Earlier this week, the Senate Office of Oversight and Outcomes released a report that concluded that the furlough savings was illusory at 24.7 facilities, specifically at state hospitals, prisons, and other 24/7 facilities that are under state operation. This finding by itself carries a considerable consequence, but amazingly it is not the only finding of its kind.
But another study done by UC Berkeley’s Center for Labor Research and Education released on Thursday found that:
“Much of the savings from California state workers’ three-day-a-month mandatory furlough will be offset by reduced revenue and increased costs to the state general fund in future years.”
The Berkeley study analyzes the impact of furloughing state employees for three days a month, the equivalent loss of seven weeks of pay. The study concludes that the furlough will save the general fund only 12 cents for every dollar cut in wages.
Government agencies across the state have imposed furloughs as a means to reduce operating costs during the hardship. They range from cities to counties to the higher educational system. It is unclear just how much these findings are generalizable to other situations, but it seems these impacts ought to be examined.
Twenty Four Facilities
In the prison system, which has 70% of all general fund paid state workers, officials say that the long-term cost of furloughs is greater than the savings. However, these official argue that they were told by the administration that short-term payroll savings are more important than future liabilities.
According to the release from Senator President Pro Tem Darrell Steinberg’s office:
“correctional workers banked 1.5 million furlough hours between February and August 2009. Most are correctional officers. At a pay rate of $34.91 an hour, those hours create a future liability of at least $52 million.
When correctional officers do take time off, they generally use furlough days, not vacation days. As a result, from February through August of 2009, the number of unused vacation days accrued by correctional officers jumped 500 percent. This massive buildup of vacation time will complicate prison staffing in the future. The accrued vacation will increase costs, because many workers will be at a higher pay rate when they finally do use their vacation hours.
Furloughs fail to save the $108 million projected by the administration in the prison healthcare system, according to the court-appointed agency operating inmate medical care. Instead, officials say, paying overtime and hiring private workers to fill in for furloughed employees will more than offset any savings.
Furloughs are projected to increase costs within the prison health care system by $37 million to $47 million this year, according to the court-appointed receiver. They say furloughs also create a “management nightmare” and interfere with the court-mandated effort to improve inmate medical care.
Employees in California’s dozen mental hospitals and developmental centers are also being forced to work furlough days. They are racking up large balances of furlough and vacation time.”
Read the full report here.
Berkeley Study
The Berkeley study analyzes the impact of furloughing state employees for three days a month, the equivalent loss of seven weeks of pay. The study concludes that the furlough will save the general fund only 12 cents for every dollar cut in wages.
The study’s lead author Ken Jacobs, also chair of the Labor Center said in a release on Thursday:
“It is poorly designed, if the goal is to provide savings to the general fund. Key design problems include furloughing state workers in revenue-generating positions, continued accumulation of pension and benefit debt, and inclusion of workers whose salaries are paid by the federal government and other special funds, in addition to the general fund.”
Jacobs said the state should consider reducing furloughs to one day each month and making up the difference in savings in the short term by raising revenues.
According to the study, a one-day-a-month furlough plan for the current fiscal year would result in a net savings to the general fund of $256 million, once future year costs are factored in, the study says.
Since February, the Labor Center report estimates a reduction in wages and benefits of $2.01 billion for the 193,000 affected workers this current fiscal year. Along with lost revenues and increased costs due to the furloughs, the net general fund savings for fiscal year 2009-2010 is calculated at $738 million. But, the study says, this year’s furloughs will result in a loss of $503 million in future years for a net savings to the general fund of $236 million.
By comparison, a one-day-a-month furlough plan for the current fiscal year would result in a net savings to the general fund of $256 million, once future year costs are factored in, the study says.
According to the study, reduced savings is attributable to the following:
- An estimated 42.3 percent of the reduction in pay and benefits comes from federal and self-supporting, special funds.
- The Franchise Tax Board and State Board of Equalization estimates that furloughs and related cuts will result in a loss of $675 million to the state’s general fund, including a loss or delay of $363 million in fiscal year 2009-2010.
- A mandatory three-day-a-month furlough will result in a projected reduction in pension payments of approximately $299 million this fiscal year, but those funds must be paid back – with interest – through an automatic adjustment in the formula for state payments to the fund, pushing the costs to subsequent years.
Moreover the study finds a ripple effect in the economy.
According to Jacobs:
“The furloughs are not only costly to workers, they are also costly to the local economy.”
By way of example, Sacramento County can expect a loss of an estimated 4,100 private sector jobs due to the reduced spending by the county’s many state workers.
The full report is available here.
In their executive summary, the authors found other very serious impacts of furloughs.
