I was going to put this as a comment to Dave’s diary about the Year of Doing Your Job, but, well, I thought it could stand as a compliment to that post. Sen. Dutton’s calling it a fiscal crisis, but really he just wants the governor to hack up the budget. You’ll remember him as being one of the Senate Obstructionists over the budget a few months ago. I’m not sure, but I’m pretty sure he was one of the senators hanging out at Chops when the Democrats were trying to work out a Budget.  But ol Bob wants to call a “fiscal crisis”.  Oooh, that sounds scary, what’s it mean? Well, Arnold would get to hack away at the budget.

Under Proposition 58 passed in 2004, the governor could declare a fiscal emergency if he determines revenue is “substantially below” what was anticipated in the budget and summon the Legislature into special session.

“If we don’t do something now … to deal with this crisis, we could find ourselves right back where we were five years ago,” Dutton said following a Senate budget committee hearing in the Capitol on Tuesday.

The administration’s Department of Finance cautioned that it was too soon to make such a call. (SacBee 11.28.07)

Well, wow, Arnold’s showing some restraint? Or could it perhaps have to do with the fact that he has no real desire to see the budget reopened. Because that went so well the last time. We are going to have some fiscal problems coming up, but the Republicans refuse to look at raising revenues. They simply seek to slash spending. MediCal? Who needs it? Not my family.

How can you negotiate when you are negotiating with your self. The Republicans refuse to look at the entirety of the issue, but yet demand answers now? To call it shortsighted is putting it kindly.

(Bumped to move the 2 budget diaries together. – promoted by Brian Leubitz)

The Schwarzenegger era will be remembered as the era of “blockbuster politics,” where the Governor took the same marketing techniques that made his movies popular and transferred them to the political stage.  He wouldn’t just make an issue a priority, he would structure the entire year around it.  “The Year of Reform!”  “The Year of Education!”  “The Year of Healthcare!”  “The Year of The Environment!” As an actor he only put out one movie a year, so one legislative initiative a year sounded about right for the average attention span.  The details of governance would be pushed backstage; the thrust would be to go big on one issue and hope the goodwill gained from success would mask whatever failures occurred.  This has not been a slam dunk; the year of reform crashed badly, other signature issues have yielded fruit.  Now, with this year’s blockbuster on the rocks due to Republican resistance, legal challenges, initiative politics and structural roadblocks, the inattention to the small problems that weren’t on the big agenda are starting to consume the state.  In an excellent editorial, Assemblyman John Laird, Chairman of the Budget Committee, explains how our current mess of a $10 billion dollar shortfall could have been easily avoided if the Governor would have paid attention to something other than staging the next blockbuster.

… [T]he chronic boom-and-bust budget cycle is rooted in a simple problem: Californians generally believe in government and want it adequately funded — so much so that they repeatedly have voted for laws or constitutional amendments that lock in guaranteed spending for, say, education or transportation. At the same time, the state’s revenue system is antiquated and volatile. It is heavily reliant on income taxes, for instance, and so the pains of an economic downturn have a magnified effect on state revenue.

The short-term solutions that get us through on a year-to-year basis all have been tried — and tried. It’s time for bipartisan hard work to bring California’s long-term spending demands into balance with long-term revenues. It won’t be easy, but the easy paths have been taken, and they’ve left the state awash in red ink.

Wingnut conservatives are calling on the Governor to declare a fiscal crisis.  It’s one of their own doing.  When California could have eliminated the constant catastrophes of the budget process by restructuring the revenue offsets to services the population desires, instead the Governor floated a $15 billion dollar bond in 2004.  The result is $3 billion a year extra in debt, every year, to repay the costs of a senseless short-term fix.  If sound Republican budgeting means “put the problem off to children and grandchildren,” then we’ve got a lot of sound budgeters in Sacramento:

On paper, it may look like spending has increased in recent years, but that is largely driven by the expiration of earlier budget-balancing tricks — such as temporarily shifting school funding to local governments, shifting costs to special funds and the multibillion-dollar temporary cut to education.

There really haven’t been significant program spending increases, with three exceptions: public safety, the result of various court cases regarding our prison system and implementation of “Jessica’s Law” to track sex offenders; debt service, primarily the annual $3-billion payment on the $15-billion deficit bond; and local government funding, a result of the vehicle license fee cut because billions from that fee used to go to cities and counties.

Sacramento does not have a spending problem.  It has a denial-of-reality problem.  The cuts are always accommodated in the state budget, like this year’s delay of COLA (cost of living adjustments) for elderly public assistance, and the $1.3 billion in transportation funding.  The revenue increases are always blocked.  Stopgaps that run out and increases in population wipe out the cuts.  We’re left on an unsustainable track.

The state is rapidly headed toward bankruptcy if it continues down this stupid, temper-tantrum approach to the budget.  if Arnold Schwarzenegger wants to leave a lasting legacy, and let’s face it, that’s all he wants to do, he can work hard to fix the structural problems that will always put the state’s financial picture in peril.  That would require sitting in his office and doing his job, not holding big speeches behind backdrops that say “The Year of the Tiger!” or whatever he’s trying to peddle to the electorate.

So now we learn that the implementation for Jessica’s Law is completely impossible and will likely never happen.

Law enforcement leaders who pushed for a ballot initiative requiring sex offenders in California to be tracked by satellite for life are now saying that the sweeping surveillance program voters endorsed is not feasible and is unlikely to be fully implemented for years, if ever […]

The difficulties include the impracticality of tracking sex offenders who no longer must report to parole or probation officers, the lack of any penalty for those who refuse to cooperate with monitoring and the question of whether such widespread tracking is effective in protecting the public.

The biggest issue, however, is that the law does not specify which agency or government should monitor felony sex offenders — and shoulder hundreds of millions of dollars a year in related costs.

