The budget crunch
From the Publisher/Arnold York
Two years ago the state was awash in money. The economy was pumping, the dot-comers were booming and our biggest problem was spending it fast enough. The Democrats got to fund programs they had been starving for years, like education and Medi-Cal, and the environment and the Republicans got a tax refund.
Everyone was happy.
And then came the dot-com bust. Consequently, the techy stock market tanked and all those wonderful, heady days evaporated. It happened with lightening speed.
In January of this year, I was in Sacramento for a publishers’ conference, and all the high poobahs came to talk to us, this being an election year. They were then talking a $10 billion to $12 billion budget shortfall, which was difficult but still manageable.
By February, our Assemblymember, Fran Pavley, who is one of the budget committee chairs and gets good numbers, was talking of a $12 billion to $17 billion shortfall. By April, the tax returns were rolling in to the State Treasury and it was apparent that even that estimate was short, and they upped the deficit projection from $17 billion to $20 billion. By May, the tax revenues were all in and the full extent of the disaster was apparent, and a shortfall of $23.6 billion out of a total general fund of $78 billion was projected. This meant we were about one-third short on the revenue side, which qualifies as staggering and historic.
The finger pointing started immediately with the Republicans charging the Democrats had been profligate, overspending on everything, oblivious to the consequences. The Democrats countered that Republican tax refunds were insanity and we gave away money we didn’t have to appease the heartless, political right. They were both, of course, somewhat right and mostly wrong, and they plunged into that great Sacramento game called, “It ain’t my fault.”
I suspect when it comes to the revenue side of the ledger, there is little that either the governor or the Legislature can do. The economy of California is the sixth or seventh largest in the world, and is buffeted by global and national forces. Frankly, in that kind of an enormous economic ocean, about all the governor and the Legislature can do is steer our little dinghy out of the way of the biggest waves, and pray. Even the president, who steers a much larger ship with much more power (meaning dollars available), can hardly impact the direction of the economy.
We, of course, are mad at our political leaders for getting us into this predicament. It’s their own damn fault we’re mad at them because in the good years they, of course, rush forward to take credit for the soaring economy attributing it to their financial astuteness and their skillful leadership. The political rule appears to be if you take credit for the good years, you’re going to have to take blame for the bad years, even though you probably have little to do with either. That’s where we are right now.
It doesn’t mean they’re blameless or, in fact, that we’re totally blameless either. Twenty-plus years ago we passed Proposition 13, which essentially froze property taxes. Whether you think that was a good or bad idea, one of the principal virtues of property taxes is the income stream is very stable.
To replace it we now rely more on income tax, which isn’t very stable. If we have a good year, the state has a good year. If we have a bad year and pay fewer taxes, the state also has a bad year, except the state’s bad year comes later. If 2001 was a bad year for us personally, we start cutting back, usually pretty quickly. We may decide not to buy that car or take that expensive vacation. But most of us don’t file our tax returns until April 15, and that’s when the state starts to feel it. That doesn’t mean nobody shouldn’t have seen it coming. I do remember an old adage about putting away for a rainy day, but that apparently doesn’t apply where the government is concerned.
You might well wonder why this happened and what happens next, and I’ll talk about it in later columns, because, after all, I should be able to squeeze at least three columns out of a budget nightmare of this magnitude.
I’ll give you a heads up on an immediate impact-law enforcement. We’re running a guest column by Sheriff Leroy Baca, telling us what the budget crisis means and predicting dire consequences if the Sheriff’s Department budget is cut.
The sheriff is, of course, circling his wagons, as are the health departments, the hospitals, the educational establishment, the prisons, the counties, the cities and just about everyone else. Everyone knows that the people with the least political clout get cut the most, so in the next few months all of the above are going to be flexing their muscles, showing their clout, predicting doom, threatening to strike, all with one objective in mind. That objective is to cut the other guy’s budget and not theirs because they’re essential to the national defense, the public welfare or necessary to keep children from starving in the streets, or whatever argument sells.
It’s going to be difficult and it’s not going to be pretty. It’s not yet clear how our fair city is going to get hit but it’s predictable that we will be hit.
To be continued …