The Golden State Binge
By Michael Nevin (07/07/03)
The deadline for passing a state budget has passed and the “Golden State” sounds more like an oxymoron. While the claim of quagmire was ostentatious during the early days of Operation Iraqi Freedom, quagmire is an accurate description of the current state Legislature in California.
An estimated cash shortfall of over $38 billion did not happen overnight and is far and away the greatest deficit and biggest challenge of any state. Although we can point to countless reasons for this debacle, let’s examine a few indisputable facts. First, spending in California doubled between FY94 and FY01 from $39 billion to $78 billion. During the economic boom in the 1990s, fueled by the tech sector, our Governor and Legislature acted like drunken sailors on shore leave. Second, as warning signs flashed, exorbitant spending continued notwithstanding the fact that the economic boom was clearly over. In 2000, taxes on capital gains and stock options generated $18 billion in revenue but in 2001 that figure fell to just $8 billion.
The question remains: how can we fix the problem? The Governor and Democrat legislators want to raise taxes, borrow, and chip away at spending. Sacramento Bee columnist, Daniel Weintraub, exposed the myth of many proposed budget cuts. In a May column, Weintraub explains: “The governor is claiming that his budget reduces spending by $7.6 billion from this year to next…In the wacky accounting of Sacramento, nearly $7 billion of the governor’s spending cuts actually result from tax increases and accounting tricks.” Consider that the $4 billion from raising the car tax will go directly to local government relieving the state of backfilling the funds, thus considered a cut. I would argue these spending cuts are akin to a witch doctor ridding a patient of cancer.
Republicans oppose new taxes, proposed larger spending cuts, but are willing to borrow. Without a few Republicans jumping ship, getting a two-thirds vote to pass a budget won’t happen. A San Francisco Chronicle editorial blasts Republicans as “the chief offenders in this budget battle.” Liberals in the media fail to hold the majority party accountable as they see hefty taxes as the only reasonable answer to budget shortfalls. Liberals believe in big government to provide everything from cradle to grave, thus making it easy to understand why they love taxes and hate Republicans.
My brother, Tim Nevin, who possesses a master’s degree in economics, explained it like this: "I think the Legislature's big worry needs to be funding essential programs with sustainable revenue streams. They need to match long term expenses with long term revenues, etc. And when they have a windfall revenue stream as they did in the 90's, they need to allocate a portion to reserve funds (so-called "rainy day" funds) and then a reasonable portion to existing expenses." In addition to that, I expect future Legislatures to consider some form of taxpayer relief.
Three years ago, California had a $9 billion surplus. Back then, the slogan in Sacramento could have read: “Let the good times roll.” Today, we are reminded of Hank Williams Jr. who sang: “The hangovers hurt more than they used to.” State Senator John Vasconcellos, D-Santa Clara, tried to explain the mess: “Everyone got caught up in it. We did too. We didn’t put enough aside in a rainy-day fund. That’s not evil. We spent a lot of money on education.” He’s right about one thing, according to a San Francisco Chronicle report, $10.5 billion was spent over the minimum guaranteed under Proposition 98 on K-14 education during the past six years. I’ve got ocean front property in Arizona to sell to anyone who thinks the majority in our Legislature will touch that hot potato and actually question school spending. There are a few powerful union folks who wouldn’t appreciate such questions.
OK. Let’s agree with Senator Vasconcellos and not call it evil. Let’s call it fiscal mismanagement and reckless. Let’s call it bad government. Unfortunately, in the end, California taxpayers will pay the highest price for the myopic decisions made during a Golden State binge.
First published on ChronWatch.com.
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