A Repeat of the California Budget Mess

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By nwunderlich


Once Again - We Have a Deficit

I am beginning to feel like California is a broken record and a bad student of history.

Once again, California has a huge budget deficit. It is about 7 weeks since the 2008-09 budget was signed, and already it is at least $11 billion in the hole.

This was bound to happen. The budget was balanced last year with accounting gimmicks and inflated revenues. Instead of using real revenue projections, the revenue projections remained flat. But anyone with common sense knows that when people are losing house and jobs, revenues to the state go down. Let's not let reality interfere with passing a budget in California. The Legislature and the Governor simply ignored that, and went on as they would.

So now the Governor is blaming circumstance beyond his control for the hole in the budget. But the ironic thing is, the circumstance weren't beyond his control. He has a line-item veto power in California. He could've vetoed out enough spending that there wouldn't be a hole. That would have been the responsible thing to do, but it would also have been politically devastating. So instead, he signed a budget that made no sense and was out of balance the minute it was signed.

Don't blame the Governor entirely. The blame also rests with the Legislature. Instead of doing the responsible thing and looking at where all of the money is going and determining if the program is successful, if the people are needed, if something could be put off for a year - the Legislature just assumed that the baseline spending that the departments and agencies had was good, and then increased spending over that baseline. They refused to take serious cuts to balance income and expenditures. Additionally, they passed bills that are going to require money in the coming year. Instead of being responsible - they wanted to be ideological.

Now there is a mess.

The Governor's Plan

This is the Governor's plan on how to close part of the budget gap that exists for this year. Not the whole gap - only part. And not fix the budget for next year - but just close the gap for this year.
This is the Governor's plan on how to close part of the budget gap that exists for this year. Not the whole gap - only part. And not fix the budget for next year - but just close the gap for this year.

The Real Problem

So instead of doing what is right and balancing the budget when he signed it. The Governor now wants to do all sorts of trickery and gimmicks - yet again (like I said, he doesn't look at history and the gimmicks that got us here in the first place).

He said, when he took office, that he would balance the budget and not use accounting gimmicks. That ship has flown. He blames the recession - other recession states have balanced their budget. The Legislature blames the two-thirds majority requirement. Maybe if they started talking earlier about real solutions rather than only 2 (cut services and raise taxes) they could deal with this gap. Other state's have a two-thirds requirement (not many, but at least 2 others do) and they pass balanced budgets. So that isn't the problem either.

The real problem is the system. Have you looked at the California budget? I have. I have done lots of work with the California budget, so I am not a novice. And from my perspective - there is no transparency. There are simply items of appropriation with a "program" (in CDCR a program is "health care") and a dollar amount. There is no way of knowing where that money goes. How much to staff, overhead and program? You cannot tell. You also cannot tell if the program is working. And for that matter, most departments and agencies cannot tell you if a program is working. All they can tell you is that the program exists, and what it does. No stats on if it is working.

And to build the next year's budget, all that is done is simply roll-over the totals from the previous year, and then make some additions - sometimes subtractions if the funding was one-time - but mostly additions. Departments get additions for raises in employee compensation, cost of operating expenses and equipment, and anything they ask for that is approved. There is not a process to justify what they already have. And I bet that the departments and agencies couldn't do it if they were asked to. Too much money can be moved around from where it is budgeted, and too many games can be played.

Also, California has a little thing called Prop. 98. When it was enacted, it was to provide state funding for schools at a certain level so that all schools would get minimal funding. It has a mandatory requirement that approximately 50% of the General Fund goes to public schools. The money isn't buying the schools equality and the schools aren't getting any better. So the Legislature wants to throw more money into a program that isn't working, instead of looking at why we need Prop. 98 or a better way of funding education (a whole topic for another time). So we have a mandatory spending for education. Additionally, Prop. 98 has a requirement that the amount given under it grows every year. Just what the budget doctor ordered - more spending.

So the problem lies in the budgeting to begin with, and is aggravated by all the other issues that the Governor and Legislature like to have - like communication.


My Solution

Just because I don't believe in complaining without offering solutions - I am going to offer my solution.

It is better than the Governor's because it will require an actual equality between income and spending - which is a basic principle of budgeting (anyone with a family knows this). You simply cannot spend more than you take in.

It doesn't involve getting rid of Prop. 98 . I am sure that getting rid of Prop. 98 would be a good solution. It would allow money for schools to be budget on need, instead of a formula. It would allow for a change in the teacher pay structure - so that it becomes incentive based and not simply length of service based. It would allow for limits on the funding for schools - so that the funds go to academics and not new football fields. When the kids in California cannot pass a High School Exit Exam that test 8th grade material - why do they need more sports if they are 12th graders and cannot do 8th grade level work? It would give the schools more of what they need, and bypass the pork barrel buffet on the way.

But it won't work. The Teacher's Union would throw a fit - and so would Democrats because they are funded by the Teacher's Union. So that solution is not a possibility - although it would be nice.

Instead, let's focus on programs that work. Each department and agency should have to justify why it needs each position and each dollar it gets. The state isn't - shouldn't be - a full employment act. The state needs to be able to function. Especially a state like California which is so large and has so many needs. So let's cut the full-employment act deal, and focus on what we need.

