The state of California is in crisis and time has almost run out. Arnold Schwarzenegger, the Governor, has spent this week haggling with state legislators to agree cuts to basic services in one of the world’s largest economies.
The state’s top finance officials warned that unless an emergency austerity plan is agreed by Monday ”” and there is little chance that it will be ”” they will not be able to borrow the billions of dollars needed to keep the current government functioning. If California was a company, it would have gone bust months ago.
The breadth and depth of Mr Schwarzenegger’s cuts are unprecedented and no one in the state, not even its dozens of billionaires, will be unaffected….
A genuine question, if I may. To this overseas observer it seems that the state legislators are culpable, because they are endlessly unable to agree on making ends meet. Why then is it Arnie who becomes the target of popular wrath rather than those folks in the capitol up in Sacramento?
Terry, it’s because he’s ultimately the one who has to decide where the budget axe falls. Also, he’s the one who has pushed for and agreed to massive increases in state spending when tax revenues were high, only to be left holding the bag when a downturn came.
It’s not all his fault, to be sure, but he’s had a big part in allowing this crisis to happen.
Jeffersonian is right, Terry. During the real estate run-up, California was hauling in property tax dollars right and left. Instead of creating a “rainy day fund” as a hedge against a downturn (which, of course, always eventually happens) the California state budget, under Democratic leadership in the California legislature, grew the state bureaucracy by double – and the governor signed those budgets into law. There was no attempt to rein in spending – just to grow government. And it’s always easier to point to a single person, and one who claims to be a Republican (they’re supposed to be the fiscally conservative ones).
Terry, Schwatrznegger is no ‘republican.’ He is a progressive, and what many of us here call a “RINO.” (republican in name only). And as far as what is ultimately happening in California – – the lunch bill has come due. Those of us in the relatively conservative midwest USA (Indiana, in my case) are watching with just a little glee to see what all those fine folks out there are going to do, now that they are forced to live within their means -or less, for awhile.
Admittedly, this report is short on details, and I’ve no access to the specifics of the cuts proposed by the governor. However, the substantial cuts to education and to public services like fire fighting follow the general tendency of bloated government to start cutting essential services instead of significant cuts to the bureaucracy. If the state bureacracy did indeed double in the past few years, then why are the cuts not made there?
Rather than doing what any business would do – cut the waste, the unnecessary, and the inefficient – governments like this make cuts that seem intended either to frighten or to punish the citizenry for their lack of continued support of higher taxes and the bloated bureaucracy.
I don’t mean to suggest that the choices would be easy, but to start by making these sorts of cuts to essential services in education (though there is probably some inefficiency there that could be trimmed) and public protective services is irresponsible and represents an abnegation of the right functions of government.
You would think, Todd, that the state government should just reduce its personnel numbers back to 1999 levels – or at least only have grown in proportion to the growth in the population (which would be about 20-30% growth – not 100%).
What’s going on now is “one-up-man-ship” – all the government, from the governor on down, have a vested interest in keeping government big – more money, more power, more control. What better way to get Californians to think they really do need to raise taxes than to say you’re going after the most vital services, fire, police, etc.? The real culprits are the public employee unions that refuse to reduce any benefits or pensions, and the Democratic legislature that really wants to do away with the 2/3 majority vote required to raise taxes (and the Republicans that are going along with them). If they can scare enough voters to change that 2/3s requirement to a simple majority (and with the Democrats controlling the legislature), then they can raise taxes over and over and over again.
We’ll have to see if it works, but as for me and my house, we’ll be leaving California sometime in the near future – as have a million and a half taxpayers over the past five years (and yet our population keeps growing – I wonder why? /sarc).
Oh, and jkc1945, be careful about that glee! The rest of the country, including Indiana, might be “bailing” California out soon.
call me a cynic #5, but I’m almost led to believe fire/cops/ems and parks are the first thing to get cut in an attempt to create political cover for tax increases. You are SO right that the bureaucracy in CA state government is just way our of hand it’s just pathetic that neither party appears willing to address it….
