Prop. 30 would make budget roller coaster more scary

Nov. 2, 2012

By Wayne Lusvardi

You probably have seen the photograph of the Casino Pier Roller Coaster on the New Jersey shore inundated by the ocean and in shambles from the impact of Hurricane Sandy.

In Sacramento, Calif. on the same day, the weather was described as a “beautiful fall day…on mostly sunny skies with highs in the middle 70’s.”   But a different type of storm — a budget cyclone — is about to hit the California capitol.

The pending California storm would send Gov. Jerry Brown’s roller coaster budget into a nosedive.  Recent opinion polls show support for Brown’s Proposition 30 tax rate increase has dropped to 48 percent.  And there are good reasons why.

The way California’s general fund budget is managed is to rely on giant upswings in unpredictable capital gains taxes every year.  Alternatively, a voter-approved tax increase is factored into budget revenue predictions if an economic recession indicates that capital gains tax revenues will be small.   Once a new higher revenue level has been established, then the budget is “balanced” high.  But the budget can be balanced low just as well as high.

This is California’s tax-and-spend roller coaster budget.  It creates artificial structural budget deficits each year that have to be met by higher and higher tax revenues. Gov. Brown already included revenues from his proposed tax hikes from Prop. 30 in this year’s budget.

How the Public School Budget Deficit is Contrived

When financial and real estate markets or voter-approved tax increases don’t deliver the projected revenues, then California declares a budget crisis.  Declaring that K-12 public school budgets would have to be cut is the way the state socially constructs and manages a budget crisis.  It is never portrayed that it is the Medi-Cal or public pension funds that are running a deficit. Public school children are used as poster children every year for any revenue shortfalls in health and welfare programs, pensions, or bond debts.

Annual public school budget deficits are a public ritual. School budget deficits are also the preferred choice of liberal policy makers, not a reflection of the stinginess of the taxpayers or conservative lawmakers. A “structural budget deficit” is always a public school budget deficit. But there is another apparent reason why the public schools are portrayed as the line item in the state budget that is running a deficit: the voter-mandated funding formula from Proposition 98 over-funds public schools.

How do we know public schools are over-funded?  Well, the California Teacher’s Association is suing the state to get paid back $3 billion that the state borrowed from the state education fund in 2004-05 to plug the general fund deficit in return for jobs protections for core teachers.  In other words, in the last seven years, public schools have lost up to $3 billion without having to lay off any core classroom teachers.

Additionally, in the past five years, total enrollment in state public schools has declined 1 percent and is projected to decline even further. But the budget formula for funding public schools is mostly based on a percentage of the state general fund budget, not on the overall attendance level.

Prop. 98 guarantees public schools about 43 percent of the state general fund budget.  What was cut out of the public school budget since 2009 is all the fluff of political earmarks — artificial jobs programs — that saved local school budgets but didn’t hurt the academic performance of the poor.

California’s General Fund budget was $102.98 billion in fiscal year 2006-2007.  Forty three percent of that for public schools was $44.2 billion.  In 2012-13, the General Fund budget is $92.55 billion, of which roughly $39.8 billion is guaranteed for public schools.  This deceivingly indicates that public schools have lost $4.4 billion in funding.

Indicated Change in Base of General Fund on School Spending

Year General Fund
(billions $)
Percent Public Schools Under Prop. . 98 Formula Public School Funding (est.)
(billions $)
2007 $102.98 43% $44.2
2013 $92.55 43% $39.9

General fund

The only way for the state to manage general fund budget deficits with 43 percent of funds locked in for public schools has been to lower the base or floor of the general fund.  The apparent way the state has managed this has been to shift monies from the General Fund to Special Funds. If you can’t reform the budget beast, the only apparent alternative has been to starve it.

In the last five years, the General Fund budget revenues have decreased by $10.4 billion.  But the Special Fund budget has increased by $13.15 billion.  Many programs have been shifted into the Special Fund to make it appear the General Fund is running a shortfall in funding for schools.

Looking at the entire state budget picture, Federal Funds have increased $16.57 billion from 5 years ago.  And the total of all expenditures in the General, Special, Federal, and Bond Funds has increased $15.8 billion over the past 5 years.

