McClintock's Floor Statement on the CA budget

Sen. McClintock ^ | 7/29/04 | Sen. McClintock

[calif_reaganite]

Mr. President:

Over the last few years, we have seen a variety of inventive ways to balance the budget on paper while racking up multi-billion deficits. So in preparation for this budget, I asked the Legislative Analyst’s Office two simple questions.

First, how much are we taking in from the revenue structure of the state – all of our taxes and fees and interest earnings?

And then I asked, how much are we actually spending for general fund programs?

In other words, how much is this family actually earning and how much is it actually spending?

And it turns out that last year, we spent $4 billion more from our general fund than we received as income.

Under this budget, according to the LAO, the revenue structure of this state will actually generate – in round numbers -- $76 billion. And it will spend $81 billion on general fund programs. We’ll “earn” $76 billion and spend $81 billion. The deficit – nearly $5 billion – will have to be borrowed.

And that assumes every budget assumption works perfectly.

In our last budget debate, one senator said, “that’s OK. Borrowed money is real money.”

If you believe that, try this one out on your spouse – “Honey, we spent $5 billion more than we earned last year, but don’t worry – I just put the difference on our charge card.” I wish you better luck with that one than I know I would have with my wife.

We’re told, “at least this is a step in the right direction.” No it’s not – it’s a $5 billion step in the wrong direction.

Let me put it another way. Over the next year, inflation and population will grow at a combined rate of 4.2 percent. Our revenues will grow 6.7 percent. So, this is still NOT a revenue problem. Revenues continue to grow faster than inflation and population combined. But here is the problem -- spending will grow 7.4 percent. That’s a faster annual growth rate than under the previous administration’s 7 percent. Our annual spending is actually growing faster now than it has over the past five years.

The widening gap between revenues and expenditures continues to be papered over with borrowed money.

Less than three months ago, on May 1st, the total amount of state general fund supported debt (this includes all the bond issues) was $33 billion. By the end of this budget year, that debt will have grown to nearly $51 billion. That is a 54 percent increase in debt in a mere 14 months. Borrowing by this state is now completely out of control.

Here is what we have:

• A significantly larger general fund deficit than last year.
• Spending growth that is actually accelerating compared to the past five years
• Spending that continues to grow faster than revenues and much faster than inflation and population.
• Total general fund-supported debt up 54 percent in just 14 months.

That is the budget we are about to vote on. “Never mind that,” we’re told, “the budget doesn’t raise taxes” – or, at least, it doesn’t raise them by much.

But here’s the fine point of it: resistance to tax increases only works IF IT IS ACCOMPANIED BY RESISTANCE TO SPENDING INCREASES.

As I have repeatedly warned – YOU CANNOT PAY FOR SOCIALLY LIBERAL PROGRAMS WITH FISCALLY CONSERVATIVE POLICIES. You cannot be both things. IT DOESN’T BALANCE. Fiscal conservatism means not only restraining taxes but restraining spending.

“Never mind that,” we are told. “We’ll control spending increases sometime in the future.” This is a song we hear with every budget – like we hear “Jingle Bells” at Christmastime. Let me remind you that successful diets don’t start in the future. They ALWAYS begin in the present.

And here’s the problem with the future diet that we are promised. This budget also obligates us to make enormous balloon payments beginning in 2006. Not only are we spending more than we can afford this year, but we are agreeing to even bigger obligations just 24 months from now. We will have balloon payments due to local governments, to the pension system, to the public schools, to the universities. Some diet.

Last year when we took up the budget (a budget that we also were told was “balanced”), I warned that it was “a rotting porch just waiting to collapse.” We ended up spending $4 billion more than we took in. This year – if all goes well – we will spend $5 billion more. The porch is gone. Now the very financial structure of our house is being eaten away.

Forty years ago, in 1964, when California admirably met the needs of its people, it spent $202 per person from both general and special funds. That’s $1,160 adjusting for inflation. $1,160. You are about to vote on a budget that spends $2,878 per person. And let me ask you – where are the roads, where are the aqueducts, where are the power plants, where are the top-flight schools and universities that our parents delivered 40 years ago?

