AFDC children and provided for payment
mer. present. and potential AFDC recipients of child-
to counties of part of state's share of delinquent con-
bearing age.
33
While it is possible to show that welfare rolls declined
GERALD
A.
for a period of time, it is important to examine that decline
FORD
by welfare category and then overlay the increase in employment
during the period Reagan contends welfare rolls declined.
I
LIBRARY
submit that once this examination is made it is clearly evident
that the reduction in unemployment had a larger effect on checking
the rise of welfare caseloads than did any other single factor.
Consider the following:
A. In April 1971 unemployment in California was 7.4%
seasonally adjusted and the welfare caseload was
2,266,808. In September 1972 when the Reagan
crowing about reform was loudest, the caseload
was 2,062,411 and the unemployment rate was only 5.9%
B. Those categories which most directly relate to
employment were the areas where the drops were
registered. The AFDC-U (Aid for Dependent Children-
Unemployed father) caseload in the same time frame
as above dropped from 330,257 to 184,996. The
general home relief category was also down in the same
time frame from 87,586 to 52,331. Thus, of the
caseload reduction of 204, 397 for the time frame
examined, 180,516 reductions are directly related
to the improving economy.
34
The following table from the December 1972 California Journal
outlines the statistical data presented above:
PUBLIC ASSISTANCE CASELOAD BY MAJOR CATEGORIES
General
OAS
ATD
AFDC-FG
AFDC-U
Home Relief
Total Caseload
1970
Oct
319,557
181,962
1,210.027
242.357
96,525
2,088,214
Nov
319,838
182.409
1,219,247
261,178
97.545
2,127,778
221,712
101.000
1.000.400
PAGE 376
December 1972
CALIFORNIA JOURNAL
We have estimated statistics from the Department of Welfare
which if and when they become confirmed may indicate that
the total caseload did continue to drop even when the rate
of unemployment began to increase substantially. We point this
out only to indicate that it is probably too early to make a
definitive judgement as to the total effect of the Reagan Welfare
Reforms.
35
IV. OTHER EXAMPLES OF REAGAN ADMINISTRATION WELFARE
INEFFECTIVENESS, INEFFICIENCY AND GENERALY POOR
ADMINISTRATION
A. One of the big points of Governor Reagan's welfare
GERALD R. FORD LIBRANTY
Medi-Cal reform program was to develop the so-called
pre-paid health plans as an alternative to delivery plans
for Medi-Cal health services. The plan was operationalized
in California. The office of the Auditor General in a
report to the Joint Legislative Audit Committee entitled
"Department of Health --Prepaid Health Plans" outlined
a number of failures and inefficiencies of the worst
order not to mention taxpayer abuse. The report said,
in part:
"Total payments by the Department of Health from
January 1, 1971 through December 31, 1973 to the 15
PHP (Pre-Paid Health Plan) contractors, 14 of whom
provide services in Los Angeles County, amounted to
$56.5 million. Of this amount, only an estimated $27.1
million or 48 percent was expended for health care
services for Medi-Cal recipients. The balance of $29.4
million or 52 percent was expended by the PHP contractors
and their affiliated subcontractors for administrative
costs or resulted in net profits to these companies.
"As one example of such administrative costs, a salary
of $120,000 plus expenses was paid by a PHP contractor
to a physician to serve as a plan administrator.
36
"The Auditor General has concluded that the Department
of Health, in paying out $56.5 million to 15 PHP contractors
and, in return, receiving only 48 percent of that amount,
or $27.1 million in actual health care services, has
administered the PHP program in an ineffective manner.
"The Department of Health has not properly discharged
its statutory authority and responsibility of instituting
and requiring uniform accounting procedures, complete
financial reporting and routine auditing of PHP contractors
and their affiliated subcontractors. Therefore, the
Auditor General has recommended that legislation be
enacted to transfer such authority and responsibility
from the Department of Health to the Department of Finance.
"Officers and directors of eight of the nonprofit
PHP contractors have formed firms of affiliated profit-
making subcontractors who provide various services,
including administration and health care, for the PHP
contractors. The complex relationship of the contractors
with the subcontractors makes it more difficult to determine
how much of the Department of Health payments is actually
expended for health care services. "
Further, the report concludes the department (the
Reagan administration) could have taken steps to correct
these problems. On page eight of the Auditor General's
report, the following statement is made:
"While there is nothing in the law regulating PHP
37
contracts with the Department of Health which establishes
GERALD
R.
a specific statutory limit on administrative expenses, or
FORD
a specific statutory minimum percentage to be spent on
health care services, it is clear that the Department of
LISERAY
Health, under its broad authority to determine the terms
of the PHP contracts, could have imposed a limit on such
expenses or a minimum percentage which must be expended for
health care services."
B. In July of 1974, the Auditor General prepared a
report for the Joint Legislative Audit Committee entitled
"Department of Health Pre-Paid Health Plans" which
concluded the administration had had inadequate controls
to preclude duplicate payments for Medi-Cal services
rendered to Medi-Cal recipients enrolled in pre-paid
health plans. These inadequate controls had resulted
in approximately $4.2 million in duplicate payments by
the state -- wasted taxpayer dollars. In addition, the
report indicated the administration's Department of Health
paid approximately $960,000 on a fee for service basis
for dental services for Medi-Cal recipients enrolld by
Foundation Community Health Plan (FCHP), a PHP contractor,
when the services should have been provided by FCHP at
no additional cost.
Further, the report indicated that the Department
policy of repayment to PHP members had been inconsistent
and was not in conformance with statutory requirements.
38
This is another example of waste, inefficiency
and poor management of the administration of Ronald Reagan.
C. One of Reagan's big cries which was incorporated
in the California Welfare Reform Act of 1971 was the need
to establish the so-called Community Work Experience
Program (CWEP) for aid to families with dependent children
(AFDC) welfare recipients. The Legislature intended that
this California state program operate as a demonstration
program to provide for development of employability of
AFDC recipients through actual work experience.