That said, these same law enforcement officials claim that the law is worthwhile, mainly because they don’t want the egg on their face for the next 20 years, and they can quietly put the whole thing to rest once everyone forgets about it.

In truth, the unworkability of this law, which trades liberty for security and provides neither, making it far more difficult to track sex offenders while beginning a slippery slope toward lifetime surveillance of anyone who commits a crime we collectively decide not to like in the future, was obvious from the beginning.  It was written poorly, and maybe some of that can be fixed.  But the restrictions on housing have caused ex-cons to live under bridges, which seems to me to set the table for them to commit more crimes so they can get some shelter.  The lack of reporting to parole officers, too, just drops these offenders off the map – when the point is supposed to be to FURTHER track them so they don’t molest again.

This is also about the dangers of ballot-box budgeting.  With the vague nature of the funding in the law, everyone’s trying to force payment on somebody else.

Gov. Arnold Schwarzenegger and state law enforcement leaders, who were allied in backing the measure, are engaged in a standoff over who should bear its financial burden.

“I don’t know of any agency that has the resources to track and monitor . . . in real time,” said Vacaville Police Chief Richard Word, president of the California Police Chiefs Assn. “You’ll need an air traffic controller to track these folks.” […]

Corrections analysts estimate that it costs the state up to $33 a day in equipment and labor to monitor a sex offender by GPS, and it would take nearly $90 million a year just to track the 9,000 now on parole if all were subject to Proposition 83.

Once offenders are discharged from parole, the state will no longer monitor them electronically, Corrections Secretary James Tilton said last month, because his department lacks jurisdiction at that point. The agency also is overextended, with an overcrowded prison system under review by the federal courts.

Nick Warner, a lobbyist and spokesman for the California State Sheriffs’ Assn., said the state’s refusal to monitor sex offenders after parole “passes the buck to local law enforcement, who are not equipped to handle them.” He said the state was “setting up communities to fail” and predicted that the matter would end up in court.

Schwarzenegger, who faces a $10-billion state budget gap next year, said through spokesman Bill Maile that he would wait for the sex offender board to address the question of who should fund lifetime GPS tracking before taking a position on the issue.

The law is clearly unworkable and unsuccessful.  Yet it got 70% of the vote because these flaws were hidden from public scrutiny.  And as a result, everyone is afraid to say we should scrap it, due to political factors.

Welcome to your direct democracy in action!

See also:
Jessica’s Law Tag
What California should learn from the Genarlow Wilson case (but almost certainly won’t)
 

The projected deficit for the state budget in 2008 is $10 billion and growing quickly. As the scope of the crisis becomes clearer, the state’s media is beginning to take notice and, as always, trying to spin the situation according to their own preconceived notions.

In that vein comes today’s article by Evan Halper in the LA Times. While the article would seem to boost us by laying the blame at Arnold’s feet, its primary argument is actually that the budget crisis is due to “voter-imposed budget constraints” that limit the legislature’s ability to slash spending when needed, and limiting the effectiveness of government.

It’s not a new claim, of course, and the article quotes Don Perata’s complaint about this that he made earlier in the year. But the politics of the budget crisis are shaped by the media coverage of it, and in that sense it’s not just significant how much the LA Times is playing up the locked-in spending, but how much they’re downplaying the lack of tax revenue.

If we’re going to prevent this budget crisis from seeing the death blow to the liberal state that Pat Brown helped build in the 1960s as well as from crippling our ability to respond to our own ecological and urban crises, we need to aggressively push back against the idea that spending cuts are the answer. California’s budget is in crisis not because we spend too much, but because we tax too little.

The LA Times article begins:

Gov. Arnold Schwarzenegger could soon come to regard the epic budget mess he inherited four years ago as a minor nuisance compared to the challenge he faces now.

As he prepares the budget blueprint that he will release in January, the governor is in a bind. There isn’t as much red ink this time, or an emergency cash shortage — at least not yet. But deals he made to keep the state afloat earlier in his tenure now hamper his ability to take on a rapidly swelling deficit that early projections show will hit at least $10 billion.

Those deals, made when the deficit was substantially larger, put a lock on billions of dollars. Large pots of money that lawmakers have tapped to patch past budget deficits are no longer available to them. The prohibitions are even etched into California’s Constitution, thanks to ballot measures championed by Schwarzenegger.

“There is no question this budget will be tougher” than when the deficit was $14 billion, said Mike Genest, the governor’s budget chief. “A lot of options we had before have been removed.”

The tone is set from the beginning – locked-in spending and prohibitions on cutting funding to schools or raiding local government coffers are going to make things “tougher” and are the basic problem the state faces in trying to resolve the deficit.

And of course, Mike Genest is being disingenuous when he said “a lot of the options we had before have been removed.” There’s nothing stopping you guys from reinstating the MVET, is there? No, to Arnold and his cronies, the only “options” are spending cuts that hurt the working and middle-classes, not tax increases that might capture some of the massive wealth generated by a small class of Californians.

The article quotes some Democrats as well:

We have just tightened the noose around our neck instead of figuring out how to get out of the noose in the first place,” said Hannah-Beth Jackson, a former Democratic assemblywoman from Santa Barbara who plans to run for the Senate next year. “We have all these spending requirements, and they end up working against each other. We can’t take from this, we can’t take from that; we’ve become immobilized.”

Of course, this noose analogy only works if you don’t include the possibility of tax increases. Prop 13 and the state budget rules form a noose as well around state budgeting, preventing legislators from enacting a fair and sensible tax system that pays for the state’s needs without stressing lower and middle income families. Perhaps she was quoted out of context here, but HBJ should know that legislative immobility on the budget has more to do with taxes than spending – and more importantly, as progressives we need to be pushing hard on the tax issue instead of arguing that the problem is an inability to cut spending.

