Change you can't believe in

Jan. 10, 2010

During Gov. Arnold Schwarzenegger’s State of the State address last week, I wanted to shout “Blah, blah, blah” when he talked about the need for creating “jobs, jobs, jobs.” He’s had nearly two terms to stimulate jobs in the state. Instead, California is still in a fine mess.

The governor was high on rhetoric and low on substance, appearing as if he’d just come from a spa weekend, relaxed, rejuvenated and full of himself. His speech felt eerily hopey-changey and optimistic. He’s an actor.

As I let the speech soak in overnight, a few of the more egregious details worked their way to the surface… such as the governor’s claim that the $60 billion budget gap was closed. A dubious statement at best, this load of happy pony poop is nothing more than accounting magic and unrealistic, sophomoric financial predictions.

I reviewed the governor’s Final Budget Summary report, and found some budget shuck and jive:  More than $67 million was loaned from the Beverage Container Recycling Account to the Air Pollution Control Account and $15.2 million from Motor Vehicle Account in 2007-08 for AB 32 (climate change) related activities.  It is unclear how much money was actually spent, though according to the Air Resources Board published data, its AB 32-related expenditures for 2007-08 and 2008-09 totaled $64,083,681.

Closing the budget gap in California may appear to have occurred, but it’s really only a mole game.

Leaders in California have done little or nothing in the way of creating jobs – private sector jobs. In fact, while government agencies are actively and very publicly forcing lower-level state employees to take furlough days without pay, the state is still hiring workers.

“Controlling state spending” is an expression casually tossed around by the people who have the power to do something about it, but have not. Last year, in an attempt to appear to be combating the budget deficit, California leadership furloughed state employees, issued IOUs, and sat idly by as the state’s credit rating dropped to the lowest in the country, while our unemployment rose to 12.3 percent — one of the highest in the country.

It is not a stretch to say that all state agencies are probably employing some unnecessary and unproductive workers.  Of the state employees with whom I am acquainted, most readily admit that this is true. They also admit that the state continues to hire workers, while simultaneously furloughing others, a topic curiously omitted from the governor’s speech.

The elephant in the California budget

One of the most necessary changes is addressing how the state “earns” revenue. Currently revenue is tied to the wealthiest of the state’s residents and businesses through taxation. Even in the state’s budget summary, the budget gap is casually explained away, “because the state’s income tax system relies disproportionately on the very high-end earners.” The surge in revenues in 1998-99 resulted in massive and unsustainable new spending commitments. “When revenue declined, the state relied mostly on one-time measures such as borrowing, to temporarily reduce spending without cutting back underlying program commitments. Thus, the structural deficit was born.”

State spending and subsequent borrowing increased even beyond population growth and inflation. And increased spending is attributed to the repayment of bad debt incurred during budget crisis time.

California not only has one of the highest unemployment rates in the nation, two California counties, San Bernardino and Riverside counties, have the highest unemployment rate in the nation for such large population areas. Only Detroit has a higher unemployment rate. The governor’s proposed $500 million for job training would be better spent cutting business taxes and/or regulatory measures in those counties. Training programs do little to stimulate employment – other than for the people hired to administer the program.

As the state only goes deeper into debt, many taxpayers wonder who is driving this bus. No one at the top seems capable of making substantive changes and instead, the rhetoric and irresponsible spending continues, as exemplified in the 2009 enacted budget summary: “As the recession deepened throughout the spring, it eroded revenues and put additional pressure on spending, especially in those areas most sensitive to economic downturns like Health and Human Services. The amendments to the Budget Act of 2009 address the additional budget gap of $24 billion that resulted from the deepening recession.”

California’s leaders are still blaming our budget deficit on the recession, and not on spending, out of control entitlements, pensions run amok and bad debt. The recession has increased the deficit because of lost tax revenue however, the real area in need of change is spending. State spending has to be curbed, cuts need to be made to entitlement programs, public pension plans must be reigned in, revenue cannot be tied exclusively to the state’s wealthiest citizens, true stimulus must occur though tax cuts and incentives to small, medium and large businesses, and the state must put an end to the regulatory barriers that prevent private sector job growth.

Budget cutting is a discipline that most of the state’s residents already know far too well; now California legislators must use discipline, and finally do what’s best for the survival of the once Golden State.

–Katy Grimes

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  1. PRI
    PRI 11 January, 2010, 11:16

    Great conclusion: “Budget cutting is a discipline that most of the state’s residents already know far too well; now California legislators must use discipline, and finally do what’s best for the survival of the once Golden State.”

    Deep down, the state government functionaries, beginning with Arnold, think it’s still 2006 and the housing boom is on and they can spend all they want. The rest of us know better.

    – John Seiler

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  2. StevefromSacto
    StevefromSacto 11 January, 2010, 11:45

    He talks about “jobs, jobs, jobs,” but wants to throw 350,000 low-wage IHSS homecare providers out of work.

    He talks about new initiatives, but he recycles many of the same budget cuts that are being held up in court because they clearly violate Federal law.

    He talks about courage, but he doesn’t have the guts to stand up to corporate interests or to the anti-tax zealots in his own party who want to “shrink state government so they can drown it in the bathtub.”

    A good summary of Arnold Schwarzenegger’s 7 years as governor: Big hat, no cattle.

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  3. Bob
    Bob 11 January, 2010, 11:46

    Nice article! We are getting scammed by govt every day! The feds are in debt 12 trillion dollars and Arnie is holding his hand out to them! Why?Because they print money! That is a Ponzi sceme!

    Reply this comment
  4. Tom Freeman
    Tom Freeman 13 January, 2010, 10:47

    We need leadership in Sacramento that understands how difficult it is, given our tax rates and regulations, to attract and retain business here in our state. With one business after the other checking out of Califorina we cannot continue to pass new rules, regulations, and laws that discourage buisness from making our great state home. Each and every business owener or executive I speak with tells me Califorina is less attractive and other states appear to be bsuiness friendly. Keep up the great work you are doing covering Sacramento!

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