In May of 1974, the Auditor General reported to the
Joint Legislative Audit Committee in a report entitled
"California Work Experience Program (CWEP) 11 The report
states, in part:
"The stated goals of CWEP include a reduction of
AFDC recipients on welfare and, therefore, a reduction in
welfare costs. As of March 1974, CWEP was involved in 34
California counties with a total of 603 participants.
"The Auditor General found that only 1,134 participants,
or less than four percent of the program's expected first-year
level of participation of 30,000 perticipants, were placed
in CWEP in fiscal year 1972-73. Further, EDD (Employment
Development Department) lowered the expected level of
participation for the second year by 82 percent and
achieved less than 25 percent placement of this sharply
reduced expected level of participation.
39
"In EDD's April 73 CWEP Evaluation Status Report, the
report stated
the volume of CWEP activity is not
sufficient to cause significant impact on AFDC caseloads.
The volume of data should increase as individual county
problems are resolved and the program is more fully
implemented.' At that time, the ratio of monthly CWEP
placements to total AFDC caseloads was one-half of one
percent. In fact, this ratio in February 1974 was
one-tenth of one percent and never exceeded six tenths
of one percent between April 1973 and March 1974.
"Although CWEP was authorized as a demonstration
project to test the hypothesis that a program providing job
training and work experience for welfare recipients would
reduce welfare costs, the program has not been implemented
in a manner which would allow its effect on welfare costs
to be determined. This results from inadequate experimental
controls, inadequate reporting, inaccurate and inadequate
cost accounting.
"The Auditor General also reported that EDD has overstated,
in its 1973 annual report, by at least 56 percent the
number of individuals placed in the CWEP program. Further,
EDD understated the costs in this report of state and
local agencies for implementing CWEP. While EDD's annual
report stated that CWEP had 1,540 participants, based on
field investigation by the Auditor General's staff, the
maximum number of participants was 1,005. On the basis of
40
the Auditor General's projected sample, the number of
participants could have been as low as 550. As one example
of the understated costs, county welfare staff time devoted
to CWEP fair-hearing activities was entirely excluded from
GERALD
R.
EDD's 1973 annual report."
FORD
The program is considered a total failure.
LIBRARY
D. On Oct. 9, 1971, Carl Ingram, a reporter for
United Press International, broke a story which said,
"state reports apparent fraud rate of 41 percent in dependent
child aid program." The article further said, "Reagan
administration officials report their controversial new
double check of welfare recipient earnings show the 41
percent rate of apparent fraud in the needy children's
program."
The Auditor General issued a report entitled
"Department of Social Welfare -- Review of the Alleged
41 Percent Rate of Welfare Fraud in the Aid to Families
with Dependent Children Program." The report covers
the Oct. 1,1971, to Nov. 31, 1971, time period. It
states, in part:
that the computation of 'apparent fraud' was
based solely on the discrepancy between the amount of
reported earnings obtained from HRD (Human Resources
D velopment) and the amount of earnings as shown in the
recipients' case files. The cases classified as 'apparent
fraud' by SDSW (State Department of Social Welfare) did not
41
take into consideration the element of recipient intent
which is an important part of the definition of fraud as
stated in the department's Manual of Policies and Procedures.
"
without investigating each case where a discrepancy
is indicated, a finding that fraud has been committed is
a premature conclusion."
When the Auditor General examined the figures for the
County of Sacramento which placed each of their cases
case-by-case in the 64 cases examined, only eight were
subsequently found sufficiently worth referral for
consideration of criminal complaints.
Therefore, it would seem that this was another in
a series of Reagan grabs for headlines.
D. In March of 1973, the Auditor General prepared a
report for the Joint Legislative Audit Committee entitled
"Department of Health Care Services -- Review of Medi-Cal
Management System." This report found, among other things,
that:
1. "Payments for claims are being duplicated, paid to
wrong providers, and are being made in excess of allowable
amounts.
2. "Procedures have been developed which encourage
improper disbursement of funds.
3. "Clerical personnel have excessive latitude in
overriding computer controls.
4. "Adequate accounting controls are not being
42
maintained for claims processing.
5. "The state has prematurely accepted and made
final payments for the development of the Medi-Cal
management system in the amount of $545,101."
Again, clear evidence is shown here of Reagan's poor
management in the welfare area and his poor stewardship
FORD & GERALD LIBRARY
in administration of efficiency and cost control in
state business.
F. WIN Program Cuts by Reagan
In 1966 Reagan promised in his campaign, "there will
be no welfare for the able-bodied unless they accept a
job. "
In July of 1970 Reagan cut the WIN (Work Incentive
Program) which is designed to put welfare recipients back
to work by nearly 50 percent of its state dollars (reduced
the state share from 2.1 to 1.1 million dollars).
In 18 months of California WIN 9,000 welfare
recipients were put to work at a saving of $20 million
to the state in welfare dollars not paid. With that one
fell swoop of the pen Reagan cut 7,560 of 16,800 WIN
slots in California.
Is that what Republican welfare reformers should do?
G. Inefficient Reorganization of the Department of Health
In March, 1975, the Auditor General in a report to
the Joint Legislative Audit Committee indicated that the
43
20-month old reorganization of the $3 billion Department
of Health has not lived up to expectations. Here's what
the report said"
"More time, money and effort are required to do the
same work.
"Federal funding for the Social Services Program
could be in jeopardy.
"Excessive staff shuffling (46 percent of the 93 top
administrators have switched jobs five or more times
since July 1970) has persisted. =
Is this any way for a governor committed to
efficiency to run this massive department?
44
CRIME
BERALD R. FORD
I. PERCEPTIONS
Ever since he became governor, Reagan has done an
LIBRARY
outstanding job on this issue by using a great deal
of rhetoric to create the image of the original super cop.
The image is one of working hard to lock up all criminals
so as to keep the streets safe for all the good citizens.
II. RONALD REAGAN ON THE CRIME ISSUE
"As governor I will support and work for a plan to take the
appointment of judges out of politics."
