Tag Archives: Governor Schwarzenegger

California May Have a Budget!

Here are some facts:

  • The budget is 99 days overdue. PA and NY’s budgets were also-past due, but they were resolved long ago.
  • According to reports, the state’s $19 billion budget gap is closed:

with what lawmakers call solutions and creative accounting tactics, some of which push off payments to the next fiscal year [MM: Sound familiar?]

  • The deal was made possible by a recent ruling by the state’s Supreme Court. It upheld Governor Schwarzenegger’s mandate that 200,000 public employees take unpaid days off.
  • The deal required $5.3 billion in federal aid. If we extrapolate the result from Sobel and Crowley, the federal aid may stimulate anywhere from $1.7 to $2.2 billion in new state taxes. 
  • Last month, the Wall Street Journal reported:

On the brink of insolvency, California may have to pay its bills with IOUs soon. A budget was due three months ago, and the legislature hasn’t passed one.

The lawmakers can, however, point to a list of other achievements this year. Awaiting Gov. Arnold Schwarzenegger’s signature, for example, is a bill that would bar the state from filming cows in New Zealand. It’s the fruit of five committee votes and eight legislative analyses.

California lawmakers also voted to form a lobster commission. They created “Motorcycle Awareness Month,” not to mention a “Cuss Free Week.”

And they kept the California state rock safe. Senate Bill 624 had sought to bust the rock, serpentine. Adamant opposition protected it, but sponsor Gloria Romero declared this “an issue we should address again.”

Pension Reforms from California Progressive Leaders

California’s pension tsunami is a few years from decimating the cities. In 2015 it is estimated one-third of Los Angeles’ budget could go to pay for employee retirement costs. Steven Greenhut reports at City Journal these facts have touched off calls for reform not just among fiscal conservatives but among several prominent progressive leaders in the state.

San Francisco Public Defender Jeff Adachi is a Democrat and the sponsor of “Proposition B” or the Sustainable City Employee Benefits Reform Act which will appear on the November ballot. If passed, the measure requires uniformed police and firefighters to dedicate 10 percent of their income to their retirement.(City employees would have to increase their contributions to 9 percent).

While unions and their political backers are likely to challenge any alteration to the status quo, a shift in thinking may be taking place, as Greenhut reports. Governor Schwarzenegger’s pension adviser, David Crane, points out the price for ignoring pension reform is less public funding for progressive programs. That tradeoff is real and significant. In the next five years the cost for San Francisco’s employee benefits are slated to rise from $413 million to $1 billion. Charles Lane writing at The Washington Post puts it another way: “Nothing threatens the political consensus of progressive government more than the widespread impression –and reality– that public employees have captured government.”

In other words, profligate fiscal policy doesn’t just affect taxpayers and weaken economies. Unsustainable spending also harms beneficiairies by undermining expectations and trust — a recipe for dysfunctional government.

A Tale of Two Governor’s Addresses

New York and California are arguably in the worst budgetary condition of all the states. Yesterday, the governors of each gave very different State of the State Addresses on how they intend to deal with the coming months. Governor Schwarzenegger reiterated his request that Washington, D.C. send back what is owed to California. In his words, “the federal government is part of our budget problem.”

In his analysis, this means more federal money will help fix California’s budget. However, more federal money to California will accomplish exactly what it has accomplished to date. It will delay real reform of California’s fiscal tailspin (e.g. CalPERS).

By contrast, Governor Paterson of New York gave a somber assessment of New York’s “winter of reckoning,” placing blame squarely on the state legislature for excessive spending and deal making with unions, feeding an “addiction to spending, power, and approval,” that has left the state in economic catastrophe.

New York’s Governor got the diagnosis right. As The New York Times notes, last year’s stimulus led the state to increase spending by 9 percent, even as the economy faltered and revenues plummeted.

Both governors want to stimulate “green job” creation. Unfortunately, it’s a policy more that’s more well-intentioned than effective. Governor Schwarzenegger talks of privatizing prisons. Governor Paterson wants ethics reform in fundraising. The primary difference is while New York’s governor has admitted to a spending problem, California’s is still making excuses to continue.

Schwarzenegger’s “The Collectinator”: California’s bailout sequel

Governor Schwarzengger has resurrected a moniker. In 2003 he called himself “The Collectinator” for his promise to get money back from Washington, D.C. Now, the governor will seek several billion more to help California meet its $21 billion budget shortfall through 2011. His office argues that under President Clinton, California received 94 cents for every dollar it sent to Washington. Now it’s 78 cents. The claim is California is subsidizing programs in other states. Of course, it does not follow that the rest of the United States should subsidize decades of excessive in-state spending in California. To be sure Governor Schwarzenegger doesn’t have it easy. An Alameda Superior Court ruled yesterday that the Governor cannot furlough thousands of unionized state workers including members of the Services Employees International Union. The case is now headed to the state Supreme Court.

More Evidence of Real World Tiebout Competition

The past year, California experienced its lowest population growth rate in over a decade. Furthermore, the state’s positive growth was maintained by foreign, rather than domestic migration. The San Francisco Chronicle reports:

Since [2005], more than half a million more people have left California than have moved to the state. They mainly have moved to neighboring Western states, said Mary Heim, chief of the demographic research unit at the Department of Finance. In past years, more of those people moved to Nevada, but last year saw an increase in people moving to Oregon and Washington, she said. Texas also attracts a large number of Californians.

The article quotes state policy analysts who suggest that the Golden State’s regulatory climate is driving jobs and residents to other states. Contrarily, a Newsweek article from earlier this year explained that California’s CO2 regulations, the strictest in the country, could help the state’s businesses:

California has led the way in demonstrating how market-savvy regulation, instead of stifling growth, can jump-start innovation. For instance, the state has revolutionized the way utilities are regulated: instead of making profits by building more power plants, the California Public Utilities Commission links utility profits to efficiency gains—and leaves it up to the utilities to decide how to do it most cost-effectively.

However, potential Republican gubernatorial nominee Meg Whitman sees the situation differently. She said of Governor Schwarzenegger’s energy regulation:

I applaud the goals of AB 32 and our Governor for forcefully advocating for a clean environment.  However, three years ago when the bill was signed, the unemployment rate was 4.9 percent with 883,000 Californians unemployed.  Today, we have 12.2 percent unemployment, with 2.2 million Californians out of work.  Simply, jobs must come first.

Whitman’s views are in line with the ALEC-Laffer analysis of the states’ business environments, which suggests that Americans are moving from states with higher regulatory burdens to those with more economic freedom.

Assorted Links

New York City Mayor Bloomberg’s job creation math called “puffery” by the city’s Comptroller.

Governor Schwarzenegger holds a garage sale.

Tree-cutting penalties waved for Potomac, Maryland parochial school in exchange for scholarships and environmental curriculum.

Federal aid now flowing to New Orleans boosting rebuilding.

“Seized”: New York’s tax authorities working to collect delinquent sales taxes from businesses. To date, 69 businesses auctioned off.