Well, well, well. For years now we’ve been hearing that California’s budget problems exist because we “overspend.” Others claim it’s because our taxes are so high that companies and jobs move to low-tax states. Texas is often held out by those making these claims as an example of what California should emulate – a low-tax, low-services, low-spending state that supposedly has government figured out.
Except they don’t. California faces a budget deficit of about $18 billion. And how much is Texas’s budget deficit?
That’s right. $18 billion:
But as the state’s budget shortfall widens-to as much as $18 billion, or about 20% of the next two-year budget, according to the state legislature’s latest analysis released earlier this month-critics are complaining that Mr. Perry’s policies have left the state with little room to reduce spending.
“There is no way that they will be able to come up with $18 billion in cuts,” said Eva DeLuna Castro, a senior budget analyst at the Center for Public Policy Priorities, a nonprofit that advocates for low-income Texans. “They would have to shut down our prison system.”
Suddenly Texas doesn’t look like such a great model for California. They don’t have an income tax, yet their revenues have collapsed just as California’s have. Texas spends a lot less per resident, with a much smaller level of public services, yet they are still facing a budget deficit about the size of our own.
This news should put to an end once and for all the lie that California’s budget deficit stems from overspending, or that we should cut our income taxes to “stabilize” revenues, or that we should follow Texas’s model of low services.
Instead what Texas shows us is that the real problem – as in Greece – is that taxes are too low, especially on the higher end of the income bracket. Higher taxes help balance the budget, sustain the services we need to attract and retain companies.
Think that last part is nonsense? Just ask two California companies that are moving to Colorado:
As for quality of life, “there’s less traffic, less stress, the people are more grounded here. My kids aren’t going to school where all the kids drive Porsches and Mercedes,” he said. “I should have moved sooner.”…
One final thought from Hansen: “It’s not that we hated Orange County … We love it. But here we’re not spending our time sitting on a freeway. There are trails right by our office.”
The OC Register article wants to make it sound like Colorado’s lower taxes were the key driver. But it sure doesn’t sound that way from the quotes. Traffic is a truly massive economic problem here in California, causing lost time and lost money. Had these business owners not had to deal with traffic, because we’d spent our money building alternatives, they may well have decided to stay, since they clearly enjoyed life in the OC.
Most decisions made by companies about where to locate their businesses don’t revolve around taxes. Cost of living, ability to recruit and retain skilled employees, quality of local schools, infrastructure, and other similar issues tend to dominate the list. Since California has systematically starved those services of revenue, it’s becoming harder to create the jobs that will produce recovery.
What we’re seeing is the “Texas is better” model proven to be the lie that it is. California should look to the model of Pat Brown, who understood that investment in our state’s services, schools and infrastructure produced prosperity, for the way out of our budget and economic crisis.
i’m a californian who moved to texas and am anxiously awaiting my moving truck to get back to cali next month. i’ve been saying this same thing to people for weeks, that the texas “model” is not a better model and texas’ budget is also in the crapper. the difference is that social services in california will (hopefully) ensure that such budget crappery won’t last as long and the supported citizens in ca (should) help the state get back on solid ground sooner. good post and good analysis…
Both companies moved in September of 2009. The OC Register earlier passed along the “news” of one of the companies moving out of state a few weeks ago.
Unfortunately California has followed the Texas Model in one very critical aspect: criminal justice. I’m reading a very important book on this subject, Texas Tough by Robert Perkinson, and I recommend it to any Progressive interested in prison reform. Here is an interview with the author on Patt Morrison’s show:
http://www.scpr.org/programs/p…
California, like Texas, has created a Prison Industrial Complex to such an extent that here in the Inland Empire we are building prisons that we can’t even afford to staff, all in the name of being “tough on crime.” Perkinson’s provocative thesis is that the roots of the Texas criminal justice model lie in slavery. Our prison system is antithetical to the roots of our democracy, and yet there it sits, consuming an ever-greater portion of our public budgets.
What is truly tragic for California is that the Golden State was the model for prison reform and convict rehabilitation in the 1950’s and 1960’s. After 1969 that all started to change as criminal justice started to focus more on retribution than rehabilitation.
The Democratic Party showed great courage in advocating the abolition of the Death Penalty in its recent platform. It should follow up with real, meaningful prison reform in its next edition, otherwise we will continue down the path toward a nation that is once again half-slave and half-free.
Now how do we get the “news” to Ross Douthat so he can issue his correction in the Times?
When I got fed up with things like traffic, and the high cost of living proved an insoluble problem after the Bush economy had left me unemployed, I admit I did in fact leave the SF Bay Area, where I’d lived since I was 10.
I went to Chico. The cheaper cost of living has by now paid for the cost of the move, and staying in California, I was able to continue receiving unemployment until I found a job last month. I don’t make what I did in the Bay Area, but with the lessened expenses, I’m likely going to be able to save more than I was. I commute “all the way across town”, which takes me a whopping 10 minutes.
There are cities up and down the Central Valley that offer opportunities like this. Lower costs, less of the hassles of large metro areas (a problem that would hardly be abated by moving to Dallas or Houston), but we still have a state government that actually thinks its job involves providing services to its citizens, and if it isn’t run all that well…well, we’re apparently no worse off than Texas.
There are many reasons for the shortfall, but primarily it is due to low sales tax revenue and lower property taxes over the past two years. The sales tax revenue is lower due to people spending less money in the recession. The property taxes are lower due to two things: the state legislature cut property taxes in 2006 but didn’t cut spending to match (one could question the logic in that), and property values have been lower due to the housing market.
Eighteen months ago Texas had a budget surplus of $11 billion. The current budget shortfall is expected to be a temporary issue that will be corrected once the sales tax and property tax revenue pick up again. I searched for the last time California had a budget surplus, and the most recent date I could find was in 1999, right before the dot-com bubble burst.
Both states are having budget issues in 2010, but that’s where the comparison ends. California has been in a budget crisis for at least two years and has had deficits nearly the entire decade, while this is Texas’ first budget shortfall in recent memory. Jumping to conclusions that the Texas model isn’t working due to one year is like saying someone who was laid off in 2010 due to the economy is not employable at all. It may be true, but more time is needed to come to a complete and informed conclusion.