Look around you and you probably know somebody who had been affected by the economic slowdown, particularly here in California.  Maybe it’s someone you know in the construction industry:

State Controller John Chiang refused to make payments Thursday to contractors for work done on more than three-dozen public-works transportation projects. The action, the first of what are likely to be a series of blocked payments, was prompted by the state’s unprecedented budget shortage.

The move was required by the Pooled Money Investment Board, which on Dec. 17 ordered a halt to the payments to projects financed with a mix of voter-approved bond funds pending a resolution of the state’s fiscal dilemma […]

The projects are all being handled by Caltrans, which has objected to cutting off the money to the contracts. Some $33 million and 39 public projects are affected.

(It’s hilarious that the Governor objected to this after his own Finance Director voted to shutter all infrastructure projects a few weeks ago.  Did he not know that this would be the result?  Another Santa Claus Republican.)

Or maybe it’s that friend of yours who doesn’t have any health care or the ability to pay for treatment, or that other lady you know who works at the hospital:

California hospitals are threatened. With only 1.9 hospital beds per 1,000 population,3 the state’s residents are being placed at risk by the negative impact caused by inadequate Medi-Cal payments and California’s faltering economy. Currently ranked 49th nationally, hospital bed availability is likely to contract further in this environment, diminishing access to health care services even more. As a result of low Medi-Cal payments, the majority of california hospitals have already made cutbacks or anticipate reducing services, including closing subacute units and psychiatric units; eliminating skilled nursing beds and ER beds; reducing cardiology, obstetrics and other clinical services; and laying off staff or reducing pay.

The impact of the economic downturn is evident. Hospitals report a 73 percent increase in consumers having difficulty paying out-of-pocket health care costs, and 33 percent report an increase in ER visits for uninsured

patients. With the growth in unemployment, hospitals are experiencing the effects of more californians without job-based insurance. in fact, hospitals report a 30 percent decrease in volume for elective procedures – one of the few areas that provide hospitals an opportunity for revenue growth. In addition, the capital markets are providing a significant hurdle for many california hospitals. More than 25 percent report the inability to access financing for construction, remodeling, equipment purchases or working capital.  This has resulted in 41 percent of hospitals halting construction projects or equipment purchases. This has a significant impact on the state’s economy and jobs.

Or maybe your neighbor has a son or daughter who wants to go to college.

The University of California system may cut the number of in-state first-year students by 2,300, or 6 percent, as the recession squeezes the budget.

The proposal to reduce enrollment for the 2009-2010 school year, as well as a plan to freeze 285 salaries of administrators, will be presented Jan. 14 to the Board of Regents by President Mark Yudof, the Office of the President said today in an e-mailed statement. The system, based in Oakland, has 220,000 students on 10 campuses.

As an aside, health care and education were the only two industries to INCREASE jobs in today’s dismal employment report.  Here in the Golden State, we are going in the opposite direction.

The failure of leadership over the last decade at all levels of government is now coming due.  We are not prepared – nor are we taking seriously enough – the magnitude of this meltdown on the state of California.  We are about 3-4 weeks away from the state sending out IOUs.  That’s functionally bankruptcy, and the trickle down of that will be fast and painful.  Everyone in the state will either be affected or know someone close who is.  

California’s dysfunctional government has finally caught up to itself.  The general lack of urgency about this is stunning to me.

Good thing an old-politics hack like John Burton will lead us out of the abyss!

…let me add state employees into the mix…

California will close most state offices on the first and third Fridays each month starting in February, padlocking DMV outlets and other services while reducing state worker pay to help survive a massive budget problem, according to a state Department of Personnel Administration memo.

Only offices deemed critical, such as state hospitals and prisons, will remain open under Gov. Arnold Schwarzenegger’s twice monthly furlough plan.

Ugly.

The Governor is “restarting” budget talks today.  Of course, “restarting” should read “using the same failed process that cannot possibly be successful.”  The Governor vetoed the only game in town because he’s controlled by strings held by the Chamber of Commerce, who suddenly looked favorably on the virtues of bankrupting the state, and Arnold had to follow.  The SacBee ed board puts it more judiciously.