Reagan for Governor Committee
campaign literature, 1966
(Reagan as governor has appointed Republicans to
76 percent of the judicial vacancies he has filled. Reagan
appointed his own former executive secretary and a 1966
campaign aide, Bill Clark, to a Ventura County Superior
Court vacancy, without clearing the appointment through
the county bar association. Reagan's judicial "reform"
plan would have taken the appointment of judges out of the
limelight of gubernatorial appointments and turned the matter
over to the backroom politics of local bar associations.)
"As Governor
it will be my purpose to see that
California's streets and neighborhoods become safe again."
"Ronald Reagan Speaks to the Issues,"
Reagan for Governor Committee, 1966
45
(California streets and neighborhoods are not safe
again. --- crime in California during the first Reagan
administration increased 39 percent. He has failed to
make this promise good.)
"As Governor I will seek legislation setting up a modern
state police academy and crime laboratory to assure out
people the best law enforcement possible."
"The Candidates and the Issues,"
San Francisco Examiner, Nov. 4, 1966
(Reagan never proposed legislation to establish a
modern state police academy. California has had for
years a modern crime laboratory in the Department of Justice.)
"California needs the kind of academy that will bring
better training to all our law officers." He said he
envisions a crime laboratory that goes "far beyond" the
small lab now operated by the State Criminal Investigation
and Identification Bureau. He said that as governor he
would create a state-operated police training academy.
Copley News Service, Los Angeles,
Aug. 20, 1966
"The only thing that's going up more than spending is
crime. Our city streets are jungle paths after dark
with more crimes of violence than New York, Pennsylvania
and Massachusetts combined."
Televised talk, Los Angeles,
Reported by the Associated Press,
Jan. 5, 1966
46
Reagan said the state's prisons, hospitals and correctional
institutions can be run more efficiently. He added: "These
institutions are the biggest hotel chain in California."
News conference, San Francisco,
The Sacramento Bee, April 6, 1967
Reagan said the "biggest hindrance to law enforcement is
the way that this state has preempted the right of local
government to enact their own criminal law."
Republican rally, Manhattan Beach,
Los Angeles Times, Oct. 21, 1966
"It is important to recognize that unless both local and
state law enforcement agencies meet their responsibilities,
we may find them usurped by the federal government or ceded
to it by default. When this happens we will have, in
effect, a national police force. And we will have taken
steps to abolish crime only at the risk of our freedom.
Speech, National Sheriffs Association,
Las Vegas, June 19, 1967
"Public information and community relation programs are no
longer luxuries for law enforcement agencies. They must
become essential parts of day-to-day operations. "
Speech, National Sheriffs Association,
Las Vegas, June 19, 1967
"In the world's richest nation we are told we could reduce
the highest crime rate by eliminating poverty. Let us say
instead the criminal -- not society -- is responsible for
47
his misdeeds and punishment of the guilty should be swift
and certain."
Speech, Young Republicans Convention
Omaha, June 22, 1967
"I'm opposed (to police review boards). I think this
is an unnecessary interference. I think that where those
communities that have tried it have found that it has
interferred with law enforcement and has unnecessarily
LIBRARY GERALD R. FORD
restricted the police and I believe that we have a fine
police department here. "
Press conference, Jan. 4, 1966
Q. "Could you state for me the official position on
capital punishment of your administration."
A. "Yes. As expressed by myself on a number of occasions,
I believe that capital punishment is necessary and should
be maintained. This is a personal view. I have been
on both sides of the fence with regard to this, but I
feel and believe that it is essential in the preservation
of law and order. I believe it is a preventative."
News conference, Sacramento
Sept. 5, 1967
(Reagan) believes some control of mail-order gun sales
would be in order.
News conference, Los Angeles,
Los Angeles Times, Aug. 3, 1966
48
Reagan said he was in agreement with Lynch's proposal for
legislation further restricting the sale and use of heavy
firearms.
"I don't want to look out of the window and see that my
neighbor has given the kids some bazookas
11
News conference, Sacramento,
The Sacramento Bee, Dec. 1, 1966
"
I think those (racial) disturbances are a terrible thing
and I think there is only one way to handle them. I think
they have to be met and controlled and whatever force is
necessary to preserve law and order must be exerted. "
News conference, Sacramento,
May 16, 1967
Q. "Do you endorse the concept that every man ought to
have a gun in his own home in order to defend himself
?"
A.
" I am not in favor of much of the proposed gun
legislation. The idea either of registration or further
restrictions. I think there are things that can be
tightened up with regard to interstate shipment of arms,
so that you should have more control of who couldn't buy.
I don't think -- you know, people kill people; guns don't
kill them. And a very small percentage ...
of our crimes
of violence are committed with a gun.
"I like the idea that the law-abiding can have protection
in their homes. I would be opposed to anything that
would make it more difficult for the law-abiding to have
that protection. "
News conference, Sacramento,
May 9, 1967
49
"There is talk these days that punishment is not a deterrent,
and I believe that talk is partly responsible for our
increase in crime. As punishment becomes more difficult
to mete out, those who should be deterred by its threat
feel freer to resort to crime and acts of violence."
Speech, National Sheriffs Association,
Las Vegas, June 19, 1967
"If I could ever have it proven to my satisfaction that
the death penalty is not a deterrent, that in other words it
is only punishment, then I would be opposed
"
News conference, Statler Hilton,
Los Angeles, Jan. 4, 1966
"If Negroes don't cool it, Martin Luther King will have
died in vain. "
San Francisco Examiner
April 4, 1968
"We will continue to seek laws to protect our young people
from pornography. A series of decisions by the United States
Supreme Court in recent years has extablished guidelines
for regulating obscenity; we will ask for measures to
stiffen California's laws in this regard, while keeping
within those guidelines and avoiding any taint of
censorship."
State of the State Message
Jan. 8, 1968
Q. "If a bill were to pass abolishing capital punishment
50
would that go across your desk?"
A. "Well I wouldn't want to make a commitment until
I knew whether it reflected the will of the people. The
people of California have at several times made it
unmistakably plain that they supported the death penalty.
I would assume that if and when such a bill ever did
arrive, that it would be because the people had changed
their minds about it."