“Oh, and jkc1945, be careful about that glee! The rest of the country, including Indiana, might be “bailing†California out soon.”
As a 20 some year refuge in California from the Midwest, i’m always facinated by the level of what seems like bitterness from Midwesterners towards California. A) What business is it of yours, since our taxes pay so much of the revenue that your state takes in from the federal government, and B) If you don’t like where you live, move. Simple as that. As to who is to blame, i would have to say the good citizens of California who continue to elect the governors and legislators to office. They do so because they don’t like to be taxed but love the benefits. In fact, they rather behave like the citizens of the United States and their legislators are just as bitterly divided between the tax and spend Democrats and the “lets pretend it’s 1955 again” Republicans. Beware, the same fate awaits the rest of the country but on a much bigger level. It will be a disaster.
[blockquote]“Oh, and jkc1945, be careful about that glee! The rest of the country, including Indiana, might be “bailing†California out soon.â€[/blockquote]
Unfortunately, quite true, an action which will cause a massive moral hazard as state legislatures get the message 5-by-5 that they can spend like drunken sailors and Uncle Sugar will be there to pick up the tab once it comes due.
Californians made this mess, and Californians need to clean it up. As Mencken said, democracy is the idea that the common man knows what he wants, and deserves to get it good and hard.
Quite a few states could take lessons in basic fiscal management from the Administration of the State of Indiana (and I do like where I live). We have a surplus (remember what that is?) of a couple of billion bucks, we had the foresight to lease out our toll road (I-80 / I-90) a few years ago for a little over 3 billion, and actually, I think we probably pay into the feds as much as we take out, and more. (can’t prove that — but it seems likely. After all, we have that surplus I mentioned a little while ago).
I do watch California with a certain amount of satisfied glee, I stand by that. They have been flirting with socialism out there for decades, and the chickens do come home to roost. And yes, you folks are quite right; we could be required to “bail out” the state of California, but we will not do so quietly. We may want to reserve the right to send a few guys out to UCLA / USC / Stanford to teach some basic economics, in exchange for our bucks. It couldn’t hurt.
#1. Have to disagree partly with some of the other answers to your question. It’s also true that most Americans are ignorant of the process. Most could not name their congressman, and probably 99% could not name their representative in the state legislature. People blame Arnold because he’s the only person in Sacramento they’ve ever heard of.
A lot of people want their representative to fight for all the local pork they can get, but think that it’s the chief executive’s job to keep control on the aggregate budget. Problem is, that does not really work well. If Arnold had been a real fiscal conservative, he probably wouldn’t have been reelected.
Ultimately a foolish populace is to blame.
Sorry, but Arnold has not ben the one pushing for big spending increases. In fact, major reason (former Gov.) Davis was recalled was that he and the legislature follishly gave away large pension increase to govt employees at the height of the dotcom boom, mistakenly arguing, “it’s [the pension fund] the employees’ money.” Of course with the dotcom crash (never recovered), they discovered the harsh reality that the employer is responsible for funding deficits in a defined benefit plan. CA has been in budget crisis since then. In addition to falling property tax revenues, nearly 25% of sales tax revenues come from car sales, sharply lower now. So Arnold may well be wondering what was he thinking jumping into a crisis not of his making, a similar question to that which may be starting to creep into Barack’s head.
I have a relative in California who is a public employee, in rehabilitation services, been there 35 years, so not part of the enormous increase. His salary is not large, the theory being that his pension would be good so he didn’t need big bucks. Now he’s taken a 10% cut in unpaid furloughs, and the pension is threatened. His opinion is (and I think this is at least in part true) that the illegals and the tax cheating by legals who brag about it to him and send sums home to Mexico are a huge part of California’s problem. So many people who draw on public services are part of the underground economy, not contributing to the legal economy. He’s not allowed to ask about legal status in providing benefits. I think the lack of discipline in the legislature and the Governor’s ratification of this by signing bills is the larger part.
jkc1945, you’re in luck in Indiana with a good Governor. Minnesota’s Governor recently faced down the legislature and prevented tax increases there. Send us some of these for the national leadership.
