It is ironic that in the last week, the very measures that Governor Schwarzenegger has trotted out to “scare” voters into for the measures, are the very reason I am now going to vote against all of the propositions. The deficit is too large and passing the propositions makes too little impact on the budget deficit to warrant holding my nose. I will briefly get into each one of them individually, but many of them rely on simply shifting and borrowing monies. That’s not much of a solution to the longer term problem.
He said, “To look for new revenues is out of the question.” Instead, his package includes cuts, borrowing, selling of state-owned properties, eliminating some state agencies and boards, accelerating revenues, shifting funds, and laying off 5,000 state employees.
If you are interested in a full array of responses from Democratic leaders and advocacy groups, I have compiled them on the California Progress Report:
Our Assemblymember Mariko Yamada also issued forth a statement:
“As California’s economic freefall continues, the Governor’s May Revise calls for deep reductions at a time when services demands are at an all-time high”, said Assemblymember Yamada. “I do not support a raid on local government whose coffers are already deeply depleted,” she continued.
Yamada called for the development of a set of budget principles, crafted in an open, transparent and bipartisan way. “These difficult times require all of us to share in sacrificing for the common good” she said. “However, a one-size-fits-all approach to the budget can have dangerous, unintended consequences especially for the most vulnerable populations, at times resulting in lost revenues and even overall higher costs to the State.”
These are devastating cuts. Some people will be alarmed by the cuts to education that figure to be in the $5 billion range in addition to the $9 billion cut in the February budget agreement. The law enforcement and public safety advocates might be alarmed at 38,000 released prisoners. Some are warning of a new crime wave, I suspect most of these people were incarcerated for relatively minor crimes, nevertheless, this is not the approach I would take to prison reform, though it is badly needed.
The Governor steadfastly refused to consider new revenues as an option. To me a cuts-only budget solution is not really going to fix the problems and there are frankly probably not enough discretionary programs left to cut $21.3 billion without sacrificing a tremendous amount of federal money. The Governor is already asking for a waiver so he can cut $900 million from MediCal.
The Sacramento Bee reported Wednesday:
“Chris Woods, budget aide for Assembly Speaker Karen Bass, D-Los Angeles, said Monday that due to various constitutional and federal protections, the state can only target about $38 billion in the budget — largely social services and corrections. K-14 education is protected by Proposition 98 and by a mandate in the federal stimulus package to maintain a certain level of funding. Higher education is also protected by federal stimulus rules, as are some social services.”
Some such as Republican Governor Candidate Meg Whitman have suggested that the state could cut 30,000 jobs from its state employees to balance the budget. State employees have become a sort of scapegoat, and I certainly agree that there are some that have amassed great amounts of wealth at public expense. We can certainly look towards correction officers who make six figures while pulling in the safety enhanced 3% at 50 retirement as a culprit. The new UC Davis chancellor is pulling in a cool $400K. The UC President Mark Yudof, a mere $800K plus change. But the typical state worker isn’t pulling in six figures and isn’t getting 3% at 50 or even 2.5% at 55 that managers get. Rather they are getting at best $30,000 plus a 2% upon retirement at 60 or 65. There is a huge difference.
Besides, it would be exceedingly difficult to balance the budget on the backs of state workers, no matter how popular it has become to try.
George Skelton back in February put it in real terms:
According to the state budget document, there is the equivalent of 205,000 full-time jobs controlled by the governor. There actually are more workers than that because some are part-time. Do the math based on 16 months, since that’s now the time frame of the projected deficit, assuming a balanced-budget package could be implemented by March 1.
You could lay off all those state workers — rid yourself of their pay and benefits — and save only $24.4 billion.
Meanwhile, you would have dumped 160,000 convicted felons onto the streets because all the prisons were closed after the guards and wardens were fired. There’d be no Highway Patrol because all the officers were canned. State parks would be closed because there were no fee-collectors or rangers.
Truth is the savings wouldn’t even add up to $24.4 billion because some of those employees are paid out of small special funds that are self-sustaining.