These findings include:
- The furloughs create a significant hardship for workers. The salary reduction is equivalent to losing more than seven weeks of pay a year. A pay reduction of this magnitude can be expected to result in lower employee morale and increased stress, both of which are associated with reduced productivity and greater work errors. Wage reductions may also lead to turnover of more highly productive workers.
- The total pay reduction without benefits from the furloughs is projected to be $1.63 billion in 2009–2010. Taking into account taxes and employee savings, this is expected to reduce employee spending by $1.24 billion over the course of the year. The reduction in spending will have a multiplier effect in the economies of cities and counties with large numbers of state workers, resulting in a loss of private sector jobs and a potential increase in home foreclosures. The furloughs are projected to result in the loss of an estimated 4,100 private sector jobs in Sacramento County.
- Workers included in the furloughs are not all paid through the state General Fund. Of the $2.01 billion reduction in spending for salary and benefits, an estimated 57.7 percent comes from general funds and 42.3 percent from federal and special funds. Furloughs of workers on federal funds represent a straight loss of income to the state.
- The furloughs include workers paid through federal funds who perform roles in qualifying California residents for federal support. Any slowdown in processing or qualifying applicants will result in an additional loss of income for California residents.
- Furloughs of workers in revenue-generating departments like the Franchise Tax Board and the proportional reduction in funds to the Board of Equalization are projected to result in a loss of $363 million in tax collections in FY 09–10 and $312 million in the subsequent years. In addition, licensing bureaus have reported increased backlogs, which will result in delayed revenue into special funds.
- The furloughs will result in a projected reduction in payments to CalPERS of approximately $299 million in FY 09–10, while benefits are maintained whole. In effect, the state is borrowing this money from CalPERS. The funds will be paid back—with interest—through an automatic adjustment in the formula for state payments to the fund, pushing the costs to subsequent years.
- Disruptions of state services have an impact on the broader economy. This includes delays in business licensing, longer waiting periods for public services, and traffic disruptions from the furloughs of Caltrans workers. Each of these exacts a cost on business operations in the state.
- For every dollar in reduced spending from furloughs, the state saves approximately 37 cents for the General Fund for FY 09–10; this falls to 12 cents when losses in subsequent years are taken into account.
The study concludes that the state should restrict furloughs to general fund paid workers.
“The state should restrict furloughs to non-revenue generating departments that are paid for out of the General Fund. In addition, the state would greatly reduce the adverse impacts of the furloughs by restricting them to a single day and raising revenue to cover the difference. Depending on how the revenue was generated, such an approach would have a significantly smaller impact on jobs and the California economy than the current approach.”
The question that the university, city and county need to examine is how much of this is applicable to them. Will furloughs end up saving money both in the short-term and the long-term.
—David M. Greenwald reporting
Translation: quit playing with gimmicks and just do a straight pay-cut for public workers. If they don’t like it, they can go directly to the private sector and take their chances…
[i]The question that the university, city and county need to examine is how much of this is applicable to them.[/i]
It certainly isn’t applicable to university faculty, because our furloughs are fake. For other reasons, though, the faculty furloughs are an unsustainable emergency measure. No serious hiring and no serious retention efforts until the furloughs are over.
Just like most of the faculty, I was annoyed when they asked us whether we wanted to take furloughs on teaching days, and then blew off the answer. However, the decision to raise fees by 30% puts the teaching days in a different light. Without that step, the university would lose money every time it admits a student. Fiscal balance is more important than a symbolic protest against furloughs.
As for the staff furloughs, it might not take much for the university to handle them better than the state. Just as with faculty, in the long term there needs to be enough attrition to get rid of furloughs and keep compensation and service credible.
“Translation: quit playing with gimmicks and just do a straight pay-cut for public workers. If they don’t like it, they can go directly to the private sector and take their chances…”
That was my first reaction, but then I thought about it. Plain pay cuts are detrimental too – if someone can’t make their house payments, that has a cascading effect, just as the furloughs did – home foreclosures adn loss of property tax revenue. But I do think furloughs tend to be voodoo economics that really push off decision-making until later. No politician wants to grapple with the fact that the state of CA is bloated with workers, and there is tons of waste, waste, waste.
Let me give three concrete examples – last city council meeting, two projects were approved and the third one was approved by DJUSD –
1) Solar power project at the wastewater treatment plant at $5.5 million. Supposedly it is supposed to pay for itself over a twenty year period, but frankly I have my doubts. I suspect it was pushed more to keep city staff employed.
2) $9 million in state and federal funds are to be spent on a bike path between Davis and Woodland. In this economy, when people are being furloughed, laid off, etc? You’ve got to be kidding?
3) DHS cannot even contemplate spending the money to close its campus as a result of gang problems, bc it is expending $9 million dollars (not sure if this is the correct figure) to renovate DHS Stadium.
