California Once Again Leading the Nation

by: Benign Brodwicz

On the thread of local property taxes being used to support education in most states—the Time piece below points out that Proposition 13 in 1978 capped property taxes for many Californians and cut them for all.

The ironic effect is that the rich neighborhoods are now more dependent on centralized state funding—they have lost local control to a large extent, as California became ore dependent on income taxes.

However, this is not to imply that I support a national Value Added Tax.

America can look forward to exactly this kind of political stalemate in coming years. It would be nice all the cuts are not taken out of those at the bottom of the social pecking order. However, it may take a more or less total breakdown of the American social contract before the citizenry takes responsibility for its government.

Regular readers know that the hypothesis I’m operating under is Strauss and Howe’s from The Fourth Turning, suggesting the crisis will come to a head within the next twenty years.

James Quinn does a nice job summarizing the Fourth Turning’s prophesies for the next twenty years, which I have discussed in The crisis at the end of the saeculum and Onward to Ekpyrosis….

Via: San Diego News Network

California Budget Crisis Diaries: Day 16 of the budget impasse

Yet another Friday has arrived with a budget agreement not in placed quite yet, but legislators still have hours before the weekend rolls in

By Hoa Quach, SDNN

Friday, July 17, 2009

Sacramento, Calif.

Yet another Friday has arrived with a budget agreement not in placed quite yet, but legislators still have hours before the weekend rolls in. Because Big 5 leaders are working together until a balanced budget plan is in place, Sacramento has become a happenin’ place with constant news. Here’s a breakdown of what has occurred since Day 14 of the budget impasse:

Unhealthy Fridays: The Healthy Families program has stopped accepting applications as of Friday. The program currently provides health care to about a million children in the state and 76,000 in San Diego County.

Gov. Arnold Schwarzenegger actually proposed to eliminate the program completely to save the state $366 million.

In addition, Schwarzenegger has proposed to reduce funding the Medi-Cal program by at least $1 billion. Other health-care cuts for low-income families could affect up to two million people, 1.5 million of which would be children.

The unrelenting treasurer: The state’s Treasurer Bill Lockyer issued a warning to the Big 5 (Schwarzenegger and party leaders) Thursday, stating their delays would severely hurt the Golden State’s infrastructure. Lockyer said among the sectors at risk were schools, highways and levees.

“With every passing day, the state’s credit rating moves closer and closer to the junk pile,” Lockyer said in a statement. “If the governor and Legislature dump us on that pile, they will end indefinitely the state’s financial ability to build schools, highways, levees - all the critical public works we need to rebuild California.

Some Democratic education: Education cuts and funding have been the core issue at Sacramento these past few days. The Democrats are concerned that should the state suspend Proposition 98, it would not be able to pay back the funding in the future.

Proposition 98, which guarantees a certain amount of funding to schools, could have a statutory change to ensure the schools would get their money.

The governor’s administration disagreed, saying the changes sought by Democrats would require voter approval because they would alter Proposition 98, a ballot initiative that guarantees a minimum level of education funding.

“When times get better, we want to guarantee that education and kids get paid back the money that they are owed,” said Senate President Pro Tem Darrell Steinberg (D-Sacramento).

Republican legislators said they wanted to concentrate on the current problem - the funding shortfall for the fiscal year that began July 1 - rather than future scenarios.

[snip]

Controller in San Diego: State Controller John Chiang is in San Diego Friday to discuss the budget crisis. He will speak at the San Diego Regional Chamber of Commerce’s “Good Government” series. As of Wednesday, his office issued $640 million of IOUs to state agencies and contractors.

Off-shore oil drilling: A proposal to allow new offshore oil leases is on the budget negotiating table. According to the environmental Web site — Red, Green and Blue — the proposal could rake in $1.8 billion in revenues for the state by in 13 years.

The site said if the deal were to be approved by Schwarzenegger, this would be the first time offshore oil leases are offered to Californians since the “1969 Santa Barbara oil spill and the California Sanctuary Act.”

Via: Time

Monday, Jul. 27, 2009

Spotlight: California's Budget Crisis

By Claire Suddath

California is a state in crisis. Negotiations to resolve its $26.3 billion budget deficit are weeks behind deadline, more than $470 million worth of IOUs are clogging government ledgers and its state bonds are trading at near junk status. It's been a long, slow tumble from the Golden State's glamorous peak in the 1960s--when Governor Pat Brown built an efficient network of freeways and thriving, affordable public universities--to today's insolvent government beset by an unwieldy constitution and decades of mistakes.

California's crisis winds all the way back to 1978's Proposition 13, which cut property-tax rates 57% and forced the state to rely more heavily on income tax revenue. When Californians were wealthy, the tactic generated a surplus, enabling politicians to cut taxes, pad budgets and bask in their popularity. But when times were lean, the state struggled to pay its bills. Governor Pete Wilson encountered this dilemma in 1991, as did Gray Davis in 2003. Now it's Arnold Schwarzenegger's turn to try to wrestle a highly partisan legislature into slashing enough programs to eliminate a towering deficit. Having raised taxes by $12.8 billion in February, the governor balked at a second hike.

California's system of governance seems designed to thwart any solution its lawmakers propose. With a two-thirds majority required to raise taxes or pass a budget, 40% of public funds earmarked for public schools and no method of overriding voter initiatives, California seems stymied by a complex puzzle that no one can solve.

2/3 Dangers of Direct Democracy

California employs a unique combination of representative and direct democracy. A 1933 provision requires a two-thirds majority in both houses to pass a budget, a rule shared only by Rhode Island and Arkansas. Tax increases must pass by the same percentage--a stipulation adopted by just 12 other states. California also uses referendums, recalls and voter initiatives more frequently than any other state. This tangled structure often combines to confound legislators seeking changes that would relieve the state's woes.

12 Referendums and initiatives on California's 2008 election ballot

0 Other states requiring a two-thirds majority to change both taxes and budgets

[The following text appears within a chart. Please see hardcopy or PDF for actual chart.]

State Budget Deficits Seven U.S. states still haven't solved their budget gaps

Percentage of overall budget

California 28%

Illinois 33

Pennsylvania 18

North Carolina 22

Connecticut 23

Arizona 41

Michigan 12

Largest state deficits, in billions of dollars

Center on Budget and Policy Priorities

Scaling Back Costs

Road to Insolvency

Unlucky 13 1978 Proposition 13 caps property taxes at 1% of a home's value, forcing the state to rely heavily on more volatile capital gains and income taxes for revenue

That'll Teach 'Em 1988 Proposition 98 allocates roughly 40% of the state budget to education

In Debt 1991 Governor Pete Wilson, who inherited a $14 billion deficit, raises taxes by $7 billion

Rolling in Dough 1998 California records a $4 billion surplus. State leaders agree on a $1.4 billion tax cut

Wrong Move 2003 Facing a $38 billion deficit after the dotcom bubble burst, Governor Gray Davis triples the state's car tax. Incensed voters recall him. Incoming governor Schwarzenegger revokes the increase, which would have raised $4 billion annually

Nice While It Lasted July 12, 2007 The state enjoys its final day in the black

I'll Owe You One July 2, 2009 After a February tax hike and major budget cuts fail to slash its swelling debt, California issues its first round of IOUs. The figure is expected to reach $3 billion by the end of July.