California's Pain Is Only Beginning

[question everything]

FEBRUARY 11, 2009

California's Pain Is Only Beginning
Cuts to Parks, Schools and Roads Hint at What's to Come Under Any Budget Deal
By JIM CARLTON and BOBBY WHITE
WSJ

BIG SUR, Calif. -- As Sacramento squabbles over the state's $42 billion deficit, Californians are getting a bitter taste of what's to come after the steep budget cuts that are inevitable when legislators and Gov. Arnold Schwarzenegger finally hammer out a deal. Some world-famous parks like Pfeiffer Big Sur State Park may not open this year. After-school programs in low-income areas are being scuttled, putting high-risk teens on the street just as police forces are being cut. Schools are closing classrooms, and some highway projects have ground to a halt. The state may not be able to monitor some sex offenders as required under law.

A budget deal may restore some of the missing funds. But everyone knows that not all monies will flow again after a deal, and Californians increasingly fear they are seeing a hint of their future... The empty coffers have hit some California icons. Pfeiffer Big Sur may not reopen this summer because work on a new bridge to the campground was halted, part of a $6 million renovation project that state officials have ordered frozen along with hundreds of millions of dollars in other state infrastructure projects.. Other states face budget cuts too, but California's budget mess stands out for its size. Its deficit is projected at $42 billion by mid-2010. Since Gov. Schwarzenegger declared a fiscal emergency 14 weeks ago, he and lawmakers have been deadlocked over how to close the gap. Democrats want tax increases and moderate spending cuts; Republicans seek deep cuts and no tax increases; the governor wants a combination.

Californians hoping to do business at the Department of Motor Vehicles were turned away on the first day of furloughs for some 200,000 state employees, a cost-saving measure that went into effect on Friday. Stacey Delo reports from the DMV. (Feb. 6) The governor's office warned Tuesday that if no budget deal is reached by Friday, the state would send layoff warnings to 20,000 workers. Gov. Schwarzenegger also said he intends to cut 10,000 jobs through layoffs and attrition to save $750 million over 17 months.

Meanwhile, the state is raising money in unprecedented ways. The treasurer's office said Tuesday that it is close to selling $200 million in general-obligation bonds to the Bay Area Toll Authority, a municipal agency, to fund public-works projects around the San Francisco Bay area. While Sacramento talks, money is drying up in places like Contra Costa County, where 40,000 families have applied for 350 available slots for Section 8 vouchers -- a federal subsidy that allows low-income families to rent in the private market. "The level of desperation is just heartbreaking," said Joseph Villareal, executive director of the Contra Costa Housing Authority. Marin County's Novato Unified School District alarmed parents with a proposal to cut its entire sports program to help save $6 million over two years, which would affect about 75% of Novato's 8,600 students. "When the community heard about the possible cut, they freaked out," said Superintendent Jan La Torre-Derby, who adds that "it's not set in stone yet."



(snip)

Printed in The Wall Street Journal, page A3

http://online.wsj.com/article/SB123431135774170619.html (subscription)

[leftstreet]

1. The Stimulus passed, so everything will be fine n/t

[Warpy]

2. They need to throw all those Repugs out

starting with Arnold and then set about taxing Arnold's class.

Progressive taxes on obscene wealth are the only thing that will get both California and the rest of the country out of this mess.

It will help if the nation also trims the Pentagon budget.

[question everything]

3. Not just the Republicans

California is the land of ballot measures that mandate all kind of generous spending without ever stopping to think of the source for such spending. Or, it is based on rosy images of the economy.

And the California bureaucracy could put other countries to shame. I once worked at a small company that considered and then rejected a contract with the state. The paperwork was enormous, mostly to prove diversity. This, in a state where no race can claim to be the majority.

(The company was owned by immigrants from India as were most of the workers there..)

[Johonny]

9. I agree

The super majority rule, property tax, and ear marked spending refs have totally hamstrung the legislature. California needs to can it's prop measure system that has passed bad law after bad law and made it totally impossible to properly run the state budget.

[Uben]

4. If you tax obscene wealth, they'll just move....

...to where the tax is less. Then you get nothing. That is why it will never work.

[tabatha]

6. It worked under Clinton.

[AZ Criminal JD]

46. Exactly how was "obscene wealth" taxed under Clinton?

[tabatha]

54. link

http://www.pkarchive.org/economy/ClintonTaxPlan.html

[AZ Criminal JD]

57. That was published in 1993

Long before the tax plan was even passed or when into effect. Means nothing since it is speculation. If it was successful there should be some information about it since then.