You would never know by our elected officials that we are in an economic crisis. I’m sure some are going to give me an argument that each of these projects is absolutely “necessary”. Let’s see what you say in a few years, when the chickens come home to roost in this state fiscally.
Well, I spoke too soon. It’s very good that David provided a link to the report — he should do that more often and more prominently. The report has some important general advice about when it makes sense to cut wages and what happens if you do cut wages:
[quote]Economists have long studied the fact that wage reductions are rare in a recession. In explaining wage rigidity, economists argue that reducing wages may lead to a loss in productivity that exceeds the savings from the wage reduction. The loss in productivity comes from three major sources. First, wage reductions decrease employee morale, which impacts worker effort on the job. Second, wage reductions lead to greater turnover, which increases costs for training and hiring new workers. Third, employers are most likely to lose highly productive workers that have greater opportunities for outside advancement and find it more difficult to attract such workers in the future.[/quote]
In general terms, all of this advice applies just as well to UC faculty as it does to state workers. Compensation for UC faculty was slightly below the market to begin with. Cutting compensation further throws UC open to other universities across America. They will hire the best people first, and whoever they hire it is expensive to replace people. The furloughs are unsustainable; they are much more a way to buy time than to save money.
However frustrating it may be to watch any institution pay workers beyond its means, whether you’re looking at UC or the city, it’s largely a reckoning for past mistakes that can’t easily be fixed. Let’s look again at three slogans that David has used to discuss budget problems at various levels: Budgets should not be balanced on the backs of workers; services have been cut to the bone; taxpayers/students are already suffering enough. This report from Berkeley endorses the first slogan more than the other two. Savings from pay cuts are often illusory; some services have not in fact been cut to the bone; and people could pay more for services that are cut to the bone.
For the future, the city and the university should scale back operations that aren’t worth it. They should also raise fees for important services that don’t have to be losing money.
Also, to change the topic slightly: Relative to the devastated state compact, non-resident students at UC now pay vastly more in non-resident tuition (on top of the fees for residents) than the state pays on behalf of in-state students. Non-resident tuition is nominally $22,000 at UC Davis, while according to one reference that I found the state general fund is now $5,900 per student.
This is an outrageous funding imbalance that is both unfair to out-of-state students and bad for UC. UC should reduce non-resident tuition and accept more out-of-state students.
I’m an out of state student and I (and thankfully a very generous scholarship) currently pay just over 11k per QUARTER to attend UCD. To give you an idea of tuition increases, my first quarter, fall 06, was just over $9000 per quarter. All told, over $100,000 has been paid to allow me the opportunity to attend UCD. I agree that if an out of state student has the means to pay and meets the entrance requirements, he or she should be allowed to attend. Every paying UCD student contributes three full paying in state students worth of $$.
[i]Every paying UCD student contributes three full paying in state students worth of $$.[/i]
It not quite 3 to 1 because you also have to count the state compact with UC to teach in-state undergraduates. There was a time when out-of-state tuition was about the same size as the compact. However, the compact has been shredded. The total revenue from an out-of-state student vs an in-state student, assuming no financial aid in either case, is about 2 to 1.
My point stands, that 2 to 1 is an outrageous ratio for revenue per student.
Also, to change the topic slightly: Relative to the devastated state compact, non-resident” students at UC now pay vastly more in non-resident tuition (on top of the fees for residents) than the state pays on behalf of in-state students. Non-resident tuition is nominally $22,000 at UC Davis, while according to one reference that I found the state general fund is now $5,900 per student.
This is an outrageous funding imbalance that is both unfair to out-of-state students and bad for UC. UC should reduce non-resident tuition and accept more out-of-state students.”
What are you thinking? CA taxpayers should heavily subsidize out of state students at the expense of its own in state students? Oh right, that makes a lot of sense – NOT! So you are saying that UCD should allow more out of state students in, whose parents do not pay CA taxes, takikng up slots of in state students who will be displaced, so UCD can make more money? The last time I looked, state universities primarily exist to educate the children of state taxpayers. If you want the UC system to primarily take out of state students, then there is even less reason for the state legislature to give any tax funding to the UC system – since it will not be serving in state students. I can’t even wrap my mind around your thinking –
CA taxpayers should heavily subsidize out of state students at the expense of its own in state students?
No, out-of-state students shouldn’t heavily subsidize in-state students. That’s the reality.
The last time I looked, state universities primarily exist to educate the children of state taxpayers.
At the moment, state taxpayers are demanding a lot more higher education than they are paying for. They’re the ones demanding subsidies from everywhere else: from hospitals, from federal grants, and from out-of-state students.
