Sacramento legislators and Gov. Arnold Schwarzenegger are behaving as if the main problems now facing the state government — a possible deficit of $40 billion over the next year and half — are the result of some unforeseen and unfathomable circumstance. No one can figure out a palatable solution, while both parties spend their time pointing fingers at each other.
Certainly, the economy has fallen rather suddenly, but did state officials expect the growth to go on forever? Were there no plans in place for the proverbial rainy day? At the local and county levels, officials are in near hysteria, warning about cutbacks in “vital” services if someone doesn’t bail them out as sales and property taxes plummet. But I never heard a peep from any municipal official in the past nine years as budgets were flush with record revenues. Nope, officials at state, county, and local levels were too busy spending all the cash.
Although 40 billion is a number far bigger than what most of us can imagine, and there is no easy solution given all the political obstacles that stand in the way of the obvious ones (spend less, cut government), there is nothing particularly complicated here. The California Republican Party put together a handy chart. In fiscal year 2000-2001, the state received $88 billion in tax revenues and spent $96 billion. In fiscal year 2008-2009, the state received nearly $130 billion in revenue and spent $141 billion. That estimate was made early in December, and the projected annual deficit has expanded by several billion dollars since that time.
California politicians have a severe spending problem. Public employees are extremely powerful in the Capitol, and their salary and benefit packages are constantly increased. The Democratic majority is committed to nothing less than finding new ways to shake more cash out of California’s already overtaxed individuals and businesses. The basic viewpoint from California Democrats is that this state is so wonderful (and it is a pretty wonderful place) that taxpayers aren’t going to go anywhere, even as out-migration of U.S.-born citizens continues from California to locales with far less wonderful weather and scenery, such as Nevada.
Republicans — not counting the barely Republican governor, who has embraced tax-increasing as a potential solution to the problem — have been solid on budget issues, but they aren’t blameless. There’s nothing the California GOP likes better than “law and order,” which is one of the few issues that they can successfully run on. So GOP politicians constantly introduce new prison-building programs, tougher laws, third strikes, and enhanced pay and benefits for police, and the ever-expanding categories of “public safety.”
The state’s districts are so gerrymandered that, even with recently passed redistricting reform, it’s unlikely that we’ll see any significant changes in the overall legislative makeup. So the current dysfunctional dynamic will continue.
Voters complain about this, but every election they reliably support billions more in spending on various ballot-box initiatives, such as the recent $10 billion bond to build a nonsensical bullet train. California voters want it all — more of everything government promises and low taxes. So the Republicans (thankfully) say no to higher taxes, but the public doesn’t want anything cut. And the Democrats try to mess with tax-limiting Prop. 13 restrictions, such as their latest plan to call many taxes “fees” as a shameless way to avoid the legislative two-thirds vote requirement for tax hikes, but the public doesn’t have any appetite for their tax plans, either.
Maybe California is just a magnified version of the “we can have it all” mentality that pervades the entire nation, but things certainly are magnified here.
The good news: The budget stalemate, driven by endemic political problems and exacerbated by a hard-hit consumer-oriented economy, could signal a return to reality in this perennially unrealistic place. Newport Beach will never resemble Saginaw, Mich., but all of a sudden California is learning that, perhaps, there are consequences to decisions, that the California economy might actually enter into a severe recession, that state policies might result in a lower standard of living for all of us. Culturally, Californians already might be learning that owning a BMW and a million-dollar house might not be our birthright.
I hear lots of stories of conspicuous consumption giving way to a “cheap is hip” worldview, even in Orange County. Granted, this is more of an economic necessity than a budget story, but perhaps that idea could migrate to Sacramento. In 2003, Californians cast aside Gov. Gray Davis for budget deficits and spending problems less severe than the ones we are facing now. Gov. Schwarzenegger tried a few reforms, was rejected by voters when he proposed some reform-minded initiatives, and then did an about-face and began engaging in the same policies as his predecessor after it became clear voters had no stomach for tough choices.
There are no recalls in the works now. But I haven’t heard much complaining from average voters (rather than government union members) at state and local calls to layoff government workers. Californians might find the fortitude to tolerate some reasonable cuts in government amid a backdrop of private-sector layoffs, store closings, and the deflation of the housing bubble.
The other night, I was walking through one of those gee-whiz shopping and entertainment extravaganzas common in California, where upscale shops merge with Disney-like storefronts, neon-clad mega-plexes, and indoor skate parks. Called The Block at Orange, it opened shortly after I moved here from a decrepit rust-belt backwater almost a decade ago. At the time, The Block epitomized to me the whole Southland vibe. Well, on Friday, the whole place seemed empty — not just of shoppers, but of stores. Storefront after storefront was empty. The big record emporium was going out of business, as was a major clothing store, which was selling everything including the mannequins. Meanwhile, home prices in parts of the Southland have fallen to almost Midwestern levels.
Perhaps it will soon sink in that we might not be that different from the rest of the country, that our economy can go south, that our officials cannot continue to spend tax dollars with wild abandon and that perhaps we cannot have it all.
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