[Johonny]

10. Why haven't they moved already?

It's not like living in California suddenly got expensive

[nichomachus]

31. Yeah -- if this were the case

All the rich and famous would be living in NH, TX, and FL. Some -- like the Bushes -- already do, but the problem with that scheme is that you have to live there. It's kind of hard to make multi-million dollar movie deals in East Bumfuck, TX or Nashua NH -- state motto "We have no taxes, and we have the roads and the schools to prove it."

[question everything]

45. Somehow I don't think that the wealthy Hollywood moguls

would feel comfortable at any red state. It is not just money. It is life style and beliefs and the weather.

[Malikshah]

14. Wrong! Airhorn to the face! Wrong!

Stop with the talking points.

Get with reality.

[cottonseed]

20. So all the CA millionaires would move to Elko NV?

I've always heard the same thing. Never seen it in practice though.

[Xithras]

23. Actually, California is an object lesson in over-dependence on income taxes on the rich.

The controller made a comment a while back that was quite interesting. Apparently more than half of the income tax revenue in California is levied against the top 3% of wage earners. Since we're generally a liberal state, we've never shied away from "taxing the rich".

The problem, and part of the reason we're in this mess, is that the rich don't work hourly jobs like we do. Their income tends to come from gains in other investment related sources like the stock market or land investments. In an interview, he said that there were many cases where wealthy people literally paid MILLIONS in taxes last year, but are paying NONE this year because they have taken incredible losses in the crash and have no income to show. Even the people who haven't taken losses by selling are "holding" investments right now, in the hopes of an eventual recovery. No profitable asset sales = no capital gains = no reportable income.

That's one of the fundamental differences between the rich and the rest of us. A truly wealthy person can generally skate for years without income because they have enough assets to get them through the bad times. If the tax structure is overly dependent on taxing the yearly income of those wealthy people, the results of those "down years" can be disastrous for the tax base.

What California needs isn't more income taxes on the rich. The state NEEDS a new taxing model that is less dependent on a tiny percentage of the population and less affected by swings in the economy.

[Hannah Bell]

25. if the "tiny percentage" has a *huge* percentage of the money, tax it.

can't believe how many "democrats" are basically saying "rich people will avoid taxes so there's nothing to be done."

if 3% of the people have 40% of the income & 60% of the property, you don't just give them a pass. if they avoid taxes, take their land.

[Xithras]

29. You're not seeing my point. The rich don't always HAVE income to tax.

Income = Profit - Loss.

In years like this one, any financial gain the Investor Class is seeing is being offset by the losses they're taking in the stock market and other investments. Most of the rich in this nation are actually seeing dramatic reductions in their wealth this year (Gates, Murdoch, et al have lost BILLIONS). You're not earning income if you're losing wealth. No income = no taxable funds.

The rich don't get paychecks. When their investments don't make a profit, they don't have any income to tax. John Chiang (California's Democratic Controller) made a very good point when he stated that half our problem boils down to the fact that our state budget is essentially dependent on the portfolio performance of 3% of the population. When they have a bad year, everyone has a bad year.

Nobody is saying that we shouldn't tax the rich, but the current income tax model doesn't work.

[AngryAmish]

34. Is it axiomatic that a wealth tax = a taking?

[Xithras]

35. Wealth taxes are an interesting idea, but the implementation is a problem.

First, you have the glaring Prop 13 issue. If a persons "wealth" is invested in land, a adding "wealth" tax on that land would be a violation of the state constitution. You cannot levy any kind of wealth tax without first addressing the Prop 13 problem.

If you tax all wealth other than land, the rich will simply shift their investments into property to escape the new taxes.

Even if you did manage to levy new taxes on land-wealth, you also have the problem that a properties value is directly dependent on peoples ability to purchase it, AND someones ability to pay it. Hypothetical situation: A person owns 50 acres of remote land worth about $300,000. The person commutes to a 9-5 job to pay the bills and the existing "wealth" taxes (nearly zero since the mortgage has $250,000 owed, putting the landowners wealth at only $50,000)

One day, the local Native American tribe opens a casino just up the road and improves the narrow road leading past the land. A developer comes in and offers the person $3 million for the now-prime property.

What do you value that land at? What is the "wealth" to be taxed in this situation? What if the person refuses to sell? Taxing wealth means assessing a CURRENT value to property and investments that have not matured or been sold. That is an insanely complicated thing to do, and would be rife with fraud.

[Kaleva]

56. Interesting!

Your post is an example of why I enjoy reading here at DU.

[hiphopnation]

5. sad

we got out just in time, with our school-age children. it's sad to think the place that used to have an education that was the envy of the free world -- i hate to think of how bad public education will suffer there. sad...

[lame54]

7. Direct result of electing a cartoon character to run the state

:mad: :wtf: :argh: :grr: :shrug: :cry: :banghead: :banghead: :banghead: :banghead: :banghead: :banghead: :banghead:

[dana_b]

38. amen!

although I do admit that it's not just Arnold.

