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| Economy |
| California's Budget Crisis: Is There a Way Out? |
| 2009-07-03 |
| With budget negotiations stalled, a cash crisis looming and its fiscal crisis deepening, California today will begin issuing IOUs — formally called registered warrants — to tens of thousands of businesses and individuals to whom the state owes money. Gov. Arnold Schwarzenegger on Wednesday declared a fiscal emergency and ordered a third unpaid furlough day each month for 235,000 state employees. California's fiscal crisis has been years in the making and will not be easy to fix. But is there a solution? In Sacramento, which rises like the city of Oz on the flat plains of the California's Central Valley, Schwarzenegger has not underplayed the gory details. "Our wallet is empty, our bank is closed. Our credit is dried up," he says. But the crisis has not helped bind up the gaping political divisions over what to do about it. Democratic lawmakers have proposed cutting billions of dollars from the state's safety net and educational system to balance the budget. Governor Schwarzenegger says the cuts must go even deeper and joins legislative Republicans in refusing to raise taxes. On Wednesday, Schwarzenegger said, "Haven't we promised too much the last couple of decades?" Conservatives view the budget crisis as an opportunity to slash California's spending back to the level it had reached 10 years ago. "Gross overspending and fiscal irresponsibility will not be tolerated by the people of California," says Senate Republican Leader Dennis Hollingsworth. Liberals, however, see this as an attack by the right on the public infrastructure that helped make California an economic giant, and an act of war against the poor and minority populations in particular. Conservatives claim California is a high tax state. In fact, California's taxes are similar to other high-tech, industrial states. According to the non-partisan Legislative Analyst Office and the Tax Foundation, California has comparatively high sales taxes and rates for corporate income, but very low property taxes. State income taxes are very progressive, with a large proportion of revenue comes from households earning more than $100,000, as well as from taxes on stock options and capital gains. Low-income households, meanwhile, face lower tax rates that in most other states. This tax system, says Steve Peace, director of finance under Gov. Gray Davis, "worked in a highly leveraged, supercharged economy. Those days are gone." The state's finances could be made more stable by raising income taxes on middle and low-income families — which would reduce the state's dependency on volatile stock and capital gains income — a big reason for the current catastrophic deficits. But that is all but politically impossible in California. Is there a solution to California's dilemma? A number of reforms are receiving attention. On the tax and budget side, these include eliminating the need for a two-thirds majority vote on budget and tax matters and instituting a split-roll for property taxes that would allow homeowners to continue to pay according to the low rates mandated by Proposition 13, but require commercial property to be assessed at market value. To relieve the logjam in California politics, momentum is growing for an open primary system, in which the two top vote getters in the primary, regardless of party, would face each other in the general election. Proponents believe it would loosen the grip of partisan ideologies and make it easier of moderates to win elections. In addition, a redistricting reform won narrow approval last November and proponents of good government keep trying to lengthen the state's term limits on legislators. |
| Posted by:GolfBravoUSMC |
| #18 Besoeker: Georgia is on my short list. I lived there in the 60s. I was in Sylvania for a couple of years and then moved to Savannah. I loved living in the "State of Chatham". Sold my property on Skidaway Island in the 70s.(Bad mistake) Maybe we can get together someday and have some barbecue and a "mess of shrimp". |
| Posted by: GolfBravoUSMC 2009-07-03 18:13 |
| #17 The only way out is through. I pity California home-owners & home-borrowers. California housing prices will stabilize only when they return to a reasonable level with respect to California household incomes. |
| Posted by: Anguper Hupomosing9418 2009-07-03 17:36 |
| #16 Wouldn't be that difficult. Just check back on the books when the present revenue income match the preceding years records. If your income matches 2001 or 1996, that's your budget for the year, to include suspending laws passed since that date. Somehow the state survived during those preceding years, otherwise it wouldn't be here. |
