So, now that we have a “deal” (Yay Deal!), how long is this one going to last. Odds are that it won’t be long until we are back at this game. Joe Matthews of the New America Foundation thinks it is only a matter of time.
I haven’t seen the whole package. But this budget plan doesn’t achieve the balance that political leaders have promised. Instead, it relies on billions in gimmicks, accounting tricks and borrowing. It is likely to have a short shelf life. Unless the economy turns around dramatically, more budget solutions will be required within months. The only question is whether we’ll need another budget before the World Series or before the Super Bowl.
The borrowing from local governments represents a considerable risk. Dozens of municipalities are already on the financial brink, short of cash needed to pay bills because of the economic collapse and, regrettably in some cases, fiscal mismanagement. Without an economic comeback in short order, you could see a wave of municipal bankruptcies in California in the months ahead.
You won’t get much argument from these quarters, this budget threatens the very stability of local budgets across the state. Already the City of Vallejo is in bankruptcy. A larger, and what was once called America’s Finest, city might be there soon:
It’s $50 million. For years, the idea that the city of San Diego was nearing bankruptcy was too much like a philosophical discussion. It was a matter of preferences — not of math.
Now, we finally have a number measuring the exact distance between the city and insolvency: $50 million.
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San Diego City Hall has finally admitted that it can’t pay what it owes to the pension fund that is holding and investing assets to pay retired city workers. The city has concluded that if its pension fund doesn’t change the rules and they don’t lessen the city’s burden, the city will be insolvent.(Voice of San Diego 7/17/09)
This is something of a matter of changing pension rules, but it is also a matter of the City just not having enough money to pay its bills. Even if pension rules are slightly changed, the City of San Diego will still be pushing it to make its obligations.
But the deal is done, and municipalities better get used to a lower amount of money. The next wave of cuts starts now. But don’t expect to wait too long until we are back here. This tricky budget isn’t likely to hold up very long.
Local governments have suffered tremendous hits to their own revenues – plunging sales tax, hotel taxes down substantially, property tax dropping in single digits, every source of revenue including franchise fees and building permits dropping.
They have gone through two round of cuts. First they froze vacant positions, deferred maintenance, freezing salaries, cutting overtime, eliminated every discretionary spending item, while spending down their rainy day reserves.
Then they dipped further into their reserves and started laying off employees, trying to minimize the loss of public safety employees, and passing through small across the board cuts in salary.
Now they need to face the fact that they are burning through their reserves at a rate that will push their general fund balances below the levels they need to smooth out unequal revenue streams.
We’ll see fire stations closing, police and sheriffs laid off in the thousands, because that’s where local government spends the lions share of its money.
and other local gov’ts may follow course. This could get real interesting real fast.
This deal will collapse even if passed. What should be
done?
1) The simplest and most direct is to recall Schwartz. The petitions are already approved and anyone can get one
and gather signatures. The election would be with the
June primary. The advantages? The new Democratic governor could sign the majority rule fee increase/tax swap and reverse some of the worst effects of the current situation.
2) Forget 2/3rds, constitutional convention. A practical way to increase revenue is to put taxes on the ballot through initiatives. The initiatives must explain where the money is going–education would be the favorite, prisons
next (recall that money going to prisons can be released back to the general fund–so a tax on ammunition could pay part of the prison bill). Oil severance taxes to the colleges, an increase in the top income tax rates for K-12,
etc. The CTA seems to favor regressive taxes since they are easier to pass, but I think they are underestimating the appeal of education.
The key thing is to be proactive for a change, rather than reactive. Will we be successful every time? No. But the Reps kept coming back on redistricting and finally won.
So let’s keep trying.