Fiscal Fairy Tales

Once upon a time, there was a magical land called California where the sun always shines, the fruit is always sweet, and there’s gold at the end of every rainbow. Dreamers from all over the world once flocked to its sparkling shores to find their fortune.

But there came a time when California fell from grace. The dreamers’ dreams were very big. They wanted to preserve all the wild lands. They wanted to feed and house all the hungry and homeless. They wanted amenities and entitlements. And when it came to time to pay for all the wonderful things, they found that the coffers were empty.

They elected leaders who promised they could fix the dream with magic. They could create wealth out of thin air, just by juggling numbers. The people didn’t realize it was all an illusion until it was too late. Reality was eating away at the dream.

Even then, they could not let go of the fantasy. Every time someone suggested cutting this or that, the people rose up and said “Nay!” So they decided that someone else should pay for their dreams, and the privilege of living in California. The Big Dreamers could afford to share with the rest of the population. But the Big Dreamers had magic of their own and could make their wealth invisible. Many others decided to chase their dreams elsewhere.

Our story ends here for the moment. Why write another chapter that says what’s already been said? Perhaps someday Californians will stop walking and talking in circles, and the story can continue. You’d think with so many dreamers, there would be more imagination.

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33 Responses to Fiscal Fairy Tales

  1. TD Pittsford says:

    I simply can’t fathom what in the world our Governor is thinking and how he has managed to ignore just about everyone in the state who are telling him exactly what’s wrong with our economy. While the billions of or tax $$ are being use to provide more benefits to illegal aliens than we will ever enjoy, that’s not the whole scenario, not by a long shot. Instead of providing incentives for California businesses, they are regulated to the point they move to more business-friendly locations. State employees are still sucking up our tax dollars with huge, unmanageable, unsustainable pension benefits. As Crabbman said, our spend and tax leadership, behind a mask of beneficence and in a time of the largest deficit in history, want to spend 100 billion for a transportation project. Someone has got to shake up both our local and federal governments and make them pay attention the the REAL issues rather than sensationalizing the mundane. What to do. What to do.

    • Tony Waters says:

      TD: Sounds to me like you do a pretty good job of “sensationalizing the mundane” yourself! More $$ spent on illegal aliens than on the everyone else??? Last time I checked, the biggest ticket item in the state budget was public schools, at which 90%+ of the students are US citizens.

      I thought Facebook moved to California because they liked the high tech environment–and so far as I know, they are not hurrying to leave. I wonder what it is about the regulatory environment they don’t like?

      I suspect we could find some common ground on any number of specific taxing, spending, and regulatory policies–I’m open ears (or keyboard) for your suggestions! But in doing so, please avoid sensationalizing that pesky ol’ mundane!

      Tony

  2. Todd juvinall says:

    I actuall watched Current TV for a few minutes tonight. The host was the Ex-Governor of Michigan who BK’d her state and is now working for AlGore’s TV. Anyway she was talking to a Berkeley Professor about the budget problems and he had the reason we are n the tank, Republicans!

    • Tony Waters says:

      Todd,
      Um, since 1966 Republicans have held the governorship for 31 years, and the Democrats only 15. Perhaps the Rs hold at least a wee bit of the blame? I don’t think the fact that revenues do not match expenditures is only a Democrat problem.

      For that matter, Democrats have hardly had a monopoly on the creation of new regulation.

      You will notice that in his screed, RL is careful not to privilege one party over the other when casting stones.

      Tony

      • Ryan Mount says:

        The initiative process has a lot to do with our fiscal issues as we’ve been able to whimsically amend the State Constitution from loud mouths sitting at folding tables in front of Kmart.

        I think we can trace our most recent woes back to Gray Davis after the California economy went dot-bomb. We went from a 10% surplus in the late 90s to, by his estimates in 2002, a $24-34.6 (depending on who you ask) billion shortfall. At the same time, you had moderate Republicans being replaced by more partisan ones in the Democrat-controlled Legislature as the inner counties turned decidedly Red. And these new Republicans were not willing to quorum with Democrats.

        Then to make us feel better about this mess, we hired an actor to replace Davis. And since then we’ve been bailing faster and faster on a very leaky ship. Now we have Governor Brown who will never convince aging conservative boomers that he’s not Governor Moonbeam anymore. He’s quite moderate by comparison.