| Posted by: Procopius2k 2009-07-03 17:23 |
| #15 Come on down to Georgia Devil Dog. We'd be honored to have you. |
| Posted by: Besoeker 2009-07-03 16:55 |
| #14 As I stood in line behind a woman in a Burqa yesterday, at the local Target store, it was not hard to figure out who has left the state and who replaced them. Born and raised in CA, I've watched this state change from one of the best in the nation to a third world toilet. Waiting for housing prices to stabilize, then it's AMF! |
| Posted by: GolfBravoUSMC 2009-07-03 16:52 |
| #13 Just defer real government and clutter up peoples lives with 1600 new bills form the legislature each and every year...... all the while doing everything possible to change the demographics of the electorate..NoMoreBS The primary goal of Barry and the Democommunists. |
| Posted by: Besoeker 2009-07-03 16:42 |
| #12 And more of us to follow. I've lived here since 1976 and have watched Paradise be ruined by a cavalcade of political idiots in the legislature and the governor's office who ceaselessly write BS laws and regulations about everything, and who give special breaks to everyone to buy votes, and who rig the electoral process to insure incumbancy, but who haven't built a freeway while the population more than doubled, nor a new dam, nor any power plants, or any other major public works projects. Just defer real government and clutter up peoples lives with 1600 new bills form the legislature each and every year...... all the while doing everything possible to change the demographics of the electorate, 1 in 4 people here were born in another country, and somewhere betwen 3-6 million illegals crowd our hospitals, prisons and schools. Many of me peers are doing the same thing I'm doing, getting ready for next spring's housing rebound, what ever little bit it might be, and getting out. Tragic to think my own government is chasing me out of my adopted state.... |
| Posted by: NoMoreBS 2009-07-03 16:28 |
| #11 "Between 2005 and 2007, ... 1.44 million people from elsewhere moved to the Golden State" So there are 1.44 million certified idiots in Californicate? And that doesn't even include the politicians. I think I see the problem.... |
| Posted by: Barbara Skolaut 2009-07-03 16:23 |
| #10 "California's Budget Crisis: Is There a Way Out?" California, here we go. Between 2005 and 2007, 2.14 million Californians moved to other states, while only 1.44 million people from elsewhere moved to the Golden State, according to the U.S. Census Bureau. |
| Posted by: GolfBravoUSMC 2009-07-03 16:05 |
| #9 "California's Budget Crisis: Is There a Way Out?" Yes, there is. QUIT SPENDING! |
| Posted by: Barbara Skolaut 2009-07-03 15:02 |
| #8 2009 federal budget |
| Posted by: ed 2009-07-03 14:57 |
| #7 All this breast beating about CA's deficit that is 22% of revenues and hardly any newspaper ink about the 2010 federal budget deficit that is greater than 100% of tax revenues. |
| Posted by: ed 2009-07-03 14:42 |
| #6 The State needs to cut spending, not increase income via dubious "fees", increased taxes, or any other dipshit scheme. |
| Posted by: Frank G 2009-07-03 14:30 |
| #5 A crafty partial solution would be to substitute huge fines for common non-violent misdemeanor offenses. For example, first time, non accident DUI has a "fee" of $30,000. But if you pay the fee, it is an administrative, not judicial, fine, which can only be appealed to an administrator, not a judge. A lot of shoplifters are not poor, like Winona Ryder, so why not slap them with the cost of whatever they stole, plus $10,000 fee and a cut going to the retailer. Many are so compulsive they would be glad to pay the fee, and keep shoplifting. Johns that go after high end prostitutes could probably shell out the big bucks, especially if it was kept discreet. And while this would only bring in several billions of dollars to the State coffers, that would still help. |
| Posted by: Anonymoose 2009-07-03 14:23 |
| #4 I don't know. I think it's a dead heat race between Time, Newsweek and Jet. |
| Posted by: ed 2009-07-03 14:15 |
| #3 Time Magazine, "Home of the Obama Cover™" |
| Posted by: Frank G 2009-07-03 14:01 |
| #2 "state's finances could be made more stable by raising income taxes on middle and low-income families" What kind of fool is this writer? Tax the middle class and you demolish the consumer spending basis of the economy. Ever heard of the laffer curve? |
| Posted by: OldSpook 2009-07-03 13:45 |
| #1 There is a way out. Spend less, roll back regulations that limit business, strike taxes that keep businesses out, unfetter the energy industry, and demolish the unions and their prohibitively expensive pensions. |
| Posted by: OldSpook 2009-07-03 13:43 |