Forget the happy talk – Here's what California's structural deficit is right now (in dollars): 9 billion
Posted on 07/09/2006 8:12:51 AM PDT by NormsRevenge
Arnold Schwarzenegger probably has stunk up his Sacramento smoking tent with more than a few celebratory cigars of late. Nine months ago, after a special election wipeout with few parallels in U.S. history, the governor looked like a political shooting star whose time had quickly come and gone. Nowadays, basking in the on-time passage of a generally lauded state budget and facing a charisma-challenged Democratic opponent with big weaknesses on both taxes and the environment, Schwarzenegger appears on a clear path to re-election.
Hold your cheers. The conventional wisdom – sure, he punted on addressing that pesky structural deficit for another year, but if the state's economy keeps booming, it will disappear – is wrong. So is the reporting shorthand that describes the current budget as balanced and next year's budget as facing a $3.5 billion shortfall.
Boiling the budget down to its basics – i.e., not counting leftover funds or treating debt repayment as regular spending – the fact is that in 2006-07, the state will spend $4 billion more than it takes in. And if we had the sort of honest accounting that we expect of well-run corporations, the state's structural deficit this year and as far as the eye can see would be at least $9 billion – largely because of a problem most voters have never heard of and almost no politician wants to address.
Still think that Arnold's political rebound suggests the state as a whole is on the rebound?
What's particularly appalling is that in this budget – thanks to a stunning $7.5 billion surge in revenue – the state could have gone a long way toward preparing itself for the storms ahead. Instead, the opportunity was wasted by a governor so damaged by his doomed crusade to use initiatives to make over a dysfunctional state that he believed he had to jettison many of his principles to hang onto office.
“This was the year to balance the budget. We could have done it,” says Assemblyman Keith Richman, the Northridge Republican whose candor about the state's fiscal irresponsibility has led the Schwarzenegger administration and fellow lawmakers to treat him like the skunk at a picnic.
We could use a few thousand more skunks in Sacramento.
“Reagan felt the power of ideas ... Arnold felt the power of himself.”
– A Schwarzenegger political operative quoted in “Fantastic: The Life of Arnold Schwarzenegger,” the unauthorized 2005 biography by Laurence Leamer
Lots of politicians shift course after a rough patch. But few have ever done it as abruptly, completely and unapologetically as Schwarzenegger.
In just a few weeks last winter, the governor:
went from backing a hard-line reformer as state prisons chief to giving the powerful prison guards union de facto control of the corrupt, out-of-control corrections system.
went from demanding changes in teacher tenure and ridiculing the idea that school quality was directly related to school spending to climbing in bed with the California Teachers Association. The just-approved 2006-07 budget includes by far the largest single-year increase in state education spending in U.S. history, and the 10 percent hike was not tied to a single reform.
went from fighting for an initiative with tough limits on state spending to embracing vast new borrowing for infrastructure and a budget in which overall spending increased by 11 percent.
Now for the really bad news: Thanks to a bombshell report in February by the Legislative Analyst's Office dealing with the cost of medical care for current and future public employee retirees, partisan carping over how to tackle the state's structural deficit has a can't-see-the-forest-for-the-trees quality.
The long-term cost of public employee pensions has been discussed for years. Schwarzenegger and other GOP lawmakers have called for a change to 401(k)-type retirement plans or plans with lesser benefits for new employees; Democrats have stonewalled, pleasing their public employee union base. Meanwhile, few voters seem aware that pension bills are already taking a toll on the state budget. This year, state taxpayers will provide nearly $3 billion to make up for California Public Employees' Retirement System shortfalls.
But at least there is a semi-consensus that this a problem that must be resolved. By contrast, no one is talking about state retirees' health care tab. Even though an estimated one-quarter of state employees will retire in the next seven years, the state has no idea how it will pay for their doctors' bills. The Legislative Analyst's Office says the state has unfunded liabilities of from $40 billion to $70 billion – and should immediately start setting aside $6 billion a year (up from the current $1 billion) to make sure these liabilities can be covered. If we had an honest accounting system, any discussion of the structural deficit would include that extra $5 billion. (To put that sum in perspective, the current University of California budget is $3.1 billion.)
So what happens when the pension and health care bills come due over the next few years?
The conventional wisdom often focuses on an either/or choice: either we raise taxes, or we freeze/cut spending, thus taking care of the problem. But it is far more likely we'll be subject to a double whammy of both tax hikes and major program cuts. That's because as gloomy as the paragraphs above have been, they are based on revenue projections in which California's economy continues to thrive.
Booms can't last indefinitely. That's why five times in the past 20 years, state revenue has plunged from previous years. We are one recession away from a true deficit of $15 billion or $20 billion, yet the most powerful people in Sacramento pretend all is well.
So much for the “soft landing” theory. So much for the state's credit rating. So much for the sort of infrastructure and targeted education spending that is considered crucial to California's global competitiveness.
Here's an idea: Why don't Gov. Schwarzenegger, Assembly Speaker Fabian NÚñez and Senate President Don Perata pass a law repealing the business cycle?
“I was born to be a leader. I love the fact that millions of people look up to me.”
– Arnold Schwarzenegger, from an interview with Britain's Loaded magazine
The governor's carefully cultivated image builds off the notion that he is forceful, charismatic and fearless. Ever since the special election debacle, however, that Arnold is AWOL. Maybe it was a myth all along.
