Quantcast

Why State Budget Cuts Always Screw Poor People

May30

michaelcgenestCalbuzz sat in on a conference call with state Finance Director Mike Genest on Friday, in which he detailed the latest $3 billion of cuts Governor Arnold is proposing to close the Deficit That Ate Sacramento.

We’ll leave it to the indefatigable Weed Eaters of the Capitol press corps to explain the full, acronym-laden complexities of the newest whacks (bottom line: a 5% pay cut for 200K+ state employees, $680 million more from schools — total cut now = $6B — and a new $1.3 billion in misery for poor kids and folks who are old, sick or both).

The most salient, big picture point, however, came in Genest’s clear and direct response to a great question by Judy Lin of the AP, who asked why it was that all the pain of budget cuts seems to fall on the poor. Said Genest:

“If you look at what the government does, the government doesn’t provide services to rich people. We don’t provide many services even to the middle class. . .”

Amid the constant and confusing flurry of numbers in the ever worsening budget mess – this was the third revision in nine days of the budget plan approved three months ago — Genest reminded everyone of a few, basic facts that often get lost in the daily dizzying reports about California’s fiscal meltdown.

1. “The budget” that’s now being cut, re-cut and re-re-cut is the state’s General Fund. Financed by income, sales and other general taxes, it represents only about 70% of California’s total budget. The other 30% includes stuff like the DMV, CalTrans and various bond funds and is financed by earmarked money, or user fees like gas taxes or license registrations, and is doing fine.

2. The bulk of the General Fund budget for the current fiscal year, which totaled just over $100B when it was approved last September, pays for three big items in particular: public schools, health programs, and welfare benefits for the poor, aged, disabled and infirm.

3. That $100 billion has now been reduced, in real dollars, by 11 percent since September; with the latest reductions announced yesterday, it will be cut another $8 billion for the fiscal year that begins July 1, leaving $83.5 billion in general fund spending.

“You have to cut,” Genest said, “where the money is.”

FYI: That’s Willie Sutton, who, when asked why he robbed banks, famously said (or didn’t really), “Because that’s where the money is.”


subscribe to comments RSS

There are 10 comments for this post

  1. avatar Anonymous says:

    AT SOME POINT: CA Governance – or whatever is currently masquerading in that role – must come to the realization —- let's call it an "AH-HA" revelation! At present, there are more poor people left in the once golden state, than there are rich or middle class. That makes the POOR a majority. Now, in representative democracies [PAUSE FOR EFFECT] that is a tough concept to grasp! For instance: BOB WHITE [former Pete Wilson gubernatorial chief of staff dating to years in San Diego City Hall] personifies the leaches and assorted hangers on currently having difficulties grasping that fundamental tenet of governance. Else, why would Bob "and his band of merry men" show up on the front steps of a State Capitol which is broke? Something has either (a) been lost in translation or – dare we suspect, correctly – (b) they just don't get it! HELL: Even bank robber Willie Sutton showed more shear genius than that: "Willie, why do you rob banks"? ANSWER" "… 'cause, DUH – THAT'S WHERE THE MONEY IS"! ;-) [DRUM RIM SHOT FOLLOWED BY CYMBAL CRASH]. IT'S A ONE LINER WHICH EVEN MORT SAHL OR SHELLY BERMAN – in their hey days at 'the hungry i' in The City – could just really appreciate – and Shelly still does cameos in Hollywood movies! [My 45-someething son to me: "Hey, Dad, who's that funny guy on the movie screen with the weird lisp and toupee"?]! RIM SHOT + CYMBAL — YOU GET THE IDEA, RIGHT? THAT'S WHY POLITICIANS ARE SUCH ABSOLUTE FUN TO BE AROUND – IN UNGUARDED MOMENTS [WHICH IS ALWAYS OR IN CERTAIN SACRAMENTO NIGHT SPOTS WITH BARS - AND 'WE ALL KNOWN WHERE THOSE ARE'\ - generally WITHIN SHORT WALKING OR even CRAWLING DISTANCE FROM THE STATE CAPITOL] THEY GIVE JOURNALISTS SUCH GREAT MATERIAL WHEN ON DEADLINES! << DRUM + CYMBAL … >> -30-

  2. avatar Anonymous says:

    We are not getting out of this depression anytime soon. Its going to get a lot worse for most of us. It didn’t have to be this way.

