The voters’ overwhelming rejection of the cockamamie quintet of budget fix measures the Capitol elite put on last week’s ballot fully exposed the political and fiscal rot at the core of state government for all the world to see.
After years of pushing hard decisions down the road through borrowing and fiscal sleight of hand, it’s clear that Judgment Day has finally arrived for our action hero governor and his Sacramento cohort. As California’s budget meltdown commands attention from Wall Street to the White House, the state’s leaders face not only a one-year, $24 billion shortfall, but also years of compounding future deficits. Their tools: a total lack of good choices, an intractably Byzantine political structure, and a set of financial trap doors beneath almost every move that resembles a solution.
Capitol Letters
Here are 10 key factors shaping the crisis:
1) It’s worse than you thought. Financially, the defeat of the ballot props is just a footnote, with a mere $6 billion in lost potential revenue. In just one day after the election, the estimated $21 billion deficit for the fiscal year starting July 1 grew to $24 billion, as the recession ate away already anemic tax receipts. Meanwhile California’s horrible credit rating slammed the door on Schwarzenegger’s plan to borrow $5 billion of the solution.
2) Arnold is a failure. The Terminator found that it’s much easier to play a governor than to govern. His utter lack of serious political skill made him a joke in Sacramento, and he never effectively communicated the full, ugly truth to those who elected him.
3) Electing a new governor won’t help much. The state’s afflictions are deep and structural. With one exception—long-shot Republican Tom Campbell, who’s issued a thoughtful budget plan—the wannabes seeking Arnold’s job have yet to say anything that seriously addresses the mess.
4) Layoffs and furloughs won’t do it. GOP front-runner Meg Whitman keeps making tough noises about “body count” and threatening to layoff 40,000 state workers. Putting aside the impact on the economy, government services, and the unemployment rate, it barely makes a dent—a few billion in a $24 billion problem.
5) Cutting where it matters is a double-edged sword. For perspective on the problem’s magnitude, consider that closing the entire UC system would save $16 billion—still $8 billion short. Besides higher ed, big ticket budget items are K-12 schools and health care benefits for the uninsured; cutting either carries reams of unintended consequences, both social and economic. Example: A California Budget Project report shows Schwarzenegger’s idea to eliminate the Healthy Families Program, leaving 942,000 California children without health insurance (11,160 in Santa Barbara County), saves $400 million in state money—but costs $700 million in federal funds. Bottom line: $300 million in additional deficit.
6) Republicans ideologues are playing their own game. Grover Norquist, patron saint of GOP tax cut jihadists, famously said he wants government “down to the size where we can drown it in the bathtub.” Sen. Abel Maldonado, R-Santa Maria, shined light on what Norquist meant when he recently told The Independent that his anti-statist GOP colleagues urged him to help drive state government “off the cliff.”
7) The two-thirds vote is determinative. Although legislative Republicans are a small minority, the California Constitution’s two-thirds requirement for budget passage means they’re driving the wagon.
8) Obama may have to revisit loan guarantees. The president said last week he opposes a federal “bailout” for California. But the state doesn’t need a bailout; it needs loan guarantees, with credit markets all but closed to California, to pay bills through a looming summer cash crunch. Given California’s political importance to Obama—and its congressional clout—look for Washington to get reluctantly involved.
9) It all started with Prop. 13. Benefits and costs to homeowners of property tax cuts engineered by Prop. 13 aside, passage of the historic measure led then-Gov. Jerry Brown and the Legislature in 1978 and 1979 to cushion its impact on local jurisdictions, sending them $5 billion in state funds and permanently putting Sacramento in the business of financing schools, and programs for cities and counties. That fateful decision set the stage for today.
10) California needs a big fix. A host of underlying factors—the twisted relationship between state and local government, special interest ballot initiatives, the two-thirds requirement for taxes, gerrymandering, term limits, and the soft corruption of massive political donations—all contribute to the dysfunctional system. Reformers, led by the corporate Bay Area Council, are now proposing a clean slate, through a statewide constitutional convention.
