California’s budget woes have garnered substantial national attention. The state legislature has just passed a budget which, presumably, will be signed into law:
Reporting from Sacramento — Voting at dawn to end a three-month impasse, the California Legislature approved a deal that Democrats and Gov. Arnold Schwarzenegger reached with a GOP holdout to resolve the state’s fiscal emergency.
Under the arrangement, Sen. Abel Maldonado of Santa Maria provided the final Republican vote needed to pass a spending plan with billions of dollars in tax hikes. In exchange, Democrats agreed to rewrite election rules that Maldonado said had allowed the Capitol to become paralyzed by partisanship, leading the state to the brink of financial ruin.
The plan gelled Wednesday night following seven unsuccessful votes held throughout the day and into the night in the Capitol, which Sen. President Pro Tem Darrell Steinberg (D-Sacramento) had locked down Tuesday, barring senators from leaving. California’s financial state had deteriorated to the point where Schwarzenegger had ordered layoffs of 10,000 state workers and the suspension of hundreds of public-works projects. Early income-tax refunds have been delayed, and public anger has grown.
“I’m very relieved for the people of California,” Steinberg said. “There’s not a lot of good news to come out of a $41-billion budget deficit, except that we in fact solved it.”
The final plan incorporated most of the framework of the original budget compromise from Democratic and Republican leaders. It included billions of dollars in cuts to schools, healthcare institutions, higher education and programs for the poor. If signed by Schwarzenegger, who helped devise the package, it also would raise personal income taxes and the state sales tax, although a 12-cent per-gallon increase in gasoline taxes was eliminated in the final hours.
This is a comment I’ve made here and there throughout the blogosphere which I thought was worth repeating here. I have no specific allergy to taxes. Here in Illinois, for example, I think we’re overdue for a slight increase in the state income tax rate.
However, I think that California’s problem is much the same as Cook County’s: every conceivable revenue stream is increasing linearly while expenses are increasing faster than linearly. I’ve read California’s budget. Most of California’s expenses aren’t transfer payments, interest payments, or capital expenses and there is no line item in the budget for waste, fraud, and abuse. Eliminating that can only be done as opportunities are uncovered. Most of California’s expenses are compensation paid to current or former government employees.
I’m not a Californian so I won’t dictate to the citizens of California what they should or shouldn’t do. It’s a matter of basic mathematics that they’ve got to bring revenues and expenses into line somehow. If they can not only raise revenues but raise the increase in revenues to match the increase in expenses, well and good. They only other alternative is cutting government employee compensation. How they make that happen politically I don’t much care as long as I, living in another state with problems of its own, am not made to pay for California’s lifestyle.
Proposition 13???
I don’t know that I can think of anything more likely to alter the political dominance of the California legislature from Democratic to Republican than an attempt by the legislature to repeal Prop. 13.
How can a 2 trillion dollar economy not afford to pay a bit more in taxes..isn’t it possible that over the last few decades we’ve cut taxes too much?
California already has the highest sales tax rate and the highest income tax rate of any state. Other states manage to provide satisfactory government services substantially cheaper, while California seems to need tax increase to pay bills. This seems to indicate that the state is doing something wrong. Even if we could afford to pay more, we’re probably not getting good value for our money.
State employee salaries are a likely culprit — public employee unions are extremely strong and politically influential here, and Dave’s analysis of the budget seems sound to me.
Another problem is the state attitude towards bond measures and other initiatives that mandate spending increases. The current budget crisis immediately follows an election where my fellow Californians approved about $20 billion in new spending.
I’m just ever so glad I moved the California.
It is the Golden State, you know. And now you know where the gold comes from.
Personally, If I were in charge of disbursing the “state aid” funds, I’d demand that in exchange for the aid, California set up a state constitutional convention to draft a new state convention, and air all the dirty laundry about why their governance and tax system is so screwed up.