    “As mass production has to be accompanied by mass consumption; mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”

    Marriner Eccles, FDR’s Chairman of the Federal Reserve Bank – 1959

    In other words, the first Great Depression was caused by greed. The rich couldn’t settle for reasonable pay. They had to have more and more and more. That caused a giant shift in buying power from the majority to the rich. When the majority lost their buying power, they lost their ability to support the economy. The rich stopped investing because they knew that it would be tough to squease the last few dollars from the majority and make further profits. So the economy tanked. Einstein said basically the same thing in 1949.

    Its even worse now. Because ordinary people havn’t only lost their relative buying power. They have also lost their savings, home values, pensions, benefits, and nest eggs. This didn’t happen overnight. Its been happening gradually for the last 30 years. Meanwhile, the rich have become super incredibly rich. The richest 500 Americans are worth almost two trillion dollars. More than the bottom 1/2 of American housholds combined. The richest 1 percent are worth over 15 trillion dollars. More than the bottom 90% of American households. Thats just insane. It can’t be justified. I don’t care how much work for humanity the rich claim to do. Its nothing but a cover for their incredible greed. We don’t need anymore rich people to inspire us or entertain us or create jobs or make donations for humanity. We need them to just get reasonable about how much money and assets they keep for themselves.

    Don’t believe it when the rich claim to be getting poorer. Property values have gone down worldwide. Not only for rich people but for all people. Thats because of the concentration of wealth and income. When the economy slows down, property values tank. So when rich people complain about a lower net worth, thats a trick. They still have the same obscene buying power on average.

    Everything that is happening with the economy is happening because the wealth has been taken away from the majority and concentrated into the private vaults of rich people. The same ones on TV and radio telling us how much we need them. How much we should love them. How much they want to help the world. Its a big lie. Just another way to promote their own business. Rich people don’t want to help the world. They want to own it.

    There will be no bailout for the people because the ones with all the money just won’t give it up. Say goodbye to the American dream and hello to the American nightmare.

  3. avatar Dave D. says:

    …What bunkum ! We’re poor because they’re rich, the whine of thieves and wanna be redistributionists the world round.

  4. avatar Anonymous says:

    This is a no-brainer. There are only four places where the bulk of state money exists: corrections, social services, health services, and education. Everything else makes up barely 5% if you’re lucky. The math speaks for itself where the cuts will always land if you don’t throw new taxes/fees into the mix.

  5. avatar Anonymous says:

    And during this chaotic time in CA: Curiously absent and unreachable for interviews by media = Democratic Chair JOHN BURTON. A curious party faithful member inquires WHY, precisely? Is JOHN awaiting The Second Coming? [Depending on one's theological training in seminaries - Jerry Borwn, are you listening: that Second COming could have a0 already occurred or (b) already manifests itself with good deeds daily]! Thus and so, perhaps John awaits the swearing in of – his new best bud in Sacramento: Lt Gov John Garamendi, when “The Guvernator” decides he has had quite enough, is up to armpits in alligators [with swamp level rising), then quits – stomping off Stage Left(!) in a huff – never to be seen in public life again? On cue: Assembled minions sing: “OH, HAPPY DAY!”

  6. avatar Vlad says:

    This is so highly disingenous. Tax expenditures are just that — expenditures, look at any document from the Congressional Joint Committee on Taxation.

    Giving homeowners a tax writeoff is exactly the same as the state collecting the scheduled taxes from everyone, then sending homeowners a check.

  7. avatar Anonymous says:

    The cuts now being proposed are years overdue. Handouts to all manner of parasites have left the Golden State broke, and it’s now because we don’t pay enough.

    My only complaint with the current round is that they don’t go far enough, and that there’s been no attempt to improve government operational efficiency by contracting out to the private sector such things as highway design and construction, prisons and many other functions.

    And while we’re at it, how about pursuing some commonsense (I know that’s a foreign term in Sacramento) reforms of our tax code: broaden the base and lower rates. Let’s calculate CA’s income tax as a percentage of the Federal tax, which would save individual and business taxpayers countless hours of guesswork to try and figure how CA differed from the Federal. Let’s also replace the current illogical Sales and Use tax, which applies to less than half the base of expenditures in CA, with a comprehensive Goods and Services Tax on everything except medical expenditures, but with a much lower rate than the 8.75% we now pay in Orange Co. Finally, combine the functions of the Franchise Tax Board, the Board of Equalization and the Department of Finance into one entity. There’s an easy half billion dollar opportunity.

    Then, let’s look for the next round of opportunities to cut, because with $100+ billion of expenditures in Sacramento, there are 100+ billion opportunities to cut.

