Posted on 02/10/2008 7:50:07 AM PST by NormsRevenge
MOST EVERYONE in Sacramento agrees that there is no easy way to balance a state budget that is at least $14.5 billion in the red. They also understand that they cannot ignore the fiscal dilemma.
Here's the situation: California's budget deficit for the next 18 months is at minimum $14.5 billion. Revenues are short even though Californians are paying the highest percentage of their incomes in state and local taxes than ever before. The state's and nation's economy is slowing down, further threatening revenues.
Even with a slower economy, there is no good reason why California is in such a difficult fiscal situation. There are, however, a number of bad reasons.
Topmost among the causes of the state's budget shortfall is the refusal of the governor and legislators to control spending. Under the first four years of Gov. Arnold Schwarzenegger's administration, spending increased by 40 percent. That is an even faster rate of profligate spending than under former Gov. Gray Davis, which led to his recall.
Another key reason why our lawmakers have such a difficult time in Sacramento is the widely fluctuating flow of tax revenues. California has the nation's most progressive income tax, with one of the country's highest top rates. As a result, California relies heavily on revenue from a small number of wealthy taxpayers. Unfortunately, income from highly affluent people varies widely from year to year because much of it is based on investments that vary.
California also has a large number of high-tech entrepreneurs and start-up businesses, which can make a fortune or go bust, depending on the overall economic climate. This means there can be huge changes in capital gains tax revenues from year to year. The dot-com boom and bust is a good example.
It would be convenient if revenues could be made to grow at a steady, predictable rate, but that is virtually impossible. There is no way to have such control over a vibrant, innovative and fluctuating economy. The untenable alternative is a far greater reliance on tax revenues from middle-class wage earners.
The temptation for the Legislature is to spend lavishly when revenues are high. That is what occurred during the Davis administration, when dot-com capital gains money was flooding Sacramento. Then there was the bust, a huge deficit and a recall.
In the past few years under Schwarzenegger, history has repeated itself. Huge increases in revenue flowed into the state during the real estate boom. Now that it has collapsed, revenues are flat, and the state is once again facing a huge deficit.
This time, the situation is even worse. The state was able to dig itself out of the Davis deficit through borrowing, accounting changes and finally, with higher than expected revenues. Those options are not available this time around. California's indebtedness is at an all-time high, and there is no new economic boom in sight. Just the opposite is true.
Back in November 2005, California voters had an opportunity to make a major reform that would have prevented the current dire fiscal situation. They could have passed Proposition 76 in the special election called by Schwarzenegger.
Prop. 76 would have limited state spending growth to the average rate of revenue growth over the previous three years. If revenues exceeded the limit, the money would go to a reserve fund to pay off previous debts. The measure would have leveled out the rate of increase in state spending over time. Budgets would be more predictable and thus, more manageable.
Prop. 76 also would have had a midyear correction. If spending exceeded revenues by more than 1.5 percent, the governor could declare a fiscal emergency. The Legislature would have 45 days to eliminate the shortfall. If the Legislature failed, the governor would close the gap.
The third part of Prop. 76 would have reformed Prop. 98, which sets minimum levels of state spending on K-14 public schools. Spending would be allowed to rise with enrollment and personal income, which usually exceeds inflation rates. Also, yearly appropriations above Prop. 98 limits could be made without setting a new floor on spending.
Schwarzenegger strongly promoted Prop. 76 but lost the battle. Instead of pursuing the goals of the measure through legislation, the governor caved and joined the Legislature in unbridled spending when times were good.
Maybe now the governor and Legislature will take another look at leveling spending increases so that there is a substantial rainy-day fund to rely on during the inevitable periodic slowdowns in the state's economy.
However, such a reform would not eliminate the current fiscal mess. There is little room for new borrowing. Substantial tax increases now could be devastating to a weakening economy. All that is left is drastic spending cuts that are likely to undercut basic state services for a time.
