Taxes & Spending

California Meltdown

As Arnold Schwarzenegger slinks out of Sacramento, proving once and for all that action heroes only exist in the movies, the Sacramento Bee provides a panoramic view of the famous (and now removed) cigar tent Arnold placed outside his office (to avoid no smoking rules in the Capitol building).

Yup, the famous cigar tent where all those budget deals between Arnold and the Legislative Democrats drove California state government into a death spiral of over-promising, over spending and over regulating. The gilded tent that looks more fitting for the likes of Muammar Gadhafi than an American governor. Gone now, but what’s next?
 
California’s Legislature is more Left than ever, with fewer constraints than ever, as California voters even removed the two-thirds vote requirement to adopt the state budget.

California voters, in a back-to-the-future spasm, even elected Jerry “Moonbeam” Brown as governor — again.

What’s undeniable is the sorry state of the state’s finances. The Wall Street Journal reports that the shortfall ranges between $25 billion and $28 billion dollars — the shortfall!

But never fear, says California’s State Treasurer, Bill Lockyer. All is well. In an op-ed in the Los Angeles Times on Dec. 20, Lockyer states “California Isn’t Broken” — all that is needed is more revenue to government.

Bill, you are the problem, not the solution.

Lockyer is a lifetime member of the professional political class. Since graduating from Cal Berkeley (Political Science) in 1965, Lockyer has never held a private sector job. He was a public school history teacher while serving as California coordinator of George McGovern’s 1972 presidential campaign.

In 1973, he was elected as a Democrat to the state Assembly; in 1982 to the state Senate; in 1998, to the office of state attorney general (Lockyer got a law degree at night school while in the Legislature); in 2006, to state treasurer, re-elected in 2010.

For Bill Lockyer, cutting state spending is the wrong reaction to the state’s chronic budget shortfall. To recover from the recession and put California back to work, “revenues” have to be raised. Bill actually believes raising taxes will restore the state’s prosperity.

If state spending did produce prosperity, instead of one of the highest unemployment rates in the country, California should be booming. Between 1990 and 2009, state spending increased 181 percent; the number of state employees increased 40 percent; and per capita state spending increased 96 percent.

The problem, in a nutshell, is that state revenues over that time also increased but only by 167 percent. If your income goes up by 167 percent but your spending goes up by 181 percent, do you have an income problem or a spending problem?

In his editorial, Lockyer takes offense at California being called the “Lindsay Lohan” of states, asserting that speculation the state will default on its bonds is wrong.

“During the current fiscal year”, Lockyer writes, “general fund revenues are expected to total $89.4 billion. Education spending . . . (constitutional first priority) . . . will total $36 billion. That leaves $53.4 billion available to pay debt service on bonds – -more than 8t times the $6.6 billion the state will need.” Forty percent of the state budget is earmarked for K-12 education.

What Lockyer leaves out of this “analysis” is that the $53.4 billion is already committed to other state spending in the budget — and that the budget also commits $28 billion of spending over that amount, for which there is no money for the next 18 months — and that’s before the $6.6 billion bond interest payment.

Drifting further into his fantasy world, Lockyer flatly denies that businesses are fleeing California’s highest-in-the-nation tax rates, notorious NIMBY (“not in my backyard) laws, and the recent first-in-the-nation state cap-and-trade environmental tax.

Tell that to General Dynamics, Northrop Grumman, General Motors, Chrysler, Fluor, Hilton Hotels, Computer Sciences Corp., Buck Knives and hundreds of other once California-headquartered companies that have left. California once had 15 car manufacturing plants. Today there are none. Twelve furniture manufacturers have left Los Angeles. The list is long; the evidence undeniable that state policies are driving productive Californians out.

The California companies that remain are harassed at every turn.

For example, CALPERS (California Public Employees Retirement System) is a big investor in Apple Inc. and has introduced a shareholder resolution for consideration at the annual meeting to change the way Apple elects members of its board of directors. CALPERS admits to $240 billion of unfunded liabilities. Even so, CALPERS is pretty quick with advice on how to run one of the most profitable companies in American history.

So what is Lockyer really up to with this “California Isn’t Broken” propaganda broadside in the L.A. Times?

California liberals are still upset at the one time in the last 32 years that the taxpayers won one in California. Proposition 13 capped property values and property tax rates in 1978, allowing for reappraisal only on sale of the property. Even though state and local revenues have grown dramatically from other tax sources, liberals still chafe at the thought of the “lost” revenues from pre-Proposition 13 property tax rates that were driving fixed income seniors out of their homes.

In the coming weeks, expect California to reach out to the Obama regime for aid and assistance (I’m sure other states will be happy to subsidize California’s spending spree), but Californians should also expect a new campaign to repeal Proposition 13.

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