        The pattern in California mimics the national political theater.

      • Todd juvinall says:

        TonyW thanks for the history lesson. I don’t think I said anyone was to blame one way or the other did I? Nope, Simply restating what the Berkley Prof said. The Governorship is a place where both R’s and D’s could have kept things under control but they didn’t. I have criticized George Dukemajian, Pete Wilson an Arnie for not using the “blue pencil” to keep the budget balanced. I have criticized both parties for inaction on our state’s problems. But, the legislature has been in control of the democrats all my life except 1995. All bulls spending money start there. Also, many Propositions were placed on the ballot for a vote becasue the democrats had no guts to vote on many importnat issues they considered to “hot” and might damage them politically. Why do you think the people of California passed term limits for them? Because even the dopiest Californian was fed up. But even that didn’t help.

        No, most of the crasp we live with here was passed by the democrats and then signed by Governors of both parties and we have a mess don’t we? But listening to this Professor from Berkely just made me laugh since we pay this buffoon to teach our kids and he is as dumb as a post.

        • Tony Waters says:

          Todd, Your welcome! I don’t pay attention to Berkeley Profs who don’t get their facts straight–usually they are not even worth straightening out. But, I have as much problem with blaming only the Dems as I do blaming only the Reps. Both over-promise.

          I also don’t under-estimate the power of the governor. It is also true the The Legislature originates spending bills. But the Governor is the one who proposes plans, and ultimately signs off on them.

          I am also of the school that “we the people” have our fair share of the blame, as Ryan writes. Prop 13 and Prop 98 are both parts of the problem with origins in the R and D camps respectively. But ultimately they were approved by the voters.

          Isn ‘t RLs blog a great place to dispense various free history lessons?

      • Greg Goodknight says:

        Since 1959, Democrats have controlled the California Assembly, and the budget, for all except for 3 years. Three years of R’s, fifty years of D’s.

        From the time I started voting, in ’72, Democrats have controlled the Ass’y except for a short period from June ’95 to Nov ’96. That’s just about 4% of my voting lifetime. Now tell me, how the state’s financial mess is largely the fault of a Republican governor or two? Not that Pete Wilson or Arnold were very Republican.

        The people were voting for Republican governors thinking they have real power, but they don’t. Just as in Washington DC, the power to tax and spend resides in the lower house of the legislature. Veto power isn’t for everyday use, and if someone, whether they be an Arnold or a Newt, stands in the way of manna from heaven (or Washington or Sacramento), they become the target for everyone whose rice bowl is threatened.

        Please excuse the duplication… this is a partial copy of a reply that went to the wrong spot, my bad.

        • Since when have the Democrats gained control of the global economy?

          • Greg Goodknight says:

            The global economy did not force the California State Assembly to continually spend more money than they take in, and make promises of future spending that they could not keep.

            Interesting story on the NPR Morning Edition… a US public pension fund is arguing it is separate from the regional government and should be allowed to declare bankruptcy. A finding in favor by the Federal court could be very interesting for California… maybe CalPERS and CalSTRS won’t pull the whole state down.

          • CALSTRS will not pull anything down, except benefits to their members, who will then have less to spend in the state. Is that what you mean by “pulling down?”

          • Greg Goodknight says:

            Let’s see… Keachie thinks the state should pay an ever increasing amount to retirees, money the state doesn’t have because they promised more than CalPERS/STRS could be expected to deliver, because if they don’t, retirees won’t pay more taxes and spend the rest, so the state won’t have the money to spend.

            Does Keach also believe in perpetual motion engines?

            The state’s wealth is generated when value is created, not when the state spends money that it borrowed. This is perhaps too subtle a point for a relentlessly partisan Democratic former public school teacher from ‘Frisco.

  3. RL Crabb says:

    Tony, if you’ve followed California politics for the last thirty-odd years, you must know that Republicans, even when they’ve held the Guv-spot, have had little influence on the state budget. Willy Brown used to be able to cobble them together by focusing on Republican legislators from backwater districts and lavishing them with money and perks to get the required votes. And what has been the result? Well, we have the present meltdown of a government that pretends that they can wave their hand and wish away the structural deficiencies and overspending of the last three decades. You can hardly blame Republicans for not trusting Democrats who see Government as the answer to every problem from dog grooming to plastic bags.