Then each program that a department or agency runs needs to be analyzed for cost-benefit. Is there a non-profit that is doing the same thing, but for less? Would it be easier to fund a non-profit with grant money than run a state program with all the overhead involved? That should be looked at. Also - the success of a program should be examined. I have no problem with programs that help those who cannot help themselves. But I know plenty of disabled people that simply don't work because they can get benefits. But they could work as a secretary somewhere. There is a blind man in our office who does analysis work on a computer. Tell me that's not a good thing.

So let's analyze the programs, keep the ones that work and dump the ones that don't. That will save money.

Then let's streamline things. A department shouldn't need 200 HR people. It doesn't need 2 office technicians for each analyst. Once again, the state isn't a full-employment act. It should run efficiently. Otherwise we will remain in this mess.

Lastly - there will be cuts. California provides the most services of any state in the country, and has one of the highest tax burdens. Do you really want to increase taxes more? And with all the services we provide, the roads suck, the school are ranked in the bottom of the country, and people are still on welfare when they should be off. So what are we getting in return for our taxes? Not a lot.

So let's make some cuts. Do we need a Department of Education and a Secretary of Education? Both of which do the same things - and some of what they do should be done at the county level. The state isn't held responsible for education, the local districts are. So shouldn't they be the ones who are deciding what textbooks are best for their students and how to teach the curriculum? Do we really need all these people working for a large bureaucracy? Let's cut some of this out.

Do we really need 2 commisions who jobs it is to review state laws and recommend changes?

Let's dump some of this, and start over. And that will require a lot of work, but it needs to be done. Each dollar needs to be analyzed, and each position needs to be justified. When someone goes into debt, this is what a credit counselor helps them do. Maybe we should contract out for one of those?

Conclusion

The last thing that I want to do is give the government more money. They cannot spend the money I have given them responsibly, so why should they get more? In the boom years, instead of putting it away, they spent more and more. So now, in a bust year, we are in trouble.

The Democrats object to a spending limit - saying that it would limit the growth of new programs. Do we really need new programs? Why not take a look at what's not working and change it so that it could be a new program. Then you could still operate within a spending limit. And the limit would grow and adjust for inflation and population growth. What is wrong with that idea?

Why is requiring justification to spend money wrong? Including justification of what you are already spending? What is wrong with that? It will take a lot of time, but why is it wrong?

And taking it out on state workers is wrong. State workers take state jobs instead of private sector jobs for security, benefits and retirement. In return, they are paid less in actual pay. They take the jobs, and now the Governor wants to mess with them. Why? They aren't the ones who screwed the budget up. That particular trophy goes to the Governor and Legislature. Speaking of which - the Legislature hasn't taken a cut recently - only grown. So why not make them take a hit? But let's not take it out on the state workers. (as a side note, why eliminate Columbus Day? Cesar Chaves Day was the last one in, so let's eliminate it first. Wait - that is politically unfavorable. We cannot do that)

So here's the challenge I want to issue to the Legislature and Governor - do something real. Balance income and expenditures with what you have, before you ask for any more. Prove to me, and all of California, that you can do the hard stuff, before you try and convince me that I have to do the hard stuff and pay more taxes.

And here's another thing - California likes to be the land of the inclusive people. So we give access to all these services to illegals - who aren't citizens. Why not eliminate that? In some states, illegals aren't provided access to anything. Why not do that here? It would serve 2 purposes - (1) make California less attractive to illegals, and (2) cut back on costs.

Anyways, those are some of my solutions. I wish someone would pay attention to them, but they won't. The state will go on as usual, and my taxes are going to end up being at 30% and in return I am going to get nothing.

Comments

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ESAHS  says:
13 months ago

"The last thing that I want to do is give the government more money. They cannot spend the money I have given them responsibly..."

"I agree with the above comment truly!"

"Therefore, I hope the next upcoming months brings economic change to the United States and not more hardship!"

"Two thumbs up!"

CEO E.S.A.H.S.  Association

bgamall profile image

bgamall  says:
11 months ago

The problem is that the economy in California was based upon people taking equity out of their homes. Median income in Calfornian is not a lot higher than elsewhere, yet house prices at the peak were 3-4 times the national average. The problem is that the spending power of this housing ponzi scheme was caused by the federal government to fund the Iraq War for oil.

So, the governator is put in a very bad position. California benefited from the ponzi scheme of the federal government more than any state, but the result is they are paying more than any state and the house prices ARE STILL TOO HIGH. They do not reflect the fundamentals of rent and wages at all.

The problem in California is catastrophic. It is Bush's fault as the government allowed the alta and option arms to run wild, even though they were warned that it would have disastrous consequences.

nwunderlich profile image

nwunderlich  says:
11 months ago

I tend to disagree. The problem was that people bought more house than they could afford and betted on being able to sell it before their mortgage readjusted.

You know when you are buying more house then you can afford. If you cannot afford the house, and have to rely on mortgage gimmicks, then you shouldn't buy it. But people were so excited they could "afford" a house they didn't take a second to think what would happen when they couldn't afford the payments anymore. They gambled and lost.

It is a problem, but my taxes shouldn't go to fix it.

An even bigger problem is that people won't let the economy readjust. They want to "fix" the problem, without really understanding it. So let's understand the problem before we try to fix it.

Spending billions to bail out banks who then cannot tell you where the bail out money is going is not ok with me.

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