We're at a crossroads. Yes, we can breathe a little easier given the news that California can look forward to $6.6 billion in unexpected tax revenues, thanks to the increased fortunes of some of our wealthiest. But just for a moment. Because we still have work to do. We haven't closed California's budget gap, we haven't solved the root cause of our long-standing budget woes, and we certainly haven't addressed the continuous pattern of demanding that our most vulnerable Californians shoulder the lion's share of budget cuts.
To close California's budget gap for this year, I applaud Governor Brown's May revision and believe that he is taking steps in the right direction to rebuild our fiscal health. However, I am gravely concerned about his suggestion that we institute a mandatory spending cap. This cap would jeopardize our ability to rebuild our public infrastructure, improve our schools, and care for our most vulnerable, such as our seniors and children in low-income families.
A long-term solution to our entrenched budget woes requires that we devise a comprehensive approach to balancing our budget that goes beyond saving individual programs from cuts, and proselytizing against tax increases. We will have to create sustainable solutions that consider the holistic needs of those of us with the least, as well as those of us with the most.
We have a disturbing habit of asking the people who have the least to pay the most. That's true with budget cuts and it's true with taxation.
The governor's January budget cut over $12 billion dollars out of the state budget, 53 percent of which were cuts to public services that low-income women and families rely upon to meet their basic needs. These services make up only 30 percent of the General Fund budget, which means that low-income families sustained more than their fair share of the cuts.
When it comes to taxation, our state's most impoverished (with average earnings of $12,600 per year) spent 11 percent of their income on state and local taxes last year. Yet our state's wealthiest (with average earnings of $2.3 million), spent 7.8 percent of their income on state and local taxes (California Budget Project, see page 33).
Over the past three years, we have already seen the devastating impact of severe cuts to social services and cash assistance for our most vulnerable Californians. No other area receiving public funding has endured cuts this large in actual dollars. Programs that support the efforts of people who are transitioning from welfare to work (CalWORKS) -- check style, provide health care for low-income families, and childcare for parents returning to work are critical lifelines -- especially in the aftermath of losing employment. (For examples, see reports by the California Budget Project on the impact of cuts on CalWorks, Healthy Families.)
Reducing government spending doesn't just hurt low-income families. It creates a ripple effect that results in fewer jobs and dries up revenue streams. Beacon Economics, a leading firm that specializes in evidence-based economic research, reported that human services such as CalWORKS, food stamps and In-Home Supportive Services provide a 32 percent boost to the local economy (see page 16 of the report).
In addition to closing the remaining $11 billion budget gap, which we can do by enacting the governor's proposals such as extending the modest temporary tax increases, we have to come up with long-term solutions.
One solution is to stop fueling the growing wealth gap. In speaking with wealthy Californians, I've heard them say that they are willing to pay more in taxes if it secures the future of generations to come. They think this is fair. They're just as disturbed as I am by the fact that over the last 20 years as the incomes of 80 percent of Californians declined, the incomes of the wealthiest 10 percent increased 43 percent.
Worthwhile revenue generating bills have been introduced. Among them is Assemblywoman Nancy Skinner's bill that would add one percent additional tax on incomes above $500,000. She estimates it will generate an extra $2.3 billion in revenues a year. Senator Kevin DeLeón has introduced a bill to make the Single Sales Factor mandatory. This would change an unwise policy that provides a tax incentive to corporations who locate jobs outside of California. By making the Single Sales Factor mandatory, California would be encouraging companies to invest in California at a time when California's deficit and unemployment rate remains among the highest in the country. It's estimated this would save us $1 billion and create 40,000 jobs.
In addition to these recommendations, we have to do more to fairly share the responsibility of rebuilding our public structures and systems. We must strengthen our resolve to work together and heed our moral obligation to create a California that works for everyone... whether they are our most impoverished or our wealthiest. Creating a stronger California means being concerned about everyone's wellbeing.
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