California Cracking

Arnold Schwarzenegger, in happier days last year in this New West Notes video, trying to work a health care plan with Democrats, unions, and Republicans such as the fellow referenced below now trying to hold the California budget hostage for a right-wing wish list.

That noise you hear is that of California cracking. The state's chronic fiscal crisis, dramatically deepened by the national financial crisis, is now even more exacerbated by conservative GOP intransigence. California doesn't have the biggest fiscal problem of the states in proportional terms, but it is the largest in absolute terms.

Governor Arnold Schwarzenegger, who's had his own role to play in the mess, having slashed the state's unpopular car tax and having resisted tax hikes prior to this year while approving more spending, officially declared it a crack-up today, a fiscal "Armageddon."

Answering state Assembly Minority Leader Mike Villines' cheeky new list from yesterday of non-fiscal demands before "considering" a compromise involving new revenue, Schwarzenegger, at a hastily called press conference right before noon, said that California's budget is nearly $15 billion out of balance. He unveiled a budget clock, showing the cost of legislative inaction on a second-by-second basis.

Right-wing Republicans have systematically made themselves irrelevant in statewide California politics. However, on account of the state's two-thirds requirement for passing a budget -- which it shares with only two other, very small, states -- and because of past partisan gerrymandering (knocked out in the next decade by an initiative narrowly passed by Schwarzenegger, Common Cause, and the League of Women Voters), they have enough votes in the state Assembly and Senate to cause this kind of trouble.

Yesterday, Villines -- who prior to his own election as a state legislator was chief of staff for a far right state senator who lost by nearly 20 points to former Governor Jerry Brown in a 2006 race for state attorney general -- revealed a lengthy list of demands not related to the fiscal crisis. It's a sort of conservative business wish list on economic and environmental matters. "If you do all those things, then of course we have to talk about that piece of the puzzle," Villines said of revenue increases. "But we're a long way from going there - and the cart shouldn't go before the horse," he told the Sacramento Bee.

The cart's been waiting for this horse for over a year.

With this, Schwarzenegger realized he needed to get talks on California's chronic budget crisis, now very serious indeed, serious as is no money in Febrary, unstuck.

Speaking of the Legislature, Schwarzenegger said: "They met, they debated, they postured and they did nothing. They didn't deal with one of those issues, and that was after being three months late with the budget this year. If that isn't a shameful performance, I don't know what is."

Schwarzenegger and Democrats generally agree that a package of budget cuts, tax increases and economic stimulus is needed.

However, Schwarzenegger's fellow Republicans -- mostly far more conservative than he, elected from such safely gerrymandered districts that the 61% to 37% tidal wave for Obama in California yielded only three new seats in the state Assembly and none in the Senate -- talk only of cuts. And borrowing. Sans specifics.

The Wall Street crisis, presided over by Treasury Secretary Hank Paulson, has deepened California's fiscal crisis.

There's a certain lack of seriousness, let's say, about the Republican stance. Since this has been going on for over a year and there's no alternative GOP budget and no agreement to a compromise.

Schwarzenegger today rolled out a display labeled "Legislature's Failure to Act: Day 35." He said that refers to the time since he called a special legislative session in November. The "clock" runs up the amount of money California has been losing since July 1: $470 every second $28,000 a minute, $1.7 million an hour, $40 million per day.

Schwarzenegger says the $11.2 billion deficit in the current fiscal year's budget has now climbed to $14.8 billion.

Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke defended their management of the $700 billion bailout last month, just one week after the administration abandoned the original strategy behind the rescue.

And over the next 18 months, if no action is taken, it's apparently $41 billion.

"I'm frustrated," said Schwarzenegger. "We have a system where we rely on the 120 legislators to make those decisions. I cannot make them stay here, I cannot lock them into the building, I don't have those kinds of powers. Believe me, I would do it otherwise."

He especially criticized GOP legislators for being "always vague and not prepared" in negotiations. He also criticized Villines for his list of workplace and environmental demands not related to the fiscal crisis.

"That is not the way you negotiate," Schwarzenegger said. "They have to start negotiating and they have to take this seriously rather than playing 'chicken,' which is what is going on now, this 'who blinks first,' that's a very dangerous game."

Last year, right-wing Republicans held the budget hostage in efforts to stop Attorney General Jerry Brown from getting localities to include greenhouse gas reductions in development plans. That failed.