Change In State Budget Levels Per Fund from 2007 to 2013

Years General Fund Special Fund Bond Fund Federal Fund Net Change
2007-13 -$10.4 +$13.5 -$3.45 +$16.57 +$15.84
Source: California Dept. of Finance

In the above table, it appears that the hole in the state budget is in the Bond Fund. This would include the liability for public pensions. Retirement benefit costs have increased from $1.4 billion in 1999 to $6.5 billion this fiscal year.

Tax cliff

As the Wall Street Journal editorial “Jerry Brown’s Tax Cliff” succinctly states it:

“The most important single vote in America next Tuesday, after the Presidential race, is Governor Brown’s attempt to stick Californians with another giant tax increase.  Mr. Brown and his labor allies say Proposition 30 will fix the state’s budget deficit and ward off education cuts.  But the real choice before voters is whether to issue Sacramento’s incorrigible spendthrifts another blank check.”

The problem is not a lack of funds, but budget management policies that intentionally shift guaranteed funds away from public schools. These funding shifts may be used not only to plug intentionally created school budget deficits, but to backfill unfunded pension liabilities or gaps in Medicaid caused by Federal Social Security Disability policies.

California’s voters are being taken on a roller coaster ride without a seat belt. They should be prepared to hold on for their life and their wallets.  The state “structural” budget deficit is not bad fate from uncontrollable market downturns, but a choice.

Voters also have a choice at the ballot box on Nov. 6.

38 comments

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  1. SeeSaw
    SeeSaw 2 November, 2012, 16:05

    My choice is to vote, “Yes” on Prop.30.

    Reply this comment
  2. NTHEOC
    NTHEOC 2 November, 2012, 18:11

    A yes vote for Prop. 30 will prevent massive cuts to education and provide billions of dollars in funding for classrooms. Passing Prop. 30 is essential for public education to get back on its feet! Or you could vote no and reap the consequences of some horrible cuts! VOTE YES ON 30!!!!!!!!!!!!!!

    Reply this comment
  3. Rex the Wonder Dog!
    Rex the Wonder Dog! 2 November, 2012, 19:24

    Oh brother….seesaw and NTHEOC stroking each other on the prop 30 scam!!!

    Listen kids, Prop 30 is dead, it died last week when it fell to 45%, and that gap will widen, trust me.

    And there was never ANY guarantee it would go to education, it would mainly go to over paid over pensions gov employees.

    Reply this comment
  4. Ted Steele, The Decider
    Ted Steele, The Decider 2 November, 2012, 22:18

    oh no! Not only is the sky falling but it looks like 30 may pass! LOL Poor Poodle!

    http://www.huffingtonpost.com/2012/11/01/poll-finds-jerry-brown-ha_n_2055950.html

    Reply this comment
  5. Rex the Wonder Dog!
    Rex the Wonder Dog! 3 November, 2012, 00:51

    LOL…Teddy trying to get to 1-14..I love it!
    30 is DOA and we all know it!

    Reply this comment
  6. BobA
    BobA 3 November, 2012, 06:09

    seesaw and NTHEOC:

    Lt Governor Newsome stated in a radio interview on Thursday that the money from prop. 30 will go into the general fund and not towards education. Newsome also sits on the UC board of regents and he further state the UC board of regents are going to raise college tuition costs regardless of the outcome of prop. 30.

    Contemplate that while you cheer on tax increases. If prop. 30 passes, will your enthusiasm for the next round of tax increases be the same as it is now?

    The well worn line “it’s for the children” is wearing thin. If that’s the reason for approving every proposed tax increase that comes along then why not call for a 15% sales tax and a 20% minimum income tax and stop the nickle here and a dime there BS? After all, it’s “for the children”.

    Reply this comment
  7. Ted Steele, The Decider
    Ted Steele, The Decider 3 November, 2012, 07:25

    0 for 13 ™!

    The poor Poodle!

    Reply this comment
  8. Richard Rider
    Richard Rider 3 November, 2012, 08:16

    Does anyone REALLY think that CTA, SEIU and AFT — the three biggest contributors to Prop 30, are going to allow “their” schools to close for three weeks if the measure fails? Government workers would lose paychecks, and the unions would lose dues.

    NO WAY! If Prop 30 is voted down, the legislated trigger cut extortion threat will evaporate like the morning dew. Alternative solutions will quickly — almost MAGICALLY — appear.