News conference, Sacramento
March 14, 1967
"I think in legislation, when hearings have been held and it
finally reaches a vote, you have a pretty good indication
as to whether the Legislature is expressing the will of the
people. Believing that, if they had done that (passed
a bill to abolish capital punishment) I certainly wouldn't
stand in their way. "
News conference, Sacramento
April 11, 1967
III. RONALD REAGAN'S RECORD ON CRIME IN CALIFORNIA
Here I think the most important thing strategically
is that we cannot go charging into Reagan on the same old
basis that crime is up by X percentage in California and
therefore he was a failure on the crime issue. Not
included in these statistics is the reference to violent
crime on the increase. My theory here is two-fold:
1. It can always be shown that crime is on the rise.
51
As such, that would not give Ford an edge over Reagan.
2. More importantly, I think there are several
issues that will make a point better with reference to
Reagan's position on crime. I refer to original comments
on the initial memo:
We are exploring the possibility that we can charge
Reagan with being soft on crime specifically liberal on
the parole of felons.
A. During the central period of the Reagan Administration
(1968 through 1972) the number of male felons in
California prisons declined more than 7,000, from
23,405 to 16,061.
B/ While it is true that part of that drop can be
attributed to the "probation-subsidy" program enacted
by the 1965 Legislature to keep so-called lesser
criminals (burglars, check forgers, etc.) out of state
prisons, Reagan's administration developed a very
liberal parole policy. The number of male felons on
parole increased from 10,524 in 1968 to 14,533 in 1971.
C. During that period of time the Reagan administration
praised itself for its many corrections reforms.
D. In 1973 Reagan's liberal parole policies came to
an end largely due to pressure for change from law
enforcement officials. Thus in 1973 and 1974 the
prison population in terms of male felons began to rise
again to the point of 21,547 when Reagan left office.
E. Going hand in hand with the above problem are the
52
following statistics on felony arrest dispositions
in California during the 1973 time frame:
Of the 233,000 persons arrested in 1973 for a
felony, only 186,000 had a complaint filed against
them and of those, only 85,000 persons were
prosecuted. Of those, only 42,000 were convicted
of a felony. Worse yet, of the 42,000 convicted
felons, only 5,000 were sent to state prison with
another 1,000 being sent to the Youth Authority.
14,000 were granted straight probation and another
16,000 were granted probation and served less
than one year in a county jail. Thus, in California
in 1973, only 2.6 percent of those arrested by
the police for a felony went to state prison.
Corresponding with this drop in the number of male felons
in prison is a skyrocketing increase in active adult
perversion caseload. The total below shows that over the
last 11 years, five of the highest percentage increases in
the perversion caseload occurred during the Reagan
administration and there is definitly a positive correlation
with reference to this increased perversion caseload and
the decrease in the number of male felons in prison.
TABLE A
53
ACTIVE ADULT PROBATION CASELOAD ON DECEMBER 31, 1963 - 1973
Year by Type of Court
Municipal
Percent superior
Percent
Superior
and justice
court to total
Year
Total
change
court
courts
caseload
1963
71,839
9.5
30,833
41,006
42.9
75,545
52
31.074
43.571
493
Source:
California Department
of Justice -- Division
of Law Enforcement --
Bureau of Criminal
Statistics
"Adult Probation in
California -- 1973
3
54
The budget act of 1972 appropriated $600,000 to the
Department of Corrections "for additional training for
prison personnel including correctional officers, correctional
program supervisors, correctional counselors, parole
agents, middle managers, administrators, and parole board
members and representatives
This $600,000 was
appropriated as a separate item in the budget act, and was
in addition to approximately $657,000 in the department's
operational budget to finance its in-service training
programs.
The Auditor General in a report to the Joint
Legislative Audit Committee entitled "Review of the
Department of Corrections Use of a Special $600,000
Appropriation Relating to Training of Correctional Officers"
in 1974 said, in part:
"The special appropriation is being used to finance
a training course to maintain peace officer's status for
correctional officers. In the judgement of the Auditor
General, this is not the intent for which these monies
were appropriated. "
Further, the report says, "twenty-five percent of the
training course covers laws of arrest which are seldom
experienced in correctional institutions. In fact, the
job description for correctional officers does not even
include arrest functions."
Still further, the report says, "the Auditor General
recommends that the Department of Corrections discontinue
55
the financing of peace officer training requirements from
the special training. Implementation of this recommendation
will free the balance of funds for training to upgrade
the performance of correctional personnel in their duties. "
And, lastly, the report indicates "the department has
not maintained a formal set or account of records for the
appropriation and, therefore, was unable to provide a
detailed breakdown of the expenditures charged to it.
The Auditor General recommends that the department immediately
establish a proper set of records.
GERALD
R.
FORD
LIBRARY
56
REGULATION OF PUBLIC UTILITIES
I. REAGAN ON PUBLIC UTILITIES
"I don't know if the government has proven it is better
able to provide power. "
Speech, Telephone Company
April, 1966
"
there is indication that they (the Public Utilities
Commission) have been unduly restrictive on the telephone
company.
"
News conference, Sacramento
May 16, 1967
" the phone company here in California has been in great
difficulty because of some of the actions of the Public
Utilities Commission, and I think that hearings might develop
that there is this problem (rate increases) and where they
have the expansion to keep up with the state's growth
...
the PUC is going to have to be more realistic in its
approach to the phone company. "
News conference, Sacramento
May 16, 1967
II. HOW WELL DID REAGAN ACT IN THE CONSUMER INTEREST
TO REGULATE UTILITIES IN CALIFORNIA?
In his announcement of candidacy for the presidency, he
talked about how terrible business was. Perhaps big utilities
need to mentioned in this light and Reagan's helpful treatment
57
of them in California.
In 1972, the Auditor General prepared for the Joint
Legislative Audit Committee a report on the state Public
Utilities Commission. The audit was to determine whether
or not the commission complied with the intent of the
Legislature and had served the needs of the public in an
economic and efficient manner in the regulation of utility
rates.
The report may be summarized by quoting from it.