This year, with the fiscal situation far worse, they have an even longer list.

The Villines wish list:

REGULATORY CHANGES - EMPLOYMENT LAW FLEXIBILITY
Employee Schedule Flexibility
Expanding Health Care Options for Employees (Health savings accounts)
Reducing Unwarranted Litigation
Overtime for high way earners
Meal and Rest clarification
Eliminate "needs test" to allow more apprenticeships

REGULATORY CHANGES - BUSINESS DEVELOPMENT
Design-build
Public Private Partnership
ADA compliance
Streamline small business certification process for micro businesses and sole proprietorships
Reclassify "destination management companies" (DMS) as consumers rather than retailers (SB 1628)
Streamlining the permitting process (THPS, development)
Contracting out

ENVIRONMENTAL FLEXIBILITY
Expanding deadlines for engine retrofits (on and off road)
Extending deadlines for greenhouse gas regulations (AB 32
Regulatory flexibility for agricultural industry
3rd party analysis of economic impact of ARB regulations

TAX CREDITS
A new employee tax credit for businesses that hire out-of-work Californians
A manufacturing investment credit to help businesses purchase the equipment they need
Capitol gains reduction for businesses that invest in California
Modification of the tax code to encourage companies to locate jobs in California
Suspension of regulatory burdens that "discourage job creation"

Notice that none of this directly relates to the California fiscal crisis.

What it does relate, primarily, to is a hyper-partisan political agenda most Californians have repeatedly shown they oppose.

Check things out during the day on my site, New West Notes www.newwestnotes.com

Comments

[AlltheBuzzfromCali]

Close all state-supported Calif. colleges and suspend the spring semester. That's it for this year. Ditto for secondary schools, all high school terms end with spring break this year. Suspend all art, music, and physical education instruction and other nonessential classes for other schools, we can't afford it anymore. Close some DMV (Motor Vehicle Dept.) offices and cut hours on others (most services are available online or can be accessed at other places, like the Auto Club.) Close the State library and just employ a skeleton staff to maintain the archives. (My consulting fee to be billed later, or maybe Ahnold can just appoint me to a State Commission or Board...)

[William Bradley - Huffpost Blogger]

That's hardly a serious idea. Better not to waste your time typing.

[Raster]

Time for a Chapter 7 filing by the Federal Government. Put USA, Inc on the auction block.

[William Bradley - Huffpost Blogger]

Sober up.

[bkbigfish]

William, you know why the state is cracking? Because it's being run into the ground by left-wing democrats, who have controlled the state legislature for decades.

FACTS:
The state budget is 145 billion dollars now, up about 40 billion in the past 4 years.
State revenue was up 40 billion dollars now, compared to four years ago.

(reference Prof. John Matsusaka, USC.- http://www.latimes.com/news/opinion/la-oe-matsusaka17-2008jul17,0,7957570.story

http://www.sacbee.com/110/story/1158590.html

FACTS:
Rankings in state income tax collections:
1.) Vermont. Top rate of 9.5 percent. Kicks in at incomes of 357,000$ or more.
2.) California. Top rate of 9.3 percent. Kicks in at an astronomical 44,000$ or more.

http://www.taxadmin.org/fta/rate/ind_inc.html

Of course, Mr. Bradley fails to mention any of this information in his "column".

[BottomLine2008]

Nobody pays those rates. California has the biggest loopholes of any big state. Another distortion ...

[William Bradley - Huffpost Blogger]

As I said before, I see there are 1 or 2 hyper-partisan trolls here trying to confuse people with a lot of disinformation. What you are selling is very misleading. Your aim is to waste time and not answer the real questions. Like the right-wing pols you front for.

[bkbigfish]

I am completely non-partisan when it comes to politics. However, I am very partisan when it comes to competence. The state legislature is incompetent. Therefore, I am against them. The real partisan in this case appears to be you. No matter how incompetent, no matter how corrupt, you just can't bring yourself to assign any blame to those who actually make the decisions (in this case, the democrats.)

So I notice with all of your "disinformation" claims, you didn't refute one thing I said.

And you sir, are the one fronting for pols. In your case, the failed, incompetent, left-wing ones.

[William Bradley - Huffpost Blogger]

Your "facts" are wrong.

[mheister]

What we need is an initiative constitutional amendment so the state can pass a budget with a simple majority.

