George Will: California's budget mess

SACRAMENTO -- The plan is for the good ship California to float to safety over jagged economic reefs -- mostly reefs of its own making -- on a tide of testosterone. But the second-most crucial member of the ship's new crew is named Donna.

Being director of California's department of finance is not for the fainthearted. "Breathtaking" and "staggering" were among Donna Arduin's initial descriptions of the state budget, which is triple the size of Florida's, although California's population is only double Florida's. She guesses that 75 percent of California's budget is controlled by constitutional or other state and federal mandates. None of the other states where she has done budget diagnostics matched California's entanglement in union contracts that limit competitive bidding by private-sector providers of services.

An aide says someone should design an Arduin ``tour jacket'' like those that rock bands have, listing on the back the cities the bands visit. So far, Arduin's jacket would list Lansing, Albany, Tallahassee and Sacramento. Before coming here from Florida, where she was helping Gov. Jeb Bush, she assisted New York Gov. George Pataki and former Michigan Gov. John Engler.

California's good news is the severity of the bad news. Change becomes easier, an Arduin aide says, "when you have one foot in the fiscal grave." The state's credit rating -- worst among the states; one cut above junk bonds -- will presumably be improved if, on March 2, voters authorize $15 billion in borrowing to tidy up past debts. The alternatives are default in June, followed by tax increases.

Then must come measures to decrease the cost of doing business in California. Concerning which, consider Buck Knives.

Favored by sportsmen around the world, they have been made in San Diego since Hoyt Buck arrived there in 1947. By next year they will be made in Idaho, where the firm's immediate savings will include $500,000 in workers' compensation costs and a 60 percent decrease in utility bills.

The owner of five Hungry Howie's Pizza franchises near Fresno scrapped plans to add five more, with up to 70 new jobs, when energy costs tripled and workers' compensation quadrupled. Multiply the businesses that do not come to, stay or expand in California and you have ... Argentina, which in 1900 had a per capita income as high as Canada's. Or sub-Saharan Africa, which In 1950 had per capita income as high as Southeast Asia's. Government -- especially bad government -- matters. In the late 1990s it helped drive roughly 200,000 Californians from the state each year.

Arduin's mastery of budget mechanics, which was known, in the service of Arnold Schwarzenegger's political subtlety, which is surprising, is already producing successes. Her task is to clarify the future costs of past decisions. His task is to revise some of those decisions.

Here testosterone enters the equation. Six months ago the question was: Could an intergalactically famous Hollywood hero heal California's self-inflicted wounds? Today the question is: Can only such a person do the job? On a Schwarzeneggerean scale, fame -- ``the fever of renown,'' Samuel Johnson called it -- might today be a political asset necessary for governing a state this big and broken.

Fame can help him strike separate deals with large interest groups, so he will not confront a vast unified opposition. The California Teachers Association has agreed to only modest cuts in education spending. But Dan Walters of the Sacramento Bee notes that this will help the governor isolate unions representing non-teaching school employees. Those unions oppose revisions of a law that impedes outsourcing non-teaching services to private contractors.

Schwarzenegger's fame can generate public support sufficient to pressure state legislators. Because of gerrymandering by both parties to protect incumbents, most legislators have seats so safe they rarely feel threatened. And with the coin of fame Schwarzenegger can buy public mobilization to enact through referenda those reforms that the Legislature spurns.

It is irrational but actual: A movie action hero as governor may be immune to charges of being soft on criminals. Therefore he can contemplate reducing the prison population through alternative handling of parole violators. Prison guards, a powerful interest group, can contemplate revising their lucrative contracts or losing jobs.

The state began expanding in-home care for the elderly in the 1950s, when the polio vaccine threatened unemployment for caregivers for polio victims. Now the $1.4 billion program is six times larger than a decade ago. Schwarzenegger proposes to stop paying family members to care for their own relatives.

Every cost-cutting idea is met with a chorus of abuse, and the opposition's idee fixe -- taxing "the rich." What is unfolding is a drama worthy of Schwarzenegger's talents, which were wasted on make-believe dramas.

Thanks! Great article. If this bond bill fails to pass then we're in trouble. Neither cost cutting nortax increases will work because of the mandated spending that by law can't be cut. The second prop besides the bond measure is just to get rid of some spending mandates but that hasn't had much press.

Understanding slowly dawns.

I had no idea of this history, or of the fact that family members could be paid by the state to care for elderly relatives and that I would have to pay for it.

This is as bad as the welfare-to-work programs where the state will pay for child care. I have personally met a young, unwed mother of 3 (by 3 different fathers of course) who could easily explain that the state would pay her to hire child care for her children so she could work. She was allowed to choose the caregiver, so naturally she chose her own mother. Now I am involuntarily paying to raise 3 more "welfare breeders".

Why do I see an endless expansion & proliferation of welfare?

