Arnie, still the governor of the fiscally deteriorating state of Calfornia, wants to outsource the imprisonment of illegal alien criminals to cheaper Mexican prisons.
We pay them to build a prison down in Mexico and then we have those undocumented immigrants be down there in a prison and with their prison guards and all this. It will halve the costs to build the prisons and halve the costs to run the prisons. That is money—again, a billion dollars right there—that can go into higher education.
His predecessor Gray Davis made a sweet deal with the union for California state prisons that made salaries and other labor costs for prison guards quite high. So California state prisons are expensive to operate.
This idea can be extended: Deport all the illegal aliens from California to Mexico so their kids can go to cheaper Mexican schools, they can use cheaper Mexican dentists, cheaper doctors, and cheaper police. Time to save money. California is a high cost state and no place for high school drop-outs from groups that continue to perform poorly in later generations.
Arnie is also making greater use of private prisons. He is trying to undo the damage caused by Gray Davis's big raises for the state prison union members.
Without a doubt, the state saves money by using private prisons. A recent state audit estimated that the cost of housing an inmate in private lock-up is between $3,200 and $7,800 less per year than in a state prison.
One reason is that private companies pay guards far less than the state pays prison officers, many of whom earn in excess of $100,000 with overtime and other bonuses. Therein lies perhaps the largest obstacle to any expansion of private prisons.
The California Correctional Peace Officers Association fiercely opposes private prisons, and regularly spends millions on state campaigns.
The union was particularly close to Schwarzenegger's predecessor, Gray Davis. Indeed, the union donated $251,000 to Davis on a single day in 2002, shortly after the Democratic governor signed a labor contract intended to give prison officers pay raises of 37 percent over five years.
Political systems accumulate parasites until crisis forces a cutting back. In California's case it is amazing just how bad the crisis has to get before various forms of parasitism get trimmed back. It isn't even clear that a reduction in parasitism will continue to happen. In the 2010 election the Democrats could win the governorship and gain seats in the legislature. If that happens the parasites will raise taxes.
The LA Times ran a story last week about how California's budget deficit is opening back up again and the Governator wants to make more big cuts in spending.
Reporting from Sacramento - Facing a budget deficit of more than $20 billion, Gov. Arnold Schwarzenegger is expected to call for deep reductions in already suffering local mass transit programs, renew his push to expand oil drilling off the Santa Barbara coast and appeal to Washington for billions of dollars in federal help, according to state officials and lobbyists familiar with the plan.
If Washington does not provide roughly $8 billion in new aid for the state, the governor threatens to severely cut back -- if not eliminate -- CalWORKS, the state's main welfare program; the In-Home Health Care Services program for the disabled and elderly poor, and two tax breaks for large corporations recently approved by the Legislature, the officials said.
The state is in a seemingly permanent financial crisis. The deficit is 20% of the general fund. Click thru and read all the details.
Since I expect Peak Oil to cause an extended period of economic contraction in the 2010s and 2020s I expect huge cuts in what governments do. As tax revenue declines the percentage of tax revenue spent on debt service will rise and spending will get cut more than tax revenue declines.
You might expect governments to raise taxes under conditions of extended declining revenue. But the voters will feel poor as their living standards decline and they won't want to give up a larger percentage of declining incomes to government.
As if they weren't high enough already.
Under the latest changes, for a married couple filing jointly, the top tax rate of 9.55% now begins at $92,698, down from $94,110. Combined with the earlier increases, such a couple with two children, earning $100,000, will see their California income tax bill rise by 22.3%, or $716, according to the state Franchise Tax Board. Their tax would go from $3,208 to $3,924, factoring in a $110 drop in the standard deduction for joint returns.
For singles, the top tax threshold has dropped from $47,055 to $46,349. This year, a single filer without children who earned $30,000 in 2008 and 2009 would pay 13.8% more: $617 instead of $542. The standard deduction for sole filers will fall by $55.
The state's ongoing financial crisis needs to be seen in perspective. Some states have no income tax at all (e.g. New Hampshire, Florida, Texas, South Dakota, Wyoming). Some states have no sales tax. California has high levels of both. There are restrictions on the property tax due to Proposition 13. But given our higher housing prices the governments still get a lot of money from property taxes. In spite of all this we still have a state government funding crisis.
I think I'm going to have to leave California eventually. Given our demographic trends this story is going to get much worse. Any suggestions on where a software developer (Linux drivers, C/C++ both embedded and Win32, Javascript/CSS/HTML, even some .NET experience) ought to live? Alternatively, got experience in places where you think one shouldn't want to live?