Posted on 03/01/2004 12:42:50 PM PST by calcowgirl
Universally, polls indicate Arnold Schwarzenegger is highly popular across the political spectrum, and that the state’s voters are largely grateful that the new governor appears to be fostering a more cooperative political environment while restoring some semblance of fiscal sanity in Sacramento.
But along the way he made the calculated decision to ignore one of the major commitments he made during the recall campaign: an open audit of the state’s finances.
While the marginalized newspapers made little mention of it, voters who are against any and all new taxes and continued lack of financial responsibility in state government remember Arnold’s, “Ja, we will open up all the books to the people and audit everything to find the billions of dollars in waste.”
After all, how does an executive leader justify taking on $15 billion more in loan debt without reconciling current outlays against revenues. The voters were entitled to an answer to the question: Who is paying for services they don’t receive, and who is receiving services they don’t pay for?
The question was never answered.
In retrospect, the deliberate decision to deep-six the audit was without question a sound tactical idea. Who knows what sort of hobgoblins would have come flying out of the closet to humiliate both parties.
Thus largely in the dark, Californians will go to the polls Tuesday to vote on a number of important measures. Arnold has been aggressively campaigning for passage of two measures that go hand in hand.
Proposition 57 is a one-time $15 billion Economic Recovery Bond to refinance and consolidate California's budget deficits. It would take nine to 14 years to pay off the bonds that would then be repaid by a quarter-cent sales tax increase. The measure however, says nothing about the excessive spending that produced the problem in the first place.
Proposition 58, the Balanced Budget Act, is designed to balance the budget annually in the future, while setting aside a reserve balance to stabilize spending.
The Day of Reckoning, March 2
But more importantly, voters will make a decision on Proposition 56, after being subjected to a highly deceptive $14 million union-financed TV campaign touting the measure as necessary for “budget accountability.” The ads propagandized the need “for an end to the bipartisan gridlock.”
That’s a laugh, because if the measure passes, there will be only one party deciding when and how much taxes will be increased, and what will be in the budget. And that will be the law!
The legislature is dominated by a 60 percent Democratic majority. Yes on Proposition 56 will render irrelevant any Republican opposition to tax increases.
According to the Sacramento Bee’s Clea Benson, “A proposition on the March 2 ballot would make it easier for California lawmakers to pass a budget and raise taxes.” As well, Benson states, “the measure would allow legislators to pass a budget or tax increase with 55 percent of the vote, instead of the two-thirds majority currently required.”
This means that the Democrat-dominated legislature would be able to raise taxes without a single Republican vote, but the governor would have the power to veto whatever gets through both the Assembly and the Senate.
Was Proposition 56 “All In the Cards”
Anyone familiar with California’s insane political chicanery recalls a revealing moment that occurred in July 2003, back when Gray Davis was still governor, and the legislature was busy finding new ways to bilk taxpayers and drive businesses out of the state.
Several members of a coalition of liberal Democrats discussed stalling negotiation on the budget as a method to force Republicans to cave on increased taxes.
Embarrassingly, they were unaware that a live microphone was broadcasting their machinations around the Capitol.
The conversation was piped to roughly 500 “squawk boxes” that permit lobbyists, staffers and media members to listen in on the lawmakers' discussions. Of the 11 strategizing members, Assemblywoman Jackie Goldberg said, “If the budget crisis were extended, it could improve chances for a ballot initiative that would make it easier for the Democrats to raise taxes by lowering the threshold for passage from two-thirds to 55 percent.”
"No one is running" for re-election, she said, according to a transcript made by Republicans. "And maybe you end up better off than you would have, and maybe you don't. But what you do is show people that you can't get to this without a 55 percent vote. "
Suddenly an unidentified staffer said, "Excuse me, guys, you can be heard outside."
"Oh s--t, s--t," Goldberg said.
"The squawk box is on," the staffer said. "You need to turn it off right there."
"How could that happen?" Goldberg said.
A poison pill buried in the measure would gut the Proposition 13 mandate that requires a two-thirds legislative supermajority to thrust new taxes on the voters.
Jon Coupal, president of the Howard Jarvis Taxpayer’s Association, has been barnstorming talk radio in an attempt to inform the public and help defeat Proposition 56.
"Even within this last legislative session,” said Coupal in the February 29th Orange County Register, “the two-thirds vote has stymied tens of millions worth of tax increases. It has been an effective barrier.”
California voters need to be aware of how important their vote is on Tuesday March 2. The squawk box truly is on, and we need to turn it off before our taxes go through the roof.
Otherwise, Jackie Goldberg’s nightmare could be coming to a mailbox near you and it will be too late to ask, "How could that happen?"
Patrick Mallon can be contacted at gohabsgo@cox.net
Which county? IYDMMA
I have to admit... that took me a second. LOL.
Los Angeles County
You and Ernest must both be at the beach, Malibu Beach.
In the rest of the county there are 22 ballot measures in your county alone asking for an increase in taxes or approval of more bonding.
Increases for police services, libraries and school improvements appear to be popular requests. No surprises here.
Schwarzenegger is going slumming with Davis to pick our pockets.
How are Arnie's supporters going to spin this one?
