Monday, January 11, 2010

California: The Bear Bones Era

Facing a $35 billion General Fund deficit, a State Debt equal to 5% of the U.S. National Debt, and a continuing economic decline, California government is about to enter "The Bear Bones Era" (excuse the pun).

In his last year of office, The Gubernator has revealed his budget proposal for 2010-11. And it's as political as one can design for a bankrupt State of California in an election year.

The Gubernator is a Republican in a State where Democrats have dominated a totally ineffective Legislature. The ineffectiveness of the Legislature cannot be completely blamed on the Democrats because Republicans can, with one-third plus one vote in either the Assembly or the Senate, block the budget approval process and any tax revenue increase proposals. The blame for this situation lies with the voters of California.

Facing a State General Fund deficit that State Controller John Chiang said on January 7 may reach $35 billion, hard choices had to be made. What the Gubernator has proposed as a budget for the State General Fund appears on the surface logical, if you consider long term economic recovery a goal.

He has proposed restoring hundreds of millions in state funding to California's state colleges and universities. He also has "pledged" to keep K-12 funding at current levels with some downward adjustments aimed at administrative cost and specific programs (but in fact has had to call for $2 billion in general cuts).

Education is good for economic growth. But if you take a look at his higher education proposals, they include a proposal eliminating the competitive Cal Grant program that funds the education of tens of thousands of students, students who tend to be lower in income and higher in grades. And in the higher education arena, that's the indicator of the election year political dilemma - what to do about the poor.

The Gubernator has focused his deepest cuts in health and human services as well as prison spending and wages for state workers. He knows, of course, that the Democratic legislators depend on a coalition of teachers' unions and other education interest groups, plus advocates for the poor and for health services, plus state employee unions. He also knows that the federal courts have blocked any attempt to cut the cost of prison operations, so in the end those cuts will have to be shifted to the only other large budget outlay, education.

By appearing to favor education, he is pitting one major source of Democratic reelection support against the others.

Of course, he's also included such gimmicks as asking the federal government of an extra $7 billion and pet proposals such as a 4.8 percent surcharge on all residential and commercial property insurance to raise $0.5 billion for fire and other state emergency response. He's also back with his proposal for coastal oil drilling leases, with funds to be used to support California State Parks.

His budget proposals do not constitute leadership for a shift in policy - California has no politicians calling for policy shifts. Instead, he has thrown his support behind the California Forward group which has developed proposals to tinker with the California Constitution and financial system, something that will not help but which might appeal to the voters who look for quick and easy answers. (For more details on this proposed tinkering see my August 19, 2009 post.)

No proposal on the table in Sacramento offers any real solution to the problem that even in the best of times California is ungovernable. None will solve the problems associated with The Great California Slump. As I stated in that August post:

In 2013 when (1) The Great California Slump ends and the economy starts to recover, (2) legislative districts are redrawn by an independent agency, and (3) legislators will be chosen in a process that includes open primaries (assuming the open primary measure is approved by the voters in 2010) then California State Government may appear less desperate. But the state will not really be governed more effectively. And more tinkering between now and then won't help.

There are really only two ways to make California "more governable": (1) adopt a completely new constitution limited to government structure with a bill of rights or (2) divide California into three states each with its own new constitution.

Since neither of those two things is going to happen, we are facing bare bones budgets for the State of California which could last well into the next decade. And it is hugely ironic that at this point the two people considered most likely to be the major party candidates for Governor this fall are:
  • Democrat Jerry Brown who is the public official most responsible for march toward the ultimate collapse of our State Government when he stubbornly presided over the adoption of Proposition 13.
  • Republican Meg Whitman who in the past 12 years was one of the two most significant players in developing a way for Californians to avoid paying sales tax on retail purchases.
Neither so far has offered one concrete suggestion as to how they are going to deal with financial and legal morass that is California government.

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