Still waiting for an alternative
One thing missing from the debate over California's budget problems has been the debate. Back when lawmakers were struggling to come up with a plan, the Democratic leadership offered proposal after proposal for closing the yawning budget gap, and Republicans countered with little more than a statement of governing philosophy. With a budget so grossly out of balance, we needed a healthy partisan wrangle over the services the state provides, its relationship with local governments, its approach to taxation -- big, weighty topics that get to the heart of the Sacramento's role in its residents' lives. Unfortunately, we got nothing of the kind, probably because it would have taken too much political courage. And now that the public has to vote on key parts of that plan, foes on both sides are offering little more than outrage.
The latest example of this comes from the Wall Street Journal's editorial board, which welcomed the train wreck that will ensue from the almost certain defeat of Propositions 1A, 1C, 1D and 1E. In addition to getting the substance of most of the measures wrong, the board joined in the chorus of superficial analysis from pundits and pollsters, saying that voting down the propositions will send an important message to lawmakers about the need for lower taxes and less spending. No, it would send an all-too-familiar message that compromising is for losers.
The Journal's right about some of the roots of the budget mess, particularly the ministrations that lawmakers have paid to public employee unions and the broken tax code. But its ideas for solutions are laughable. It's facile to say that the state should "cap total spending" and "add a flat-rate income and sales tax" that are significantly lower than the current ones. The problem today is the chasm between what the state takes in and what it spends, which means making some non-facile decisions about what the state does with its money. Where are the meaty suggestions for $21 billion worth of cuts in the state's budget (more than 10% a year in this year and next)? The only suggestion for bridging that chasm is "drilling for oil offshore," which is the kind of short-term thinking that the Journal ridicules.
I don't like the deal that legislators struck, either -- it's rife with penny-wise, pound-foolish choices. I'm confident that there are better ways to close the gap. But rather than just denouncing tax hikes (or teacher layoffs or cutbacks in mental-health programs or any other favored cause), we need to see some credible alternatives. That means moving past vague exhortations to "rein in spending" or "eliminate waste, fraud and abuse," and getting serious about the state's duties and the most efficient way to fulfill them.
Take into consideration the fact that even when in "good times", California legislators always slipped in some form of "pork". Even in bad times, such as now, there are still some efforts to slip more of the same through, because it has always "worked before". Let's face it, as voters, we just don't trust these people in Sacramento. There is just too much inconsistency between what they say and what they do. They're just too beholden to their political party or campaign contributors. Even those that have good alternatives and ideas, are looked at suspiciously. Even if the Feds come to the fiscal rescue; will the resources be utilized wisely? Can these "leopards" really "change their spots"?
Posted by: Dan | May 25, 2009 at 11:41 AM
if local governments had continued to pay for the services they were paying for in 1991.
Didn't the state use local revenue in the early 90s and early 2000s?
Posted by: Jason S. | May 22, 2009 at 07:41 AM
@Jason -- You left out perhaps the most significant "if" -- and if local governments had continued to pay for the services they were paying for in 1991. But again, one of the issues here is the degree to which the cost of local services (most notably schools, but not just that) has been handed off to the state.
This is the point that's repeatedly overlooked in this debate. But it will become painfully apparent if Sacramento cuts spending back to 1999 levels *and* borrows billions from local and county governments, and the governor has proposed. That's a double whammy on services.
Posted by: Jon Healey | May 22, 2009 at 03:25 AM
Well, there is something to be said about incrementally raising taxes during robust economic periods, if only the states would save the revenue for the sour stretches.
I'm reading that if California had kept spending at levels of consumer price inflation + population growth over the past 18 years, there would be a $15 billion surplus.
If that were the case, now would be the best time to propose tax decreases, by jiminey. Darn a duck.
Posted by: Jason S. | May 21, 2009 at 10:23 PM
As someone who is no longer a California resident I find it hard to believe that the fundamental problem of California is its inability to raise taxes at will. All the states most exposed in this economic down turn were those that kept their level of taxation highest in the good times. The good times might not be coming back for a real long time.
Posted by: ChrisMarks | May 21, 2009 at 05:53 PM
Linda, you are incorrect. According to the Legislative Analyst's Office, real per-capita spending -- that is, spending per person, adjusted for inflation -- has only increased 2.2% in the past 10 years.
Hustin, the problem with Prop 13 is that it requires a 2/3 supermajority to increase taxes, making it nearly impossible to raise new revenue, and destroying the democratic concept of majority rule. With the 2/3 rule in effect, Republicans in the legislature have a stranglehold on the budget and taxes, without having to take the blame for current problems because they can just claim they're in the minority.