What will be our generation’s answer to history? “Sorry, it’s the best we could do?” Shakespeare’s words come to mind: “Age, thou art shamed. Rome, thou hast lost the breed of noble bloods.”

[BradyLS]

��5{��������nt to influence policy, you go to the halls of power where policy is directed. That takes an investment of time, money and involvement in the political process where the people and institutions that impact our lives reside.

You make a great case for Tom and a bad one for Arnold. Arnold has the money, certainly, but when was he involved in the institutions of power and the political process in California? What was Arnold doing before he walked on Leno's set and announced his candidacy?

[SierraWasp]

Hi D1. CA being in debt for ANYTHING other than "Infrastructure" is blatantly un-constitutional! So is running any kind of a "deficit!" Thus, if it is un-constitutional, it is extra-legal (against the highest law of the state and the will of the people) and totally illegal, immoral and fattening of future taxation levels as an illegal debt service!!! CA cannot print money like the Feds and has no mints, breath, or otherwise.

By the way... since you mentioned "Emergency Powers" being invoked, did Gray Davis ever rescind his declaration of "Emergency Powers?" Has Arnold???

We've simply Recalled one Governor that exceeded his constitutional authority and replaced him with another that has already exceeded his and convinced to voters that the illegal credit card has been "cut up" which isn't being honest with us. He engaged in more borrowing for this budget deficit just exactly as Davis did and the courts stopped Davis. They will probably stop AS in exactly the same way. This is NOT succeeding, or "success" by any definition, is it?

[goldstategop]

We need to put a TABOR-style spending limit into the State Constitution. Until then we are cursed to live with champagne tastes on a beer budget.

[goldstategop]

This was a John Burton budget. I would have voted against it too. It borrows too much, spends too much, and cuts too little. No tax increases are nothing to cheer about cause basically this is a big government budget propped up by a lot of borrowing and fiscal accounting gimmicks. Where are the savings?

[DoughtyOne]

I agree with your take on the idea of running any kid of a deficit.  As I stated in one of the earlier posts, both parties have participated in it, the media has given them cover, and I don't really like it.  None the less, we find ourselves at this place in time with no one bringing legal action against the perpetrators of this illegality.  That being the case, the current governor has chosen to open himself up to ridicule based on our perception.  I do however observe that it's a little tough to damn Schwarzenegger for doing something state officials have basically approved of by omission, for several years.

It seems to me that McClintock and other public officials could have brought suit against Davis in the past, and Schwarzenegger presently on this subject.  I believe Davis was taken to task on some of his bonds, deemed non-viable since voters didn't approve of them.  Too bad he was not also taken to task on running budget deficits.  If someone wanted to challenge Schwarzenegger on that point, I think he would be fair game.

I knew someone might bring up the subject of the printing press.  The federal government finances it's additional spending by selling treasury bonds.  In recent years it has opted to reduce the term of those bonds.  Most treasury bond sales these days are short term.  As long as the fed can still unload those suckers, they've got a license to spend indefinitely.  Frankly, I don't like that either.  I am not a deficit spending protagonist by any sense of the imagination.

IMO Davis' cardinal mistake as far as the courts were concerned, was his avoidance of seeking the will of the people on those bonds.  Schwarzenegger did place the bonds before the people and they approved them.  You can make the case that deficits are unconstitutional, and I'd agree, but that being said, I'm not at all convinced the courts would strike down those bonds because they violate the deficit spending aspects of the constitution.

The situation we find ourselves in, legitimizes the need for the bonds, even if they are unconstitutional.  The invalidation of those bonds would not only throw California into an untenable financial situation, it would invalidate the fifteen billion dollars in bonds.  That would cause a ripple effect through the financial markets.  Everyone who bought those bonds would be thrown into financial chaos. We would be unable to pay those bonds off now.  We would default on them, we would default across the board.  It would simply be impossible to eliminate 50% of California's spending for the next year to pay off all it's debts.  Half of everything California does would have to cease.

Half of the schools, half of the Highway Patrol, half of the prisons, half of the healthcare payments, half of everything would have to cease.  I cannot imagine a judge making a decision that would force this upon California and the financial markets that sold it's bonds.  On top of all this, it is almost certain that massive tax increases would be mandated in the short term.

