Wednesday, March 11, 2009

The Sins of the California Government

In the (poorly-covered) process of getting a budget bill passed in CA, taxpayers were under served by media explaining what was going on. To fill this gap, I present a summary of what happened, as I see it.

First, remember that Gray Davis was recalled after giving away huge swaths of the budget to public union members (especially the prison guard union). Then, he signed an executive order to triple the VLF (vehicle license fee, or "car tax"). That was to close the budget gap created by government, because even though the tax revenue grew nearly every year, CA spending grew even faster.

Arnold Schwarzenegger ran to replace Davis saying he wanted to fix government. Famously he said in his first "state of the state address,"

Every governor proposes moving boxes around to reorganize government.

I don’t want to move boxes around; I want to blow them up.

Upon taking office, he restored the VLF to the rate before Davis raised it. He set out to have the budget reviewed. But then he didn't follow through:
The fruit of these explosions was delivered in 2005 - in the California Performance Review, a blow-up-the-boxes-blueprint for government reform detailing some $32 billion in savings. (Doesn’t that sound good right about now?) It scrutinized more than 300 state boards and commissions and recommended axing 88 of them.

Yet nearly four years - and many crippling budget crises - later, there’s little to show for it. “Not only did these recommendations fall on deaf ears,” outgoing state Rep. Todd Spitzer recently told The Watchdog, “but since this report was released, state government has dramatically grown. In fact, since the Governor took office, the state has added nearly 700,000 jobs.”

In a complete collapse of his promise to structurally fix the budget, he even appointed his friends to new positions on the useless boards his study said to axe. Cushy jobs that are rewards (using our tax money) for doing what the Governor wants.

In fact, under Schwarzenegger, the budget has grown much faster than population + inflation--even faster than under Davis. He has repeatedly used the claim of "fixing the budget" to borrow, paper over, and generally not fix the budget, but make it look like we were living within our means. In fact, government spending in CA has doubled in 10 years. Take a minute to think about that.

All of this borrowing, and the budget problems, the bond rating of California was downgraded to the lowest of all the states. Which means that when California borrows a dollar, it's very expensive.

On December 18, 2008, the state legislature violated the state constitution. They passed a budget which raised taxes without the requisite 2/3 majority. They instead reworked taxes and fees (in supposedly a "revenue-neutral" way) and then raised fees to have a total net increase in income (watch Karen Bass--the Assembly speaker--try to justify it here). After calling it illegal, Schwarzenegger vetoed it (though that veto was in doubt for a few days).

Finally, the budget actually passed relied on calling a "reduction of planned increases" in the budget as "cuts," borrowing more money, and raising taxes. And of course, the Republicans in the legislature conspired to pass the tax increases, even though nearly all of them signed anti-tax pledges just before the elections last November. The raised taxes include the income and sales taxes (even though CA already has the highest rate for both in the entire nation).

The irony of course is that one of the tax increases includes...a doubling of the VLF fee, the single biggest issue Schwarzenegger campaigned on against Davis.

Updated to add: one thing practically ignored in the whole budget issue is that the CA governor actually has line-item veto. He can remove or reduce any item in the budget, and from what I've seen, he's only used it for petty purposes.


Andrew said...

I remember the relief I felt, sitting in the hospital with my wife just following the delivery of our child, as I saw Gov. Schwarzenegger announce the order rescinding the raise in the Vehicle License Fee. We couldn't afford it.

Most working families in California have to have two cars, because our population is spread out sparsely in most regions, which limits the effectiveness of mass transit.

The result? The increased taxes, with special emphasis on the increased VLF, will drive more working families, more of the established tax base, and more of the businesses out of California.

How long will our pro-illegal immigration policies mask this problem? I'm guessing not much longer at this point.

Big Jay said...

I can remember turning down job offers in California and not moving there in the first place. So in a way, I second what Andrew just said.

Big Jay said...

Mark -- This is a good summary. What is the freaking problem out there? You listed a pretty succinct set of facts. Is the problem just that you are more clairvoyant than the reporters who write in the newspapers out there?

Mark said...

My summary is just the high points. I've not ever seen an article in any media laying this all out.

In fact, many in the media were just acting like cheerleaders before the budget deal, just hoping that the budget "would be passed"--as if simply having a budget was going to solve any real problems.

The problem with the "4th branch of government" is that they're pushing lefty goals and higher government employment just as much as the other three branches here in CA.

Andrew said...

Jay, I'm simply amazed by all this. I settled in California before I became politically aware.

Now I have a job I like, property I couldn't sell, and family close by. That makes it worth staying and working for reform as long as possible.

If I were deciding where to settle and had job offers in multiple states, California would be my last choice.