#11 jkc1945 says:
The data in this report (PDF document) is a few years old by this point, but at least in 2004 Indiana did pay slightly more to the federal government than it got in return: the state received $0.97 of federal spending for every $1.00 it paid to the feds. That makes it a net contributor to the feds.
Of course, in the same year California only got $0.79 for every dollar they sent to Washington, so they were relatively much more generous.
reining in the prison guard’s union might be a good place to start.
flirting with socialism? What was prop 13?
No, the problem is wanting social services, but not wanting to pay for them. Prisons, schools, health care, roads. All pretty expensive. aT one time California had the best school system in the country. No more.
Gawain, finally a chance for me to agree with you about something – the prison guards have negotiated a sweetheart deal and the taxpayers are left with the bill. But the problem is far more widespread than that, as outlined so succinctly in #13.
I’ll say it again: the most dramatic fault line in our society is between those people who work for the government and those who don’t.
I thank those above who answered my question, although with different nuances. In some of the answers there are parallels with the situation here in the UK. For example, there are two big issues that our politicians are not talking about and indeed are frightened to do so: immigration, and public service pensions. The former is widely perceived to be creating increasing strain within our society. The latter is a ticking time-bomb as more and more people retire from public service with generous pensions largely paid for not out of savings but out of the ongoing public purse, ie they are an item of recurrent annual expenditure on the budget and a growing one. Of course, people know about these issues, and yet, if the political elite is not prepared to tackle them, where do we go from here? People are increasingly, and in desperation, turning to fringe parties: the Greens, the United Kingdom Independence Party and the ghastly BNP which thinks the late Herr Hitler was tragically misunderstood. The latest opinion polls gives these fringe parties 18% of the votes. Not enough to get anywhere, but a sign of voter weariness with the old Let’s Keep Things the Way they Are politics.
[blockquote]reining in the prison guard’s union might be a good place to start.[/blockquote]
Not a bad idea, though it won’t go far in fixing California’s budget gap. Eliminate the entire penal system and you save around $6 billion, only about a quarter of what’s needed. You’ll need to take on all the other public employee unions whose mouths are attached to the state’s teats, too. John Sweeney (and by extension, president Obama) won’t like that one little bit.
[blockquote]The latter is a ticking time-bomb as more and more people retire from public service with generous pensions largely paid for not out of savings but out of the ongoing public purse, ie they are an item of recurrent annual expenditure on the budget and a growing one. Of course, people know about these issues, and yet, if the political elite is not prepared to tackle them, where do we go from here?[/blockquote]
Public pensions are a huge problem here, too, Terry. The reason is likely the same as in the UK: They are the perfect political payoff vehicle insofar as they buy votes [i]today[/i] with money that gets spent [i]tomorrow[/i]. The shortfalls are such that, should any private enterprise run them as long as the government has, legislators would be in the highest of dudgeons demanding the fraudsters be brought before them in irons.
Governor for sale…..anybody want him?
No thanks, Cennydd, we’ve got a pretty good Democrat in the statehouse at the moment. The last thing we need is someone, anyone, who thinks the solution to every problem is to plunder the electorate’s wealth so he can throw dollars at it.
One poster writes rather callously … “Those of us in the relatively conservative midwest USA (Indiana, in my case) are watching with just a little glee to see what all those fine folks out there are going to do …”
Why anyone would be gleeful is a mystery to me. But to the poster, I say … the liberal intelligentsia, Hollywood elite and even Episcopalians — people so many T19 fans love to dish — are people who typically live well and do so within their means. For the most part, they aren’t the ones who are going to be harmed … they’ll do just fine. Those being hurt are everyday ordinary Americans for whom California has become too expensive. And yes, a few people (percentage wise) who have lived beyond their means … especially now that their means are beginning to disappear.
Still, a few nights ago at Yountville’s chic French Laundry … having a fixed price menu starting at over $200 per person (food alone) … there wasn’t an open reservation to be had. In fact, there never is … not even in this economy.
Always remember … there are two California’s when you here about those who are hurting. And take my word … one of them isn’t going to hurt.