"The commission authorized rate increases of $784
million during the five-year period through June 30, 1972,
compared with a rate decrease of $34 million during the
preceding five-year period. This unprecedented increase
of $784 million raises a serious question as to whether or
not the commission has met the needs of the public in
assuring that the public utilities shall furnish adequate
services at reasonable rates. "
The report further points out the following as some
of the reasons for the increases.
"The authorized rate increases are attributable to
an overall increase in the cost of living and a combination
of the following factors which are directly controllable
by the commission.
A. "The raising of authorized rates of return for the
regulated utilities during the last three years.
B. "Change in an established rate setting policy for
the state's largest utility company allowing the firm's rates
58
to include incurred income tax expenses.
C. "Allowing the excess profits of an affiliated
company to be passed on in the form of higher rates to its
consumers.
D. "Failure to consider some relevant factors which
would limit the amount of rate increases such as operations
of affiliated companies, major costs claimed in support to
offset rate increases and the operations of regulated companies
located out of state.
E. "Failure to provide incentives that will promote
efficient utility operation. "
And, further, the report can be summarized by saying,
"present policies and procedures practiced by the commission
tend to prevent the efficient and effective regulation of
utilities. These include the following:
A. "Assignment of commission hearings to individual
commissioners.
B. "Commission preventing its legal staff from taking
positions independently different from other commission
staff.
C. "Review lacks verification of earnings, plant and
equipment costs and other services.
D. "Formal organization of utilities division is over
specialized and results in conflicts of authority among
supervisory staff.
E. "Two divisions duplicate each other's efforts
in determining the reasonableness of a utility's request
for rate increases."
59
The issue here seems to me to be that the governor
appoints the PUC commissioners and if he appoints
commissioners to act in favor of utility companies, rates
have a larger chance to increase, If on the other hand,
he appoints commissioners who attempt to act in the
consumer's interest, rates have less of a chance to
increase. Further, my thinking is that New Hampshire,
where utilities, questions of energy, etc., are of great
importance, we find the way to either expand on this
information or use it elsewhere.
CERALD
R.
FORD
LIBRARY
60
The report presents the following totals to illustrate
the rate increases and decreases over the 10-year period
it examined.
Table 1
Public Utilities Commission Utility Rate Changes Authorized
Comparison of Five Fiscal Year Periods
1967-68 Through 1971-72 With
1962-63 Through 1966-67
GERALD R. FORD LIBRANA
Fiscal Year
Amount
Fiscal Year
Amount
1967-68
$ 3,976,677
1962-63
$ 969,105
1968-69
82,899,917
1963-64
(50,374,021)
1969-70
152,145,710
1964-65
2,492,928
1970-71
100,867,299
1965-66
1,921,448
1971-72
443,613,982
1966-67
11,459,340
$783,503,585
$(33,531,200)
Source: Annual reports of Public Utilities Commission.
Comparing the total rate changes for the two five-year periods shows
that the changes during the most current five-year period, exceeded those of the
prior five-year period by $817,034,785.
61
GERALD R. FORD
PROPOSITION ONE
LIBRARY
I.
As part of his cost-cutting image, Ronald Reagan placed
before the voters in the State of California a ballot
measure which was ostensibly a tax limitation initiative.
Perhaps one of the most interesting and politically usable
factors about this is that it was defeated. That in combination
with Reagan's massive mandate when he defeated Pat Brown
and substantially lessened support when he defeated Jess
Unruh and his defeat on Proposition One could argue for
some political rhetoric which says that Reagan's popularity
went downhill substantially over eight years culminating
with the defeat in 1973. At least, that is something to
play with.
II.
Rather than have us do a summary of Proposition One,
I have included an analysis prepared by the California
Journal.
62
Analysis of key provisions in Proposition 1
Here are the principal provisions of the tax lim-
ernment taxes would remain subject to change by
itation initiative on the November 6th statewide
majority vote.
special election ballot:
Pro
Tax rate limits would be estab-
Expenditime " celling At the heart of the measure
lished for cities, counties and special districts similar
PAGE 8
CALIFORNIA JOURNAL
63
III.
When running for election in 1966, Reagan was quoted
as praising A. Alan Post, the California Legislative
Analyst. At that time Reagan said:
"I've turned to the most competent authority I could find
on this budget, a man employed by the state to analyze
the budget. He's been doing it for 15 years. His duty
to be fair and objective is spelled out by law. I refer
to Mr. A. Alan Post, a legislative analyst. I've taken
a long hard look at this budget but I couldn't possibly
match his comprehensive findings."
However, with reference to Proposition One, Post took
on Reagan by saying in a California Journal article in
September, 1973:
"This measure does not appeal to me as good public
economics. It may well constitute an overreach of the
state into the private economy, and it may well end up as
a threat on the part of the state from the development
of sound fiscal relationships and responsibilities with
respect to local government. It may well add to the
total administrative cost of government in California
where functions being carried out by the wrong level of
government, using the wrong kinds of taxes, and in a
bureaucratic and costly manner."
64
GERALD R. FORD
MALIBU RANCH DEAL
The attached is a copy of a report prepared for the Unruh
for Governor Committee in 1970 when Jess Unruh was the Democrat
nominee against Reagan in the California General Election for Gover-
nor. We have not attempted to review it for accuracy but feel
it should be presented as early as possible in order to give
the committee the chance to determine whether or not it warrants
further checking.
It is potentially damaging, but appears to me to need a
great deal of additional work.
As you can see, there are two memos. The second was evidently
prepared to answer questions raised by the first.
65
TO:
Jess Unruh For Governor Committee
FROM:
Marvin S. Shapiro
GRALD R. FORD
DATE:
October 16, 1970
This memo is intended as a summary of the various
documents and items of information I have examined with
regard to property in Malibu formerly owned by Ronald
Reagan. There are two parcels of property involved in
this discussion: (1) a parcel consisting of 236.39
acres south of Mulholland Highway (the "236-Acre Parcel"),
and (2) a 54.44 acre parcel north of Mulholland Highway
(the "54-Acre Parcel"). These two parcels, as well as
the rough boundaries of a contiguous 2,500 acre ranch
owned by Fox Realty Corporation of California ("Fox"),
are outlined in the attached map (Exhibit A). The border
marked with x's reflects the 2,300 acres Fox acquired in
March 1946. The dates of the other acquisitions by Fox
are also indicated. Also attached is a contour map of
the area (Exhibit B).