If Arnold can cut this nonsense off we will be forever indebted to him.

I'd love to see several polls conducted. One, of existing business which have actually moved staff or assets out of California in the past five years due to a non-competitive business climate (utilities, taxes, labor, Real Estate costs). Second, business which have delayed or halted business expansion plans due to CA's business climate.

And finally, the number of Californians who (a) plan to move out of the state in the next 12 months, (b) who have seriously considered leaving the state over the past five years, (c) who could envision nothing that would cause them to leave the state.

Problem is, no one really wants to know the truth. But, if you're involved with business in CA, you already know the truth, i.e. that business and job loss in CA resembles an open fire hydrant, with the Leftist Dem's thinking only of how to pry that valve open wider.

SFS

The second prop besides the bond measure is just to get rid of some spending mandates but that hasn't had much press.

You're kidding, right? Just to get rid of some spending mandates???

WRONG. What Prop 58 gets rid of is the constitional provision that would FORBID the exact bonds that are being proposed in Prop 57. Without it, Arnold's bonds are dead. The rest of the provisions are window dressing.

BTW... if Prop 57 passes, we're still in trouble. Long term debt is not the answer.

It's a SPENDING problem, remember?

If this bond bill fails to pass then we're in trouble. Neither cost cutting nor tax increases will work because of the mandated spending that by law can't be cut.

Please explain why bankruptcy would not work?

I always thought that this would bring payments, even those mandated by the State Constitution or law, under the control of a bankruptcy judge.

Unless this judge has the power to unilaterally raise taxes, his only option will be to allow reduced spending, which would then become legal, even if it were below the mandated levels.

Possibly he would even have the power to sell off state assets. The state owns lots of idle land as "preserves" which it does not have the money to turn into parks. Sell.

Another asset ripe for sale is the automobiles given to state legislators. Sell the damn things and let them buy their own, just like the rest of us peasants.

If this bond bill fails to pass then we're in trouble.

It had better not. You're in trouble now. (Boy, am I glad I abandoned CA 9 years ago!)

What needs passing is massive spending cuts. Stealing more money via taxes or bonds just props up the worthless government unions and political hacks.

The state's credit rating...will presumably be improved if, on March 2, voters authorize $15 billion in borrowing to tidy up past debts. The alternatives are default in June, followed by tax increases.

That's a disheartening thought. Can I gather from this sentence that tax increases are automatic if the state defaults on its obligations?

If so, the Dem-controlled legislature doesn't have to work with the Governator -- they just stall for time and taxes go up. They don't have to actively oppose Arnold, and they avoid the political pain of having to vote for more taxes.

The biggest bonus -- when election time comes, they can pound on Arnold for raising taxes when he said he wouldn't!

"The alternatives are default in June, followed by tax increases."

Wrong, George. Not bonds, not default, not taxes. None of these are options. There is only one cure and that cure is to STOP SPENDING!

George Will should just give up commenting on economics. He's a complete bust on that subject.

Or sub-Saharan Africa, which In 1950 had per capita income as high as Southeast Asia's. Government -- especially bad government -- matters.

I'm pinging Clive to the thread for that tangential comment, specifically. The red-hot third rail of international policy is that Africa was better governed and less abused before the "rapacious colonists" yielded to the native kleptocrats, er, statesmen, in the sixties.

I'd just like to add the point that there is absolutely no reason that California couldn't get as screwed up as Zimbabwe, given twenty years of the Mugabe-level screwing it was getting from Davis, and the legislature... and the legislature remains, full of democrats, an emotional toddler with powerful weapons.

... the opposition's idee fixe -- taxing "the rich."

What's interesting there is that high taxes usually drive the actual wealthy into tax shelters, so that they have very low realized taxable income relative to how well off they actually are. Taxing the rich always winds up hosing the middle class -- which may be why Mr Will puts in in quotes.

d.o.l.

Criminal Number 18F

She guesses that 75 percent of California's budget is controlled by constitutional or other state and federal mandates.

I had no idea mandatory spending was THIS high! All I had ever seen in writing before was that mandatory spending was around 40%--but this is double that.

If this doesn't cause a revolt against the big spending liberals which have populated the CA Legislature for more than a decade, I don't know what will.

To put it bluntly, there's no law saying I have to stay in this state

You don't have to stay in this state but you have to stay on this planet. Better to fight here and now.

maybe the stupid damn voters in this state will wake up if they get their taxes raised before the spending is cut

The voters of this state are voting their immediate financial interests - as most voters do. Inotherwords, people who vote for tax increases think they'll be the beneficiaries of state spending, on balance.

What's wrong with me voting with my feet to satisfy my own needs?

Nothing. People have been doing it for thousands of years. But we're running out of places to run. You might get away with it...but I doubt your kids will...and certainly not your grandchildren.

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