These spending constraints were the product of an electorate angry at legislators for raiding necessary programs:

But legislators have played a role in creating the dilemma they face. Citizen ballot initiatives often draw on the public’s distaste for a Legislature perceived as financially incompetent and politically tone-deaf. Only 25% of likely voters trust state government officials to do what is right most or all of the time, according to a September poll by the Public Policy Institute of California.

Lawmakers’ slowness in addressing skyrocketing property tax bills led voters in 1978 to pass the landmark Proposition 13, limiting how much such bills can increase every year. In 1988, voters approved Proposition 98, which set aside about 45% of the state’s general fund for education programs and gave lawmakers complicated rules for allocating it.

“The reason voters lock in spending is because they don’t trust the Legislature to share their priorities,” said John G. Matsusaka, president of the Initiative and Referendum Institute at USC.

It seems that legislators have not, in fact, actually dealt with this lack of trust. It was lack of trust that created the political conditions in 1978 that helped pass Prop 13, and a similar lack of trust that has led voters to protect important services such as education. It was a lack of trust, exploited by Republican dirty tricks, that led to the recall in 2003 during a previous budget crisis.

So for legislators to complain that locked-in spending is the problem seems to me to be missing the point entirely. But it doesn’t help when the LA Times publishes an article so strongly reinforcing that point.

The real issue here is that in 2008 we face a crossroads in California. Will we continue to balance California’s budgets on the backs of our most vulnerable and needy people, on the backs of an already stressed middle class, so that the wealthy can escape their obligations? Or will we finally push back and work to restore the promises of the 1960s, AND face the crises of our own time?

Further quotes from Arnold’s budget man suggest that they’re going to try the former route, with gusto:

Genest said the governor has no regrets….

Now is the time, Genest said, for hard decisions.

“The governor made these deals fully aware that the day would come when some of us would say we wish we had more options,” he said.

That suggests to me that Arnold is “fully aware” of what those spending constraints would lead to – an overwhelming desire to gut state services in the next budget crisis. It’s the shock doctrine for California – gin up a crisis and then use that crisis to push through a deconstruction of the liberal state, privatizing government services in the name of ending the fiscal crisis but in fact merely enriching a small coterie while the vastly inferior privatized services set most Californians even further behind.

Sound a bit overstated? Consider who was in Mike Genest’s position when these spending limits were made: Donna Arduin. As I explained in my article “The Plot To Privatize Public Education”:

And it is a deliberate privatization. ALL of this is in fact quite deliberate. It is not a reaction to a fiscal crisis. Instead it is a carefully planned effort to destroy mobility and access for the mass of Californians in order to allow those who have already prospered to keep their wealth while shutting the door behind them to those who wish to follow.

It goes back to Donna Arduin. Brought in as Arnold’s finance director in 2003, she is an ardent advocate of privatization. In order to “balance” budgets in Michigan, New York, and Florida under Republican governors, she advocated the gutting of social and educational spending so as to prevent a tax increase. As [an earlier] LA Times article notes, she took a similar approach to higher ed in CA:

Her budget plan for UC and CSU called for hundreds of millions of dollars in cuts for the third consecutive year, major student fee hikes, a reduction in enrollment and a plan to steer thousands of students to community colleges instead of the universities.

With Arduin as his very own Milton Friedman Arnold has maneuvered California into a crisis, and hopes to use that crisis to finish off what remains of California’s liberal promises of equality and opportunity for all its residents.

Will Democrats go along with this? With the media stoking Arnold’s fires, the prognosis is not good.  If we are to prevent this crisis from gutting not just our egalitarian heritage, but our ability to respond to our own crises – water, energy, food, transportation, renewed accessibility for higher ed, and health care – all these will require new state spending. There’s simply no way around it.

The only time the LA Times article gets even close to discussing the revenue problem is at the end:

Others are hopeful voters will see that the state lacks the funds to provide all the services they expect, and a tax increase is not unreasonable.

State Treasurer Bill Lockyer says that at minimum, that is a healthy debate to have. And one long overdue after years of the state spending more than it brings in and papering over deficits by shifting funds around from accounts that now cannot be touched.

“The constraints limit our flexibility, but they do not cause overspending,” Lockyer said. “The real problem is tooth-fairy budgeting.”

No, Bill, the real problem is a lack of revenue. It’s really that simple. Since 1978 California has decided to protect a small group of homeowners and the wealthy at the expense of everyone else. A 25-year increase in real estate values and wealth took place and the state saw hardly any of that money because of the unchallenged system of Prop 13. As our needs grew, and as the wealth to help address those needs grew, politicians such as yourself did nothing to tap those resources, preferring “tooth-fairy budgeting” to actual measures to put California on a long-term stable financial footing. Lockyer WAS in the legislature, after all, in the 1980s and 1990s.

Lockyer, you’ll remember, is also the person who recently kicked around the idea of privatizing UC outright. wu  ming delivered a classic smackdown of this idea, but it’s worth remembering that to Lockyer, the only viable solutions are neoliberal solutions. We should cut and gut state services, he counsels, but god forbid we actually consider fixing our tax crisis.

Already, 30 years of state budget cuts brought on by legislators’ unwillingness to challenge Prop 13 has led to what the California Budget Project called A Generation of Inequality, where Californians increasingly are stuck in low wage jobs while the wealthy few enjoy most of what remains of the California dream. Health care costs, housing costs, energy costs, and education costs play a primary role in that inequality – and the state can, with proper tax and spending priorities, help alleviate those problems.

The California Tax Reform Association has proposed a series of reforms that would raise upwards of $17 billion for state government – and that doesn’t even include restoring the MVET, which would add another $5-6 billion. If we also rejected wasteful spending like the ridiculous $9 billion prison bond, or the $3 billion in dams that Republicans demand, that’s another $12 billion in bond capacity we could use to help build badly needed infrastructure, like high speed rail or a revitalized Delta, without straining the general fund even further.