I know people, including myself do not want to pay more in taxes, you want to the state to be responsible with your money, I get all that. But I don’t think people get how bad the economy has gotten that we have come to this point.
With all of that said, the propositions are not answers to these problems–short-term or long term.
Proposition 1A would do a few things. First, it puts a cap on the budget. Second, it sets aside a rainy day fund. Third, it extends the tax increases passed in February for years three and four. Fourth, it enables the governor to unilaterally slash programs in the midyear.
There is something in Proposition 1A for everyone to hate. But for me, the picture at the top shows it all. Proposition 1A does a lot of bad things from my perspective in making it more difficult in the future to balance a budget and it does nothing right now to fix the budget deficit. The budget deficit this year will be the same regardless. Those who portray this as a tax increase I think are wrongheaded, it simply extends the currently agreed upon tax increase for two years. If that’s your reason for opposing it, I suspect you will see a tax increase in the future that will be worse than the one on the books.
Proposition 1B is why the California Teacher’s Association is supporting the ballot propositions. It promises to pay back money taken from education that has been mandated under Prop 98 to the tune of $9.3 billion in future years. It can only take effect if Proposition 1A passes. Most of the other teacher and educational groups are opposing Proposition 1A and they argue that they can go to court to enforce the provisions of Prop 98. I think that’s unlikely, nevertheless, right now I am opposing all of the ballot measures and hope we can we hit reset on the budget process to come up with more workable solutions that are not simply shifting monies around. Remember, like Prop 1A this will only affect future budgets, not the present one, so this will have no impact on the current Budget Deficit.
It is Propositions 1C through 1E that will actually impact the current budget, most of it through Proposition 1C. So you could actually get most of your bang for the buck if you only pass Prop 1C.
But, I would argue that each of these are fundamentally irresponsible and simply juggle monies around. In a way, it is simply VooDoo economics.
Here a fairly decent description of Proposition 1C from BallotPedia:
“Proposition 1C would authorize borrowing against future lottery proceeds as a way to avoid state government spending cuts. The 2009-2010 budget plan includes $5 billion from this source, and the measure would also authorize similar borrowing in future years. It does not include a cap on the amount of future lottery revenue that could be pledged to pay for current spending. Essentially, the measure would allow a form of deficit spending that is not subject to the balanced budget provisions adopted by a vote of the people in California Proposition 58 (2004).
The proposal would also repeal the current requirement that lottery revenue be used only for education. Instead, the legislature could appropriate lottery revenue for any purpose. However, the measure would require the legislature to appropriate general fund revenues to education in an amount equivalent to the lottery revenues that went to schools in FY 2008-2009, adjusted for inflation and changes in student counts.”
It was interesting that in the Enterprise yesterday was a supposed proponent of First Five arguing for Proposition 1D. In fact, this proposition would take money from First Five.
I’ll again use BallotPedia for their description of the Proposition:
“To avoid additional cuts in general fund-supported state spending, Proposition 1D would authorize a fund-shift of $268 million in annual tobacco tax revenue currently earmarked for “First Five” early childhood development programs under the terms of California Proposition 10 (1998). That revenue, plus $340 million in unspent “First Five” tobacco tax money now held in a reserve fund, would instead be used to pay for other state government health and human services programs that serve children, including Medicaid, foster care, child care subsidies, preschool programs, and more. Money for these programs currently comes from the state general fund.
Currently, 80 percent of “First Five” money is distributed to county governments for similar programs, including government “school readiness” programs for pre-schoolers, Medicaid health coverage to children whose family income is above the cap for that program, government parent-education training, food and clothing subsidies, and more. Under Proposition 1D, that revenue stream would cease for five years, essentially ending most First Five programs. However, it’s likely that the state will use general fund money to continue some of these. For example, a prime candidate would be the “First Five” expanded Medicaid coverage, since under the SCHIP program the federal government pays more than half its cost.”
