Mac Taylor’s goofy happy talk triggers more toxic fallout

Dec. 4, 2012

By Chris Reed

Legislative Analyst Mac Taylor’s unhinged decision to project budget surpluses in coming years in California could turn out to be the defining moment of his career. The decision of state voters to back temporary sales and income tax hikes last month did little to nothing to resolve the enormous financial headaches ahead from unfunded retiree pensions and health care, from Obamacare, from the bullet-train debacle, and so much more. Incredibly, Taylor would have us believe otherwise — leading directly to goofiness such as Senate President Darrell Steinberg projecting a new era of free spending:

“‘I really believe this is the end of one very difficult era in California and the beginning of a new and better era,’ he said at the Capitol after the Legislature gaveled in its new two-year session.

“There is a chance that the state will begin to see budget surpluses in a few years, and Steinberg proposed that one-third of any surplus go to a rainy-day fund, one-third to paying down the state’s debt and a like amount to restoring social service and education programs cut during the last five years. ‘There is a lot of need out there,’ he said.”

As Dick Enberg would say, oh my. We haven’t gotten out of our present fiscal debacle, and, with Mac Taylor’s encouragement, the leader of the Senate is already planning to spend billions that are not, repeat not, in hand.

What could go wrong? Here’s the short list from my analysis last month:

• The likelihood of major cuts in defense spending in coming years as the federal government strives to end trillion-dollar annual deficits [which] would have a harsh effect on [much] of the state.

• The prospect that bankruptcy of one or more struggling nations in Europe could trigger another global recession, with terrible implications for California’s economy – and for its revenue collection, which is so dependent on the capital gains of the investor class.

• The prospect that the broad switch to cleaner-but-costlier energy mandated by AB 32 will drive heavy industries from the state and make California’s exports less cost-competitive.

• The heavy costs of implementing President Obama’s health care overhaul going forward as federal subsidies diminish and as Medi-Cal patients explode in number – just as many of the state’s family doctors near retirement. The California Academy of Family Physicians says 30 percent of primary-care physicians are 60 or older, the highest percentage of any state.

• The cost of paying for pensions and health care for a steadily growing army of public employee retirees. A 2010 Stanford study that avoided rosy return scenarios puts the total unfunded pension liability at $500 billion; LAO accepts the rosy scenarios.

• The possibility that the federal government will demand repayment of the nearly $10 billion it has loaned California to pay unemployment benefits since the state’s jobless fund went broke in 2009. Presently, Washington only requires that Sacramento pay for the interest on the loan.

Did Mac Taylor even consider these factors? Cursorily, at best. He owes taxpayers — and his respected predecessors — an apology.