But to undertake any of these sensible reforms requires confronting squarely the dominant political assumptions of the last 30 years in California. And it’s important to note they are assumptions. Yes, California has straitjacketed itself on taxes as much as it has on spending – but why assume that the solution is to break the spending rules, and not the tax rules?

Orange County conservatives were hammered in the court of public opinion in recent weeks over their opposition to a 2005 tax measure that would have helped fund fire responses that were found lacking in the recent firestorms. An October LA Times poll showed voters are willing to tax themselves for health care. The opportunities to fight back against the neoliberal assumptions that have ruled California ARE there, to anyone willing to act on them.

And so we face a crossroads. Will we sit back and let Republicans and the media shock doctrine us into giving up what remains of equitable, accessible, broadly prosperous California, and eliminating our ability to tackle the multifaceted crisis of the 21st century? Or will we fight back and finally challenge these assumptions, that we should look to spending cuts before tax increases, and finally put California on a sound financial footing by giving us the resources we need?

I didn’t have the time yesterday to mention that the Legislative Analyst’s Office has confirmed what everyone had feared for a while, that California is staring a $10 billion dollar budget deficit in the face and there’s seemingly no political will to address the structural fiscal problems underlying the projected deficit and do something about it.  All of the top legislative leaders had something to say about the LAO report, and I didn’t see a ton of leadership there.  Arnold and the Republicans focused on major budget cuts while making vague and insufficient nods toward “serious discussions” on budget reform.  Speaker Nuñez was pretty vague himself though he held the line on a cut-only approach, and Senator Perata had perhaps the strongest response, though it’s perhaps too focused on the past:

“Since last May, I have talked about California’s flawed and unbalanced fiscal structure. Today’s LAO report is another sobering reminder that quick fixes will not provide a long-term solution to the state’s budget woes.

“I once again call on the Governor and my fellow legislative leaders to begin a serious discussion about how to build a structurally balanced budget.

“There is an ongoing gap between state expenditures and revenues that this Governor helped create by slashing Vehicle License Fees and refusing to balance that loss with revenue from another source. That alone accounts for $6 billion of this problem.

“An honest dialogue about closing the budget gap must include exploring all options.”

But the real strong medicine was delivered by the LAO’s Elizabeth Hill.

In releasing her five-year fiscal outlook Wednesday, Legislative Analyst Elizabeth Hill said lawmakers face tough decisions for the fiscal year that begins July 1.

“All the easy solutions are gone,” she said.

Hill, the state’s top budget analyst, called for immediate cuts to “double up” savings for the current and upcoming fiscal years. She also offered solutions certain to meet political opposition, including raising taxes.

Her projections were worse than previously stated by the Schwarzenegger administration, which pegged the shortfall at $6 billion. Hill said the deficit has increased due to growing government expenses that have outpaced revenues in an economy weakened by the real estate slump.

Realistically, since you can’t deficit spend, it’s going to take a combination of revenues and cuts to balance the budget.  This problem is only likely to get worse.  The median home price in the state dropped $60,000 in a month.  That severely impacts property tax revenue.  And the state lost a Supreme Court case where they were trying to stop a payment of $200 million in interest to the teacher’s pension fund.  But those are just the short-term issues.  The problem is long-term.

Hill said the state’s structural imbalance has been around for years – a challenge state leaders have failed to address.

“We’ve been facing a problem every year since 2001-02,” Hill said. “And when you look out to 2012-13, we still do not have our expenditures and revenues in line.”

The state has confronted bigger fiscal crises before. In 2003-04, lawmakers were facing gaps as big as $38 billion. The state resorted to borrowing, which Hill said is exacerbating the current problem because cash is going to debt payments.

Borrowing at this point is almost immoral.  There’s going to be a need to maybe allow some painful cuts in exchange for long-term fixes in revenue structure.  Next year will be incredibly difficult.

(Apologies to the Thers at Whiskey Fire for stealing his gimmick of using a Guided By Voices lyric as a blog title)

I feel like there are two completely different conversations happening on the major issues of the day in California.  In one, there is an historic opportunity to provide quality health care to everyone in the state, which will be affordable and comprehensive and go a long way toward solving our numerous health care problems.  In the other, the state is completely in the fucking toilet and nobody in a position of power has the political will to do anything about it.

Now the governor finds himself in a predicament similar to that of his predecessor, Democrat Gray Davis: staring at a crippling budget shortfall that threatens to overshadow all other business in the Capitol and tarnish his political legacy.

On Monday, Schwarzenegger ordered all state agencies to prepare plans to cut spending across the board by 10% next year. Education, transportation and healthcare will all be affected. Some programs face elimination. Layoffs may loom. The state’s budget shortfall, thanks largely to the troubled housing market, has ballooned from a few billion dollars projected at the beginning of the year to $10 billion.

Experts are not surprised.

“There has been lots of talk and lots of gimmicks, but none of the state’s underlying budget problems have been dealt with,” said Ryan Ratcliff, an economist at the UCLA Anderson Forecast. “Even in the middle of a revenue boom, we kept spending more than we take in.”

Spending has increased, but the issue is structural.  There’s no way California can meet the needs of its burgeoning population under the draconian revenue and spending structure we have in place, and the Governor has made no moves to fundamentally change that, just to pass the horror show on to whoever replaces him in the most hacktastic manner possible.  Here’s Kevin Drum.

Four years ago Arnold Schwarzenegger took office in the midst of a massive budget crisis after promising voters that he would end our “crazy deficit spending.” In true Republican fashion, he did this by immediately reducing the state auto licensing fee by $4 billion a year and then insisting that we all approve $15 billion in bonds to paper over a shortfall that was now even more desperate than the one he inherited. The hope, apparently, was that nothing bad would ever happen to the economy and eventually we’d squeeze out from under the rock we were under.