    It took all of ONE WEEK for the CA state pension “reform” bill to be submitted, passed, and signed into law. Ignoring the absurdly weak nature of the bill, it demonstrates just how quickly a motivated Sacramento can dump the so-called trigger cuts.

    Reply this comment
  9. Richard Rider
    Richard Rider 3 November, 2012, 08:19

    One unintended consequence of Prop 30: If passed, the LA Lakers and other pro sports teams are going to find it more and more difficult to win bidding wars for talented free agents. Most athletes would prefer to “work” in tax-free Texas or Florida than to pay a 13.3% CA tax on ALL their income (including endorsements).

    If you are a CA pro sports fan(atic), vote AGAINST Prop 30!

    Reply this comment
  10. Richard Rider
    Richard Rider 3 November, 2012, 08:23

    If Prop 30 passes, many of California’s super rich will leave — without even leaving. They will declare one of their other homes their official residence (jumping through numerous legal hoops to make it so). They will still live in CA several months a years — just less than 6 months.

    They do NOT have to spend the rest of the time in their new home in another state — they only need live outside CA for over 6 months. This works especially well for California’s hated and disparaged “investor class” (their income is not tied to California) — not to mention the rich Hollywood actors and moguls who today do most of their movie work in other states!

    Indeed, it’s not public what the state of residence is of an individual. It’s quite likely that ALREADY many Hollywood “liberals” have quietly arranged to shift their state of (tax) residence out of CA — to their “second home.”

    Reply this comment
  11. Richard Rider
    Richard Rider 3 November, 2012, 08:26

    While CA is a Democrat state, when it comes to tax increases, not so much.

    Contrary to liberal cant, CA tax increases CAN pass with a simple majority vote. When such a prop goes on the statewide ballot, that’s all that’s needed to pass.

    Surprisingly, the last EIGHT such statewide tax increase props failed — six by double digits.

    While TRIBAL loyalty favors the Dems (the GOP will NEVER make it in CA because if its perceived anti-Hispanic view), folks do NOT easily cotton to tax increases.

    That being said, it will be close (on the Brown tax — Prop 30).

    Reply this comment
  12. Queeg
    Queeg 3 November, 2012, 08:59

    Stress…..lies……greed……misdirection…..bunker boys in agony….Prop 30 is good policy….embrace the new California….sweep out all Republicans!

    Reply this comment
  13. SeeSaw
    SeeSaw 3 November, 2012, 09:08

    There has never been any denial that the proceeds will go into the general fund. There has been plenty of warning from the Governor that education is the first thing to be cut if Prop. 30 does not pass–every other program has already been cut. You can choose your own poison–either you can support the State of CA by sacrifing your little quarter of one percent when you spend, or you can help to plunge it further into the abyss where it landed on Sept. 2008. It does not take a rocket scientist to see that, if more layoffs occur, the affect could be that those who are so against this Prop. might find it affecting them, because they have less patrons with money to buy their products. I love CA–those who hate it are welcome to move to Texas, AZ, or any other Red state that they think would provide them with a much happier, lifestyle.

    Reply this comment
  14. Douglas
    Douglas 3 November, 2012, 10:05

    I’m not a tax expert like Mr Ryder, but I was lead to understand that sports professionals paid tax in the state where their money is earned, so if they live in Texas and play a game in California, they will pay California taxes on that portion.

    I do know they will not pay 13.3% tax on ALL their income. 13.3% is the MARGINAL rate. I pay about 8% marginal rate, which turns out to be an effective rate of about 2% of my income. And I get almost a third of that back in federal tax write-offs.

    How many millionaires will leave? How many millionaires are really as portable as Tiger Woods? And how many are tied to lucrative jobs and businesses in California? And how many California millionaires AND businesses actually SUPPORT prop 30?

    I think I smell hyperbole.

    And don’t tell me we already have the “highest taxes”. In 2010, even when Arnold’s temporary taxes were still in effect, FOURTEEN other states paid higher sales tax per capita than California. TEN other states paid higher state plus local taxes as a percentage of income than California.

    Ubuntu

    Reply this comment
  15. Douglas
    Douglas 3 November, 2012, 10:13

    “it’s for the children” is wearing thin?

    If lowering taxes increases business, why don’t we lower taxes to zero?