To me, you can kind of weigh the value of one program against another, but unless you are really dealing in billions rather than hundreds of millions, you know that you are really not going to get much out of it. For me, First 5 is a good program that supports health coverage for at-risk children up to 6 years old, it just doesn’t make much sense to me for the amount of money we are talking about.
Proposition 1E cuts shifts money from mental health programs under Proposition 63 (2004).
“To avoid additional cuts in general fund-supported state spending, Proposition 1E would authorize a fund-shift of approximately $230 million annually in income tax surcharge revenue currently earmarked for specified mental health programs under the terms of California Proposition 63 (2004), also known as the Mental Health Services Act. For two years that revenue would instead be used to pay for the state’s share of the “Early Periodic Screening, Diagnosis and Treatment Program,” a federally mandated Medicaid program for low income persons under age 21. Revenue for this program currently comes from the state general fund.
The earmarked Proposition 63 (2004) revenue that would be diverted comes from a 1 percent state income tax surcharge imposed on the portion of a taxpayer’s taxable income in excess of $1 million. In the past this surcharge has taken in between $900 million and $1.5 billion annually.”
Finally there is Proposition 1F. On the surface, no one can really object to it, and few do. It prohibits salary increases to top California Government officials during years that the General Fund is expected to end the year with a deficit.
To me this is really a solution in search of a problem. When you are facing billions in budget gaps, plugging things in the low millions (at the very most and probably in the hundreds of thousands) isn’t a solution. It is akin to trying to address the city’s budget deficit by halting council lunches and travel, it sounds nice but it does not matter. Frankly I would support this measure but for one reason–the reason it is on the ballot to begin with.
Senator Abel Maldonado held up the approval of the February budget forcing the legislature to accept a number of his pet projects one of which was the open primary and another was this–the legislative pay increase initiative. I simply refuse to reward his tactics.
The bottom line here is that of the six propositions, it appears really that only one will actually impact the budget deficit, that is Prop 1C. Propositions 1D and 1E account for it appears half a billion. Proposition 1A proposes budget caps and will impact the future budget. Proposition 1B does give money back to education, I suspect that they will get it back anyway once the budget crisis dissipates.
For me the fact of the matter is that regardless of these propositions we have to find $15 billion in cuts and that is going to devastate this state in ways that few can really understand.
—David M. Greenwald reporting
* Pictured above: Gary Passmore Executive Director, College of California Seniors, Anthony Wright Executive Direct, Health Access California, Lillian Taiz, President, California Faculty Association, and Dennis Smith, Secretary-Treasurer, California Federation of Teachers stand on L Street Sidwalk in front the State Capital in Opposition to Prop 1A demonstrating the impact of Prop 1A on the current budget deficit.
I completely agree with you on this, David. These propositions do nothing to help our state budget problems long term and even in the short-term. Two are just shifting money from programs the voters approved into the General Fund allegedly to pay for the same sorts of services, but the GF money can be used for anything. The lottery proposition helps to fill an hole now only to create a bigger one in the future. Prop 1A really does not have much affect at all, and is so poorly written it is hard to tell what it is supposed to do. I am still not sure about 1B.
We need to raise revenues. We need to raise taxes. One of the first things we need to do is get rid of the 2/3 vote requirement to pass the budget and to pass taxes.
Raising revenues isn’t that easy.
Let me try to explain why.
California raises a large part of its taxes from the wealthiest residents.
Suppose there are 100 people making $1 million a year who each pay 10% state income tax to the state each year. In total they generate $10 million in taxes.
What happens if we increase taxes by one fifth, to 12% a year?
You might think that revenue would increase by one fifth also, to $12 million.
But it doesn’t work that way.
Higher taxes are a disincentive to work and some will earn less.
Worse however, ten of the hundred may decide they have had enough
and move to Washington or Nevada or Texas or Florida, where there is no state income tax.
The state will lose all of their taxes.
In the end revenues may not go up at all, and they may even drop.