Any quick fix economic prescription will not cut it. The reality is that our current economic downward trend has forced California to cut.
Well, sort of . We have two options (which I will ruthlessly simplify). Either we raise taxes for the wealthiest in the state, or we cut out of the general fund.
I notice that no one really likes to consider the first option, and usually sees the latter as the natural solution. All one must do is study Keynesian economics, particularly on how it was applied to the great depression.
Cutting workers salaries, selling public stadiums, etc are not quick “fixes”, but rather liberalization attempt.
I think this article clearly outlines the problems with how we approach for a solution. Instead of miraculously trying to balance “cuts” with “increased efficiency”, we need to understand that those two notions hardly go together. When we cut salaries and resources, efficiency will go down, and failure is almost guaranteed. Education needs to be funded.
California has the money to fund it, well, it has the ability to get the funding. Implementing a n adequate/tailored progressive tax would be more than enough to balance the budget and save our educational system.
Like Nixon said when it became painfully clear that government had a responsibility to steer the economy:
“We are all Keynesians now”
Spare me the attempts to fire back my owns semantics. Take it for what it’s worth.
Cutting compensation further throws UC open to other universities across America. They will hire the best people first, and whoever they hire it is expensive to replace people. The furloughs are unsustainable; they are much more a way to buy time than to save money.
I agree that cutting compensation is generally not a good idea and will result in employee motivation issues that can more than offset the savings. Well run private companies will cut full positions and employees… or in some cases reduce hours but keep the pay rate the same. The only exception would be if a mark-to-market for a given role proved that the company was over-compensating. However, even in that case any reduction in comp should be implemented over time (as in zero or reduced raises) until comp reached market levels.
The way any organization should address the need to reduce compensation expense is to first visit what benefits can be reduced or cut, and then begin a careful reduction in the workforce. Say you need to reduce compensation by 15%… take five people in a given role, fire the lowest performer and tell the remaining four they need to pick up the slack. Tell them if they do a great job they will receive up to a 10% performance bonus, but fall below the performance line and they might need to be replaced. The right four people can likely do the job of the previous five, and they will be motivated to be recognized with an extra 10% bonus.
Private industry has been doing this dance for a while. At some point there is little extra productivity to be gained, as the workforce has been fully tapped out. For the UC system, I would guess it could survive several workforce reductions if implemented this way.
Jeff, even though you might think that UC has been corrupted by its public status and maybe by general political ideology, the fact is that it does have some very good managers, and others who are not bad. Our department chair is excellent at keeping track of the budget and finding savings, and from what I hear so is John Meyer.
I’ve also seen very serious management problems in private industry. One summer I worked for a major industry research corporation. The problem there was that the research institute hadn’t existed long enough for anyone to tell whether management was good or bad. It had also unique research objectives, so it was also hard to compare to peer companies. It was anyone’s guess whether any particular manager was a top dog or a lame duck. People did spend a lot of time guessing and scratching their heads, until one or two major divisions of the company failed.
So it’s not that administrators at UC Davis are all numbskulls who need to learn remedial management from Dale Carnegie. Yes, some of them are; some of them should fire the lowest performers or be fired as the lowest performers. But most university administrators are bright enough. The problem is more that some of the most expensive mistakes that universities make are also very popular. For instance, Aggie stadium is a huge tub of red ink, but it has the appearance of a big success.
The other problem right now, whether or not there are more efficiency gains, is that the state legislature pays so little that they basically expect us all to walk on water. One major way that companies stay profitable is to pack up and move 2,000 miles away when they need to. That’s why there is only one car assembly plant in the US west of Texas, and even that one (a Toyota plant in Fremont) is closing.
UC can’t pack up and move 2,000 miles away. However, UC faculty can.
What happened to capping the accumulation of vacation days? This is done at every place I have ever worked. UCD caps the number of vacation days that can be accrued. Institute that if you don’t furlough and take the day off, you cannot “bank” it for another time. Furlough days are not vacation days.
Why didn’t state managers think of this potential abuse of the system.
Since Corrections staff don’t get it – that this is supposed to lower expenses temporarily – I think they and others in their job description should just get a straight pay cut to achieve the cost savings that every one else is sacrificing to achieve.
[i]Since Corrections staff don’t get it – that this is supposed to lower expenses temporarily[/i]
It’s not that prison guards are too thick to understand the purpose of furloughs. They have the right to try to protect their labor interests, and that is what they are doing. The larger problem is that the prison guards’ union is one of the most powerful state employee unions in California. California is first out of 50 states for hourly compensation for prison guards.