    Reductio ad absurdum

    Reply this comment
  16. Ulyssess Uhaul
    Ulyssess Uhaul 3 November, 2012, 13:19

    It’s about young people. You have too much. Your bunkers and bug out shelters are filled to the brim with material goods…..aren’t you guilty and shameful….just look at your “goodies”.

    SHARE! PROP 30 IS GOOD FOR CALIFORNIA!

    Reply this comment
  17. Ted Steele, The Decider
    Ted Steele, The Decider 3 November, 2012, 14:08

    46 kids in a 1st grade classroom– teachers try to teach kids to read in 1st—- our failure to invest in the next generations is penny wise and pound foolish….

    Reply this comment
  18. BobA
    BobA 3 November, 2012, 15:01

    Richard Rider:

    Yes, California is a democrat controlled state that’s ran like the mafia. Once you get elected to office as a dues paying democrat, you become a made member of the California Democrat Family and set for life. Reelection is guaranteed if you pay your tithes, keep your dirty laundry hidden from the public and do what the “Family” tells you to do.

    My only question is: when will the “Family” get around to eliminating the opposition by outlawing the republican party and libertarian party? Republican and libertarian ideas are a threat to the Family’s “thing” and must be dealt with before it becomes a threat.

    Reply this comment
  19. Rex the Wonder Dog!
    Rex the Wonder Dog! 3 November, 2012, 16:06

    Ted Steele, The Decider says:

    November 3, 2012 at 2:08 pm

    46 kids in a 1st grade classroom– teachers try to teach kids to read in 1st—- our failure to invest in the next generations is penny wise and pound foolish….
    ==

    hahhahahahahahahahahahhahahahahhahah………46 kids in FUSRT GRAFE!!!!!! Says who TEDDY????? YOU!!!!!!!!!!!!!!!! HAhahahahah.

    Fact, NO CLASS in ANY CA K-12 has 46 students except PE classes. None.

    K-3 typically have 18-20 kids per class, and even tha is very misleading b/c there are usually 2-3 teacher aides or parent volunteers in addition to the teacher, that is 5 aduklts per 18-20 kids, or about a 4-1 ratio.

    Nice try trougher……I swear you have a career in stand up comedy if you ever get off CWD 🙂

    Reply this comment
  20. Rex the Wonder Dog!
    Rex the Wonder Dog! 3 November, 2012, 16:08

    And don’t tell me we already have the “highest taxes”. In 2010, even when Arnold’s temporary taxes were still in effect, FOURTEEN other states paid higher sales tax per capita than California.

    Oh there he goes again with that trougher spin spin.

    Dougie baby, CA has the HIGhEST TAX rate in teh nation, marginal or otherwise, so stop trying to use SEIU spin here, it simply will not work.

    Reply this comment
  21. Rex the Wonder Dog!
    Rex the Wonder Dog! 3 November, 2012, 16:13

    SeeSaw says:
    There has never been any denial that the proceeds will go into the general fund. There has been plenty of warning from the Governor that education is the first thing to be cut if Prop. 30 does not pass–every other program has already been cut.

    Oh really troffer????

    Did they cut the $100K retire at age 50 pensions?? Did they cut the $200K salary of CHP, cops, FF’s and other HS educated employees making more than private sector pediatricians???? Did they cut the $150K meet for 8 hours per month “commissions”, did the cut the vehicle use of CalTRANS and other trougher for private use??? NO.

    There millions of areas we could cut-start with cutting with every trougher job that does not require a college degree getting comped over $100K, which is 99% of the gov jobs-even janitors comp close to a $100K in trougher land.

    Go home, another spin master spanked into submission.

    3 days seesaw, get on your Prozac now, you’ll need a triple dose for the next year on Nov 6 😉

    Reply this comment
  22. Douglas
    Douglas 3 November, 2012, 18:06

    Life is amazing.

    Chumming is even better than trolling.

    Reply this comment
  23. Ulysses Uhaul
    Ulysses Uhaul 3 November, 2012, 19:36

    Poodle posts too much…..