This might get us to where we want to be, but it's not the detour I would recommend.  Who would get the lion's share of the blame for this default?  Davis and company drove us here, now the republicans, read that 'conservatives' would take the absolute brunt of the dissatisfaction over the default.  Davis would get a complete pass.  Now I know you'll rebel at my use of the word conservative in the last sentence, but if you don't think the press would run with that explanation, you're not thinking on all six cylinders.  Much would be made of the fact that republicans rule no better than the democrats.

In a number of ways, you and I would agree with this.  In the real world we have to accept that this is not true for the most part.  I think it goes without saying that we would rather have Bush elected this year than Kerry.  In other years, the same scenario plays itself out.  We cannot simply abandon the Republican party for the simply reason that it is the only thing that stands between us and a complete switchover to a socialist model that would make a Russian blush.

For better or worse, we are stuck with certain realities.  I don't really like it any better than you do.

[FairOpinion]

Schwarzenegger is taking ACTION:

"The governor is prepared to make government efficient for the taxpayer and will be undeterred by forces who would be opposed to that," Schwarzenegger spokesman Rob Stutzman said Friday. "


Report to recommend huge gov't overhaul (Cuts!) -- California

http://www.freerepublic.com/focus/f-news/1182002/posts
A plan to reorganize state government that Gov. Arnold Schwarzenegger will release next week will propose eliminating one third of the state work force, hundreds of state boards and commissions while possibly saving $32 billion over the next five years...


===

Report Proposes Sweeping Overhaul of California State Government
http://www.freerepublic.com/focus/f-news/1182149/posts

The report's reform proposals suggest consolidating state operations by combining 11 agencies and 79 departments into 11 major departments. It also calls for technological leaps inside the state bureaucracy, noting Schwarzenegger was unable to e-mail state employees collectively to ask their help in the reorganization study.

[TomasUSMC]

Arnold is going to SEND the Golden State INTO bankruptcy and implosion. End of story.

And this is good. Those who support the aborting of 3000 innocent babies every single day need never have a happy day nor ever get credit for one. Arnold is one of these. The Republican party leadership in Cali is full of these.

The Republican Convention is coming, we've turned the corner on the abortion loving demoncrats control of the White House, we ain't going back.

Keep the Rinos in the Closet. If you ain't ProLife, stay off the stage.

God will help the GOP as long as the GOP stays Prolife.

[snopercod]

IIRC, those emergency powers had to be renewed month-by-month. Not hearing anything, I just assumed that the new governor had let them lapse. But I really don't know for sure.

But even so, Ahnold penned a new one for a "water-shortage emergency" [link]

He also declared one on the fiscal crisis [link] which allowed him to cut spending without the legislature's approval. Why the heck didn't he use that???

[snopercod]

Now that I have enough coffee in my circulatory system, I found it [link to full article]:

Davis calls energy crisis over - State of emergency, in effect since '01, revoked

Mark Martin, Chronicle Sacramento Bureau
Friday, November 14, 2003
San Francisco Chronicle

Sacramento -- In one of the final acts as governor, Gray Davis on Thursday declared an end to the state's energy crisis.

Davis, who will leave office Monday in part because voters never forgave him for the electricity turmoil that roiled the state, rescinded the state of emergency he first declared in January 2001. The state of emergency gave the governor the authority to waive laws and regulations to help alleviate the crisis...

[SierraWasp]

"Why the heck didn't he use that???"

Make one wonder, doesn't it! Maybe it has to do with your tagline...

[SierraWasp]

That was truly a sincere, extremely thoughtful and appreciated reply, D1 and I read and absorbed every word of it!!! These are "trying times" for many of us and sometimes we try each other's patience just a wee bit too much. You are a gentleman and a scholastic!!! As Tennessee Ernie Ford used to say... "And may the Good Lord take a liken to ya!"

[Amerigomag]

People who stand on street corners and protest make no impact whatsoever. None.

Talk to the Freeper who coined "Sorelooserman" and the thousands who stood on corners and forced the press to project it into the political lexicon after the 2000 election. The perception made a difference to the SCOTUS.

