Tuesday, August 05, 2008

You Call That Dancing?

We are now into August, and California still doesn't have a state budget (due July 1) and still doesn't have enough money in its coffers to function for more than a month. Not having an on-time budget is nothing particularly new in this state. Having the kind of fiscal shortfall that might impair future emergency borrowing, however, is new, and very worrisome.

Part of the problem lies with the state legislature. Led by Democrats but with enough Republicans to thwart any meaningful review of tax policies (California needs a "super majority" to pass any tax increases or new taxes), the legislature can't seem to find the energy to pass a budget which would actually start whittling away at the massive debt the state has incurred and which would still protect services to citizens that require them.

The governor hasn't been much help, either. His first rather creative proposal was to sell shares of future lottery earnings to investors. Now, making gambling the centerpiece of any budget is never a prudent move, but at a time when folks are finding it hard to afford the basics (food, housing, and enough money to actually make it to work), it's entirely possible that the lottery is not going to be as profitable as the governator seems to think it has been and could be in the future.

His next dramatic solution has been to issue an executive order slashing the pay of state workers to the federal minimum wage (not the state minimum wage, which is markedly higher) for the time being. The State Controller, John Chiang, doesn't think the governor can legally do this. He also points out a very real problem in the governor's scheme, as pointed out in yesterday's Sacramento Bee:

State Controller John Chiang said Monday an antiquated state computer system makes it impossible to adjust the state payroll quickly to issue minimum-wage checks to state workers. He said it would take at least six months to make the change.

Yes, that's right: the state in which Silicon Valley is located has a computer system which is teh suck.

So, Mr. Schwarzenegger has approached the legislature with another grand idea: raise the sales tax a penny for a temporary period until the budget shortfalls are ameliorated, but there's a catch to even that proposal, as noted in today's Los Angeles Times.

Gov. Arnold Schwarzenegger proposed during private negotiations over the weekend to close the state's $15.2-billion budget gap with a temporary but immediate one-cent hike in the state sales tax, according to legislative sources.

The proposal, floated in meetings with the Legislature's leaders and their staff, hinges on lawmakers agreeing to automatic spending restraints and new powers for governors to cut programs whenever the state falls into the red. ...

It is unclear whether lawmakers will embrace the governor's proposal. His automatic spending restraints would be written into the state Constitution, something Democrats have long resisted, saying they could force steep cuts to schools and other programs and limit the Legislature's flexibility.
[Emphasis added]

Giving the governor, any governor, the duties that belong to the legislature makes about as much sense as giving the President of the United States, any president, the duties of Congress. I mean, we've seen how well that has worked out over the past 7+ years.

A sales tax increase would push most of the state to a 9.75% rate, and could push Los Angeles County (currently considering a 0.5% sales tax hike to fund MTA projects) to 10.5% on everything but food and medicine. Because a sales tax hits the working class disproportionately, the Democrats aren't too thrilled with the hike. Because it is a tax increase, the Republicans aren't either.

Frankly, like all of his budget proposals, this is probably just another bit of grandstanding by the governor. What he apparently has forgotten is that running a state is a little different than starring in an action-hero movie. Actually, it is a lot different.

And the legislature hasn't really offered anything in response, again, primarily because of the "super majority" provision that the voters themselves are responsible for.

I think the state is in for a long dry spell when it comes to a budget and to fiscal responsibility that is shared by all of its citizens.

In other words, I am not optimistic.

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