Posted by: Richard | May 20, 2009 at 04:06 PM
@Hustin -- property taxes are simply a mechanism to spread the pain broadly. They hit everybody -- homeonwers pay directly, renters have the cost passed along to them by their landlords. To the extent that they're disproportionate, it's because folks who own or live in the largest, most valuable properties pay more than everyone else. But most Americans support progressivity in the tax code, so I don't think there are a whale of a lot of complaints about that. (Nor would you find much support for the argument that only parents benefit from public schools, so they alone should pay. You're essentially discounting the public value of having an educated workforce.)
What Prop. 13 addressed was the taxation of unrealized capital gains. We don't tax unrealized gains in stocks or mutual funds, so why do so with property? The effect of Prop. 13, though, was to dry up a revenue source that local governments had come to rely on, forcing the state to take up some of the burdens that locals had previously funded. That's why Prop. 13 comes up in these discussions. I agree that it's not fair to tax unrealized gains, but I also think there are some loopholes created by the proposition that have allowed some property owners to avoid taxes on the gains they've actually realized. That's something worth addressing, IMHO, and it can be done without violating the spirit of the proposition.
Posted by: Jon Healey | May 20, 2009 at 03:29 PM
I know that some out there have been advocating that Prop 13 be extinguished. I feel that is terribly wrong. Why should property owners bear the brunt of paying for services that are used by everyone?? I don't have five kids who use educational, medical, and other social services that are paid by taxes. Why should I pay for someone else's household decisions? Taxing is so disproportional, as it is.
Posted by: hustin1 | May 20, 2009 at 02:23 PM
The problem is structural. California has experienced a fairly large exodus of the middle and working class native-born, and an influx of poor/working class immigrants, mostly from Mexico. These and/or their children require a lot of state employees -- from teachers (Mexican immigrants in the US have larger families, on average, than Mexicans in Mexico, let alone native-born Americans) to healthcare workers (back when 'Anglos' did construction work in California-- 20 to 25 years ago -- many were unionized and had healthcare) to (unfortunately) prison guards (Hispanics have a higher incarceration rate than 'Anglo' whites -- yes there is some data that immigrants themselves have lower rates of incarceration but their kids have a higher rate).
So the unions associated with these 'helping' professions get stronger -- they have numbers and demand for their services. Moreover, these folks constitute a large part of the native-born middle class that is left in Cali, so their neighbors and clients are reluctant to vote against them. I believe the governor found this out a while back.
So is there a fiscal alternative -- say, cranking up taxes. Maybe temporarily, maybe they'll be some sort of other 'bubble' or legitimate boom. I have a feeling, however, its going to be a long time coming.
Posted by: Mitchell Young | May 20, 2009 at 09:32 AM
Hundred plus outraged ranting comments on the front page on the defreat of the propositions, thousands more on the radio calling into the babblers and shouters....THREE COMMENTS HERE WHEN THE CHALLANGE IS DEFINED IN TERMS THAT REQUIRE AN ALTERNATIVE BEYOND RHETORIC. Having spent time reading and learning the intracacies of the problems, their genesis and the potential solutions, my conclusion is that the body politic is too lazy to bother applying mental work at it. SIGH!!!! As the saying goes you get what you pay for.
Posted by: nyongesa | May 20, 2009 at 02:53 AM
@Jon -- good comment, especially your mention of "the steady shift of burdens from local and county governments to the state."
Posted by: Doug | May 19, 2009 at 02:53 PM
@Linda -- Thanks for stepping up to the plate! You've laid out a good starting point, but the missing part of your equation is the steady shift of burdens from local and county governments to the state. That's why I think the solution has to be in analyzing the state's role, considering how and why responsibilities have shifted to Sacramento, and trying to identify categories of things the state doesn't need to do. Simply rolling back the clock on budgets doesn't get to the question of what the state is doing for the public, and why.
Posted by: Jon Healey | May 19, 2009 at 11:49 AM
Here's a credible alternative for you:
First, acknowledge the fact that during the past decade state spending in all departments has far exceeded either inflation or population growth, and that during that same period public employee wages and benefits have gotten entirely out of control and out of touch with the real world.
Next, rollback all departments' budgets to what they were a decade ago, then add your most generous annual allowances for inflation and population growth. Finally, rollback public employee wages and benefits to what they were a decade ago, then again add your most generous annual allowances for inflation.
What do you get? The credible savings you crave, and a defensible budget that Californians can support.
Posted by: Linda | May 19, 2009 at 11:23 AM
This is a really good editorial.
Read it and weep.
Posted by: Allan Cooley | May 19, 2009 at 08:37 AM