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Jerry, I think the state's contribution to the UC budget is only about $3 billion/year. See page 2 of:
http://www.universityofcalifornia.edu/ne...
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MrsDoverSharp (anonymous profile)
May 28, 2009 at 9:30 p.m. (Suggest removal)
Hi Mrs. Sharp - You are correct that the state share of UC's $16+billion budget is only $3B (a little less now). I was using the $16B figure for comparison's sake to indicate the order of magnitude of the problem. Sorry if that wasn't clear. Interestingly, there's a power/money grab move afoot in the Legislature in the last couple days in which a group of lawmakers, led by Sen. Leland Yee of SF, is trying to seize oversight authority for UC away from the Board of Regents and give it to Legislature. My partner and I have had some coverage of that issue over at www.calbuzz.com if you're interested. Thanks for checking in.
jerryroberts (Jerry Roberts)
May 29, 2009 at 7:28 a.m. (Suggest removal)
Thanks... yes, you say $16 billion would be saved by closing UC, and you don't say that only $3 billion would be saved by the State of California, so your article was accurate, but it is easy to be confused.
Your Calbuzz article was a bit too smart alecky for me; I don't know Leland Yee from Adam. But there is a bigger point, that somehow UC is not serving the people of California in the manner they want to be served, or else the budget would not have been cut so much during the past decade. Yee may in fact be grandstanding, but there may be a germ of truth in his actions.
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MrsDoverSharp (anonymous profile)
May 29, 2009 at 10:11 a.m. (Suggest removal)
"the wannabes seeking Arnold’s job have yet to say anything that seriously addresses the mess."
That's absolutely not true. Gavin Newsom is calling for repeal of the 2/3 rule, which is the cause (by allowing the minority of Republican wingnuts in the legislature to block sensible revenue increases) of this mess. It's odd that you point out that it all started with Prop 13 but failed to mention that that's because it contained the 2/3 rule. Also on the ballot in 1978 was the other Prop 8, which would have created a split tax roll allowing a higher property tax rate on commercial property and would have given residential property owners the relief they needed in a far more sane way than Prop 13 -- but Prop 13 contained a clause invalidating Prop 8. Needless to say, large corporations, not homeowners, got the bulk of the benefit of Prop 13, which they heavily bankrolled.
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JayB (anonymous profile)
May 29, 2009 at 12:11 p.m. (Suggest removal)
"somehow UC is not serving the people of California in the manner they want to be served, or else the budget would not have been cut so much during the past decade"
Non sequitur; in fact, it gets cause and effect backwards.
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JayB (anonymous profile)
May 29, 2009 at 12:14 p.m. (Suggest removal)
If the cause is the budget cutting, why does the State Leg cut the UC Budget, JayB?
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MrsDoverSharp (anonymous profile)
May 29, 2009 at 2:58 p.m. (Suggest removal)
I'm not a state resident so I hope you will forgive my ignorance, but it seems to me that the crux of the intractability of the problem is Proposition 13 and the onerous 2/3's requirement to pass a budget. Why can't Proposition 13 be repealed?
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jgzeger (anonymous profile)
May 30, 2009 at 8:52 a.m. (Suggest removal)
Tax revenue is created by high wage jobs in industry and manufacturing. California tax policies and fanatic environmental restrictions (e.g. Nava against oil development while jetting to Sacramento) are destroying what is left of the industrial base. Importing more and more poorly educated people while exporting highly skilled and highly educated people who happen to be the wrong demographic is just dumb.
The left says we should be like Canada. Canada uses a points system for immigration that emphasizes education and ability to assimilate. Canada only has a 6% unemployment rate and hasn't had a single bank failure.
Canada is actively developing its oil shale reserves. Maybe we should emulate Canada instead of pandering to La Raza.