I opposed the bonds at the time, and I’ve never regretted that vote since. Defeating the bonds would have caused immense fiscal pain, but it would also have forced Schwarzenegger and the legislature to actually fix our underlying problem by increasing taxes and reducing spending. Our nonpartisan legislative analyst made it clear from the beginning that Arnold’s plan had no long-term chance of success, but he just flashed that million-dollar smile and went ahead with it anyway.

And now we’ll be paying for years and years to come, with ENORMOUS pain just down the road when the bonds come due.  And we’re talking about providing universal health care?

The plan itself has significant things to feel good about, even if it is only a first step.  It includes an individual mandate, but with all of the affordability exemptions, it’s not a mandate at all.  It expands public health services as much as any reform since the creation of Medicare and Medicaid.  And there are excellent reforms like guaranteed issue and a modified community rating for cost control.  Obviously there are questions about what minimum coverage provides but the affordability requirements, capping out of pocket costs at 6.5% of income, should be a mitigating factor.

But the entire discussion is happening in some kind of alternate universe of fiscal health.  The 10% across the board cuts will impact health care, particularly any public care options; is AB X1 going to account for that?  The convoluted funding mechanism, which will need voter approval because the 2/3 system for tax increases is still in effect, includes 8 core parts, including “federal matching funds” and “reinvested state savings.”  Why don’t you just add a pony, too?  We’re heading into a time where the state could be as much as $10 billion in the hole.  The new entitlements will be the first ones crowded out by a governor wedded to anti-tax ideology.  And he hasn’t signed on to a new cigarette tax, by the way, still preferring PRIVATIZING THE LOTTERY, and the net income increase from which will be approximately zero dollars in the long term, at best.

And let’s not gloss over the ballot-box hurdle such a plan would have to scale.  Maviglio soft-sells the defeat of a tobacco tax to pay for health care in Oregon yesterday, saying that California’s different, conveniently forgetting that Prop. 86, which was, um, A TOBACCO TAX TO PAY FOR HEALTH CARE, failed miserably here just last year.  In fact, the Oregon ballot measure wasn’t the only one that a tax-averse, skittish electorate rejected yesterday.

Cost-conscious voters rejected school vouchers for Utah students, state-sponsored stem cell research in New Jersey and increased cigarette taxes in Oregon to fund health care for uninsured children.

New Jersey voters had not killed a statewide ballot measure since 1988.  The rejection was a defeat for Democratic Gov. Jon S. Corzine, who campaigned heavily for the plan to borrow $450 million over 10 years to finance stem cell research.

“The public understands the state has serious financial issues that must be addressed first,” Corzine spokeswoman Lili Stainton said.

No state has more serious financial issues than California right now.  And voters are listing the economy as a greater concern than Iraq at this point in time.  Ballot-box budgeting ends up producing results that are popular but not necessarily effective.  Painful solutions regarding revenue and spending are the only way to dig us out of the mess the so-called leaders in Sacramento have created, and voters aren’t entirely likely to be informed and sanguine enough to pull the trigger on that.

This is why I continue to maintain that universal health care ideas on the state level are doomed almost by definition, and particularly in a state with the looming budget troubles like we have here. 

The history of state health reform initiatives (and there’s quite a history) is a tale of false hopes and great disappointments. The deck is stacked from the start, and the house-in this case the insurers, the providers, and other agents of the status quo-always wins. The new raft of reforms may prove different, but they probably won’t. Universal care advocates must be realistic about that, and think hard about how to convert the energy in the states into a national solution before the current crop of novel experiments fail-because fail they almost certainly will […]

One of the great things about state governments is that they have more freedom than the federal government does to test new policy ideas. But it pays to look honestly at what the results of those tests actually say. And in this case, the results are pretty clear: states are no good at delivering universal health care.

No one can doubt the role Massachusetts and California have played in reinvigorating the debate over national health care. And if the reforms currently percolating at the state level help provide momentum for a national health care system in the next few years, all the effort will have been worth it. If they don’t, however, they may ultimately prove detrimental. If high-profile efforts like those in Massachusetts and California can’t be properly implemented, or are launched and then collapse, they’ll become powerful weapons in the hands of protectors of the status quo.

There is a world in which bad policy ideas can actually be worse than now policy at all.  We have to tread very lightly and ensure that doesn’t happen in California.

“I made Kaleefornia a fantastic place for business!”

Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California’s budget is plunging further into the red — largely because of the troubled housing market […]

Economists say the state’s declining fortunes are due in large part to the shakeout in the housing market and a volatile revenue system overly reliant on income taxes […]

[Chris Thornberg, a principal with Beacon Economics] said the trouble in the housing sector is reverberating through the entire state economy, causing income and consumer spending to decline. He noted that unemployment is up a full percent since the beginning of the year, a jump that typically foreshadows recession.

“What’s happening right now is big in terms of the revenue hit,” he said. “The numbers are coming in way below where they should be.”

And don’t forget, one of the state’s top industries could be shut down for months. 

When you balance the budget on borrowing, have no flexibility in the budget structure, and then recession hits, there’s absolutely nowhere to go.  We have severe money gaps and no way to brek through the draconian 2/3 measure to increase revenue for vital services.  In this environment, the first order of business should be an immediate recalibration of the tax structure, not cutting a budget that’s already down to the bone.  But we all know that’s not going to happen.  It’s much better for the fortunes of those “leaders” who got us into this mess to tout an insurance company giveaway as “getting something done” so they can get themselves re-elected.

This state is in big trouble.

Statewide foreclosures in California hit the 24,000 mark in the third quarter of 2007 for the first time ever.  In fact, it beat the previous record by 39%.  Nationally, there are almost 18 million vacant homes, and the homeownership rate, often touted by the Bush Administration as proof of economic success, fell for the fourth straight quarter.  What’s really concerning are the foreclosures in upper-income areas:

In four Newport Beach-area ZIP Codes, for example, there were 11 foreclosures in the third quarter, up from just three in the same period last year. There were seven foreclosures in Bel-Air, and none a year ago.