The other larger problem is that the state legislature has been weakened by the state proposition system and the state budget crisis. They don’t have time to negotiate good deals. They are desperate to find any savings as fast as possible, no matter how temporary or inefficient. They truly are eating the seed corn. After being commanded to lower taxes and raise spending for 30 years, and after setting the legislature against itself with supermajorities and term limits, that is what it has come to.
Completely agree Greg.
The other larger problem is that the state legislature has been weakened by the state proposition system and the state budget crisis. … After being commanded to lower taxes and raise spending for 30 years, and after setting the legislature against itself with supermajorities and term limits, that is what it has come to..
Gosh darn… just when we are gettin’ on the same page blaming the state legislature, now I read that those boys and girls were hamstrung by propositions, “commanded” to do bad things against their will, and had some alien force set them against each other with supermajorities and threats of term limits.
Sorry for the snark, but we really need to stop blaming virtual entities and smoke since there is absolutely no solution or satisfaction created with their flogging.
How about blaming our big-spending state lawmakers, their giant campaign-contributing unions and trial lawyer association, and the vast loot and mooch left wing voting bloc? This coop has governed and controlled the state since the baby boomers start bathing more than once a week, (despite a few faux fiscal conservatives in the governor seat) and it is wholly responsible for perpetrating the decades of fiscal decadence that got us to this point. The greedy Wall Street types and mega-rich bankers didn’t do it. Neither did the left’s favorite fake scapegoat, prop 13. Credit goes to the coop.
[i]now I read that those boys and girls were hamstrung by propositions, “commanded” to do bad things against their will, and had some alien force set them against each other with supermajorities and threats of term limits.[/i]
Jeff, it’s a little late for you to only read about it now. Whether you think it’s a good thing or a bad thing, state propositions certainly do command elected officials to do things that could otherwise be against their will. That’s the whole point. Representative democracy is deemed untrustworthy in California, so we may need propositions to hamstring elected officials.
Yes, supermajorities and term limits generally do set a legislature against itself. It takes time and leverage to establish cooperation, and term limits works against it. At the same time, supermajority rule demands more cooperation than a simple majority rule.
Again, maybe you think that that’s a good thing. But it’s not some “alien force” that did all of this, and it’s not just Prop 13 either. Voters have imposed (a certain part of) their will on the legislature through a whole series of state propositions.
But it is true that a lot of voters are just throwing up their hands at our incompetent legislature. Because they don’t know or don’t care how much direct democracy has changed the state budget process. Or they don’t care to know.
One other thing: It may well be true that it doesn’t solve anything to blame the state proposition system. Maybe there is no solution; maybe the state legislature will stay “incompetent” and the budget will stay screwed up forever. I can be unsentimental about this. I’m from Alabama, which is a state that is still dealing with problems that it has had for 190 years.
One thing that is clear is that unless we get rid of the two-thirds requirement and probably term limits, we will never fix the system. People will have to at some point decide whether it is more important to them to make it impossible to raise tax or make it possible for the legislature to reasonably govern the state.
Term limits – good intentions, bad in practice
Propositions – much needed to override the bad decisions of legislators
2/3 Majority – could be a bit of tweaking might be useful, say 60%, but who wants to put left wing overspending loonies in absolute power, so they can tax and spend even more than they are doing now?
Prop 13 – was needed so seniors would not be shoved out of their homes
Ultimately the blame lies with leftist legislators who want to tax and spend, tax and spend, tax and spend. They just love to spend OTM – other people’s money. Those on the right can’t get their act together, and show some kind of sensible fiscal restraint. There just seems to be too much wheeling and dealing at the state capitol, and not enough legislating for the common weal. Look at Darrel Steinberg, who was a highly respected lawmaker, who prostituted himself in the water wars.
One thing that is clear is that unless we get rid of the two-thirds requirement and probably term limits, we will never fix the system. People will have to at some point decide whether it is more important to them to make it impossible to raise tax or make it possible for the legislature to reasonably govern the state.
David, California is already the highest taxed state. Do you know the Laffer curve?
The Democrats have had the majority and their way for decades. So, now the blame is the 2/3 majority and prop 13? I am thinking creatively about what the next blame would be after prop-13 and the 2/3 requirement have been abolished. There will be something I’m sure.
I really don’t think you and others understand that we are competing with other states for high wealth individuals and businesses to provide inflows to fund government. That is why I say California has about leveraged our good weather. Why does Tiger Woods live in Florida? Personally, I love living in this state, but I am one tax increase from moving out or downsizing my financial life. I am just a middle-class dude, but my tax burden in this state is already too high. My incentives to grow business and wealth have diminished with every tax and regulatory increase. Now it is close to no longer penciling out. The same is true for many Californians that produce and pay their own way.