[HollywoodBill]

Go for it! All you need to get an initiative on the ballot is 433,971 signatures. And at least $20 million to mount a bare bones tv campaign statewide. This will be a direct assault on Prop13. So be prepared to do battle with the Howard Jarvis Taxpayers Association, founded by its namesake, the power and brains behind Prop13. It is one of the most successful watchdog groups in California history..

The Howard Jarvis Taxpayers Association was founded in 1978 to prevent the lunacy of the Democratic overspending in California. Except for a brief period in the 1990s, the Dems have had control of both the Assembly and the Senate since the 1950s. There have only been four Democratic Governors during the entire 20th century: Culbert Olsen, Pat Brown, Jerry Brown and the ill fated Gray Davis (who did not win by a landslide either). An adult to mind the store so to speak. There is still widespread support for Prop13, around 60%, and the JarvisTaxpayers Association has been hugely successful in defeating any and all measures to weaken its basic premise.

So, feelin' lucky?

[William Bradley - Huffpost Blogger]

When I have time, I'll clean up all this disinformation. Which is all beside the point of the crisis, natch ... :(

unless the point is to screw California.

[William Bradley - Huffpost Blogger]

You certainly disappeared.

[wlpc]

In California's most recent election these measures passed:
$9.95 billion in bonds be issued to establish high-speed train service, $980,000,000 in general obligation bonds be authorized for children's hospitals, $900,000,000 bond to aid California veterans,
Measure R will impose a sales tax increase of half a cent on the dollar in Los Angeles County, raising the rate to 8.75% (tying Alameda County for the highest sales tax rate in California.)
And a 9.3 tax rate on any income over $44,000.
As if we are not broke enought already. Yes, we do get the government and results we vote for.

[Eclectic Radical]

California has abused the system of legislation by ballot initiative terribly, I won't deny that. Nor do California's constant bond issues help their economy. I am actually in favor of the tax hikes, in fact I will go so far as to say that I am in favor of most tax hikes. The United States, for all the complaints Americans make about their taxes, is one of the most lightly taxed nations in the civilized world. Compare US tax rates with those in Europe and Canada and we pay pennies. The increase in the state income tax is necessary and it is an increase that the legislature has lacked the stones to enact since I was a child. I have mixed feelings about the bond issues. Most of the bond issue initiatives in California are made necessary by Pay-As-You-Go policy, as a result new spending requires cuts, new taxes, or new debt. I'm in favor of high speed train service and children's hospitals. I don't like the debt balloon California has been building for years, but budget gridlock has often required bond issues by ballot.. The fact that the tax hike passed by ballot when the state legislature has balked at raising taxes for years somewhat proves my point about the gridlock. A functioning government depends on taxes, and people who most object to paying their taxes are people who can most afford to pay them.

[BottomLine2008]

The Reeps have no answers. Period. Full stop. They don't give answers because they don't have the.

[William Bradley - Huffpost Blogger]

That is because the public want answers, not negativity.

[Eclectic Radical]

I'm originally from California, I moved away for economic reasons. I can say, categorically, that none of this is new. Yes, the current state of the national economy makes it all worse than usual, but none of it is new. As for the right wing list of demands..'

This is not the first time that California conservatives have attempted to hold the budget hostage to get their demands met, either. It was precisely this kind of wrangling between the Democrats and moderates and the right wing that led to the budget gridlock under Gray Davis. This budget gridlock and the resulting inability to pass legislation was directly responsible for the recall effort that elected Schwarzenegger governor just after Gray Davis had won re-election by a landslide.

Schwarzenegger does deserve his share of the blame, I believe he allowed himself to be pandered into running for governor unnecessarily and that he has failed in his efforts to solve the problems (mostly in the right wing of his own party) that have continually knee-capped the California legislature. However, he has also worked with centrists and liberals to attempt to provide genuine governance and has shown a reasonable (if not outstanding) respect for the democratic process and the mostly liberal values of California voters.

This problem will not be solved until the districting reforms Schwarzenegger signed into law go into full effect and if that /does/ solve the problem then Governor Schwarzenegger will also deserve his share of the credit.

[UltraClassic]

California and the rest of this nation want to have their cake and eat it too. This country has stepped over the edge. We want our bennies but we don't want to pay for them. We are on the razor's edge of economics.