Two tests for California bonds
Voter OK, then Wall Street favor, needed for $15 bln. issue
By Rachel Koning, CBS.MarketWatch.com Last Update: 4:28 PM ET Feb. 28, 2004
CHICAGO (CBS.MW) -- If investor appetite for a recent California bond offering is any barometer, demand for $15 billion in deficit bailout bonds could be equally ravenous, a key step in plugging the state's budget hole.
But the issue faces a bigger initial test -- California voters.
Recent surveys show Proposition 57, to allow the one-time bond issue, and its companion Proposition 58, which requires balanced budgets, should pass in Tuesday's vote. But their popularity is far from overwhelming, leaving some doubt on Wall Street and forcing state officials to pursue backup refinancing for the $14 billion in short-term debt due to mature in June, which the state must pay off or risk a more serious threat of bankruptcy.
Even passage on Tuesday might open doors to new controversy.
"If it passes, watch for lawsuits filed by municipalities angry at the intercept of their local revenues" which are likely to be compromised as the state must pay debt service on its larger bond issue, said analysts at California-based municipal bond underwriter Stone & Youngberg.
The state sold a much slimmer $2 billion general obligation bond offering last week, drawing substantial bidding from institutional and retail investors alike. In fact, retail investors snapped up more than $870 million, their largest share in California bond history.
The Stone & Youngberg analysts said the smaller sale might prove a good litmus test for general California bond demand, but there are no guarantees.
California general-obligation debt carries ratings of "Baa1" from Moody's, and "BBB" from both Standard & Poor's and Fitch, the lowest ratings of any state and teetering unusually close to "junk" status. But bond market analysts have said it's not likely the state, which is the world's sixth-largest economy, will default on its bond payments.
The rating makes California debt, long an anchor of municipal bond funds, too risky for the rules governing many pension and insurance funds. The new debt would presumably carry the same ratings, or potentially higher ratings, analysts have said.
A slow national economy, the technology bubble burst and the steep bill after electricity shortages under the watch of former Gov. Gray Davis have stung California. Aggravated by political wrangling, the budget gap is expected to reach $7 billion in fiscal 2005-2006 and remain roughly the same over the next few years, without changes to current tax or spending structures. Tuesday's ballot will also include a measure to require just 55 percent approval in the Legislature for state budgets rather than the current two-thirds. Passage would effectively give control of the budget to Democrats, who have had to negotiate with Republicans in past years to reach 67 percent approval for tax or revenue increases that balance the spending plans.
Passage of the $15 billion bond measure is key to California's near-term fiscal fix and may help make inroads to longer-term stability, but a budget gap over several years still looms, said Andrew Tilton, an economist with Goldman Sachs.
He thinks investors would more likely warm to California bonds if the state could pass at least one of its more controversial proposals to change revenue and spending stipulations.
"Given California's economic strength, the state could easily generate more tax revenue if needed," he said.
Schwarzenegger stumps
Gov. Arnold Schwarzenegger courted Wall Street's largest investment banks while in New York last week. He assured these potential investors in the state that his administration, working under the counsel of Schwarzenegger friend and investment guru Warren Buffett, would craft a bond proposal that makes the most sense for California's fiscal rejuvenation and yet not add undue interest costs to taxpayers.
Schwarzenegger's administration has been short on details, such as duration and financing structure for the $15 billion sale, but the actor-turned-politician reportedly told the bankers a 15-year bond might be preferable to a shorter maturity, in part because interest rates are currently low, Reuters said.
Jeff Lipton, who oversees the tax-exempt investments for management firm Weiss, Peck & Greer, said he's not certain he'll buy the new California bonds if the measure passes Tuesday, but he'll take a close look at the investment.
He says the state's historically low credit rating is accurate because it more likely reflects the state's "unwillingness" to finance its budget deficit rather than its inability to.
Still, he said that despite the rating, the state is a much sounder investment, than say, corporate bonds with similar ratings.
Contingencies
If Tuesday's measure is rejected, the state hopes to proceed with a $10.7 billion bond issue previously approved by Davis and the Legislature, although the issue remains hung up by a court challenge that says voters should be allowed to approve all new bonds.
To buy some time if necessary, the state has secured a costly but potentially credit-rating-saving guarantee that allows it to legally postpone some short-term bond payments.
State Controller Steve Westly told a business luncheon on San Francisco last week that officials were prepared to run to Wall Street if Tuesday's ballot measure fails.
But he warned that California's desperation might mean the state has to sell bonds "at loan-shark interest rates."
Including the latest general obligation offering, proceeds from which are used to fund infrastructure projects and other basic state needs, California's general obligation debt outstanding is about $15 billion, roughly 1 percent of the state's gross domestic product.
Goldman's Tilton said that from a broader economic perspective, California's debt problems are not that extreme.
He suggests California's woes "pale in comparison" to 1970s New York, when New York City by itself ran a budget shortfall three times the size of California's red ink.
"California's economy is strong enough to weather the current crisis ... but Gov. Schwarzenegger still has some heavy lifting ahead of him," said Tilton.
Arnoold is getting desperate! he should never do anything with Grayout Davis!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.