Anti-capitalists have come out of the woodwork seeking their pound of flesh and over the media-hyped stories of Wall Street greed. There is no denying a broken system that allowed so many bad players to accumulate so much wealth. However, a sustained anti-business mood combined with more tax and spend government is a recipe for disaster. Conversely, it is also an opportunity for states that can get their collective head out of their collective ass. The only sustained way to solve California’s budget problems is to attract more business to the state. To do this we need to cut spending and reduce the tax and regulatory burden. We then can launch a big marketing campaign: “commercial property is cheap and we have lowered taxes and reduce regulations”. The solution is: more businesses, more jobs, more state tax revenue, and fewer people on the public dole. The longer we deny this reality, the more we will lose to other states quicker to figure it out.
“David, California is already the highest taxed state. Do you know the Laffer curve?”
That’s fine, but not the point I’m making. The question is whether you are more concerned with governability or more concerned that the legislature have no possibility of raising taxes. Right now I think the former is a bigger problem. Your recourse to the latter is to vote people out. Right now, it doesn’t matter who is elected because you have the same basic problem–a structural system that makes it impossible to govern. At some point people are going to have to recognize that the system is unworkable.
From the Field Poll it is clear that time has not come and we will have to endure several more go rounds before something changes.
The thing I warn you of is the dam that breaks. That’s what happened to the left on Prop 13, they denied the problem of people being taxed out of their homes until Prop 13 emerged and the taxpayers revolted. Had those in power dealt with the problem earlier that would have been avoided.
What is the breaking point of the system, we’ll find out, but my guess is that people on the right will eventually be kicking themselves that they did not make reasonable reforms before the entire system was thrown out and replaced with something far worse than simply lowering the 2/3rds requirement to 55%.
[i]That’s fine, but not the point I’m making.[/i]
Actually it’s not fine, David, because Jeff’s claim that California is the “highest taxed” state is not true ([url]http://www.taxadmin.org/fta/rate/08taxbur.html[/url]). Both Jeff and “Anon” have various false premises and false inferences before you even get to whether they address your point.
As for your point, of course my thinking is mostly in line with yours on this, but I am not at all convinced that there will ever be any “dam break”. Even if there were one, I very much doubt that any anti-tax or pro-proposition zealots would kick themselves.
Zealots generally do not blame themselves, not even when they reverse course completely. For instance, look at what Reagan had to say about Afghanistan and Iran. The medieval Islamic fundamentalists in Afghanistan were “freedom fighters”. Iran wasn’t really a terrorist state, rather it was a shady middle agent that could be paid to make contact with terrorists. Bush’s foreign policy towards these two countries simply contradicted Reagan’s foreign policy, but you didn’t see people of their type kicking themselves.
Because for some people, the means justifies the ends. There is a faction that enjoyes jerking the state government around for cross purposes. In their view, government doesn’t work anyway, so it deserves rough treatment. Why not help it die of its contradictions? These people won’t kick themselves if any dam breaks. For instance, as Grover Norquist said, he wants to shrink government until he can drown it in the bathtub.
Part of the vision is corporatization. For instance, in Texas there is a privatized city larger than Davis called The Woodlands. It is planned, operated, and controlled by one giant developer. Except for a fairly new token government, The Woodlands has no citizens, only customers. Why not send California, DMV and K12 and everything else, down the same path?
And part of the vision is nihilism. When Proposition 13 was a campaign and not the law, Howard Jarvis was asked about its effect on public libraries. Jarvis didn’t resort to sugary promises about how public libraries would come out all right. No, he said who the hell cares about public libraries, because today’s high school graduates (in 1978) are illiterate. Jarvis saw himself as an emeritus of a noble old generation. He saw young people as a loser generation that didn’t deserve government services, certainly not on his dime.
Jarvis isn’t kicking himself over anything happening now. He died in 1986. LIkewise Paul Gann died in 1989.
Greg:
Your partisan California Budget Project chart does not include local taxes for CA residents and is a measurement of what has been collected, not what has been levied. See here for a ranking that includes both state and local taxes that are levied on CA residents. This ranks CA as #6, but also excludes other special taxes and use fees that the legislature has implemented as stealth taxes. Add them all up and CA has the largest tax burden per capita.
California’s business tax climate ranks 48th (see here) .
California’s top income tax rate is 4th highest in the nation (see here).
California’s sales tax is highest in the nation (see here).
California ranks 27th for the highest property tax collections per state (see here).
California’s corporate tax rate is the highest in the west and 6th highest in the nation (see here).
So, as I understand my Zealot-ness… I do not blame myself for not allowing more taxation. I guess you can make a case for me not supporting a faster race to the bottom. I mean, look at all the wiggle room in that 27th ranking for property taxes.