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revisionist (anonymous profile)
May 30, 2009 at noon (Suggest removal)
Reads like a last minute column to meet a deadline. A few billion in a 24 billion problem sure sounds like a significant amount to me, say 15-20%, not a bad start. I thought the governor was a joke when first elected, but my image of him now that he has centered himself respectably is very high, and would vote for him. California is one of the highest taxing states in the country and has hidden taxes in the form of no break at all for capital gains which is huge. The real issue here Jerry is something that you don't want to seem to address, that of illegal immigration and its huge cash drain on our schools and budget. It is absolutely ridiculous that our schools are focusing their resources on ESL kids to raise testing levels and cutting the budget on GATE and other gifted kids and cutting out arts and music. What a joke. If this souunds a bit angry, it is. I am really tired of paying for "Illegal" immigrants that send their money back home and have no pride or respect for our country. And by the way, I am far from a right winger, just really fed up and your column doesn't address the real issues here, not even close. You'd rather point your finger at the governor and offer political, rather than substantial solutions to the issue.
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swheeler (anonymous profile)
May 30, 2009 at 12:32 p.m. (Suggest removal)
Bravo to swheeler -- ignoring the illegal immigration problem was a key problem with the old News-Press under Jerry's editorship, and the McCaw News-Press isn't any better. Jerry, talk to some legal immigrants who are not Latino -- you will find many who really resent the enormous expenditures on health care, welfare and education for illegal imigrants and their children. When you add these same children walking out of school carrying Mexican flags, as recently ocurred in Santa Maria, you are just further enraging taxpayers.
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revisionist (anonymous profile)
May 30, 2009 at 12:46 p.m. (Suggest removal)
It's interesting to me that the governor's threatened too-little-too-late cuts are almost exclusively in areas adversely affecting the less fortunate among us, tantamount to a shrunken family budget that says "Dad gets to keep enjoying his sports car, booze and cigars while Mom won't have to break a nail appointment but sorry, kids, you'll all still be wearing last year's shoes. Grew out of them? More's the pity..."
As long as corporations and fat cats fund our legislature we'll have government of the rich, by the rich and for the rich. Clean, fair, and transparent elections, funded with public money, are a must, followed by a plan to pay off the deficit with new state taxes based on well thought-out wants and desires.
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jonkwilliams (anonymous profile)
May 30, 2009 at 1:52 p.m. (Suggest removal)
And what was the News-Press under Jerry Roberts supposed to do about "the illegal immigration problem"? The News-Press was — and still is, albeit a sorry one — a newspaper.
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Moonrunner (anonymous profile)
May 30, 2009 at 3:42 p.m. (Suggest removal)
Wow, so Republicans are to blame for 7 of the 10 bad things on that list.
Wouldn't it be easier to just ban Republicans?
*sarcasm*
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bronc (anonymous profile)
May 30, 2009 at 11:14 p.m. (Suggest removal)
State government is so bad that it cant be revised or fixed. I'm with Nordquist and Maldanado. Drown it. Drive it off a cliff.
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nuffalready (anonymous profile)
June 4, 2009 at 5:29 p.m. (Suggest removal)
All Republicans are EVIL! Hogwash! Democrats want BIG GOVENMENT, Republicans love small GOVERNMENT but republicans are more libral than they were some 20 or 30 years ago. We have large, hungry government plus a huge imigration problem coupled with imigarnts with voting power to sway the vote in their favor. Obama was elected because of WHITE guilt and shame. White's voted for him and others because they want to right the wrongs of a Nation shrouded in shame for enslavement of blacks. I didn't vote for Obama because I have NO white shame. My family NEVER owned a slave but had been enslave throughout time by other powerful Countries, Russia, Germany, Norseman, Persia, Rome, Greese. State Government was corupted way before the Goveanater took over, kick-backs from the Power Companys, Big Industrial Bussiness, Oil Companies, etc..
No matter who takes Arnold’s place the economy in California is doomed. There is NO silver bullet, No magic wand or spell to make this problem disappear. California has had way too many thiefs taken from the State Coffers and the more the economy goes bad the more people who need Government monies to survive. Besides, Arnold, doesn't draw a State Pay-Check, the next guy will.]
dou4now
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dou4now (anonymous profile)
June 5, 2009 at 10:53 p.m. (Suggest removal)
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