If California is the Petry dish for prospective national policies, the experiment has failed:
California, the sunny incubator of America’s future, has relished its role as a leading indicator of political trends. Tuesday it became what it thinks it should be, the center of attention, but not in the way it wants to be.
Its voters, at last sensible, rejected, by an average of 65 percent, five of six propositions. Gov. Arnold Schwarzenegger, the “post-partisan” Republican, and the partisan Democrats who control the legislature, promoted the propositions as efficient for and essential to eliminating the state’s budget deficit, which will now be $21 billion.
There is a basic, fundamental truth that those who bemoan California’s voters’ rejection of their governor’s and legislators’ plans for yet another short-term and short-sighted fix to the state’s fiscal problems including California’s governor and its state legislators need to recognize.
It’s not, as those who support the propositions that went down to defeat would have it, that California voters are irresponsible and don’t want to pay taxes. That’s absurd. California’s per capita tax burden is among the highest in the United States and the highest of any Western state.
To understand that fundamental truth you’ve got to take a couple of things into account. First, most of California’s budget is wages in one form or another, current or deferred, for state employees or the state’s contribution to local government employees’ wages, e.g. teachers, police officers, firefighters. It’s not handouts or frivolous capital expenditures. Second, median household income in California is about $60,000 (the average is about $70,000). The average individual state employee’s salary is around $70,000. In other words on average California’s state employees as individuals make what households make on average in the state. Third, most of the state’s revenues, like most states, is derived from three sources: taxes on income, taxes on real property, and sales taxes. That accounts for 90% or more of the state’s revenue. Finally, all of those things on which the state depends for revenue, i.e. income, property values, and retail sales, are declining right now.
Here’s the fundamental truth. Public employees’ wages can’t be determined by what they want or what they’re worth or even what they need. They can only be determined by what the taxpayers are willing to pay. When they’re flush and feeling good, Californians are willing to pay. But when they’re not state employees will feel the pinch, too.
I haven’t heard anyone mention it (although someone must have by now, and I’m not following the news that closely) but that $21B deficit is probably an optimistic estimate. The Fed just revised their economic forecasts downward, and will probably do so at least two more times this year based on what independent analysts think. Since California is Ground Zero of the current crises, that most likely means that California’s estimates from a few months ago are most likely out-of-date.
Are those numbers raw salary? If so, the situation is even worse once you take into account benefits packages that include pensions that let you retire at 60-90% of full salary in your 50s.
I assume that it’s 1040 wages, Eric, and, as you say, unfunded benefits makes it that much worse.
A stat that caught my eye in the Governor’s budget proposal: Over the next five years “[t]he working age population will grow
by 1.1 million, or 5.6 percent and retirement‑age group will soar nearly 14 percent.”
Like Rall said, states tend to balance short-term budget deficits with early retirement proposals, moving the wage and salary problem into the pension program. Plus, the new job openings give the political parties patronage opportunities.