[JePenseDoncJeSuis]

Excellent point. As my Econ 101 professor said in the first class -- there's no such thing as a free lunch. Now, the question at hand is "Do we want people to get their lunch from the government via taxes or do we want people to go out and earn their own lunch?"

[leeman79]

Earn it if you can find a job. That's becoming the problem.

[BottomLine2008]

The dead-enders who got killed in last month's election don't want to pay.

[William Bradley - Huffpost Blogger]

I am guessing you are not a Californian.

[Semaj51]

Reading this makes me happy that I live in the state of Florida. Just think about it, NO state income tax....

[rich misty]

Boosh, the GOP and Republicans are cheering the demise of their most hated enemy: America and Americans

[IvyMaureen]

It is so sad to see how stupid our elected officials and citizens have become. The entire global financial system is bankrupt and it's business as usual for the dummies in Sacramento. They are so blind to what is happening on a global level and can't connect the dots. It's the end of the present system and these guys are fighting over the crumbs that are rapidly disappearing. So sad!

[JePenseDoncJeSuis]

Yes, yes, it's all about taxes not being high enough. Tax revenues have increased by 34% since Arnie took office, yet the Legislature that the poster would have us believe can fix the budget problem (if we could only figure out a way to eliminate a few wascally wepubwicans) has continued its spending spree. Face it. The state's financial woes, although exacerbated by the current downturn, are the result of a failure to address the structural deficit problems. Combine that with regulatory and tax pressures that are already forcing businesses and minds out of the state, and there you have it -- one big fat budget crisis that won't go away with any "temporary" tax increases.

[bkbigfish]

Exactly! And yet the dummies keep voting democratic because they hate Bush. Meanwhile, their state is going down the drain.

[BottomLine2008]

"Their?"

Claim to be a Californian, doncha?

Haha.

[William Bradley - Huffpost Blogger]

No, they haven't.

[BottomLine2008]

Bernanke is the other one. That's gobbledydook he's talking there in that video.

>>>>Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke defended their management of the $700 billion bailout last month, just one week after the administration abandoned the original strategy behind the rescue.

[BottomLine2008]

Paulson is one of the biggest reasons we're in bad shape. He talks nonsense in that video.

[BottomLine2008]

Villines looked like a nice guy in that video with Arnold last year.

[HollywoodBill]

It's never enough money for California's incredibly wild spending Assembly or Senate.

It's not a question of enough taxes as much as it is a matter of too much spending. California has one of the highest tax rates in the country and the tone deaf Representatives and Senators want even more. Gray Davis was recalled for raising the car tax and the author wants it reinstated? The public wouldn't stand for $600 yearly license plate renewals in 2003 and they aren't going to take it in 2009.

The two thirds majority for any tax increases can be changed any time the legislature wants to take it to the people and let the voters decide. It's a relatively easy procedure. But ultimately, the legislators are going to find that not all of their Utopian dreams are going to be borne on the backs of the taxpayers. Other solutions, please.

[BottomLine2008]

That's a lie.

>>>>>>California has one of the highest tax rates in the country

[HollywoodBill]

California is ranked as the one of the worst states to do business in. It ranks 48th. California is losing businesses to Nevada and Arizona whose tax rates are more favorable to a business climate and thus produces more jobs for those states' economies. http://www.taxfoundation.org/files/bp581.pdf

In addition to the Federal Income Tax and Social Security, California has the highest personal income tax of any state.

It is mainly because of Prop13 and the low property taxes that Californians overall tax burden stays more in the middle. Money Magazine ranks the overall tax burden as 20th.

The Dems are free to try and raise taxes all they like. They just have to take the increases to the people who must approve it by a 2/3 majority.

[William Bradley - Huffpost Blogger]

Correct.

[bkbigfish]

Absolutely correct, Hollywood! Nice to see a fellow Californian fight back here against this nonsense propaganda that somehow, we don't have enough money, and if those knuckle dragger republicans would just roll over, we would attain Nirvana. Even the liberals in CA are starting to scream at the dopey dems in Sacramento about this crap.

[BottomLine2008]

You're a freeper, not a Californian.

His first post was a total lie. So he tried again. His second was wildly misleading.

And this, friend, is BS.

>>>>Even the liberals in CA are starting to scream at the dopey dems in Sacramento about this crap.

[William Bradley - Huffpost Blogger]

I don't believe you are a Californian.

[William Bradley - Huffpost Blogger]

Your spending numbers are all wrong. That's because your handlers are misleading you.