    Reply this comment
  24. Rex the Wonder Dog!
    Rex the Wonder Dog! 3 November, 2012, 20:51

    Man, my hand hurts so much from smacking the troughers around I may take a long vacation Nov 7 😉

    Reply this comment
  25. Ulysses Uhaul
    Ulysses Uhaul 3 November, 2012, 21:07

    Yawn

    Reply this comment
  26. NTHEOC
    NTHEOC 4 November, 2012, 07:24

    C’mon you CHEAPSTERS!!The sales tax, which would take effect next year, would increase one-quarter of 1 percent, generating $1 billion a year.School children can’t vote!! They can’t tax themselves!! And they don’t have the ability to apply the kind of political pressure that makes things happen in Sacramento!! They can only do one thing, They can depend on voters to recognize that they are the best investment we can make in the future of California.Vote YES Proposition 30! Or take the chance to just find out how these cuts will come!!!!!!

    Reply this comment
  27. SeeSaw
    SeeSaw 4 November, 2012, 07:34

    Looks like you are the one who needs the anti-depression medicine, Rex. What are you afraid of? Afraid that some people actually might have some money to put into this sad economy? Afraid that the powers-that-be are not going to take money away from those who earned it legally, and according to the rules? Many items you cite, must go through the collective bargaining process–that’s where everybody gets a place at the table–you don’t like that do you, Rex. You haven’t done very well putting your point across here in CA. Maybe you should move on to one of those Red states. After all, the pusuit happiness is your right–go where you will find it.

    Reply this comment
  28. Ulysses Uhaul
    Ulysses Uhaul 4 November, 2012, 08:50

    Poodle knows losing well posters…..in fact, habitually losing even with his ex girfriend Big Betty!

    Reply this comment
  29. Edward Rasen
    Edward Rasen 4 November, 2012, 09:49

    California voters were asked during 1984 to approve a State Lottery because the revenue would be used solely for education. Last year the Lottery generated $4.8 billion yet Governor Brown needs a sales tax increase supposedly to “save education.” Vote “No” on props 30 and 38 and tell Jerry Brown you aren’t buying his lies.

    Reply this comment
  30. Rex the Wonder Dog!
    Rex the Wonder Dog! 4 November, 2012, 14:53

    ……Rex. You haven’t done very well putting your point across here in CA. Maybe you should move on to one of those Red states. After all, the **pursuit** happiness is your right–go where you will find it.

    Haven’t done so well????? LOL…you troughies spending TENS OF MILLIONS to pass 30 and are STILL LOSING!!!! I think seesaw and the troughies should leave to a more left leaning blue state…..and why leave on the twilight of my BIGGEST VICYTORY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    2 days, seesaw will need more Prozac to cope with life than the entire cast of one flew over the cuckoo’s nest!

    Reply this comment
  31. Ulysses Uhaul
    Ulysses Uhaul 4 November, 2012, 15:22

    Cage em and put poodle on the midnight train to upstate Vermont with his new socialist buddies!

    Reply this comment
  32. Rex the Wonder Dog!
    Rex the Wonder Dog! 4 November, 2012, 18:48

    Teddy, stock up on the Prozac now, b/c there will be a public employee run on i tin 2 days 😉

    Reply this comment
  33. Ulysses Uhaul
    Ulysses Uhaul 4 November, 2012, 18:53

    Yawn……

    Reply this comment
  34. Donkey
    Donkey 4 November, 2012, 20:43

    Let the RAGWUS die, vote no on 30!!!! Yea on 32!!!!!! 🙂

    Reply this comment
  35. Acapitalistpig
    Acapitalistpig 4 November, 2012, 21:52

    More tax and spend, tax and spend. And if you don’t vote for it, the kid gets one in the head. Go to hell Demorats.

    Reply this comment
  36. Ted Steele, The Decider
    Ted Steele, The Decider 5 November, 2012, 06:42

    If 30 passes and the school year is shortened wait for all the whiney parents to howl about the nanny state not being available to baby sit their dreadful kids !!!

    Reply this comment
  37. BobA
    BobA 5 November, 2012, 07:06

    Acapitalistpig:

    You got it half right. It’s tax and spend, then spend and tax. And no, they’re not going to shoot the kids in the head (they still need them as hostages). They’ll shoot them in the foot this time to show they mean business and then threaten to shoot them in the head the next time around.

    Even the devil in hell is pleading with God to save him from the democrats! They’ve put out the fire, completely trashed the place and now they’re marching in protest demanding air conditioning!!

    Reply this comment
  38. Daisy
    Daisy 30 January, 2013, 10:02

    Ah California! The land of the fruit and nuts. No wonder many of the rich people are leaving your state in droves. They are sick and tired of paying for your welfare state.

    Reply this comment

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