Jean Ross: “The Battle for California’s Future”
Today the Governor will release his final “May Revision” – the document that updates budget estimates and policy proposals.
Release of the May Revision traditionally signals the end of spring training and the shift of budget season into high gear. And as much as we might have hoped otherwise, we’re not surprised by Schwarzenegger flack Aaron McLear’s statement that the May Revision would include no tax increases and “absolutely terrible cuts.”
Since January, much of the smoke from the smoke and mirrors “solutions” proposed by the Governor has dissipated. The state is likely to receive $3 billion to $5 billion in federal funds – but not the $7 billion unrealistically assumed by the Governor in January.
The state has won some legal challenges to past budget-balancing actions, but lost others. Unrealistic hopes that strong April tax collections would ease pressures on the budget have also dissipated, and the harsh reality of the state’s fiscal situation has begun to emerge from the Capitol fog.
We generally try to avoid hyperbole, but this year, it is fair to say that the battle over the budget that will soon begin is nothing short of a battle for California’s future.
Our public institutions and structures are battered, some near the breaking point.
Per student spending in California’s public schools has fallen so deeply as a result of recent budget cuts that we now trail the rest of the country by a greater margin than at any point in the last 40 years. Student fees have more than doubled in less than a decade in the California State University and University of California systems and more increases are in store, while 2009-10 budget cuts closed the door to the CSU and UC for nearly 20,000 students.
Cash assistance grants have been cut to 1989 levels and purchase half what they did 20 years ago at a time when one out of every seven mothers in the labor market finds herself without work.
While a litany of budget facts can be mind-numbing, they are also informative. The state is on track to spend $18 billion less this year than it did just two years ago – yet an almost identical gap remains. Just how large is that gap? Almost exactly equal to what the state spends annually for prisons and all higher education from community colleges to the UC and CSU and student aid.
By taking revenues off the table, the Governor places California firmly on a fast track race to the bottom. The glory days of California’s past were the direct result of investments in public structures from schools to transportation and health care. The state has not, and cannot, compete in a global economy with a workforce made up of individuals who were homeless or lacked health care as children and who were turned away from college as young adults.
By taking revenues off the table, the Governor also ignores one of the two major causes of California’s current budget crisis.
While the still-pervasive impact of the economic downturn is certainly the primary source of our current fiscal woes, over the longer term, a systematic erosion of state revenues – the $10 billion plus annual cost of tax cuts enacted over the past 15 years – ensures that the state faces bad budget times even when the economy is strong.
This last point bears mentioning, since the Legislature kicked off this year’s budget battles by digging an even deeper hole, approving hundreds of millions of dollars of new tax breaks on top of the billions of dollars of tax cuts enacted as part of the 2008 and 2009 budget agreements. All of which brings to mind the cover art from an old New Yorker in which artist Edward Sorel reserves the deepest ring of hell for “politicians who promised to cut taxes and balance the budget.”
There will be no happy ending to this year’s story.
The problem is too big and the options available just too few. However, there can be a better ending than the one promised by the Governor’s spokesperson. Craft the inevitable spending cuts so that they preserve the core capacity of the structures and policies that have served California well in the past.
Start the state on the path towards doing what it should and must do right: building a healthy future and providing a safety net for those who need one when all else fails. Go back to Washington, again, hand-in-hand with governors and lawmakers from around the country to make the point that prominent economists have made: state and local budget cuts threaten to derail an already fragile economic recovery.
Finally, the Legislature should admit that it made a mistake and roll back recent dark of night tax cuts. Lawmakers should also close loopholes in the sales tax that reward businesses that don’t create a single job in California and allow resource extractors to go untaxed.
So as the battle begins, the question remains: if this is a battle for California’s future, who’s going to fight for the future?
Jean Ross is the executive director of the California Budget Project, a Sacramento-based non-profit research group.
Very well written! One can only hope that a Governor Jerry Brown could lure Jean Ross into the big leather chair at the Department of Finance for eight years.
It is hard to argue that the Governor and the Republican leadership are doing anything less than the full Grover Norquist “starve the government into submission” agenda. Hiding behind hot rhetoric of “waste, fraud, and abuse” and “bloated government”, these neanderthals are dismantling the government infrastructure that fuels economic growth and creates jobs, profits, and taxpayers. Good bye to highways, schools, universities, welfare reform, preventive health care, and other bedrock on which modern economies are built, we are well on our way to being the new Mississippi.
The most disgusting moments today, however, will not be the Governor’s smug roll out of his “I’m out of here anyway” hatchet job. It will be the spineless, solemn, “well I guess we have to cut everything cause revenues are off the table” surrenderhetoric of the party formerly known as “Democrats.” (See my rant of last August: http://www.calbuzz.com/2009/08/some-suggestions-for-the-impotent-democrats/
If you had a dollar for every Democrat who speaks out today against the Republican barbarism, you might have enough money to buy some aspirin. And you’ll need it.
Wow am I glad to be wrong. President pro Tem Steinberg and Budget Chair Ducheny absolutely nailed their response-to-the-Governor press conference today. Finally someone speaks for those who have no voice.
Memo to Dems:
1. Follow the get-tough lead.
2. Don’t make any summer vacation plans.
3. Close these ridiculous corporate tax loopholes before you cut another dime.
4. Never — NEVER — let someone tell you have to cut a deal to “prevent the state from going off a cliff.” It is this argument, even more than the 2/3 vote requirement, that gives Republicans complete power.
My favorite moment of the press conference was when the guy with the orange skin was talking off-script about how, compared to his first year as Governor, state revenues are the same but GDP has risen from $1T to $1.5T (its actually $1.8T). He had this deer-in-the-headlights momentary flash of “UH OH” when he realized he has just made the Democrats’ best revenue argument.
To illuminate the revenue/GDP ratio point and to indicate the absurdity of the ‘taxes are off the table even though we’re going off a cliff’ stance check these graphs here: http://www.npr.org/blogs/money/2010/04/inside_the_returns_of_americas.html
and the reference data here: http://blogs.wsj.com/economics/2010/02/17/a-look-at-the-tax-returns-of-the-top-400-taxpayers/
California goverment is actually going to starve women and children and take away their health care to balance the budget, but not close loopholes in corp tax laws?
The helpless are always the first to get the death sentence.
And please note that the aforementioned corporate tax breaks–passed just last year to get enough GOP votes to pass the budget–amount to $2.5 BILLION a year. Most go to the 6 biggest corporations in California. None, I assure you, go to one-person corporations like mine.
The one analysis I have not seen yet, even by the always astute Ross, is how many cuts slash-and-burn Schwarzenegger (aka special-election Schwarzenegger) is making that will actually COST California money. Assemblymember Bill Monning pointed out that the governor’s last budget proposals cut programs that qualified for federal matching funds. So every dollar the state cut in spending for those programs, cost us between $2 and $9 in matching funds. In other words, they cost us more money than they saved. I believe that does prove Ave7’s point that this has nothing to do with saving money and everything to do with gutting government.
The common thread in all these comments is, “Tax someone else.” Higher business taxes are probably part of the solution, but broadening the tax base and moving away from volatile capital gains taxes has to be part of the solution as well.