State Budget Mess

As the legislature considers the state budget, I would recommend that every member read the first and last paragraph in Dan Walters' Tuesday Sac Bee column:

Were California a corporation, rather than a state, its officers would be playing tiddlywinks with Bernie Madoff in the federal slammer, having engaged in years of hide-the-pea accounting tricks, under-the-table loans and other gimmicks to cover up the state's perpetual operating deficits…

The most damning aspect of this tiresome situation is that the best budget our political system can produce is deceptive and fundamentally dishonest. It should tell us that we have a much bigger problem than an unbalanced budget.

The rest of us should think long and hard about the “most recommended” comment that accompanied this article:

"Why is it that WA, a “blue” and progressive state, can maintain highways, a ferry system, and three separate university systems without imposition of a personal income tax? Why does that State attract and keep businesses like Microsoft and Boeing, which create high paying jobs and generate significant revenues at state and local levels? Why does WA, where eco-consciousness is paramount, have thriving forest products, agricultural and fishing industries that also provide jobs and revenues for government? Why does CA have none of this? Perhaps it is that WA is governed by a part-time Legislature that convenes bi-annually, composed of citizens who must work for a living, rather than a pack of venal professional politicians whose only job is to put their corrupt interests ahead of the public good. May be it is that WA restricts State functions that duplicate federal governance, eliminating a duplicate tier of regulation that inhibits revenue generating enterprises. Maybe it’s both."

I’m having a hard time disagreeing with anything said in the article or in the reader comment above!

To read the entire article, click here:

http://www.sacbee.com/walters/story/2041808.html

The Wall Street Journal also weighed in on the state budget debacle (click here for story), hinting that the state's solution will likely exacerbate California's staggering unemployment rate:

The budget deal struck by California Gov. Arnold Schwarzenegger and statehouse leaders is expected to hurt a broad band of state residents and crimp the state's recovery from the current, deep recession.

Fiscal experts said the negative effects of the budget plan, crafted in an attempt to keep the state solvent, will offset much of the intended beneficial effects of President Barack Obama's federal stimulus package.

California's economic decline, economists predicted, will last longer than downturns in other states. They said the proposed cuts in the budget deal will compound the continuing impact from other recessionary blows, including an 11.6% state unemployment rate, widespread foreclosures on homes and depressed real-estate values.

In a second Journal article, focusing on the budget's impact on local government, they pointed out:

The state's cut into local funds, economists said, could have an outsized effect in delaying California's recovery.

Los Angeles city officials in said they expect to lose about 2,300 construction jobs because of a proposal in the budget agreement to take $72 million of its funds for redevelopment projects. The city's Community Redevelopment Agency has a $688 million budget, but most of that money goes toward paying off debt service on other projects underway in the nation's second-largest city.

The $72 million represents what is needed to fund new projects, said Cecilia Estolano, the agency's chief executive. Redevelopment funds will be taken from many other cities across California under the budget deal. "We're very concerned the state will be in essence shutting down the one economic-development program the state of California has during the worst recession in 70 years," Ms. Estolano said.

Both articles point out the absurdity of this budget "solution". The state managed to cut the items most likely to dig the state out of its recession, while protecting the wasteful duplicative programs in Sacramento. As I pointed out in Sunday's blog, most of their solutions will actually increase the deficit, leading to more cuts before the middle of the budget year.

This method of budget cutting isn't surprising given who really wears the pants in Sacramento--which is the powerful unions that represent state workers. It is no coincidence that all of the cutting and layoffs are occurring at the local level, while not one state worker has lost their job. Hopefully, they are done bludgeoning local government and will be forced to start cutting the fat in the next round of cuts.