“It’s definitely increasing,” said Joyce Essex, a Coldwell Banker real estate agent based in Beverly Hills who specializes in selling foreclosed homes.

Essex said most of her properties were in the San Fernando Valley and South Los Angeles, but about 10% of her listings are now in a more affluent part of town.

“It’s working its way to the Westside. The Westside is always last to get hit,” Essex said of the foreclosure wave, based on her experience in the 1990s downturn.

The mortgage crisis is finally catching up to those who live hand-to-mouth on a higher level.  The millions who used home equity loans to finance their lifestyle, pulling money out of their properties over and over again, now have no ability to continue the scheme.  And this is just the beginning.  Millions of variable-rate mortgages will reset to a higher rate, in some cases doubling the payment, in the next 2 years.  That will mean more foreclosures, a sapping of housing wealth, and a real impact on state finances:

More than $23.6 billion in California housing wealth will evaporate if real estate prices continue to decline and foreclosures on subprime home loans soar, according to a new congressional report that indicates the fallout from the national mortgage crisis is worsening.

In addition, over the next two years, the state will lose nearly $111 million in tax revenue from the forecast repossession of 191,000 homes and the spillover effect on neighboring property values, said the study, released Thursday by the Senate Joint Economic Committee.

“State by state, the economic costs from the subprime debacle are shockingly high,” committee Chairman Chuck Schumer, D-N.Y., said in a statement. “From New York to California, we are headed for billions in lost wealth, property values and tax revenues.”

And that’s actually a very optimistic scenario, plus it focuses only on tax revenues and not residual effects.  In a country where two-thirds of all economic activity is consumer spending, housing jitters will redound through the entire economy, with families cutting spending because they can no longer rely on their houses for retirement security.  And this isn’t temporary.

“It took Southern California 10 years to recover (from the last housing downturn), and it took the Bay Area six or seven years,” said Cynthia Kroll, senior regional economist at the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “That’s a very realistic expectation.”

This was all very predictable.  Everyone knew that subprime mortgages were a risky asset on which to rest the entire economy.  But it was easy money, particularly for those financial institutions making cash in mortgage-backed securities, so they allowed it.

There is pending legislation in the House Financial Services Committee that would help protect consumers against predatory lending, and other bills would allow Fannie Mae to buy a bunch of mortgages and give homeowners a chance to stay in their homes.  Hopefully, the market has gotten so bad that legislation like this will have a chance to pass.  Otherwise, California and the nation will have a very tough road ahead, impacting the ability to improve people’s lives in education, health care, and practically everything government does.

In 1960, the Master Plan for Higher Education in California was adopted, with Democratic Governor Pat Brown having played the key role in brokering the deals that produced the remarkable document. Among its core principles were access – from the guarantees of UC or CSU acceptance for students in the top levels of their high school classes, to community college transfers – as well as affordability with an outright ban on tuition and the expectation that “student fees” would be limited, and used for things such as student activities and dorms. The state would provide the support for instruction.

But ever since Reagan took office in 1967, these promises have been under attack. In a political or especially an economic crisis, state politicians have repeatedly undermined the Master Plan, limiting access by reducing affordability. After a truce in the 1990s, the budget crisis of the 2000s saw another sustained attack on higher ed and the first acknowledged abrogations of the Master Plan’s promises. Today, a UC or CSU education is no longer affordable, and reduced state support not only limits access, but is impoverishing those who work in its ranks.

All this is the subject of a fantastic LA Times article this morning titled “Less to Bank on at State Universities: Educators fear a 2004 funding deal has schools sliding toward mediocrity.” But the article is about more than just the problems of reduced funding. Instead it outlines how this is a deliberate policy of the Schwarzenegger administration, an effort to privatize California colleges and put them out of the reach of those who have been promised access to them.

The story does not end there. An unstated, but equally important aspect of the piece also shows how this crisis is also the product of a stunning failure of public officials to protect the institutions and historic policies they have been charged with defending. Whether it is the UC Regents, the State Legislature, or the Democratic Party, these officials have done little to nothing to protect one of the most important projects in California history.

One of the best aspects of this article is how it foregrounds the suffering of those working at the colleges. Many of us are familiar with the costs of college facing a student in California – hell, most of us were or still are students at a California public university in the recent past – but the problems of university staff have gone comparatively unrecognized.

Library assistant Linda Snook isn’t usually someone to stand up in front of hundreds of people and discuss her personal finances. But when the UC Board of Regents met here this summer, she pleaded for help.

Snook told the regents that she makes $26,000 a year working full time at UC Santa Barbara and pays more than half of that in rent. Her supervisors have recommended her for raises, she said, but there is never enough money in the budget. She’d like to enroll in graduate school at UCSB, but, on her pay, that’s a distant dream.

“I am barely making it,” she told the regents. “We’re not paid what the private sector would make. We desperately, desperately need help. Please.”

As anyone familiar with Santa Barbara knows, $26K is WOEFULLY inadequate. And her inability to pursue a graduate degree shows just how much access has been reduced. These days, when one needs not just a BA, but a Master’s degree, to be competitive for professional jobs, denying workers such as Linda Snook the opportunity to get that education is a direct failure of the state to meet its promises.

Higher education is the key to a strong, successful, and prosperous California. It promotes long-term growth, provides new technologies and entrepreneurship, trains skilled workers, and itself keeps economies afloat in towns as diverse as Riverside, Chico, and San Luis Obispo.

Without affordable access to higher education, California will slide into a kind of caste system where only those who already have wealth can afford to send their kids to college, and everyone else either cannot go at all, or must take out so many loans that they become shackled to their debt, unable to contribute meaningfully to the state economy.