[ContinentalOp]

52. "electing"

right

[Winterblues]

8. That may teach them it isn't wise to kick out a Democrat and replace him with a Republican.

California has been on a steady downhill trend since then. Granted there were problems before Ahnold, mainly caused by the Enron/Energy swindle, but things have gotten much worse under the Republican Governor.

[question everything]

11. I don't think that it matters

Over the past 20 years, I think, California has had trouble balancing its budget. Except, perhaps for a few years in the 90s when Silicone Valley soared.

[Winterblues]

12. History may disagree with you

Democrats have always run a more fiscally sound economy than Republicans. Granted there are downturns but on the whole there is no comparison.

[Shakespeare]

16. It's not who sits in the Governor's mansion. It's prop 13.

It's been like a slow-growing cancer on the state budget ever since it was passed. One of the dumbest things Californians have ever done.

[rvablue]

19. Yep. And it will never change. CA homeowners aren't going to raise their own taxes

by overturning it. And the CA legislator will never touch it -- political suicide.



ed:typo

[Gregorian]

27. Prop 13 has it's benefits.

I for one don't like paying lots of tax. I know, but one can be a liberal and not want to pay taxes. It helps older people keep their houses. There is no way in hell my folks could keep the house they bought for 30 grand that is now worth a million just because prices went up around them.

I don't want the tax collector snooping around my property every year. Besides, property tax isn't the only way we can fund what we need. I think most of what we need comes from federal taxes. But so far they have been going toward bombs, mainly. That is my biggest gripe with taxes. Give me something for my taxes and I won't complain. Most of the local property taxes go toward things I have zero interest in. But then I'm not married with three kids.

[Hell Hath No Fury]

28. It keeps me in my house.

I have lived there 44 years -- Mom bought it when I was just four, for $22,000. It was last estimated (pre-bust) to be worth $600,000. And we are talking about a small, two bedroom, one bath house.

If I were to be paying property taxes on the value of my house, I would be paying over half of my entire yearly salary to keep up. I am house rich, but have a completely working class wallet -- a rarity here in SF anymore. :(

I would be forced out of the City I grew up in.

[slackmaster]

30. The property tax limits directly benefit almost everyone in the state

Since landlords almost always pass property tax on to renters.

The only people who don't see a direct benefit from it are prisoners and homeless people.

[rvablue]

37. Really? Do you benefit from a crumbling school infrastructure? n/t

[slackmaster]

42. Of course not

But you can't deny that keeping housing costs low doesn't help just about everyone.

Did you know that counties and municipalities can vote in local assessments over and above the Proposition 13 property tax limits to pay for things like schools?

I live in San Diego. The local bonds, nearly all of which are for schools, add up to about a 10% surcharge on property tax.

Blaming the state's fiscal woes on Proposition 13 is a cop-out. The legislature has failed to discipline itself on spending.

[rvablue]

36. I know people don't want to pay more taxes, I get it. But CA will forever continue

to go down hill with Prop. 13 in place.

If you live in CA, "Paradise Lost" by Peter Schrag is a must read to understand the "cancer", as another commentor deemed it, that is Prop. 13. He predicted close to it's inception that it would ruin CA.

Your local library should have multiple copies.

[slackmaster]

43. About 55% of the state's revenue is from personal income taxes

Which are the highest in the country - 9.3% for people with AGIs just over $44,000 per year. That's a very heavy tax on all but low-income people.

Our corporate tax, fuel tax, sales taxes, and vehicle registration fees are among the highest in the country.

Vermont has a 9.5% bracket, but you have to earn $375,000 to get hit with that.

Blaming our budget problems on Proposition 13 is a cop-out. I find it extremely annoying when people say the reason the state is messed up is that I'm not paying enough tax. Proposition 13 was a reasonable reaction to a completely unreasonable situation, in which both the state and the counties were raising taxes without restraint.

I'd be happy to share a summary of my 2007 tax returns later this evening if anyone doubts that someone like me pays plenty of tax.

[Gregorian]

53. I disagree with his premise. But agree with the reality.

I've been furious with what happened here. But it wasn't legislation that caused it. I watched as the out of state license plates showed up in droves, along with the new housing developments. It was the weather. It was the increase in population after world war 2. I'm still struggling with my discouragement over the mess, nearly forty years later.

[AlCzervik]

13. and all the state workers that have to take an unpaid day off a week, we won't feel that

until March i think, that's almost a whole week of pay and here in Sac lots of people work for the state.

[Parker CA]

15. Word is that the budget will finally come together by tomorrow.

Keeping fingers crossed that the gridlock will end!! This is an embarrassment for this state, and a sign that the leadership is inept. Not even remotely a good showing for the fifth largest economy in the world.