After a gun, the streets are the single most effective tool the voter has to sway legislative perception. The French Revolution, universal suffrage, US civil rights, the fall of the Soviet Union and the California recall election were all precipitated from the streets.

Generally I am hesitant to take to the streets unless I am armed but I have a great deal of respect for those who do with nothing more than their little signs and a defiant spirit. I suspect they are effective because most politicians recognize that if they ignore these peaceful folks, individuals like me are not far behind and much like the sea we are terribly unforgiving of carelessness and neglect.

[SteveH]

Schwarzenegger is taking ACTION:

No he's not. Boiled down, he's posturing using aspirational words.

(And so are some of his supporters on FR.)

Arnold's MIA on the bottom line, as in line item veto.

He *had* a choice. He chose personal popularity, yet more spending, and (eventually) yet more tax burden on us and our offspring.

Strip away the grandiose pie in the sky future plans, and that is what one is left with.

(And some of his supporters on FR insist there is no choice but to support him for all this increased spending accompanied by hot air.)

[SierraWasp]

Here's what he's up against

[DoughtyOne]

Thank you for the nice response to my last reply, and for this link as well. I appologize, but I've been unable to spend time on the forum during the last 48 hours or so. I may be able to this evening.

With terms like "over arching", I think it's fairly obvious where this writer is coming from. Underarching? Perhaps. We'll see.

Take care.

[SierraWasp]

Hey! You have a great day and remember... when your arches have fallen, and you feel like an underdog... it's just a classic case of "Underarching," right?(grin)

[calcowgirl]

Criticism of the Budget has everything to do with the fact that it is a BAD budget, and very little to do with Arnold personally. It increases the deficit and continues the dangerous practice of borrowing, despite "spending caps" and promises to "cut up the credit cards". The bills coming due a year and two years from now are looming in our future.

You realize that 10 out of 14 Republican Senators voted against this budget, right? Your support of the budget puts you clearly in the Republican minority, or on the side with the Democrats (only 1 of 25 democrat Senators voted against the budget). Perhaps you should take another look at whom you are aligning yourself with. It looks like you have teamed up beside the likes of Burton, Cedillo, Kuehl, Speier and the lot.

Republican Senators voting against the budget (10):

Aanestad, Battin, Bowen, Brulte, Denham, Hollingsworth, Margett, McClintock, Morrow, Oller, Poochigian

Republican Senators voting for the budget (4):

Ackerman, Ashburn, Johnson, McPherson

Democrat Senator voting against the budget (1):

Bowen

Democrat Senator voting for the budget (24):

Alarcón, Alpert, Burton, Cedillo, Chesbro, Ducheny, Dunn, Escutia, Figueroa, Florez, Karnette, Kuehl, Machado, Murray, Ortiz, Perata, Romero, Scott, Sher, Soto, Speier, Torlakson, Vasconcellos, Vincent

Not Voting (1)

Vacancy (Republican - Knight*)

*may he rest in peace

[calcowgirl]

You are now free to continue your bitching and mewling.

Bloomberg - July 31, 2004

The budget is the first for the 57-year-old Republican governor who said he'd repair the state's credit and tame its deficits. The spending plan defers billions of dollars in costs and borrows to fill the gap. Schwarzenegger had vowed he'd coax the Democratic-controlled legislature to pass a budget by the start of the fiscal year on July 1, a deadline he missed.

``The budget does little to address the state's structural budget issues; rather, it is largely a budget of political expedience,'' said Brian Tournier, an A.G. Edwards Inc. analyst, in a research report.

Three years of record deficits and late budgets have left California with the highest borrowing costs and lowest credit rating of all U.S. states.

(snip)

California's credit rating from Moody's Investors Service, raised in May to A3 from Baa1, is still the lowest of any U.S. state. Standard & Poor's and Fitch Ratings both have a rating on California of BBB, two grades above junk status.

Dang right we'll keep bitching... until the situation is improved.
.

[calcowgirl]

Great post... thanks for taking the time and doing the analysis.

[12 Gauge Mossberg]

WELL SAID! Holy smokes this thread is kicking!!!