The bulk of the article is dedicated to explaining this problem. In previous financial crises, such as those in the early ’80s and early ’90s, cuts made in lean times to higher ed budgets were restored in boom years. The crippling cuts of 1991-92 were reversed by 1996-97, for example. As recently as 2001 “the universities were in relatively good fiscal health.”

But that changed with the most recent budget disaster. Both Gray Davis and Arnold Schwarzenegger hit higher ed with massive cuts, partly enabled by the fact that neither the UC nor the CSU have guaranteed funding minimums, a necessity in this age of a foolish unwillingness to consider new taxation.

As a result of this crisis, UC and CSU leaders sought a new “compact” with Arnold, and in May 2004 they got it:

The two university chiefs struck a deal with the governor: They agreed to slash spending that year by hundreds of millions of dollars in exchange for a funding formula lasting until 2011. Titled the “Higher Education Compact,” the agreement calls for modest annual increases in state funds, private fundraising to help pay for basic programs, and large student fee hikes, especially for graduate and professional students.

There was no hearing on the pact; no legislative discussion; no vote. Many UC regents were not told of the deal until it was done. Richard C. Blum, who became the regents’ chairman this year, called the lack of disclosure “an error in judgment.”

The problem is that the amount of funding Arnold promised is LOWER than what was given in 2001. For 7 years – 2004-2011 – UC and CSU have to either accept this lower amount that leaves them at least $1 billion short of what is actually needed, or break the deal with Arnold and thereby face worse cuts.

The effect of this is to cut back the level of state support for public education – privatization through the back door:

In 1970, the state spent 6.9% of its budget on the University of California. Today it spends 3.2%. In 1965, the state covered 94.4% of a UC student’s education. Last year it paid 58.5%.

This year, California will spend an estimated $3.3 billion to operate UC. It will spend three times as much — $9.9 billion — to run the state’s prisons.

And it is a deliberate privatization. ALL of this is in fact quite deliberate. It is not a reaction to a fiscal crisis. Instead it is a carefully planned effort to destroy mobility and access for the mass of Californians in order to allow those who have already prospered to keep their wealth while shutting the door behind them to those who wish to follow.

It goes back to Donna Arduin. Brought in as Arnold’s finance director in 2003, she is an ardent advocate of privatization. In order to “balance” budgets in Michigan, New York, and Florida under Republican governors, she advocated the gutting of social and educational spending so as to prevent a tax increase. As the LA Times notes, she took a similar approach to higher ed in CA:

Her budget plan for UC and CSU called for hundreds of millions of dollars in cuts for the third consecutive year, major student fee hikes, a reduction in enrollment and a plan to steer thousands of students to community colleges instead of the universities.

And in fact that is what happened. The results have been catastrophic.

• Students are burdened with enormous loan debt, but as the California Budget Project noted in its recent report A Generation of Inequality, young college educated Californians have had a harder time finding work than those with just a high school diploma. Students are saddled with debts they cannot pay off.
• Workers are left behind as the California economy and even its society are increasingly geared toward serving those who have wealth. The library assistant described above trying to survive on $26K in Santa Barbara is but one example of how higher ed workers are increasingly treated as servants – people expected to work extremely hard, but not paid enough to live in a state with a high cost of living.
• The quality of education suffers. In order to continue to educate students, all three branches of higher ed are turning to part-time, adjunct instructors – the “field hands” of academia. Although these part-timers work diligently to provide the best possible instruction, their working conditions are very difficult, and as a result the use of part-time instructors has been proved to adversely affect graduation rates at both community colleges and four-year schools.
• The privatization plan also overwhelms community colleges, who have a more difficult time handling the influx. I currently teach at a community college, and will defend its quality of education against any critic. But without more resources – from classrooms to tech equipment to full-time faculty – it is nearly impossible to keep up.

Arnold Schwarzenegger and Donna Arduin’s privatization plans are a major culprit in all of this. But their plans would not have had success if they didn’t have help. Leaders at the UC and the CSU system, the state legislature, and Democrats have all played their role in abandoning California’s commitment to affordable, accessible higher education.

UC and CSU leaders have frequently gone along with budget cuts, refusing to rally the public against them. The tone was likely set in 1967, when one of Reagan’s first acts as governor was to fire UC President Clark Kerr. UC Regents, CSU Board members, and all the other campus heads, are very aware of their dependence on politicians.

So instead of fighting these cuts, university administrators have instead chosen to fight others in the university community over the remains, massively increasing student fees and trying to gut workers’ wages and benefits. Just last week the graduate student employees’ union, UAW 2865, won a contract protecting their benefits and wages, providing even an annual cost of living increase. Earlier this year CSU faculty won a major victory in getting a wage increase, as high as 20% when it is fully phased in. And the campus staff, from those who work in the offices and libraries to those in the food service sector, have been continuously organizing to get wage increases.

As the university administrations fight students and workers instead of rallying to their cause, neither the state legislature nor Democrats have put up a meaningful fight to reverse this alarming trend. Legislators are afraid of reopening the tax question, despite the fact that the question of taxes usually only ever comes up when Republicans are trying to win a particular election. Democratic legislators make a major error when they think that voters are interested in holding the line on taxes at the cost of soaring college costs – the middle and lower-class households that still make up the bedrock of the Democratic coalition in California are hurt far more by the planned privatization of California higher education than any tax increase.

Ultimately this privatization, planned in the governor’s office, signed off in secret by the UC and CSU leaders, and tacitly accepted by Democratic legislators, is nothing more than an effort to preserve the wealth of those who currently have it and to ensure that nobody else in this or future generations will ever have the opportunities they had again.