The only hope is that our lawmakers will learn from the second fiscal meltdown in less than a decade and initiate the reforms needed to prevent another one.
The California voters who have supported this jump into a financial abyss are as much to blame as anyone for believing there really is such a thing as free lunches.
I'm starting to think these people really are aliens from a parallel universe. ;)
and now, add into the mix, for a few more piles of wampum, we have only enhanced the likelihood of more politicial intrigues ahead as another small group is being afforded the opportunity to particpate in a big way in the political process thru the use of the almighty dollar.
between the unions and their lackeys, the ‘special interests’, and power hungry politico, we are witness to the perfect storm on an epic scale. It seems like a hollywood production,, and all we can do is hope ‘FIN’ is soon on the screen. Where’s Ed Wood when ya need him?
but don’t count on it, there are lots more reels in the can and if history holds to pattern, the old saying ‘You ain’t seen nothing yet!’ ought to scare the heck out of every taxpayer in this state.
I predict sadly, “Prop 13” will eventually be repealed.
There’s no way, California democrats can deal with the budget by lowering spending. No way.
And tax revenues certainly aren’t going to keep increasing, with the tax base evaporating.
I’m pessimistic, about the future of California.
PeRATa will have a heck of a time doing as he says,, ‘cut cut cut’ ,,unless he’s working in a prison’s kitchen peeling and cutting up potatoes.
It couldn't be the same guy who got us into this mess.
These voters are positive we have enough money to spend bilions on embryonic stem cell research, let alone free lunches.
Are you sure you aren't being too harsh on them?
(I changed my position to being against the recall when it became clear that the Grovelnator was a fait accomplis).
“Revenues are short EVEN THOUGH Californians are paying the highest percentage of their incomes in state and local taxes than ever before” — EVEN THOUGH should be replaced by BECAUSE.
If you want more of something, reward it. If you want less of something, tax it. — Hey folks it ain’t rocket science!
Politicians should try repealing the law of gravity. Their attempts fo repeal the laws of economics have failed.
Governor Schwarzenegger should have held these tax-and-spender's feet to the fire for fiscal responsibility instead of spending more and borrowing more.
This is what happens when you send a RINO to do a Republican's job.
Right now, the state pols are bending over backwards to come up with more creative ways to milk the populace of more money. I’d like to be a fly on the wall to hear of some of their ideas.
Look for more tobacco taxes; don’t forget their failed healthcare plan relied heavily on this.
How about ammunition tax? It’s come close before.
Expect to see a lot of new user fees, sales tax increase, gas tax and many other rip-offs.
Don’t worry. Arnold will “audit everything.”
Time for another commission to study the problems we face? ;-)
That and a huge increase in the number of illegal alien taxpayers...
Since they did not learn from the first, why would anyone expect them to learn from the second? By the way, there is a simple test for whether they learned... Did they elect fiscally conservative politicians?
Question: “CA: Will we learn from second budget crisis in decade?....”<p.
Response: No.<p.
Comment: Balanced budgets and fiscal responsibility are so 1950’s. The issue is CASH FLOW FROM A TO B.
Ping...
*sigh* wrong thread...
No worries here, Arnie can just borrow the state out of financial crisis.
Every election billions of bonds are passed that we are told will do nothing less than “save the world”. They are so easy to get passed the proponents don’t even bother to update their TV ads from the previous elections. And we are always told by these snake oil salesmen that we can do it all “without raising taxes”. Using that phrase in a bond commmercial should carry a jail sentence.
How can things get better when legislators care more about spanking bills and whether or not vulnerable children are taught homosexuality in public school?
If California the State was a human patient they would receive a diagnosis of incurable diseases.
RINO Arnold is not the Dude that inspires leadership in Sacramento.
This entire mess has Maria finger prints all over it.
Arnold will run for Boxer seat in 2010 so he does not want to make waves.
The idiot Dem politicians I see at the gym in Sacramento are so far removed from reality its amazing.