This is a simplistic analysis, but economists have far more sophisticated models
of the effect of tax policy on revenue generation. There is a lot of evidence that
increasingly high taxes results in lower revenue at a certain point.
Raising revenues isn’t that easy.
Let me try to explain why.
California raises a large part of its taxes from the wealthiest residents.
Suppose there are 100 people making $1 million a year who each pay 10% state income tax to the state each year. In total they generate $10 million in taxes.
What happens if we increase taxes by one fifth, to 12% a year?
You might think that revenue would increase by one fifth also, to $12 million.
But it doesn’t work that way.
Higher taxes are a disincentive to work and some will earn less.
Worse however, ten of the hundred may decide they have had enough
and move to Washington or Nevada or Texas or Florida, where there is no state income tax.
The state will lose all of their taxes.
In the end revenues may not go up at all, and they may even drop.
This is a simplistic analysis, but economists have far more sophisticated models
of the effect of tax policy on revenue generation. There is a lot of evidence that
increasingly high taxes results in lower revenue at a certain point.
I’m of the view that if something were easy, it would be done already.
That said, I think you can run through roughly the same model for spending cuts which is part of the problem. Sure you can cut spending, which generally means laying off employees but it has costs associated with–unemployment benefits, possible health care benefits, and loss of economic performance and slowdown. So I wonder how much of the actually wages and benefits actually go back into the general fund when all is said and done.
We basically are trading off higher taxes for someone’s job.
Interesting, no mention of 1F. Actually they tried to pass 1F in a different form awhile ago. In that form, it prevented legislators from getting pay increases in bad budget times, but it tacked on a provision that education and various programs would always be fully funded. Thus I didn’t vote for it. I didn’t like the way the individuals made the initiative out to be “holding politicians accountable” when what it really did was prevent any future spending cuts. This one is different. It simply says that politicians cannot get pay increases during a budget deficit and that is all it says. Unless someone can give me a solid reason against it I will vote for it.
Here is what I said about 1F:
[quote]Finally there is Proposition 1F. On the surface, no one can really object to it, and few do. It prohibits salary increases to top California Government officials during years that the General Fund is expected to end the year with a deficit.
To me this is really a solution in search of a problem. When you are facing billions in budget gaps, plugging things in the low millions (at the very most and probably in the hundreds of thousands) isn’t a solution. It is akin to trying to address the city’s budget deficit by halting council lunches and travel, it sounds nice but it does not matter. Frankly I would support this measure but for one reason–the reason it is on the ballot to begin with.
Senator Abel Maldonado held up the approval of the February budget forcing the legislature to accept a number of his pet projects one of which was the open primary and another was this–the legislative pay increase initiative. I simply refuse to reward his tactics.[/quote]
My apologies sir you did mention it. I see it now. never mind. I still think it is a good idea.
So far I have not really heard an argument against this except that Maldonado is a bad guy.
This is simply preventing the government CEO’s from voting themselves fat cat bonuses when they do a lousy job. This isn’t about saving money. The $ savings are negligible.
I don’t think it would be objected to if it were corporate CEO’s getting the shaft.
David,
Good points. They are messy propositions all around. Dunning made a good point in yesterday’s Enterprise — running government by ballot propositions doesn’t allow for the kind of give and take compromise that’s needed to overcome situations like this. Voters don’t have the opportunity to go back and ask for 80% of this and 10% of that on proposition — it’s all or nothing as presented.
But how do we begin to repair the damage? Wait around and pray that things get better? The system is clearly broken and likely won’t give us any better results until it is fixed. If a person loves smaller government, this is a kind of utopian situation. But budgeting, taxes and government also represent shared community values, whether it’s community protection and corrections, physical infrastructure, education, or health care access. Right now all of those values are eroding to one degree or another.
WDF: I spent an hour on a Bay Area radio station today addressing that very issue. My take is we need to change the two-thirds requirement and see if that will fix this problem. I know that makes people nervous but the current system is ungovernable. Eventually I think we may have to start from scratch.