On March 27, 1951, Ronald Reagan, an unmarried man,
acquired the 236-Acre Parcel and about 50 acres on the
This may
north side of Mulholland (including 14.44 acres of the
54-Acre Parcel). The stamps on the deed* indicate
not be
a
purchase price of $65,000 Apparently, Reagan acquired
accurate
the other 40 acres of the 54-Acre Parcel at another time
Since Reg.
and disposed of about 35 acres north of Mulholland at another may have
time.
assumed
In December, 1966, Reagan conveyed to Fox by grant
a pre-
deed* the 236-Acre Parcel and granted to Fox an option*
to purchase the 54-Acre Parcel. The option to purchase
existing
was exercisable between January 1, 1967 and December
31, 1973. The option price is $8,000 per acre, all cash.
mortgage
The Transcript of the Assessment Appeals Board proceedings
in January 1968 discussed below records that Reagan's
attorney, Mr. Endicott of Gibson, Dunn & Crutcher, stated
that the purchase price for the 236-Acre Parcel and the
option was $1,930,000 (Tr. p. 296). Since the recorded
trust deed given by Fox* indicates that it secures a
note in the amount of $1,391,167, one may infer that a
balance of $539,000 was paid in cash. Mr. Endicott
stated that the promissory note was for a one-year term
and that it was in fact paid (Tr. p. 255). Prior to
*Indicates that I have a copy of the document.
66
TO:
Jess Unruh. For Governor Committee
FROM:
Marvin S. Shapiro
DATE:
October 16, 1970
PAGE: 2
payment of the note, it was assigned by an assignment*
recorded February 15, 1967, to Jules Stein, William
French Smith and Robert Shuman, as trustees under the
Ronald Reagan 1966 Declaration of Trust. The deed of
trust was reconveyed on February 19, 1968.
to whom
By deed dated June 18, 1968*, Reagan conveyed the
54-Acre Parcel to Santa Rosa Ranches, a Kaiser-Aetna entity.
The stamps on the deed indicate that the value of the
consideration received was $3,000 per acre. Since there
was no trust deed, one might infer that there was an all
cash deal. However, Bryan Stevens informs me that the 54-Acre
Parcel served as the down payment by Reagan for about 700
acres in Riverside County. Also, Santa Rosa Ranches may
have had a right to compel Reagan to repurchase the property.
Fox has never given up its option interest in the 54-Acre
Parcel. By deed recorded September 11, 1969*, Santa Rosa
Ranches conveyed the 54-Acre Parcel to Fifty-Seventh Madison
Corporation, a real estate company, which was represented by
Rosenfeld, Meyer & Susman, which also represents MCA. The
deed indicates that the address of the buyer is 598 Madison
W
asses.
Avenue, New York City, attention: Morris Berman, and that
$3,000 per acre was paid.
The assessment of Phil Watson, the County Assessor,
for fiscal year 1967-68, based on values as of March 1967,
indicate his conclusion that the 236-Acre Parcel was worth
$916,800 and that the 54-Acre Parcel was worth $30,000.
Bryan Stevens, a teacher who is active in Democratic
politics, appealed the conclusion of the Assessor. The
Appeals Board, after a hearing reflected in a transcript
of over 1,000 pages, ruled that the value of the 236-Acre
Parcel was $1,459,200, and that the value of the 54-Acre
Parcel was $216,400. The Transcript may be examined in
Room 265 in the Los Angeles Hall of Administration. Both
Reagan (still the owner of the 54-Acre Parcel at that
time) and Fox filed suits in the Los Angeles Superior
Court contesting the Appeals Board decision. Superior
Court Nos. 940504 and 940643. FOX dismissed its suit
after taking no other action for a year. There is nothing
filed in Reagan's suit except his complaint. The Reagan
complaint, which was verified by Endicott, states that the
full cash value of the 54-Acre Parcel was $30,000.
67
TO:
Jess Unruh For Governor Committee
FROM:
Marvin S. Shapiro
DATE:
October 16, 1970
PAGE: 3
The position of Fox reflected in the Transcript
was that the Assessor's determination of value at
$916,800 was correct, notwithstanding the fact that it
paid approximately $1,000,000 more than that value for the
236-Acre Parcel and the option. Fox and Reagan stated
that there was no allocation of consideration between the
236-Acre Parcel and the option. However, it would be
difficult to assert that the $8,000 per acre option had
any significant value when thereafter Reagan somehow
sold the 54-Acre Parcel for consideration worth $3,000
per acre -- the $3,000 per acre value being consistent
with Reagan's position before the Appeals Board that
the 54-Acre Parcel had even worse topography than the
236-Acre Parcel (Tr. p. 53).
Fox's counsel's position was consistent with
testimony of Alan Altman, Watson's special assistant
in charge of the appraisal, that "Fox was expanding
their properties in that area in order to accommodate
their motion picture production business which had been
forced out of the 20th Century lot in West Los Angeles
by their sale to Alcoa, and as a result they needed to
develop this area in such a way that it would protect
their future expansion for movie purposes. " Mr. Altman
then went on to indicate that there was concern that the
use of the 236-Acre Parcel for purposes other than ranching
or semi-agricultural uses would adversely affect the use
of Fox's contiguous 2,500-acre parcel for motion picture
production purposes (Tr. p. 978). Mention was made of the
possible adverse effect of development of the 236-Acre
Parcel on the background scenery for movie making on the
2,300 acre parcel. This appears unfounded because of
ridges on the properties.
TO:
Jess Unruh For Governor Committee
68
FROM:
Marvin S. Shapiro
DATE:
October 16, 1970
PAGE:
4
Fox's counsel also stated that Fox needed the
property because of flooding of their 2,500-acre parcel
by the Malibu Creek and because of their need for
alternative access routes (Tr. pp. 314, 428, 1020).