Bill Lockyer, who recently proposed outright privatization of UC as a budget deficit “solution,” graduated from UC Berkeley in 1965. He and/or his family would have only paid $880 in student fees for his 4-year education from 1961 to 1965. The equivalent of that in 2007 dollars would be, according to the federal Bureau of Labor Statistics, $5,808. Currently undergraduate fees at UC are $6,141 – a four year total is $24,564. That’s over a 300% increase beyond the rate of inflation. That’s nearly $20,000 that individuals must pay now that the state, through distributed taxation, paid in previous years.

It is shameful that so many who benefited from state subsidies are now arguing that current and future generations should not have the same opportunity. Perhaps we should ask Bill Lockyer and other California politicians who argue for privatization to reimburse the state $20,000 for the cost of their education.

Or perhaps we should instead demand that California live up to its historic promises of affordable, accessible higher education. If a strong economy with a equitable distribution of wealth, financially secure families, and opportunities for advancement and creativity is what we want in our society, then we must restore the broken promises of the 1960 Master Plan. But if we instead want a neo-feudal California, where those with wealth are the only ones able to enjoy security and prosperity, where everyone else is not only poor and struggling to get by but also shut out from the education they need to get out of that condition, well, all we have to do is…nothing. Maintain the status quo, and that ugly outcome will quickly become an ugly reality.

Of course, we *could* look to other solutions, such as those wu ming proposed, to deal with the state’s budget crisis an enable us to restore these broken promises. But why do that when it’s so much easier to create a new inequality?!

By Dave Johnson.  This piece originally appeared at the Speak Out California blog.

As I read my Monday morning (Oct. 1, 2007) San Jose Mercury News a headline jumped out at me: “Cigarette tax would hurt poor“.

How often do we hear that taxes “hurt” or “punish” one group or another?  How often do we hear that taxes are a “burden on the economy” or “cost jobs?”  How many politicians talk about providing “tax relief?”

George Lakoff, of the Rockridge Institute writes that this language “frames” taxes as an affliction:

For there to be “relief” there must be an affliction, an afflicted party harmed by the affliction, and a reliever who takes the affliction away and is therefore a hero. And if anybody tries to stop the reliever, he’s a villain wanting the suffering to go on. Add “tax” to the mix and you have a metaphorical frame: Taxation as an affliction, the taxpayer as the afflicted party, the president as the hero, and [people who believe in government] as the villains.

This anti-tax rhetoric results from an anti-government worldview that is pushed by conservatives, in which they portray our government as some kind of enemy of the public.  Ronald Reagan is famous for sayings like, “Government is the problem, not the solution” and, “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’ ”  The constant use of negative framing like this to describe government and taxes leads regular people to think about their government as a negative, malevolent force. We have been hearing this drumbeat for so long, and with so little pushback to counter these ideas, that many people just accept that this is the way it is.

But are taxes really an affliction?  Is government really a negative force in society?  Let’s step back from the affliction frame for a second and take a different look at the idea of taxes and government.

Let’s start with the basics.  Who is the government?  The Constitutions of the United States of America and of the state of California both begin with the words, “We the people.”  So “we, the people” are the government.  The government is US — you and me!  When you think about it this way, it makes the things Ronald Reagan said sound contradictory.  How can we, the people be the problem?  How can it be scary that we, the people are here to help each other?

What does our government do?  Again, back to the basics, our government builds the roads, hires teachers and police and firefighters and judges, and, in the bigger picture, sets up the rules for the society we want.  We build roads and the roads allow us to get to the schools, businesses, stores and parks where we work, shop, study and relax.  And because we have our schools and jobs and stores and parks, and the rules for the society we want, in theory we are able to live a little better every year.  When the government is functioning as it should, these rules enable all of us to pursue happiness and our businesses and people to prosper.  And these rules are decided by us through our elections. 

In other words, WE decide what our government does and how our money is used to our mutual benefit. 

So how can government and taxes be bad if the government is us?  Looking at things this way, doesn’t this all mean that taxes are like a savings and investment account where we get back so much more than we put in?  And, building on that, since we use the taxes to our mutual benefit aren’t we all better off if there are more taxes rather than less?  Doesn’t that just make us all stronger?

What about all the “government bureaucracy” that conservatives complain about?  Well, looked at in this new way, the government’s money is our money, so of course we want to be able to account for how it is being spent.  That means it has to be tracked every step of the way.  We want to know that it is spent honestly and efficiently, and the necessary transparency and the oversight that accomplishes this does require people and procedures. 

Conservatives also say government is “inefficient.” But anyone who has worked in a corporation has experienced the alternative.  In many corporations a few people at the top decide how things are going to be, and they pass commands down from the top.  Anyone who disagrees has the choice to do what they are told or leave.  It’s great for the people who are at the very top – but sometimes not so great if you are not. 

The processes involved when lots of people get together to decide how to utilize our shared resources can get somewhat cumbersome.  Anyone who has ever been in a homeowners association understands this.  But in our system of government everyone is involved in making the decisions.  This can take longer than it can take in a business, but it also lets all of us have a say.

This is how democracy works.  This is the price we pay for letting everyone have a say in how our society is set up.  Together we mutually decide how best to build and manage our society, and this can take some time and effort.  We decide the best ways to spend our money and we want systems in place so that we know that the money is being used properly. 

So we all have a choice.  If we want firefighters and police to be there for us when we need them, and if we want good schools and teachers so all of our children have an opportunity to succeed, then we have to pay the necessary taxes to pay for those things.  And if we want to continue to have a say in how our government works and what it does, we have to put up with the decision-making process.  It’s a part of growing up and taking on the responsibilities.

Or, we go a different way.  We can hand those choices and responsibilities over to the “private sector” – the corporations – and let others decide how things are going to be done and how our money and common resources will be used.  Thinking about Enron and Katrina and Iraq and our current privatized health care system, I wonder how we can expect that will work out for us? 

Dave Johnson regularly blogs at Seeing the Forest