  8. avatar wmartin46 says:

    More no-think mush from the “liberal” press. How about telling us just who “the poor” are. And while you’re at it, why not tell us why they are “poor”? Is it because they have been denied access to public education, because of some “special status”? Well, that one’s easy—NO! Are they poor because they have been denied access to jobs, because of some other “special status”? Again .. NO! So .. who are these people, and why are they “poor”?

    How about a few numbers, please! From the US Census Y2K we see:

    California Population: 33M
    Per Capita Income (1999) $22K
    Persons below poverty: 12.4%
    Persons under 18: 26%
    Persons 65 (or older): 11%

    The US Census data is not always helpful. Infant children are included in the “per capita income”, so this “per capita income” number can be misleading. The simple stat: “Persons below Poverty” is statistically valid, but is too broad. Are those included working, or notworking?

    And then there is the issue of “illegals”. The following helps to fill in a lot of background data about “illegals” and their economic impact on California government expenditures:

    Center of Immigration Studies:

    Illegals cost the state at least $10B a year.

    Of adult immigrants, 31 percent have not completed high school, three-and-a-half times the rate for natives. Since 1990, immigration has increased the number of such workers by 25 percent, while increasing the supply of all other workers by 6 percent.

    The low educational attainment of many immigrants and resulting low wages are the primary reasons so many live in poverty, use welfare programs, or lack health insurance, not their legal status or an unwillingness to work.

    http://dhc.ucdavis.edu/convocation/ESW07/Border%20Crossings.htm

    Over 15 % of students enrolled in the California public school system are children of undocumented immigrants, members of society who, for the most part, do not contribute to public school funding through tax payments. Yet it is the golden state—with its budget deficit of over $2.2 billion—that must rise to the challenge of educating its ever- increasing population. This is an especially difficult challenge, considering the average cost of a yearly K-12 education is $7,200. Currently only a minority of tax-paying citizens are paying enough into the system to support the continual and effective education of our students. Such shortages have led to cuts in many programs accelerating learning (most significantly English as a Second Language). In addition the current No Child Left Behind Act presents a hurdle to urban, low-performing schools by denying financial aid to schools with the highest need.
    http://www.sacbee.com/capitolandcalifornia/story/1781007.html
    Now a group is circulating petitions for a possible ballot initiative titled the California Taxpayer Protection Act, which calls for issuing special birth certificates and limiting welfare payments to children of foreign parents.
    “Another reason they don’t go home is they are being subsidized,” said Ted Hilton, author of the California Taxpayer Protection Act.
    He said Los Angeles County officials told him that 70 percent of child recipients of a cash program have illegal immigrant parents.
    Passel’s research puts the current illegal immigrant population nationally at 11.9 million. California still has the greatest number of illegal immigrants, 2.7 million, double the number in 1990. But the state’s share of the total undocumented population fell from 42 percent in 1990 to 22 percent in 2008.
    —————–

    Which gets us back to the point of this article. Where in the California Constitution is it stated that people have a right to a guaranteed income, whether they chose to work, or not? And where in the Constitution does it clear state that people from anywhere have a right to come to California, and make a claim on Taxpayer dollars?

    This economic downtown gives California a chance to look at its expenditures under a very large microscope. Time to give “the poor” a chance to earn their own living.

  9. avatar DAVID says:

    RIGHT = Like the time I started being 'poor' in February, 1980 after my aerospace-defense industry 'systems house' paid me off after I'd sold $10M in new business. During 'The St. Valentine's Day massacre' I received a pink slip effective Feb 28th along with a notice that no bonuses nor commissions on sales would be paid – because "there was a new corporate policy: to receive those added incomes, I'd have to be on payroll asa of 1 June"! Oh, well — after too many graveyard, minimum wage shifts at a convenience store later – we lost our house [almost to a foreclosure], but sold it & divorced. Since then, I've been considered since 1979 to be "over-qualified" to return to full employment in my chosen profession. SO, AM VERY interested in the US Supreme Court associate justice njminee's interpretations of "The Civil Rights Law (1964)" since racial and gender goals, quotas and timetables for jobs and government benefits are "expressly forbidden & were never intended" by that original legislation. Source: US Sen. H. H. Humphrey on floor of the Senate during debate on that bill before it was signed into law by President L. B. Johnson — while I was in military uniform overseas in Far East during the Vietnam War build-up (1963-65). For past 30 years: Tried poor, hated it! Not recommended.

  10. avatar Jim Alford says:

    If I was writing the kind of stuff anonymous was I would prefer my identity not be known too. Calm down. You’re writing drivel.

Please, feel free to post your own comment

You must be logged in to post a comment.

  • CIGNA