Speaking of zealot-ness, after the Gann Amendment was “repealed” in 1998-1990 by the education union-backed props 98 and 111, California state spending went on a tear. For example, starting in FY97-98 the state spent $68.5 billion. In FY07-08, state spending increased to a whopping 46% in excess of inflation and population growth. So, I understand your point that zealots will never will generally not blame themselves, because otherwise state Democrats would own up to the mess they have created in their ever expanding quest for greater government and higher paid public sector union labor.
“In their view, government doesn’t work anyway, so it deserves rough treatment.”
In my view, government works well doing some things like national security and space exploration. There are some good programs and agencies that provide value commensurate with their costs. However, without a profit and growth motive, there is a fundamental broken incentive for quality and efficiency. Also, unlike most private business with paying customers, there is nothing above most government agencies and programs to ensure accountability. You might laugh at this point given the behavior of all the greedy bastards working for Wall Street, but regulators existed and without the Bush-Obama bailouts, these firms would have all collapsed like Bear Stearns and Lehman Brothers from their bad business practices. What kills a government agency or program engaged in bad business practices… the government?
California receives only $.78 for every dollar of federal taxes paid, so maybe all on the left should be pestering Obama for a bigger piece of the bailout pie instead of continuing to demand more state taxes which would do nothing but expedite our race to the bottom.
Okay, I confess that I don’t know why my HTML tags for URL links works in preview mode but not after posting… here are the links:
http://www.taxfoundation.org/taxdata/show/336.html
http://www.taxfoundation.org/taxdata/show/22661.html
http://www.taxfoundation.org/taxdata/show/228.html
http://www.taxfoundation.org/taxdata/show/245.html
http://www.taxfoundation.org/taxdata/show/251.html
http://www.taxfoundation.org/taxdata/show/230.html
[i]Your partisan California Budget Project chart[/i]
But I don’t have a California Budget Project chart, “partisan” or otherwise. I gave a link to the national Federation of Tax Administrators, which has no particular reason to be partisan about California.
i]Add them all up and CA has the largest tax burden per capita.[/i]
“Add them all up”? Your first link from the Tax Foundation is the total state-local tax burden. Total already means all revenue. You have no basis to say that your other links aren’t already included in this total. And even if you did, you wouldn’t have an argument that California has more of these “stealth taxes” than the other 5 states listed in front of it.
It sounds like you started with the conclusion that California has the highest taxes, then figured that pointing to enough different tax charts somehow adds up to enough emphasis to put California first. New Jersey is the state that is actually listed as first, and I’m sure that if you lived there, you would say that it has the highest taxes.
[i]However, without a profit and growth motive, there is a fundamental broken incentive for quality and efficiency./[i]
So why shouldn’t Davis follow the model of The Woodlands in Texas? Surely the entire city should dissolve as a public institution and reconstitute as a private developer. Then we wouldn’t have any city taxes any more, at least not for water, city streets, zoning, fire, or parks and recreation. We would just have assessments. There would be no need for Measure J either; corporate management would make the expansion decisions.
But I don’t have a California Budget Project chart, “partisan” or otherwise. I gave a link to the national Federation of Tax Administrators, which has no particular reason to be partisan about California.
Sorry, I wasn’t very clear there. The number 12 ranking is from a known “study” called the California Budget Project which was controlled and funded by connectors to the state Democrat Party. It understated the tax because it left out the local tax (including property tax). A more accurate ranking is 6, but then this excludes things like taxes on gasoline and other stealth fees like the ones on your telephone bill and the $16 added to the cost of any new flat screen monitor sold in CA, etc. etc… CA has more of these than any other state, but they are difficult to count and therefore most “tax burden” studies do not include them… which is just what the state legislature wants.
New Jersey is the state that is actually listed as first, and I’m sure that if you lived there, you would say that it has the highest taxes.
Alright then, let’s assume a number 6 ranking (you can’t exclude local taxes) and then say you get your way and the 2/3 majority requirement is abolished and prop-13 is overturned… don’t you think then CA goes quickly to number 1?
So why shouldn’t Davis follow the model of The Woodlands in Texas?
I’m not in favor of no government, just less government. However, there is a good puzzle in your question: at what point does private business need to take over because government fails? To some degree higher taxes amount to a bailout for government that has consistently demonstrated a complete failure to operate within budget. So, how about we appoint a private receiver to operate government as a consequence of its bailout? Maybe Halliburton could run the state better.
[i]The number 12 ranking is from a known “study” called the California Budget Project which was controlled and funded by connectors to the state Democrat Party.[/i]
But that is some wild numerology that has nothing to do with any part of the discussion. For instance, in your own reference ([url]http://www.taxfoundation.org/taxdata/show/336.html[/url]), California was 12th in 1987 in tax burden as a fraction of income. Take it from a mathematician, sometimes a 12 is just a 12.
