Governor adopts budget realism

MAY 14, 2010

By JOHN SEILER

The party’s over.

That’s the message from Gov. Arnold Schwarzenegger’s austere May Revise, released today, of his budget for fiscal 2010-11, which begins on July 1. It calls for cutting $3 billion from state spending over the previous year, dropping it down to $83.4 billion for the general fund. The estimated $19 billion deficit would be eliminated and a $1.2 billion reserve would be available. There would be no new taxes.

The deficit reduction number actually is close to realistic, Rep. Tom McClintock, R-Rocklin, told me; for more than 20 years in the state Legislature he was California’s fiscal watchdog, before being elected to the U.S. Congress in 2008. He said that while the governor’s numbers are a proposal, the actual numbers coming in at the state Controller’s office show a deficit for the past 12 months of only $500 million.

As ex-Gov. Gray Davis once said about one of his own budgets, that’s “close enough for government work.”

In Schwarzenegger’s May Revise, major programs would be slashed or eliminated, saving:

  • $1 billion by ending CalWORKS, a welfare-to-work program.
  • $1.2 billion by ending daycare funded by state taxpayers.
  • $673 million by cutting in-home healthcare for the elderly by a third.

It will be difficult to get these cuts through the Democrat-controlled Legislature, whom the governor blamed for not acting earlier on proposals he made to save money.

As to whether the governor will get the cuts, McClintock said, “I doubt it. That requires a political battle the governor isn’t willing to fight. It’s the equivalent of Schwarzenegger throwing up his hands and saying to the Legislature, ‘You guys fix it. I’m not going to be serious this year. I’m going to Colorado’,” a popular Schwarzenegger

McClintock said that CalWORKS and the other programs certainly need serious reforms to eliminate fraud. For example, he said, “You should send an investigator the the person’s home to see if they really need the program and are actively seeking work.”

The budget proposal says it “continues to fully fund K‑12 education, increases funding for the University of California, the California State University, and the California Community Colleges to avoid further tuition increases or deep cuts to the classroom.”

McClintock said that the problem there, and with prisons, is that the state bureaucracy still carries too much overhead. More power over schools and prisons has to be devolved back to principals and wardens so they can adapt programs and spending to particular situations, instead of imposing costly state mandates.

The budget also expects to get $3.4 billion more from the federal government to pay for such things as housing illegal immigrants, about half what the governor asked for in January. “Not if I have anything to say about it,” McClintock said. His position, in which he has been joined by Democratic U.S. Sen. Dianne Feinstein, has been that California’s government caused the state’s deficit by overspending and the rest of the country’s taxpayers shouldn’t be forced to fund a bailout.

But he conceded that he’s a Republican in a Congress with heavy Democratic majorities in both houses, so some sort of bailout is likely. House Speaker Nancy Pelosi, a Democrat, hails from San Francisco. At least, McClintock said, the governor’s request “is more realistic than what he had before.”

Much of the May Revise’s accuracy depends on what happens with the national and state economies over the next year.

It says, for the nation, “Ongoing robust job growth will be needed to keep the recovery moving ahead…. According to the current outlook, the unemployment rate will improve gradually and may not reach “full employment” for several years.”

The Revise points out something I have noted here on CalWatchDog.com, that California unemployment has been jumping much higher than the national level in recent months: “California’s unemployment rate partially bucked the national trend by climbing through the early months of 2010. The national rate leveled off at 10 percent in November and December 2009 and slipped slightly during the first quarter of 2010. The state’s rate, in contrast, was still trending up through March 2010, reaching 12.6 percent.”

It doesn’t explain why this has happened, which I have blamed on Schwarzenegger’s February 2009 tax increases and the impending imposition of AB32, the draconian global warming legislation that will begin hitting the state next January – unless an initiative in November effectively repeals it.

But it expects that “The longest and deepest recession in the post‑Depression era is most likely over,” yet is cautious: “The recovery, will probably be moderate and prolonged by historical standards. This means that the outlook for the near future is positive but sober.”

However, the May Revise takes no notice of the ongoing meltdown of the Greek government and economy, the potential crash of the Euro and the European economies and the effects all of that would have on America.

McClintock noted that a positive aspect is that next year Gov. Schwarzenegger’s 2009 tax increases expire, a positive for the state economy. But next year many of President Bush’s tax cuts expire, meaning a major negative for the overall U.S. economy. How the mix of tax cuts/tax increases affects California state revenues cannot be known.

Another major economic uncertainty is the possible repeal, mentioned earlier, of AB32. Its repeal could be a boon to the state’s economy, while its defeat could mean, according to some studies, the loss of many jobs.