[question everything]

18. Just in time to start next year budget which, I think, starts July 1st

or, perhaps, Aug. 1st?

[dana_b]

40. but we've already spent half of the money

and owe billions more.

At least people will get to go back to work.

[SidneyCarton]

17. I hate the referendum system, but we need a ballot measure here

That would let the Legislature pass a budget with a simple majority. The budget would pass on time, and the State GOP would become truly insignificant.

[LaPera]

21. 59 Dems in the assembly to 21 Repukes - and it's minority rule in CA!

The minority republican party in the assembly refuse to raise taxes, which are absolutely needed to help out schools, health care programs, etc....But now will be cut by tens of billions of dollars collectively.

The states republicans have been threatened by that sick republican pig Grover Norquist, that if any republican EVER votes for a tax increase of any kind in CA Norquist's organization will unseat any republican that votes with the Dems on a tax increase in the next republican primary.(The republicans in CA even signed a pledge to Norquist).

Needing 2/3 of the assembly to pass a budget it's being held up (for almost a year now) by the usual greedy, selfish republicans with minority rule.

Norquist of course doesn't even live in CA but wants to break ALL government (state & federal) social programs, (which includes education).

The republican are directly to blame for this budget crisis in California.

[Parker CA]

24. And Arnold's complete inability to broker a deal between the top two people from assembly and senate

is a massive failure. Recall, anyone? We need someone that can actually get the job done. This is pathetic.

[XemaSab]

22. Let's hope to got we get some rain in the next few months

Fortunately it's raining now, but for a while there it was looking like dust bowl time in the Golden State.

[Warren DeMontague]

26. Gee, whiz. If only there were some highly profitable source of revenue.. something that, if

legalized, regulated, and taxed, would constitute a multi-billion dollar industry and across the board boon to the state's revenue, while simultaneously allowing a cut in a massive source of expenditures; i.e. the warehousing of certain non-violent criminals.



Gosh. Wow. Can you imagine? Of course, people wouldn't be so dumb as to overlook such a massive source of revenue, right?



No one could be that stupid. Right?

[Blaze Diem]

32. Wouldn't that just be the 'shit' if good old Pot saved the US Economy from total collapse.

HA !! i-fuckin-ronic

[K Gardner]

33. Wish I could just K&R this response, LOL !

[rvablue]

39. Can you tax something that people can grow on their window sill or back yard?

This is the only reason pot is not legal.

The drug companies can't figure out how to profit from it. And the government cannot figure out how to tax it.

[tjwash]

41. You can grow tobacco in your back yard too.

But people would rather go to the store to get a pack of smokes, because they always to have it available, and they are quality controlled. Who wants to wait around forever for their plants to bud out on them, when they can run down to the liquor store for a bag?

[slackmaster]

44. You can get in trouble for doing that

Google Wickard v. Filburn.

[Warren DeMontague]

48. If nothing else, the savings from the "drug war" would be pretty big.

Nevertheless, brewing beer at home isn't terribly complicated, yet most people find it simpler to go to the Safeway and buy a 6-pack. I suspect the same would be true of pot. People are fairly lazy; not all of them are going to want to go to the trouble of growing it.

Jesus, making your own espresso at home is a fairly no-brain, 5 minute operation, yet look at what a bonanza Starbucks' does selling lattes for 4 bucks.

[varelse]

49. California is ready to go with this obvious and simple solution

Too bad our Federal Government is responsible for banning this potential revenue stream, and sadly there's plenty of stupid to go around on Capitol Hill :P

[Taverner]

51. HAHAHAHAHA EXACTLY!!!!!

And it would increase tourism here

Especially if, only for a small while, California is to to 420 what Vegas is to gambling...

[Toasterlad]

47. At Least Those Gays Can't Get Married! Californians Understand Priorities!

It's worth the financial hardship to make sure the hell-bound don't have rights. You have to focus on what's IMPORTANT.

[Taverner]

50. At least the stimulus passed, which means $$ so education doesn't go down

Or at least, not down as much...

[Zomby Woof]

55. Prop 13 only took a generation to wreck the state

The only foreseeable act of political courage in California is unfortunately, political suicide: repealing or reforming Prop 13. Until then, the budget "solution" coughed up every year is just a shell game which will ultimately fail us all.

[rvablue]

58. Glad someone else is shouting this from the rooftop...

every time I post about I get shot down.

I can sympathize 1,000% that people don't want their taxes to go up.

Some say they wouldn't be able to afford their houses anymore.

But the bottom line is like you said: if Prop. 13 remains in place CA will only continue to decline.

And frankly the whole referedum system should either be overhauled or trashed. CAer's keep voting in new measures that don't have adequate funding.