Bobby: I probably would have voted for it if it weren’t for Maldonado’s tactics that I want to discourage. But, I dont really think it’s been a huge problem that needs to be addressed with a law.
“For me the fact of the matter is that regardless of these propositions we have to find $15 billion in cuts and that is going to devastate this state in ways that few can really understand.”
If this is your bottom line, why not try to mitigate it to some degree?
“one will actually impact the budget deficit, that is Prop 1C”
Right, so why not support it? Yes, it takes funds from ‘tomorrow’, but hopefully the economy will be better off by then. And we can hope that we can get rid off the 2/3rds requirement so as to not be held hostage to extreme demands of a small minority!
Yolo: “We need to raise revenues. We need to raise taxes. One of the first things we need to do is get rid of the 2/3 vote requirement to pass the budget and to pass taxes.”
I agree, but this won’t happen on the 20th of May – or anytime in the next year! Meanwhile, a short-term mitigation can help. Even our ‘moderate’ “Governor steadfastly refused to consider new revenues as an option”
I feel that any money raised will save someone’s job!
PS: Your link to the “California Progress Report” did not work.
I urge Yes votes on 1A, 1B, and 1C, No votes on 1D and 1E, and I frankly don’t care what happens on 1F. 1A and 1B help to stabilize education funding. 1C — sure, why not. Might as well borrow from future lottery revenues.
I oppose 1D and 1E because I believe that specific changes to voter-allocated funding should be in the context of a broader budget overhaul. There are lots of specific programs voters have approved, specific taxes directed at certain things (gas taxes for transportation, for example), and it doesn’t really make sense to me to single out these two areas for change. Especially when the amounts are relatively small. This seems like an odd way to set budget priorities.
I do feel as though we’re being blackmailed by a couple of Republican legislators who wanted cover for their votes on the budget. But the 2/3 requirement isn’t going to change anytime soon, and the Republicans in the legislature are all from safe districts. Not a single one of them is going to vote to increase taxes. So these three measures somewhat reduce the cuts that will be necessary. That’s about the best we can say for it all.
These measures don’t solve our problems by any means. But if they fail to pass, our problems will be a lot worse. School districts will take an even bigger hit in the short run if they fail.
I don’t plan to vote for any of the propositions except 1F. Why? Because they don’t really address the budget problem, and they provide cover for politicians to blame the budget problem on voters. I don’t care much for Bob Dunning, but he had this one right. Punting the problem over to the voters is a cheap copout, and does not get the job done, bc there is no give and take when voting on propositions – it is an all or nothing deal.
That said, how do we get out of this fix? We talk labor unions and their employees into taking paycuts – in the public and private sector. Then we gradually pare down the frills in gov’t. And there are many frills. But if we lay off massive numbers of workers, we will end up w a bigger budget problem. Why? Bc those who have no jobs cannot pay tax, which means less tax revenue coming in. We need to keep people employed.
“We basically are trading off higher taxes for someone’s job.”
Raising taxes has other negative repercussions.
For example, when a wealthy person leaves the state, California loses not just
their entire tax payment, but also the spending they would have done in state, and
the jobs generated by small businesses they own.
At some point higher taxes become a transfer of wealth from the private to the public sector
but do not result in saving any jobs. Indeed, they can cost jobs overall.
We may already be at the point where tax increases cause lower revenue and fewer jobs overall.
glad to see you’ve come around. it’s a horrible set of choices to make, but i think no on all of them is probably the best choice of a bad lot.
at any rate, it was a bit of a sideshow; the real battle lies on the 20th, not the 19th.
How can we ge a comparison between California’s expenditures and those of other States on a per capita basis in such major categories as grade level education,higher education, corrections, highway patrol, highway maintenance and construction,State parks and etc?
Per student spending on K-12 education is a commonly report statistic. This is one for 2006, released in 2008. More recent surveys may exist. This one shows that California is below national average:
[url]http://ftp2.census.gov/govs/school/06f33pub.pdf[/url]