Mr. Culver testified that the 236-Acre Parcel has no
serious flood hazard and that it was therefore desired
as a place to locate sets which would not be threatened
(Tr. p. 510) Culver also stressed the importance of
access for the western portion of the Fox ranch to
Mulholland through the 236-Acre Parcel via a road through
a pass in the southeasterly portion of the 236-Acre Parcel
(Tr. p. 516).
Mr. Ferguson, an officer of Fox, testified that
Fox was concerned that telephone poles or power lines on
the southern portion of the 236-Acre Parcel would adversely
affect the shooting of scenes in the western part of the
Fox ranch.
Ferguson stated that Fox was informed in November
1966 that the Reagan properties were for sale. (Mr.
Altman of the Assessor's office testified that there had
been no listing or advertising of the Reagan property.
Tr. p. 982.) Ferguson stated that Fox wanted the option
on the 54-Acre Parcel because it wished to assure that it
would continue to have frontage on Mulholland even if
there was a realignment of the road (Tr. pp. 648-649).
Fox's counsel said that Fox had acquired the 120-acre
Hunter parcel to protect Fox's entrance via Waycross (Tr.
p. 177). That transaction closed on November 1, 1966, and
involved a price of about $15,000 per acre and a retention by
seller of a life interest in seven of the acres sold. The total
purchase price of $1,650,000 included a note secured by a
trust deed* for $1,200,000. (The deed of trust indicates
that the Fox-Hunter transaction was pursuant to an agreement
of sale dated August 1, 1966. That agreement probably
reflects an obligation of Fox to pay an additional sum of
$105,000 for the seven acres when the seller dies.) Thus,
approximately the same percentage of the total purchase
price (27%) was paid in cash to Reagan and Hunter. But
the terms of the trust deed notes were strikingly different:
Reagan received a one-year note, virtually the equivalent of
cash; the sellers of the Hunter parcel received a note with the
following terms: 25 equal annual installments of $48,000
each, commencing November 1, 1967; interest payable annually
at 5% until November 1971; 5 1/2% to November 1976, and 6%
for the balance of the term. That note clearly did not have a
cash value approaching the face amount of the note.
69
TO:
Jess Unruh For Governor Committee
FROM: Marvin S. Shapiro
DATE: October 16, 1970
PAGE:
5
The Assessor has determined that the fair market value of
the 120-acre Hunter parcel was approximately $1,000,000
in March 1970, $1,250,000 in March 1969, and $925,000 in
March 1968. Mr. Culver, the expert witness of Fox and
Reagan, stated that most of the Hunter parcel could be
developed, and that the Hunter parcel had a greater value
to Fox than to any other person (Tr. pp. 406-408).
In October 1964, Fox acquired 35 acres abutting
Las Virgenes Canyon Road from Edgar Shafer. The deed
indicates a price of $450,000, or $12,850 per acre. In
August 1963, Fox acquired 14 acres abutting Las Virgenes
from Lowell Hoff. The deed indicates a price of $175,000,
or $12,500 per acre.
Mr. Sapiro, Stevens' counsel, denied the need for
access by Fox because they, in fact, already had access
to the property via Waycross Drive, which leads to Las
Virgenes. Also, Fox can build a road to a portion of
Mulholland Highway abutting their 2,500-acre property.
Among other arguments made by Fox's counsel was
that better property in the area sold for less than the
Assessor's valuation. That statement seems supported
by the evidence, notwithstanding Stevens' position to
the contrary. Stevens' position was based on sales made
at about the same time in the same general area. However,
Stevens' focused exclusively on the purchase price and
did not consider at all the terms extended the buyer.
Almost invariably, the terms involved the payment of
relatively little cash, consisting primarily of prepaid
interest, with long term purchase money notes for the
balance. Discounts were applied by Mr. Altman, which
seem reasonable, indicating that these "comparable sales"
were generally made at about $4,000 per acre or less.
In any event, this was the position of the expert witness
of Fox and Reagan.
70
TO:
Jess Unruh For Governor Committee
FROM: Marvin S. Shapiro
DATE: October 16, 1970
PAGE: 6
Rebuttal to any suggestion that the $1,000,000
premium paid by Fox was related to the needs of their
2,500-acre property should include the following
reasoning: (1) Fox sold their Century City properties
to Alcoa long before 1966, i.e., in 1961 (April 1969
Fox SEC Registration Statement, p. 11); ; and (2) it is
more than a coincidence that Fox perceived its needs
shortly after it perceived that Reagan was to be the
next Governor -- the transaction apparently started in
November 1966 and closed in December 1966. Fox
acquired virtually all of its 2,500 acres in the area
in 1946.
The Transcript suggests three possible reasons
for the $1,000,000 premium: (1) additional access to
Mulholland, (2) concern that development of the 236-Acre
Parcel could adversely affect the background for outdoor
scenes, and (3) to provide a location for their production
facilities which would not be threatened by floods. Further
examination of the area with an expert on land acquisition
indicates the following:
(1) Only the 236-Acre Parcel or the western portion
of the Fox ranch could benefit. from the Mulholland access
which was available from the 236-Acre Parcel. (The western
portion was not used often -- virtually all of the production
facilities are in the eastern, level portion, which already
had excellent access.)
(2) If power poles existed on the southerly portion
of the 236-Acre Parcel, they could be seen from the western
part of the Fox ranch. But it is unlikely that that portion
of the 236-Acre Parcel -- the most rugged portion -- will be
developed in the foreseeable future. (Tr. p. 715.) Develop-
ments on the relatively developable part of the 236-Acre
Parcel could not be seen from Fox's 2,500 acres. It is
possible that two or three single family dwellings could be
built on the top of ridges which are visible from Fox's
production facilities, but one such observable dwelling already
exists on one of the three small parcels abutting Mulholland,
which neither Reagan nor Fox owned. In any event, poles or
additional dwellings could be edited out of any scenes if they
were filmed inadvertently.
71
R.