Democrats agreed to a 2 percent cut in welfare grants, and some, but not all, of the environmental exemptions. They also have insisted that the governor first negotiate with unions before attempting to furlough state employees and eliminate some paid holidays.

In an interview and op-ed in The Bee Tuesday, Senate President Pro Tem Darrell Steinberg suggested the deal blew up not because of policy differences, but because of political pressure placed on Schwarzenegger. Steinberg says the governor got “cold feet” over the Democrats’ plan to raise taxes and fees through a majority vote.

There may be some truth to this. On Tuesday, the California Chamber of Commerce issued a statement urging the governor to veto the Democrats’ plan, saying it included “unconstitutional and discriminatory tax increases.” Since the chamber is one of the governor’s few political allies, their stern opposition to increasing taxes by a simple majority vote may well have led Schwarzenegger to backpedal.

The ed board goes on to criticize Democratic leaders for not wanting to cut enough.  You know, I thought a mid-year budget deal was designed to fix the budget for the current fiscal year.  If we have two-year budget cycles now, it’s news to me.  I understand the logic of a two-year cycle, but the desire to fill an 18-month gap in January puzzles me and seems designed to further more draconian cuts.

And the continued ignoring of the elephant in the room and casting this as a failure of both sides to compromise is truly absurd.  There has been nothing but compromise coming from the Democrats, not just now but for years.  “Bipartisanship” has always meant “do whatever Republicans want” to the Very Serious Media.  George Skelton today is lamenting the loss of Leon Panetta, as if a guy telling lawmakers they should have more drinks together is the answer to every problem the state faces.

This isn’t rocket science.  Lawmakers aren’t allowed to do their jobs.  We elect a representative government along majority votes, and them load them down with rules that prevent majority rule.  It doesn’t take a genius – or even Leon Panetta! – to fix that.  Just an acknowledgement of the problem.

(Incidentally, a judge threw out the lawsuit from the Howard Jarvis crowd attempting to rule the work-around budget unconstitutional, since it was vetoed and therefore not germane.  If it comes to such a work-around again, however, expect more lawsuits.)

He’d have a better shot at that than convincing the Yacht Party of anything.

Gov. Arnold Schwarzenegger gave Democrats the cold shoulder as he grew convinced he can somehow win Republican support for a midyear budget deal that includes tax hikes, Senate President Pro Tem Darrell Steinberg said Wednesday […]

“He believes that he can convince the Republicans to vote for revenue increases given that we’re now pretty much at the brink,” Steinberg told The Bee’s Capitol Bureau. “And if that’s the case, great. Then we’ll resume a different kind of negotiation. If it’s not true, then I expect we’ll be right back to our $17 billion-plus proposal and try to close that out.”

Steinberg said he thinks lawmakers can still avert a cash shortage if they pass midyear changes by February. While the changes alone may not be swift enough to provide California with enough cash to pay its bills, he suggested that passage of a credible budget solution would enable the state to take out sufficient loans.

It’s important to remember how stunningly ineffective Schwarzenegger has been at governing for five years.  He hasn’t brought one Republican along on ANYTHING he has sought.  All of the policies he’ll be talking about as part of his “legacy” were passed without any Republican votes.  He has no chance whatsoever to attract anyone from his own party, and he never has.  That is the epitome of failure as a leader.

Of course, you have to question whether he really wants to solve the problem at this point.  It’s probably more about political posturing at this point.  Democrats wouldn’t privatize the state, so Arnold will fall back on the same tired tactic of demonization while California goes up in flames.

“We all know how this movie goes,” Steinberg said. “The governor will be out again in some community in California attacking the Legislature and elected representatives for failing to act. It’s frankly a tired, old movie.”

In the end, the Democrats couldn’t — or wouldn’t — meet Schwarzenegger’s demands (more cuts, additional public-private partnerships and easing of environmental regulations for at least 10 projects) for him to sign the budget.