Prop 13 would pass again today. Remember that every land owner..even the new ones have benefited from Prop 13.
New buyers know that they pay 1% roughly..they know how much it will go up each year..and property is valued on that basis.
It is kind of like a “flat tax”..you know the terms when you buy the property.
If they repealed Prop 13 it would be on the next ballot.
Perata and the rest of the legicritters know that the tax payers are taped out.
Sending home all the illegals from out schools..stopping health care for illegals and ending busing would ballance the budget overnight.
A simple solution would be a $1500/head illegal alien tax before McCain gives them the right to vote.
Another key reason why our lawmakers have such a difficult time in Sacramento is the widely fluctuating flow of tax revenues. California has the nation’s most progressive income tax, with one of the country’s highest top rates. As a result, California relies heavily on revenue from a small number of wealthy taxpayers.
Horsecrap.
Many states have rates that affect only reasonably high incomes. The top rate of 9.3% is assessed on all income over $44,819. This is what the Contra Costa Times calls “wealthy”?
This in contrast to some states where the top bracket doesn’t kick in until $100,000 or even $200,000 income.
For those in low cost states, bear in mind that the California median income is $49,200. So at least half of all taxpayers in California are paying the top tax rate of 9.3% on at least a portion of their income.
In the bay area, everyone I knew was in 6-figures. Cops, everyone (due to overtime).
All of these people are paying 9.3% on at least $65,000 of their income.
It stands to reason that most tax money comes from the rich, since most money is concentrated among the rich. But it is pure bullcrap for this article to imply that the mass of the middle class is unaffected by the top marginal tax rate of 9.3%.
Another lie is that revenues in Calfornia are swinging wildly. California got 2 windfalls — from the Tech boom and the housing boom. They waste the money. They will always waste the money. The idiot electorate will always vote for idiot communist legislators who will always waste the money.
I can’t wait to retire and flee this Rat infested hellhole, if it doesn’t kill me first.
Bustamante!!!
The liberal public and the legislators they elect are largely to blame. The liberal suburbanites and the poor want universal health care, universal child care and a whole pallette of nanny state socialistic programs. Typically, they get away from paying for it by “taxing the rich,” businesses or the smokers.
Another attack, one the Governator is particularly guilty of, is the over-regulation of businesses. More than 1700 new building codes were added with union pressure this year to bring us up to the International code. This will add more than $30,000 to the cost of a $500,000 home. Does this make sense in an era of building slumps and mortgage defaults? The new diesel air quality regs will cost tens to hundreds of thousands of dollars on farmers who are being forced to replace machines used only a handfull of times per season. Agriculture is still a leading industry in California. The amount of silly environmental regulations being rained down on farmers and ranchers is driving land conversions and consolidations under corporate landowners.
Regulations shift the cost of public policy goals unfairly onto the backs of business. The Governator’s marriage with the greenies is burdening business, encouraging the rush to leave to ABC (Anywhere But California) and souring growth, which in turn affects tax income.
The combination of these forces is ushering in a decline to the status of a third world nation.
$14 bill deficit, $10 bill to illegal services
Of course we haven’t learned. The GOP pushed aRINOld and got RINO problems; now the pattern is repeating itself on the national scale with a RINO about to take the GOP nom for pres.
Of course, the RINOs will blame the Socons, as usual. And they even do it on this Socon forum, the height of being an impolite turd.
Maybe it's time for another revolution. How about abolishing the income taxes? Then the state wouldn't have this problem. How about making property tax collectible only from escrow when the house changes hands? Then we wouldn't need Prop 13. How about ending consulting and legal jobs for ex-state employees for at least 2 years post employment? Then term limits might have meaning...
And so on. We could even bring prop 187 back, or one modeled after the equivalent from Arizona.