TO:
Jess Unruh For Governor Committee
FORD
FROM:
Marvin S. Shapiro
DATE:
October 16, 1970
PAGE:
7
(3) It is clear that the Malibu Creek overflows
from time to time. However, we saw no evidence of any
motion picture production facilities on the "safe" 236-
Acre Parcel.
We are informed that a stockholder's suit has been
filed against 20th Century Fox in New York, asserting that
Fox should not have entered into the Reagan transaction.
Court files in Manhattan have been checked without turning
up anything.
In 1968, Watson again determined that the value of
the property was $916,800. Stevens again appealed that
determination and was in the process of obtaining a
review by the Appeals Board when that Board concluded
that Stevens' attorney could not control the course of
the presentation of evidence against the Assessor's
determination. Stevens obtained an order from the
Superior Court in November 1969, reversing that determination.
Superior Court No. 944756. Fox has appealed that decision.
Watson's determinations of fair market value have
been as follows:
236
54
March 1970
$1,105,000
$115,000
March 1969
1,488,000
115,000
March 1968
916,800
115,000
March 1967
916,800
30,000
March 1966
---
30,000
March 1965
-------
10,000
107
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74
TO:
Jess Unruh For Governor Committee
FROM:
Marvin S. Shapiro
DATE:
October 21, 1970
I have ascertained the following additional facts:
The seller of the 236-Acre Parcel to Ronald Reagan
did not have a mortgage on the property at the time of
sale. Therefore, the total amount of the purchase price
paid by Reagan was $65,000. The $65,000 consisted of a
R.
first trust deed note for $50,000 and $15,000 cash. Reagan
FORD
paid off the note in 1958, and at the same time borrowed
against the property, giving a new mortgage for $35,000
That new mortgage was paid off in December 1966.
LIBRATE
In response to the statements made by Reagan to the
charge that there had been a million dollar bonus, I
suggest that the following questions be asked:
If your property was worth $1,000,000 more than the
$1,930,000 price you charged Fox, why did your expert
witness, David Culver, say that your property was worth
only $944,000?
Did you ever list your property with any broker or
advertise it for sale? Did you ever get an offer from
anyone other than Fox? If so, how much was the offer,
who made it, and what were the terms of the offer?
If your property was worth as much as you suggest,
why did you complain that your property was being over-
assessed by the County Assessor?
What type of land development project did Fox have
planned for your property when they bought it? If the
response indicates that Fox had in mind anything other
than usage in connection with its motion picture activities,
it should be pointed out that Mr. Culver and Mr. Ferguson,
an officer of Fox, testified that the reason that Fox
wanted the property was exclusively in connection with its
motion picture activities, and that Culver testified that
the best use of the property was holding it for future
residential development and that it was worth $944,000
based on that type of usage.
What has Fox done with the land since 1966?
75
TO:
Jess Unruh For Governor Committee
FROM:
Marvin S. Shapiro
DATE:
October 21, 1970
PAGE: 2
Do you have a lease on the property? HOW much
rent are you paying?
How is it that you were able to sell the 54-Acre
Parcel that you owned on the north side of Mulholland
Highway when Fox had an option to buy that land for
$8,000 per acre?
Why did you file a suit in the Los Angeles
Superior Court claiming that the 54-Acre Parcel was
worth $30,000 when you were able to sell it for $165,000?
76
Source of quotations of Reagan's attorney, Twentieth Century Fox's attorney
and the appraiser hired by Twentieth Century Fox and Reagan.
MENT
1. State 1 that the purchase price was $1,930,000. Made by Mr. Endicott,
Reagan's lawyer, at page 296 of the transcript of an Assessment
Appeals Board hearing in January, 1968.
2. The statement by the appraiser representing Twentieth Century Fox
and Reagan, Mr. Culver, that the fair market value of the land was
$944,000. (Page 413 of the transcript.)
3. Statement by the attorney for Twentieth Century Fox, George C.
Hadley, that the assessor's valuation of $916, 000 was "on the nose.
11
(Page 310 of the transcript. )
FORD 'y OFFICE
77
RONALD REAGAN ON SOCIAL SECURITY
Social security has "changed from an insurance concept
DERALD
A.
FORD
when it started to a welfare concept now. It should be
LIBRARY
made voluntary. 11
Los Angeles Times, Jan. 22, 1965
"The flagship of the liberal cause is social security,"
"Social security dues are a tax for the general use of
the government and payment of that yax does not automatically
entitle anyone to the receipt of. the benefits. The benefits
are a welfare program which can be cancelled or curtailed
by Congress at any time. "
Speech, Amarillo, Texas
March 2, 1964
"Do not exchange freedom for the soup kitchen of compulsory
insurance."
Arizona Republic, May 23, 1964
"I think social security's a fact of life. It's here to
stay and it's a good fact. I think it is not only a
great benefit to the recipients but I think at the same
time it serves all of us to the extent that it probably
tends to level off economic ups and downs by keeping the
pruchasing power among the people. However, I've reserved
the right and have on many occasions criticized flaws and
faults which I think endanger the program, and faults
which could only be termed as fiscal irresponsibility in
78
the administering and running of this program."
News conference, Jan. 4, 1966
"At the same time, can't we introduce voluntary features
that would permit a citizen to do better on his own, to be
excused upon presentation of evidence that he had made
provisions for the non-earning years?"
A Time for Choosing, television
speech for Goldwater, November, 1964
Reagan said he had never favored social security being
voluntary but had favored "excusing an individual from
contributing to social security if he proved he had made
adequate provision for his retirement years. "
Campaign tour, Fresno,
Sacramento Bee, Oct. 16, 1966
Reagan says he supports social security, but "I am critical
of some aspects. For example, you cannot name your
beneficiaries as you want to. Also, I think we could
explore the idea, perhaps to permit those who want to go on
private plans to do so, provided they submit a record
each year of such participation."
KNX Firing Line call-in show,
Los Angeles Herald-Examiner,
Oct. 25, 1966
"I still believe we could explore whether a man who could
do better on his own" should be allowed to purchase a
voluntary private retirement plan in lieu of the federal
compulsory program.
KNX Firing Line call-in show,
Los Angeles Times, Oct. 25, 1966