“The Legislature has been more than willing to meet the Governor halfway on his proposals, but we cannot in good conscience back an ‘anything goes’ approach to California’s environment and a privatization scheme that would make George W. Bush blush,” the Democratic leaders write in an op-ed in today’s Bee.

Arnold was never interested in “creating jobs,” he was interested in breaking his old nemesis, the unions.  And when it didn’t happen, he used the ridiculous excuse that now, when the Republican project to bankrupt government is almost realized, NOW they’ll see the light.  And in the end, even his “comprehensive” budget solution would only solve the problem until he could leave office, sticking his successor with another crisis.



Fail, fail, FAIL.

UPDATE by Brian: The Republican Senate Caucus just sent out a quite humourous email.  I’ll summarize: You try to kick the ball Charlie Brown, we’ll definitely leave it there. A snip:

We should start by immediately enacting the $6 billion in budget solutions that have already been agreed upon by both Republicans and Democrats. This would be a responsible first step to avert the looming cash crisis and put Californians back to work.”

“Republicans continue to stand ready to work with the Governor and Democrats. Too much time has been wasted on schemes to make an end-run around Prop. 13 and the will of the voters. It’s time to adopt a fiscally responsible budget plan, which is what voters rightfully expect from their elected leaders.”

Just so we’re clear here, well over 60% of the California voters agrees that we need to increase taxes, according to recent polling data.  In some polls, that even exceeds the 2/3 figure. The will of the voters is to have a viable K-12 system, higher education, decent transportation options and human services.  

Apparently, the Democrats should compromise on the parts they are willing to give, but the Republicans don’t have to give anything.  That’s not compromise, that’s unconditional surrender. Surrender to a theory of market economics that is crumbling around us as we speak, yet that’s where the GOP leads us.  Compromise indeed.

One of the worst elements of the current budget crisis is that it crowds out all of the other urgent problems facing the state.  Nowhere is this more true than in health care.  When the Nunez/Schwarzenegger overhaul failed last year, the problem never went away.  And there are a host of other issues with health care delivery that linger.  Fortunately, we’re seeing a little progress and a few good ideas that can set a course for the future.

First, the state reached an agreement with Blue Cross to reinstate 678 patients who were wrongly removed from their insurance plan in a practice known as “rescission”.  Basically, the insurer waits until a patient files a claim and then invents a reason to cancel their policy.

The insurer has agreed to reimburse the subscribers for any out-of-pocket medical expenses and create a third-party process to review policy cancellations.

Blue Shield faces up to a $5 million fine if it does not take corrective action, said Darrel Ng, insurance department spokesman.

Between Jan. 1, 2004, and May 31, 2008, Blue Shield improperly dropped 678 subscribers, the agency said.

Obviously, the state meeting its responsibilities to protect California consumers is helpful, but it doesn’t solve the big problems of health care delivery.  One of the most pressing concerns how to get quality care out to rural areas, where there is a dearth of doctors and facilities.  Fortunately, John Garamendi has a plan to recruit new doctors to rural health centers.

State Lt. Governor John Garamendi is proposing an ambitious fast-track medical school at University of California-Merced in an effort to create more doctors for the San Joaquin Valley, one of the most physician-poor regions in the state […]

Entering freshmen – recruited from San Joaquin Valley high schools, with family ties to the region – would study at UC-Merced and local community colleges, then train in existing medical centers and clinics, instead of at a pricey research-oriented hospital.

They would be encouraged to train as primary care physicians and learn the challenges of practicing medicine in this vast region, where 130 languages are spoken and many residents suffer from chronic ailments such as diabetes, heart disease and respiratory ailments from dust, diesel-burning farm equipment and wood-burning stoves.

And then there are the macro issues with rising costs and the uninsured in general.  Recognizing the dire needs in this area, foundations and nonprofits are stepping up in this area with advocacy that will hopefully bring more attention to the issue.

Overall, while the budget is obviously the pressing concern, we cannot overlook these burgeoning crises throughout California public policy.  There is sadly no magic fix for them, even if a budget is someday signed.

