Posted on 07/05/2006 8:46:46 AM PDT by NormsRevenge
Compared to prior years, the resolution of the 2006-2007 California state budget was a relatively benign affair. True, it was still late, as the constitutional deadline was June 15th. But like the line from the first Pirates of Caribbean movie, this constitutional provision has always been treated more like a “guideline,” not a firm rule. (This alone tells us a lot about the fidelity to constitutional principles held by our ruling elites).
The budget was passed, happily, before the beginning of the fiscal year which started on Saturday. That has not happened since the year 2000. And there is more good news. A massive influx of new revenue is making it easy for Governor Schwarzenegger to adhere to his no new tax pledge while, at the same time, expanding state government to a level that, more or less, placates the tax-and-spend crowd.
How much new revenue? About $7.5 billion more than expected. Indeed, all told, revenues are up a staggering 23% over a 3 year period. While state politicians are all smiling about this revenue, not everybody is smiling about how it is being spent.
First, let’s give credit to the Governor for not raising taxes. Other Republican governors have raised taxes without having a legislature dominated by the opposition party. This governor understands that raising taxes would inflict a fatal wound to California’s economic recovery.
Second, while it is true that the national economic recovery has played a large role in the flood of tax receipts to California’s coffers, the Governor can take substantial credit for setting the tone – in word and deed – that California is not as hostile to business as its reputation would warrant. Workers comp reform and job creation are two weapons Arnold will aim squarely at Phil Angelides this fall.
Now the bad news. Despite buckets of new cash, California is still spending more money than it is taking in. It is a well-worn budget cliché that if you find yourself in a hole, the first thing you do is stop digging. Well, California continues to dig away and that probably explains why, in the budget vote, a large number of Republicans said No.
Budget contrarian and fiscal expert Sen. Tom McClintock spells out the numbers in stark detail: Income: $94.4b; Spending: 101.3b; Deficit: $6.9b.
McClintock also makes a valid point with respect to the vaunted “paying down the debt” argument. Yes, the budget does repay some debt, but much of that which is characterized as “debt” reduction is merely transferring funds to prior obligations, including transportation and education.
The sad truth for taxpayers is that was truly a “get out of town” budget. Instead of addressing the structural deficiencies in the current budget process, our political leaders have put it off, yet again. And they did so for political reasons.
The Governor signed off on the massive spending increase to better position himself for his political battle against Angelides in the fall. He can rightfully claim that he has reached out to Democrats in the crafting of this budget which gave a huge infusion of cash to the prodigious education bureaucracy – a major constituency of the political left. The Republicans can claim that they have not raised taxes. The photo of the budget signing ceremony was dominated by big smiles.
Yet California is still on the precipice. With all the new revenue, we had a rare opportunity to step back from the cliff, but our elected leaders demurred. We can only pray that our national economy doesn’t backslide because, if it does, there will be the same recriminations and finger-pointing that transpired when Gray Davis was unceremoniously kicked out of office.
Yes, there are a few good things about this budget. Unfortunately, it still fails to meet the ultimate acid test: It calls for spending in excess of revenues.
"It calls for spending in excess of revenues."
With the billions Ca. takes in, this is a travesty!
In the book Shakedown, Wall Street analysts said that Jesse Jackson had shakendown every single major corporation in America including major unions in California and other large states.
In addition to cash payments, he has had his own key people placed on stockholder boards.
These people have very little, if any, financial experience, and we've seen the results with the downturn in the markets in some key areas and in the state of California particularly.
I don't understand why this isn't discussed more often on the Neil Cavuto show and by Republicans when the discussions turn to the economy.
When California has a real estate price correction, the state is even more screwed. Property tax revenue may go down substantially.
Example: $700,000 house sold. Property tax approximately 1.2% of purchase price = $8,400. House goes into foreclosure, no one bids, the lender becomes the proud owner. Lender dumps it for $600,000. New property tax = $7,200. To what extent this scenario will play out, I do not know. Unfortunately, variable interest rates loans have gone up substantially, and I suspect that a lot of people are going to be in trouble.
If they can't balance the budget during fat times like these, they certainly can't do it during lean times. My suggestion is that you think about selling any California State bonds you own.
How much new revenue? About $7.5 billion more than expected. Indeed, all told, revenues are up a staggering 23% over a 3 year period. While state politicians are all smiling about this revenue, not everybody is smiling about how it is being spent.
--
revenue up 23% but considering that their spending is up about 30%.. and who proposed and signed off on the past 3 budgets, nothing to crow about, yet likely all those responsible will be re-elected. Go figure.
I did better than that. I sold my house at an inflated price, and moved to Scottsdale : )
Man, did you call that right. There will be tens of thousands in Cal. alone!
The sad truth for taxpayers is that was truly a “get out of town” budget.
and a get re-elected one as well. and sadly, most if not all will be.
Selling bonds to pay for past and present current expenses is not only illegal it's stupid. That's the bad news.
The worse news?
Revenues are greater than expected. Wooo Hoooo!
Wait.
The usual suspect in the California legislature are spending it as fast as it comes in!
WTF?!!?
In other words, "We're paying down the debt" is a myth.
We're paying off the interest is maybe more like it.
How many billions of approved yet unused bonds are still outstanding?
What politicians try and sell as practical and principled solutions would get most regular folks tossed in debtor's prison or worse.
Yep. As required by law.
How many billions of approved yet unused bonds are still outstanding?
About 3 billion.
(The Palestinian terrorist regime is the crisis and Israel's fist is the answer.)
(The Palestinian terrorist regime is the crisis and Israel's fist is the answer.)
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.