Once again California lawmakers cannot come to terms on a budget and a hastily and poorly crafted compromise is put on the Governor’s desk.  The budget passed on Tuesday by the legislature is particularly odious in the how it was put together.  Because the Democrats have refused any significant cuts to spending and the Republicans have refused any increase in taxes we have watched nursing home and assisted living facilities closing down due to lack of Medi-Cal payments.  Because of the institutionalization of our political lines in the sand we have seen vendors supporting organizations and entities dependent on funds from the State for operation such as prisons, hospitals, public works go out of business due to lack of payment for goods and services for over 80 days. Because our state politicians are secure in their little fiefdoms created by gerrymandered districts that keep them safely elected and re-elected they have little incentive to cross the line, the party line, to reach any decent compromise and truly reform our state’s fiscal problems—so our Sacramento budget problems just gets worse.  Because of bad politics, entrenched special interests, contract entitlements and a slew of other reasons our Long Beach, like virtually every area of the State, has local hospitals that are facing cash issues with millions and millions of dollars owed them from the state for treatment and care already provided, local vendors that are owed millions and millions of dollars for goods and services provided to state agencies.  Because of the budget impasse the State of California has stopped making payments to vendors and service providers—but it continues to collect taxes from individuals and businesses.

The budget passed on Tuesday is a joke.  Democrats want to tax the rich and the Republicans do not want to tax anyone, but this budget falsely taxes everyone—with the heaviest burden falling on lower income individuals and small businesses.  With the completely foolish “compromise” not raising taxes but instead increasing the withholdings for all individuals by 10% and pre-collecting 10% of the estimated tax payments from businesses all the legislature’s budget has done is loan the state a couple of billion dollars interest free from the citizens and businesses of the state.  If you have $100 per paycheck withheld now for state taxes, this budget will withhold $110; that is $10 for the state to spend and that you cannot—until you file your return in 2009 and 2010 and then get your refund.  If you are a small business and pay quarterly payments now of $2000, you will pay $2400 the next two quarters and then $2000 the final two quarters; loaning the state money until you file your corporate returns in 2009 and 2010.  In the end this maneuver does not balance the budget, it just borrowers money from tax payers for several months until tax returns are filed and the State has to give it all back.  

In the past five years the state budget has increased about 20%, during this time state revenues also climbed about the same amount—until this year when the state saw a drop in revenues.  So during times of increasing revenue our state politicians have increased their spending; now that revenues have decreased most of them are adamant about not decreasing spending.  Instead they blame lack of revenue for creating a budget problem and are looking for how to raise revenue.  Let me remind you, governments raise revenue by raising taxes.  It does not matter what segment of the economy they tax it trickles through and taxes everyone—sort of reverse Supply Side economics.  But without spending cuts the inevitable will happen in the next budget and the state with the highest taxes will increase them even more.  And more businesses and people will leave the state.

This budget does increase revenue; it just borrows some from you and me, and does not cut any significant fat out of the spending side of the budget.  All this budget does is create a bigger problem for next year’s budget.  We can expect tax revenue to decline this year for the state, with home prices and sales dropping lowering property taxes, with unemployment increasing in the state income taxes will decline, with dropping stock and property values capital gains taxes will decline and with slower economic production and sales we will see sales tax revenue decline as well.  Knowing revenue will be declining in the coming year or more the politicians have put nothing in the budget to account for this—same revenue assumptions and same spending on personnel and programs.  So what will the budget look like that is presented to the legislature in January?  More taxes to collect from a smaller tax base?  Fewer cuts against spending and programs that will be even more entrenched?

This budget on the Governor’s desk solves nothing but ensuring critical payments will be made to hospitals and other critical services, and that a lot of programs expanded in the past several years will continue to get their funding.  In three months the Governor will have to present a budget that will require even deeper cuts than the initial budget he proposed this year and was thrown out as “too draconian”—if Sacramento Democrats thought that budget was draconian wait until they see what they forced onto next year’s budget.

Locally Long Beach is also facing annual budget problems, not real hard to see why if we connect the dots between past Long Beach City Council members who have gone on to spend your money in Sacramento the same way they have spent it at home.  Part of the current Long Beach budget was crafted with expected revenues from Sacramento for among other budget items infrastructure and public safety.  Shockingly the State budget cuts those funds to Long Beach so the budget that was just finalized this week by the Long Beach City Council is already in a deficit; ergo we will start next year with a budget deficit we will need to bridge and guess where the electeds will look first?  Revenue.  And so the bad budget cycle, the increased spending and entitlements will continue in Long Beach as the State pulls back on funding or raids the municipal treasuries to cover their own fiscal imprudence.

A budget was presented to the legislature in January of this year, nine months later a crappy compromise was finally reached on a budget that will probably be vetoed by the time your read this.  In nine months our deeply seated and guaranteed elected politicians have done nothing but partisan bickering, finger pointing and passing of a couple of thousand relatively useless bills in light of the fiscal mess they have created.  Were I Governor I too would veto this budget and make the legislature over-ride my veto.  I would then veto every single piece of legislation put on my desk until true budget and fiscal reform is passed in Sacramento.  No matter how critical or necessary any bill appears to be I would put the veto stamp on it until the most important piece of legislation is crafted and passed—one that puts our State on track to be fiscally sound in the future.  Not a dime beyond critical services will be spent until future dimes are all accounted for.  No bills protecting three-legged dogs or naming streets after union leaders.  No laws banning what our kids can eat or what materials can go in our shoes.  No “there ought to be a law” feel good legislation to make hometown pols feel good about working with the people. You want a bill to ban smoking within two thousand feet of a school or any tree?  Reform the budget process and spending allocations.  You want to mandate that all pre-schools be taught in English, Spanish, Khmer, Thai, French and Italian?  Mandate spending controls and reviews of every department in the State.  Nothing.  Not one piece of legislation until fiscal reformation is codified by the legislature.

But that will not happen, the Governor will go back to doing nothing but smoking cigars and trying to become friends with the Democrats who will increase spending obligations and the Republicans will further entrench themselves as the bitter party in the minority that can and will block future budgets. And the same people and their clones will continue to get elected to the same positions merely because they have a (D) or (R) next to their names on the ballot and are in the correct (D) or (R) district.  So we will have the same budget crisis next year, and the year after that and so on.   

It is said that in a democracy you deserve the government you elect, and evidently Californians deserve a fiscally imprudent, partisan, short-sighted group of lawmakers that enjoy spending money that is not theirs on programs that perpetuate their re-elections.  On November 4th we can count on the electorate to behave as expected and re-create the current State Assembly and Senate for screwing up next year’s budget as well.  Look for this post to be reconstituted sometime next August or September, just as this budget will be.

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