2009 June 11 Thursday
Democrats In California Legislature Face Fiscal Meltdown

Absent drastic spending cuts the state government of California will run out of money in late July 2009.

Senate President Pro Tem Darrell Steinberg pushed for raiding much of the state's proposed $4.5 billion budget reserve next year to bankroll key health, welfare and college aid programs.

"The purpose of a rainy-day fund is to provide funds for a rainy day," he said. "It's thunder and lightning in California right now."

A budget reserve is for worsening conditions and unforeseen problems. The economy could easily contract even further and and further reduce the state's tax revenues.

The editors of the Fresno Bee say partial solutions got us into this mess.

Gov. Arnold Schwarzenegger is correct to insist that the Legislature solve the entire state budget problem of $24.3 billion, and not come up with partial solutions, with the hope that tax revenues will increase as the economy improves. Partial solutions have brought California budget misery that now threatens every state program, including the safety net for our poorest residents.

Karen Bass doesn't want a $24 billion dollar hole in a $92 billion budget to lead to big spending cuts. To do what is necessary is a misuse of the situation.

Assembly Speaker Karen Bass also explained that [t]he bottom line for Assembly Democrats is that we are committed to ensuring that the state's fiscal emergency isn't allowed to be misused to eliminate the safety net in California or to eviscerate our public education system."

Misused? A budget deficit shouldn't be "misused" to cut spending? How should a budget deficit be used? To increase spending? There's an Alice In Wonderland aspect to the California state legislature. The state is in its biggest fiscal crisis since the Great Depression and the Democrats are in denial that they have to make big cuts in spending programs.

Clue for Karen Bass: When you have less to spend you have to spend less. Admit it. Accept it. Make peace with it. The state government doesn't have the money that a welfare state requires. Don't dig the hole deeper. You are just delaying the inevitable and making the inevitable cuts deeper when they come.

I wonder of the Democrats in Sacramento need for the state to totally run out of money in order to let them justify to their supporters that government employees must get pay and benefits cuts and that many welfare programs must be slashed and eliminated. Do they need a fully developed state crisis to force them to make drastic cuts?

State Treasurer Bill Lockyer says the legislature needs to vote with to solve the budget crisis with the belief they will not get reelected.

Lockyer was invited by Assembly Speaker Karen Bass (D-Los Angeles) to explain the fiscal facts of life to house Democrats during a five-hour caucus Monday. These mostly-liberal lawmakers soon will be asked to cut spending as they'd never dreamed in their worst nightmares.

"I began with, 'Why don't you start with the realization that probably none of you are going to be back here next year?' " after the November elections, Lockyer recalls.

"That's a very liberating thought, and with it you can get a lot done."

Imagine that none of the people in the legislature were even eligible to run again. Would they finally vote to balance the budget?

Arnold Schwarzenegger wants to terminate some spending programs. Schwarzenegger calls on the legislature to put the citizens ahead of the interests of employees of the government and unions.

In the wide-ranging interview, Schwarzenegger challenged legislative Democrats to resist the influence of special interests fighting the deep program cuts he has proposed to help balance the budget.

Clearly alluding to labor unions that oppose the cuts, the governor said: "Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them."

But Arnie's in some denial of his own over Hispanic immigration.

SACRAMENTO Gov. Arnold Schwarzenegger on Friday disputed claims that illegal immigrants caused California's $24.3 billion deficit, while he praised their economic contributions and said he is "happy" they have access to services.

Reality check: Imagine America's southern border was closed to immigration 30 years ago. Imagine illegals were rounded up and deported. California would have many millions fewer lower skilled and lower earning Hispanics. Also, millions of higher earning whites would not have fled the state for a better life elsewhere. So the state would face less demand for medical, prison, and other services for poor Hispanics and more tax revenue per higher earning citizen. The state would be in better shape to the tune of billions of dollars per year.

The illegals alone cost several billion per year. The descendants of previous generations of illegals cost far more.

He said the cost of services to illegal immigrants, which has been estimated at $4 billion to $5 billion annually, is a "small percentage" of the deficit California faces.

Update: BTW, a factor rarely considered in discussions of immigration is the fiscal effects of population growth. When a population grows the number of roads, schools, police stations, court houses, jails, fire stations, sewage treatment plants, and other physical plant must all increase. Those costs end up getting paid much more by the existing population than by the new population since all are taxed to pay for the needed additional assets. Since the immigrants have much lower productivity and earning power than the natives the natives pay an even larger amount to fund the needed infrastructure.

California's rapid population growth due to immigration is a major reason why it is in a fiscal crisis. Lower income immigrants have come in while higher income natives have left. This trend looks set to continue in the future. The remaining white population will shrink while the lower earning Hispanic population grows. We will see both higher taxes and lower quality of public services as a result. The California dream is dead.

Share |      By Randall Parker at 2009 June 11 11:43 PM  Economics Government Costs

Anonymous said at June 12, 2009 5:48 AM:

CA is hoping for a bailout from the Feds. But I hope they crash and burn instead.

Sgt.. Joe Friday said at June 12, 2009 10:18 AM:

"He said the cost of services to illegal immigrants, which has been estimated at $4 billion to $5 billion annually, is a "small percentage" of the deficit California faces."

$5 billion is roughly 1/5 of the deficit. Unless you consider 20% of something to be a "small percentage" it looks like a pretty good place to start, if you ask me.

Oh, and BTW the water crisis we're having would not be nearly as big a problem if we had, let's say, 24 million people instead of 38 million. Ya think?

Anonymous said at June 12, 2009 10:50 AM:

"Oh, and BTW the water crisis we're having would not be nearly as big a problem if we had, let's say, 24 million people instead of 38 million. Ya think?"

I'm sure the Sierra Club will get right on that...

kurt9 said at June 12, 2009 1:50 PM:

I'm sure the CA legislature is hoping for some kind of bailout from the Feds. The problem with this is that it would be political suicide for either Team Obama or any of the congresscritters to support such a bailout. You must understand that much of the rest of the country is very hostile towards any federal bailout of CA and that any congresscritter voting for it is likely to be replaced in the next election.

CA state government will eventually have to bit the bullet and start auctioning off state assets. This will include highways, state land, and the UC and CalState university systems. Of course the state workers unions and other liberal-left interest groups will oppose this. This is why it will not happen until CA state government actually collapses, which is likely. Historically, bureaucracy is incapable of internal reform. The reform process can only come from outside, which usually means collapse (the U.S.S.R. is a textbook perfect example of such a collapse).

Some wordy bastard said at June 12, 2009 10:17 PM:

I think kurt9 is correct. This situation will not be fixed from within.

Let the state go bankrupt, I say.

Priapus said at June 13, 2009 6:03 AM:

Look on the bright-side:
Malthus and Darwin agree that the present distress in California will make for some very good 'extreme-porn' with noted auteurs such as Rob Black and his 'Extreme Associates' outfit putting out even more 'challenging' producy, there being no shortage of willing female raw material in SoCal.

"Ho, ho, ho - The Phallus".

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