I don’t think FR is a socon site. I am a conservative who favors limited government and local control. I an an originalist on the principles of the Constitution. I am a fiscal conservative in that I would not favor the Hucksters Nanny state liberal social programs. I believe in building local community capacity and leadership to address social problems. The anti-gay agenda, creationism, home schooling et al are not my issues. I consider those socon issues.
I think the socons assume to much that all “conservatives” share their issues.
Where do you think I got that idea that this is a socon website rather than a GOP website? From JimRob.
From the front page of Free Republic:
Statement by the founder of Free Republic
As a conservative site, Free Republic is pro-God, pro-life, pro-family, pro-Constitution, pro-Bill of Rights, pro-gun, pro-limited government, pro-private property rights, pro-limited taxes, pro-capitalism, pro-national defense, pro-freedom, and-pro America. We oppose all forms of liberalism, socialism, fascism, pacifism, totalitarianism, anarchism, government enforced atheism, abortionism, feminism, homosexualism, racism, wacko environmentalism, judicial activism, etc. .... We are not connected to or funded by any political party, news agency, or any other entity. .... We aggressively defend our God-given and first amendment guaranteed rights to free speech, free press, free religion, and freedom of association, as well as our constitutional right to control the use and content of our own personal private property. Despite the wailing of the liberal trolls and other doom & gloom naysayers, we feel no compelling need to allow them a platform to promote their repugnant and obnoxious propaganda from our forum. Free Republic is not a liberal debating society. We are conservative activists dedicated to defending our rights, defending our constitution, defending our republic and defending our traditional American way of life.
I think the socons assume to much that all “conservatives” share their issues.
***Your honesty is refreshing. I think most of the RINOs and Socons are like you, co-opting FR and the GOP without reading the first page. But most of them are not nearly as honest as you, they simply hide their agenda.
RINOs and Socons = RINOs and ANTI-Socons
Well then it is not a SoCon site after all, is it? The Huckseter is a SoCon and he stands for the Nanny state and big government social programs. He does not stand for limited government at all.
These are small liberatrian conservative principles: pro-Constitution, pro-Bill of Rights, pro-gun, pro-limited government, pro-private property rights, pro-limited taxes, pro-capitalism, pro-freedom. One does not need to be a socon to embrace them. I think you need to enlarge your perception of Jim’s tent.
Huckster is a Socon nanny stater. JimRob has acknowledged in the past that it was socons who started this site and built it in the early years. Where the Huckster departs from the definition of conservatism, he’s wrong and I can see why a conservative wouldn’t vote for him. But he is a Socon and that’s why JimRob obliquely endorsed him.
Seven good reasons to support Mike Huckabee [be sure to read reason number seven]
http://www.freerepublic.com/focus/f-news/1962819/posts
I can only speak for myself, but it’s the socon values that cannot be betrayed. We can vote for someone who isn’t Fiscon enough, but we can’t bring ourselves to vote for someone who’s anti-life, which is why we keyed up on tootyfruityrudy.
If you are a federalist, then issues like abortion are properly a state issue. Issues like federalism, small government and local control are structurally fundamental to individual freedom, property rights and the protection of retained individual rights from populist sentiment. These issues are the antithesis of socialism. They are fundamental to what America is all about. They are not something to be carelessly waived.
I cannot accept a candidate who asserts the primacy of marriage between a man and a woman, but would give away the protection of my freedoms.
Are you a federalist when it comes to infanticide? If some state decided that it was okay to kill 3 year old babies due to the fact they weren’t viable then do you stand by such principles? Not bloody likely. It’s funny how “federalism” becomes a priority when it’s abortion. It’s just a smokescreen for a pro-choice position.
Recall that the supreme court spent considerable emphasis on the age of viability in its arguments over Roe V. Wade. In Common Law England, the age of Viability was 6 years old, and by the time of RoeVWade it had shrunk to zero because the baby had access to societal resources. Now the babies have access to societal resources even while still in the womb, with in utero surgeries and laws being passed to protect preborn babies during car accidents & such.
So your argument is a bunch of hogwash.
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