“I think Arnold likes to be liked. I don't know that he's going to take on the hard issues,” says a public official who knew Schwarzenegger for years before his first bid for office.
In coming years, the hard issues will be everywhere. For two decades, high-powered commissions have warned of the fiscal devastation that awaits the federal government when baby boomers begin retiring in 2008. The budget problems California faces in coming years are at least as severe, according to Steve Frates of the Rose Institute of State and Local Government, whose pending report for the California Health Care Foundation on the state's unfunded liabilities is likely to be a bombshell on a par with the February Legislative Analyst's Office report.
But you can't deal with a crisis unless you have the courage to admit it exists – and in Sacramento, they're just about all girlie-men now.
Compared with his predecessor – Gray Davis, the gift that keeps on giving – Schwarzenegger obviously has been a big improvement. His anti-tax, anti-regulation stands are crucial to California's future, given the Legislature's incomprehension that hostility to business can destroy the state in an era of globalization and mobile capital.
Schwarzenegger also benefits from any comparison with the Democratic nominee for governor, Phil Angelides, a 1970s throwback tax-and-spender. As Frates notes, “If the governor doesn't get re-elected, any reform is moot.”
But given the challenges California faces in coming years, we don't need a good governor – we need a great one. And unless Schwarzenegger has yet another radical makeover upon securing re-election in November, he won't even come close.
More than ever, California needs an action hero. Instead, our best option appears to be a governor who thinks he's starring in a feel-good fantasy.
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Reed is an editorial writer for the San Diego Union-Tribune.
Forget the happy talk – Here's what California's structural deficit is right now (in dollars): 9 billion
Republicans won't even read an honest report about the mess in California that its liberal, Austrian governor refuses to address so that he can cling to power.
Don't hold your breath Norm. There will be few replies on this thread.
LOL.. I hear ya..
Duplicity makes for strange bedfellows.
--
Just posted this..
California voters may find new measures too taxing ($43B more borrowing,$3B in annual tax increases) ^
http://www.freerepublic.com/focus/f-news/1662753/posts
"You just want Angelides to win!" < /FO >
GOVERNOR SCHWARZENEGGER CALLS UPON LAWMAKERS TO STOP THE RED INK
If only the numbers weren't so mind-numbing.
This forum wouldn't be fair and balanced without the CAGOP represented .... nor much fun.
Not voting for candidate A is actually a vote for candidate B or the even more classic A vote for anyone but candidate A is a vote for candidate B, while clearly moronic, adds a great deal of levity to the forum.
If the CAGOP were band from the forum think what you'd be missing:
1) Repetitive postings every 3 minutes.
2) Threads were the first six replies are provided by the original poster
3) Logic that provides wholesome entertainment.
4) The latest ploys from the reelection committee.
5) Contestant redefinitions of values and traditions.
6) A manual of public action in the finest tradition of Politics for Dummies
But it's not just the Governor's fault, in fact most of it is not.
For example, the Democratic legislature is just horrible. And who is in the majority? It isn't Republicans.
Any executive can only do so much with a crappy legislature. The voters need to give him something to work with.
Well, do you?
"More than ever, California needs an action hero."
More than ever California needs to clear out it's girlie-men legislators who lack the skills to even manage a newspaper delivery route.
The governor proposes and approves the annual budgets.The governor can veto any legislation and the legislative Democrats can't override the veto.
Please take your head out of the sand. Yes,bordergal, most of it is the Austrian's doing
What was the title of the classic 1994, Jim Carrey movie?
New LAO Report published Friday:
http://www.lao.ca.gov/2006/major_features/major_features_2006.html
"Out-Year Implications of the 2006-07 Budget. Based on our current projections of revenues and expenditures under the 2006-07 Budget Act policies, the state would continue to face operating shortfalls in the range of $4.5 billion to $5 billion in 2007-08 and 2008-09. "
They can veto any darn thing they want--by line item!
Of course they can override the veto with a 2/3rds majority in both houses.
Democrats do not enjoy a 2/3rds majority in either house of the California legilsture.
The Democrat's lack of a 2/3rds majority is the primary reason Schwarzenegger has struggled to get his proposed budgets and bonding measures approved by the California legislature. Most Republicans have refused to go along with his liberal promotions. Schwarzenegger and his Democrat allies have had to pick off Republicans, one at a time, to meet the super majority requirements.
Gotcha. I didn't know that, and it is very disappointing.
Notice that the majority of Republican legislators didn't vote to approve the 2006-2007 budget. Schwarzenegger and his two Republican caucus leaders, with the help of Democrats, had to arm twist, literally bribe, those few Republicans that did capitulate in order to achieve a bare, 2/3rds majority to pass the budget on to Schwarzenegger for his approval.
Shocker.
Thanks for filling in the blanks, Amerigomag. I had missed bordergal's response this morning.
BG--the 2/3 majority reuirement is the one force that Republicans have to fight off the leftists. That force has been weakened by our Republican governor. If either Schwarzenegger or Angelides are governor, we need to work hard to hold the 1/3 plus in force and hold them accountable to blocking excessive spending, borrowing, and other leftist actions. As Amerigomag said, Republicans have been picked off one at a time and forced to move left. That needs to be exposed and stopped.
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