[i]Alright then, let’s assume a number 6 ranking (you can’t exclude local taxes) and then say you get your way and the 2/3 majority requirement is abolished and prop-13 is overturned… don’t you think then CA goes quickly to number 1?[/i]
First of all, there are two different 2/3 requirements. By Proposition 1 in 1933, it takes a 2/3 supermajority to pass a budget regardless of the tax situation. By Proposition 13 in 1978, it takes a 2/3 supermajority to raise taxes.
In your question, and some other parts of what you have said, you equate the entire state proposition system with Prop 13. It’s not that simple. Prop 13 doesn’t exist by itself. There are also some big state propositions that directly increase state spending, most significantly Prop 98. On the other hand, I don’t know of a single operative state proposition that limits spending, even though there are several others besides Prop 13 that limit taxes. All of the state propositions that limit spending have been mooted in one way or another, usually by other state propositions.
So that’s the real point. It’s not that the state propositions are a brake on spending and taxes. It’s that, together, the propositions expect the state to spend money without obtaining it from taxes. Collectively, the propositions treat the legislature as a conspiracy to collect taxes and not spend them at all.
You yourself acknowledged the other half of the picture when you said that some unions got Prop 98 and Prop 111 passed. Well, they passed, didn’t they? They are just as much the will of the people as Prop 13.
Anyway, to answer your question, with variations: If they threw out the entire state proposition system, then probably California would have roughly the same taxes and roughly the same spending, but the state budget would stay in balance instead of dying by inches every year. And the state would have a better credit rating.
If they only threw out Prop 1 from 1933, then they would probably spend less money and taxes would be a little lower. A 2/3 supermajority to pass a budget requires an expensive compromise every year.
If they only threw out Prop 13 from 1978, then probably taxes would be somewhat higher, but again the state would be more solvent. I don’t see that it would be first in spending. There is no evidence that California is further to the left than all other 49 states; its voting patterns are more conservative than for instance Hawaii and Massachusetts. Moreover, the total tax rate is in a fairly narrow range across most of the states, according to your own tables. In 2008, New Jersey is first at 11.8% and Michigan is 27th at 9.4%, and that’s not all that big of a spread. Alaska and Nevada are much lower, but that’s because of oil and casino money.
You yourself acknowledged the other half of the picture when you said that some unions got Prop 98 and Prop 111 passed. Well, they passed, didn’t they? They are just as much the will of the people as Prop 13.
Greg, if I let my employees run the company, we would likely have too many employees doing too little work and all being paid too much. The business model would not be sustainable and the business would fail. We need leadership to make unpopular decisions which counter the tendency for humans to pursue their own short-term self-interests to their own detriment. That thinking may seem to put me in the big government ideological camp, but it is matter of nuance and degree: people generally only need leadership that has vision, can explain the vision and can set a framework in which to perform… not a huge book of rules that attempts to control their every move.
Certainly the CA proposition system is a culprit hamstringing our state politicians from cutting certain spending or raising certain taxes; however my ire is directed at these same state politicians (dominated by the left for decades) that have been holding hands with the same public employees unions that spend zillions to get the spending-mandate initiatives passed. Where was the leadership during the campaign for these spending mandates? Prop-13 and all other propositions to prevent taxes from being raised are truly people’s initiatives and it was in response to the previous frequent tax increases to support out of control spending.
Two sets of conflicting demands to satisfy self-interests… You are more apt to decry the people-supported mandates limiting increased taxation… and I guess blame all the stupid people for voting for it. I am more apt to decry the union-supported spending mandates and blame politicians for their failures of leadership supporting the people. You see room and justification for increased taxes; I see a state that already suffers economically from too-high taxation.
You seem to think that we would be better off without the CA initiative system. You may be right. However, with the demonstrated lack of quality leadership in our state political apparatus, and given the history of spending increases approved separate from the union-backed spending mandates (like prop 98, and 111), I think CA would be in even a bigger world of financial hurt. Just look at the national level… what is the governing mechanism to prevent out of control deficit spending? It seems that without political mandates from the people, the governing mechanism will be the eventual complete and final collapse of the entire system.
Also, public systems that expand with high spending do not contract easily when revenues fall. UCD is a prime example. This tendency combined with the union’s well-funded marketing machine would always ratchet up spending by leveraging the heartstring pull for the poor public sector employee that will have to endure furloughs or lose a job. The governator attempted to combat this and failed (primarily because of the Democrats in the state legislature in bed with the unions), and so, it demonstrates a need for mandates to prevent tax increases. I am very happy for the 2/3 supermajority rule and prop-13 and I think you should be too.