The California Budget Dilemma


California is really messed up. The rules under which the legislature and the governor work, make it almost impossible to get decent governance, and especially decent budget making. It takes months and months of negotiation, and often capitulation by progressives because the Republicans only need to get 34% of the votes in order to stymie any new taxes or for that matter any other budget decision. That’s the reason California will have a more than $20 billion deficit for the next year.

I thought this article by Richard Halls that in the Marin Independent Journal would be interesting to many of you.

(I apologize that I have not had more blog articles recently. Because I broke my wrist a few weeks ago and am wearing a cast is very difficult to write. In fact, I am using a software product called Dragon naturally speaking, to say the words and have the system right on the screen by itself. It still takes a lot of proofreading, because the software can’t make all the distinctions that a human mind can make.)

Marin budget makers balance state budget with more than $30 million in new taxes

Richard Halstead

Posted: 06/27/2010 07:33:45 AM PDT

The Marin Independent Journal

It took a group of 50 Marin residents gathered Friday afternoon at Terra Linda High School a little more than two hours to balance California’s state budget even though they started with a $20 billion deficit.

The attendees participated in a computer simulation that was staged by Next 10, a San Francisco nonprofit, and hosted by Assemblyman Jared Huffman, D-San Rafael. Democratic members of the state Legislature have been hosting similar bake your own budget parties throughout the state with the help of Next 10.

“We’re nonpartisan but when Speaker of the Assembly John Perez came in, he wanted to partner with us to try and get information out about the budget,” said Noel Perry, who founded Next 10 six years ago. The $20 billion deficit reflects the reality that Legislators face this year, due in large part to the economic slowdown.

So how did this group of budget amateurs achieve a task in 120 minutes that typically takes the governor and the Legislature months? To be fair to the politicians, many of the choices made by the simulation participants would not be politically feasible in the real world.

“If this were the real world,” Huffman said, “we’d lock all the doors and I would tell you guys I’ve got some bad new for you. You’ve got great ideas but our Republican colleagues wouldn’t go for the more than $30 million in tax increases that you supported. So we’re back to the drawing board because you didn’t make any cuts.”

The Marin


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group Friday actually added $14.7 billion to the budget deficit by approving new spending or canceling cuts previously approved for this year before beginning to whittle the deficit down by boosting taxes.The group’s first decision was to add $12.7 million to K-14 education spending. The group’s next move was to keep fees for attending University of California and California State University schools from rising each year by 9 percent and 10 percent respectively, which added another $1.4 billion to the budget.

Next, the group chose to expand eligibility for Medi-Cal and a health program for low-income kids who don’t quality for Medi-Cal, which boosted the deficit by another $600 million.

But this is when the tide turned. The Marin budget makers saved $1.7 billion by reducing the inmate population by 25,000 through various reforms and cutting spending on inmate health care services.

They began to make up lost ground fast when they came to the part of the simulation that allowed them to raise taxes. First, they generated $4.8 billion in new revenue by raising the top income tax bracket to 10 percent and 11 percent, where it was in the early 1990s before being lowered to 9.3 percent. Perry said this option has proved popular at all of his simulations, even one held in conservative Orange County.

The Marin group was only getting warmed up, however. Next they extended the 1 percent sales tax increase imposed last year, which is scheduled to expire this year, and broadened its base generating $8.7 billion in new revenue. Then they added another $4.2 billion to the state’s coffers by increasing the vehicle license fee to 2 percent of the vehicle’s depreciated value – where it was from 1948 through 1997.

Finally, they repealed business tax breaks approved as part of last year’s budget compromise, saving the state $1.9 billion; eliminated business tax breaks adding $1.7 billion in revenue; allowed more frequent reassessment of non-residential property values generating $1.6 billion in revenue; and approved new taxes on oil production, cigarettes, carbon and marijuana (if legalized).

At the end, the budget balanced exactly.

“I don’t think I’ve every had that happen before,” Perry said. But Lara Lovett of Larkspur wasn’t through.

“I have another tax to propose,” Lovett said. “Tax the production of waste, especially toxic waste.”

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2 Comments

  1. rich mckone
    Posted June 28, 2010 at 7:29 pm | Permalink | Reply

    The Senate Democrats proposal to transfer some State responsibilities to the counties could reduce the deficit by billions! Massive savings are possible because of the cost differential between prison and county costs. Prison beds cost $53,400 per year and contract beds cost just $22,000. Housing technical parole violators in county operated contract facilities would reduce annual prison operating costs by over $400 million. It would also increase prison capacity by about 17,000 beds. California would have 11% of its inmates in contract facilities, just like Texas. The prison bed savings would allow the State to apply most of the $6.5 billion in prison bond construction funds to the deficit. They need to do it!

    • Posted June 29, 2010 at 4:48 pm | Permalink | Reply

      in what possible way would contracting reduce the cost if the quality is maintained? Where the cost has gone down, it has been because rehabilitation and psychological support services have been reduced and the prisons become a waypoint on the way to recidivism. That has certainly been the experience in states where where contracting has been done with private, for-profit organizations. The one place where costs can be reduced by contracting with counties might be that it reduces that the influence of the prison guard union, which is the state of California has far more influence than it deserves. While prison guards do have a very hard job and deserve decent wages for it. There’s no excuse for them to maintain their political influence, and and salaries which are often greater than those of police and other safety forces.

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