California Dreamin, or, Delusions of Solvency

        It seems we Californians have wandered astray during our little jaunt to see the wizard. We left the yellow brick road and fell into a hallucinogenic dream state in the midst of our native flowers or, more likely, an opiate cousin. In this dream state we have, apparently, told pollsters that we believe it unnecessary to either raise taxes or make significant cuts to our common budget in order to bring it into balance.

http://latimesblogs.latimes.com/lanow/2010/11/california-voters-dont-want-to-raise-taxes-or-cut-spending-timesusc-poll-finds.html

Instead, we propose that there is sufficient “waste, fraud and abuse” - the mantra of the delusional outside of cleptocracies like that of the Russian republic - to allow for a painless reduction of our deficits that won’t disturb our slumber in the least. Clearly, this can only be due to the stupor induced by all those poppies. What rational person experiencing the financial catastrophe that is the California budget could possibly arrive at such a conclusion? Of course it could be the medical marijuana that’s causing such reality free analysis of our budget woes. Whatever the cause, it is a situation that needs reversing if we are to avoid the ignominy of either default or a drastic and unsustainable reduction in basic and critical services.

Here are some basic facts, dear sirs and madams:

Total Current California Budget - $86.6 Billion

Projected deficit for the next budget year - $25.4 BILLION

Deficit as a percent of the current budget - 29%

So, unless you believe that almost 30% of our current budget is waste, fraud and abuse, then you should reconsider your allergy to taxes or your desire for our current level of government services.

Here is some history directly from the current published budget:

The 2010 Budget Act marks the third year in a row that the Governor and the Legislature have been compelled to take unprecedented steps to bring the state Budget into balance in the midst of the ongoing effects of the worst recession that California has faced since the Great Depression. After having to close a $24.3 billion budget gap in 2008 and a gap of $60 billion in 2009, the 2010 Budget Act closes a budget gap of $19.3 billion—an extraordinary three‐year period in the state’s fiscal history totaling budget solutions of $103.6 billion. The 2010 Budget Act holds General Fund spending essentially flat compared to the prior year—$86.6 billion in 2010‐11 compared to $86.3 billion in 2009‐10. This level of General Fund spending is substantially lower than the level of spending in 2004‐05, adjusted for inflation and population growth. It is also lower than the level that would have been allowed had a spending cap been in place since 1999.

As you can see from the above, our budget has been chopped by approximately $100 Billion over the past few years. Granted, that is a reduction from what it otherwise would have been had automatic increases been permitted to take effect. It’s important to note, however, that most of those increases are due to increases in costs and the population of the state, which inevitably lead to increased costs for everything from education to roads and healthcare, not to mention our extensive prison system, overflowing and under federal mandate.

For reference, our tax revenues for the 2000 - 2001 budget year were $90.4 Billion. That’s four billion dollars more than our current budget, which we are expected to cut by said $25.4 Billion. For more contrast:

CA Population 2000 census - 33.9 million

Projected CA Population 2010 census - 37 million

Per capita budget expenditures 2000 - $2,723

Per capita budget expenditures 2010 - $2,340 (NOT inflation adjusted)

OK, I don’t know about you but there’s no way that my expenses have decreased by 14% over the past decade! Even though inflation has been low, almost all of my costs and my overall budget have increased significantly in that time. That’s in spite of the fact that my house payment including taxes is almost unchanged. Even if we kept spending at the same level as in 2000 and without adjusting for inflation, we would come up with a figure of $100.8 Billion. If we adjust for the cumulative inflation of the past 10 years (29.57%) we get a per capita figure of $3,528. Using that as a basis we arrive at the following budget:

$3,528 X 37 Million = $130.54 Billion

That’s a difference of about $45 Billion right there. Our budget is LESS than it was a decade ago. Even if you believe that government spending was excessive at that time and wanted to reduce it by, say, 14%, the inflation of the past decade would put us well above the figure we are now at. If you want to check the numbers go here:

http://www.lao.ca.gov/2000/calfacts/2000_calfacts_state_budget.html

http://quickfacts.census.gov/qfd/states/06000.html

http://www.inflationdata.com/inflation/Inflation_Calculators/Inflation_Calculator.asp#calcresults

I’m not making an argument one way or the other for cuts or taxes in this piece. Decide for yourself according to your personal philosophy. There are certainly some who could envisage a California without its universities or even its K-12 school system. I certainly can’t and I’d like to see them remain or achieve first rate status. Unfortunately you can’t have both a first rate public educational system along with the levels of expenditure in keeping with the required cuts to balance the budget. Money isn’t the only thing that matters in education and money poorly spent is clearly unhelpful but money does matter.

The same principle holds true for our aging roads and infrastructure. When I was younger, I knew when I’d crossed from California into Nevada without the help of a sign. I could feel and hear it as the roads worsened. Now, some 30 years on, the situation is reversed.

My personal opinion should come as no surprise. We should cut where possible, avoid crippling cuts to critical infrastructure maintenance and investment, adequately fund our schools while continuing the ongoing process of retooling for the modern world and increase and rejigger our revenue base as needed to provide these funds so that we don’t either mortgage or cut away our future.

One thing we cannot do is stay dreaming in the poppy fields. We’ve got a threat more real and deadly than the wicked witch of the west to deal with.

Take a look at the Los Angeles Times interactive budget balancing tool. The numbers haven’t been updated for the coming budget year but it’s a useful exercise nonetheless. Try your hand at eliminating our budget deficit. See what cuts you’re willing to make.You can find it here:

http://www.latimes.com/news/local/la-statebudget-fl,0,95571.htmlstory