It’s worth mentioning that AB32’s backers, who oppose its repeal, say the opposite: that it will create jobs. If AB32 is repealed, some companies that have started to take advantage of its rules might no longer be viable. In any case, the whole matter and its affect on the economy is up in the air until November.

McClintock said that, in the 1960s and early 1970s, California commonly was one of the last states to go into recession and one of the first to come out. Now, it’s the opposite: we get clobbered first and come out last. “There’s just so much additional baggage now, including higher taxes and regulations,” he warned. “We’ll be the first to drop in any new recession.”

John Seiler, an editorial writer with The Orange County Register for 19 years, is a reporter and analyst for CalWatchDog.com. His email: [email protected].

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  1. stevefromsacto
    stevefromsacto 15 May, 2010, 09:55

    Budget realism? You’ve got to be kidding.

    1. At a time when our goal is to shrink the welfare rolls and get people back to work, our governor eliminates CalWORKS, the only effective program we have to get people off of welfare and back to work. So we will now be the ONLY state in the union without a welfare-to-work program and will lose billions of federal dollars because of it. Congratulations, Mississippi, you are now a progressive state!

    2. Last year, the governor tried to cut the cost-effective In Home Supportive Services (IHSS) program, which costs taxpayers five times LESS than nursing home care. The courts shot him down, pointing out that these cuts violate a number of Federal laws, including the Americans with Disabilities Act. So what does he propose this year? That’s right, class, more IHSS cuts.

    3. Once again, the governor proposes a cuts-only budget that will be DOA. Trying to solve the budget problem with cuts alone is like trying to fight with one hand tied behind your back.

    In conclusion, remember that the definition of insanity is doing the same thing over and over again and expecting the results to be different.

    Reply this comment
  2. EastBayLarry
    EastBayLarry 16 May, 2010, 05:36

    Since the governor can only suggest, not require, budget changes, his whole plan will fail. The Democrats will increase spending, tax rates and regulation and NOT pass a budget on time anyway.
    Greece is getting a hugh bailout to help them survive a similiar situation right now, but the required spending cuts are causing riots. Get ready for it California.

    Reply this comment
  3. stevefromsacto
    stevefromsacto 17 May, 2010, 09:17

    Larry, Larry, Larry, go ahead and blame the Democrats and ignore the fact that they cannot increase tax rates because the Rabid Right has the legislature tied in knots with its 2/3rds vote requirements for budgets and taxes.

    Reply this comment
  4. stevefromsacto
    stevefromsacto 17 May, 2010, 09:21

    And here are some more facts that the Right conveniently ignores:

    The unemployment rate in low tax states like Mississippi (11.5 percent), South Carolina (12.2) and Florida (12.3) is almost as high as it is in California (12.6). In Nevada it’s 13.4. (So all the right-wingers who threaten to move to Nevada should do so. It’ll help both states.)

    Contrary to myth, as a percentage of personal income, California ranks 19th in the nation in state and local taxes

    Also contrary to the pervasive mythology, California’s lowest income families pay the largest share of their incomes in state and local taxes; the richest pay the smallest share.

    Of course, the rich pay much more of the total share: They have the highest incomes many times over. But their burden is lower.

    Reply this comment
  5. StevefromSacto
    StevefromSacto 18 May, 2010, 11:47

    This from the LA Times on cutting CalWORKS:

    “California is not just being cruel, it is being foolish, because the costs of an unemployable adult population will continue to mount and the bill will be presented again and again in future budgets, although perhaps disguised as county police, jail and court costs.”

    Reply this comment
  6. StevefromSacto
    StevefromSacto 18 May, 2010, 15:28

    And this just in:

    Analyst: Raise Revenue to Ease Calif. Deficit

    The Associated Press

    Published: Tuesday, May. 18, 2010 – 3:42 pm

    SACRAMENTO, Calif. — California’s nonpartisan budget analyst says lawmakers should consider raising the alcohol tax and delaying corporate tax breaks as part of a plan to deal with the state’s budget deficit.

    Increasing the vehicle license fee permanently and reducing some tax credits are among other recommendations in a report issued Tuesday by the Legislative Analyst’s Office.

    The report comes days after Gov. Arnold Schwarzenegger released his revised plan for closing California’s $19.1 billion deficit. He proposed eliminating California’s welfare-to-work program, which provides cash assistance and other services for low-income families with children.

    The analyst says simply delaying the corporate tax breaks given in recent years would generate additional revenue for the state treasury.

    AMEN!

    Reply this comment
  7. John Seiler
    John Seiler 19 May, 2010, 19:05

    Delay “Corporate tax breaks”? Are there any corporations left in California?

    Reply this comment

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