Five top Democratic governors have called for a larger stimulus package than is presently being called for in Washington, precisely to fill in the gaps created by a loss of tax revenue in the states.

To help offset state budget cuts, a group of Democratic governors urged the federal government Friday to pass a $1 trillion economic stimulus package, significantly larger than the one under discussion in Congress.

The package would help states compensate for cuts to education spending that could cause long-term economic decline, as well as bolster infrastructure projects and benefits programs for the poor, the governors from New York, New Jersey, Massachusetts, Ohio and Wisconsin said in a news conference […]

The governors recommended that the stimulus plan include $350 billion for infrastructure, including transportation, wastewater and broadband projects; $250 billion for anti-poverty programs such as Medicaid, unemployment insurance, food stamps and child care; $250 billion in flexible education spending to maintain funding for programs from pre-kindergarten to higher education; and middle-class tax cuts.

The money, disbursed over two years, would offset cuts needed to balance state budgets and would serve as a “bridge” until 2011, by which time the governors hope the economy will have recovered, said Massachusetts Gov. Deval L. Patrick.

Predictably, the Republican Governor’s Association called it a “bailout” of the general funds of the various states.

Well, yes.  The states, by and large, did not have the ability to get out from under the financial meltdown, and the consequent economic downturn that resulted shouldn’t disproportionately affect the least of their citizens.  Furthermore, given that the road to recovery is massive fiscal stimulus, having states cutting back on spending at this time, be it infrastructure, education or healthcare, is completely counterproductive and will do nothing but prolong the agony.

In the future, it will take more than backfilling state budget cuts in a downturn, but a more structured system, like a “Federal Infrastructure Finance Corporation,” to ensure that state assets aren’t sold off to private interests during a downturn.  The days of creative borrowing and the crossing of fingers are over.  We need new structures to manage economic volatility and avoid fiscal traps, PARTICULARLY in California, where the tax system too closely mirrors the boom and bust cycle.

In the near term, I imagine something like this will pass.  Barack Obama today put out a call for “strategic investments” to create jobs and improve the long-term economic outlook simultaneously.  The question locally is whether California’s plans will actually accomplish that.  CalPIRG is criticizing the state’s wish list, saying that it relies too much on increasing highway and road capacity and not enough on cleaner energy investments:

The California Public Interest Research Group reports that the state plans to spend 31% of road money on creating new capacity instead of addressing long-deferred maintenance and repair projects. By contrast, the group said, Massachusetts would commit 100% of its road funds to repairs.

“We can’t afford to waste precious resources on new highways at the expense of ready-to-go projects to repair and maintain existing roads and bridges and expand public transportation,” said spokeswoman Erin Steva.

The group also faulted the California Department of Transportation’s list, saying that only 37% of the funds would flow to public transportation. The group called for a higher percentage, citing the record ridership on California’s mass transit systems, which have been hit by severe cutbacks in recent years. The proposed percentage is less than what is being planned in Tennessee, Wisconsin and Massachusetts, CALPIRG said.

It is elemental that the stimulus spending cannot prop up an unsustainable growth model based on sprawl.  Experts up and down the state understand this, and one of the best examples is in this Merced Sun-Star editorial, which nicely explains the tension between speed and smarts:

The problem for the planners is that the stimulus must be geared toward putting people to work as fast as possible. That, many believe, argues for the traditional sort of public works, such as highways.

In many cases, plans are already in place to replace crumbling roads, highways and bridges. By contrast, plans for urban transit systems and intercity high-speed rail are less firm, meaning it may take more time to actually start turning dirt and generating paychecks […]

We’re confident that a solution exists that puts people to work right away and also lays the groundwork for a new approach to the nation’s transportation needs.

It won’t be easy, but it has to happen. We can’t continue to simply build more transportation infrastructure on a model that’s now more than a half-century old.

A new model for transportation is part of the change we need.

Read the whole thing.  One good idea calls for phased stimulus spending, giving enough for critical highway and road repairs at the start, with the bulk coming later for transit and rail projects.