    It’s also understandable that Californians have rejected the Republican party, mostly due to their 17th Century social agenda, which is being revealed in statehouses all across the country. Anyone who thinks that there is a “middle” in either of these dying institutions should get into rehab before they start pissing pure kool-aid.

    • Tony Waters says:

      RL, I’m not letting the Democrats off the hook, only pointing out that spending more than you take in is a bi-partisan issue. And being governor ain’t beanbag–the governors write the budget (revenues and expenditures) to which the legislature responds. The governor gets to veto things he doesn’t like, and propose new sources of revenues. Guess what? It ain’t only Willie Brown’s fault when the two don’t balance ten or fifteen years after he leaves office.

      Ryan mentions the ballot box budgeting that has contributed to the problems California has, and he is right to do so. Ballot box budgeting whether in terms of requiring expenditures, limiting revenue, or requiring new mandates all contribute to the problems. The initiative process is not a directly red or blue proposition (though both have their hand in the cookie jar), but also a product of DTS voters like me.

      • Ryan Mount says:

        That’s right Tony. It’s not Red or Blue.

        Red gave us Prop 13.
        Blue gave us Prop 98.

      • Todd juvinall says:

        Go read the Governor’s revised budget. I scanned through it and when you go through the eco segments you will see no diminution of money but more more more. What the point is is billions go to all these eco projects and conservancies, paid by the people’s voting in bond measures which is simply a credit card. Dig deep in all all the categories and you will see what the politicians on the left are concerned about and it is not jobs or the working people.

  4. Don Baumgart says:

    One bright spot, locally, seems to be the demise of plans to rebuild the Nevada County Court House, which had created opposing camps of “Keep It Downtown” and “But Don’t Tear Down the Old One!” I said a while back that if Jerry is collecting cell phones it wouldn’t be long until he grabbed the court house construction pot-o-gold. Happened this week.

  5. Michael says:

    Agree with Ryan Mount re. tables at Kmart. I think that is a big part of the problem, we end up “locking up” so much of the money— it’s all allocated away and can’t be moved.

    I think both parties are to blame, obviously, but I know that the Dem’s problem is that all these new regs. and initiatives that make us “feel good” cost real money.

    Brown said it best, “You either cut, or you tax. There is no 3rd way.”

    Now, if they’d just stand by that statement.

  6. don russell says:

    Re Reps and Dems. I remind all that a kinder and gentler fascism is still fascism.

  7. Ben Emery says:

    Michael,
    Here is an excerpt from a very interesting article.

    http://www.webofdebt.com/articles/mysterious_cafrs.php
    “That was in Missouri, but the figures I was particularly interested were for my own state of California, which was struggling with a budget deficit of $26.3 billion as of April 2010. Yet the State Treasurer’s website says that he manages a Pooled Money Investment Account (PMIA) tallying in at nearly $71 billion as of the same date, including a Local Agency Investment Fund (LAIF) of $24 billion. Why isn’t this money being used toward the state’s deficit? The Treasurer’s answer to this question, which he evidently gets frequently, is that legislation forbids it. His website states:

    “Can the State borrow LAIF dollars to resolve the budget deficit?

    “No. California Government Code 16429.3 states that monies placed with the Treasurer for deposit in the LAIF by cities, counties, special districts, nonprofit corporations, or qualified quasi-governmental agencies shall not be subject to either of the following:
    “(a) Transfer or loan pursuant to Sections 16310, 16312, or 16313.
    “(b) Impoundment or seizure by any state official or state agency.”

    The non-LAIF money in the pool can’t be spent either. It can be borrowed, but it has to be paid back. When Governor Schwarzenegger tried to raid the Public Transportation Account for the state budget, the California Transit Association took him to court and won. The Third District Court of Appeals ruled in June 2009 that diversions from the Public Transportation Account to fill non-transit holes in the General Fund violated a series of statutory and constitutional amendments enacted by voters via four statewide initiatives dating back to 1990.

    In short, the use of these funds for the state budget has been blocked by the voters themselves. Bond issues are approved for particular purposes. When excess funds are collected, they are not handed over to the State toward next year’s budget. They just sit idly in an earmarked fund, drawing a modest interest.”

    • Michael says:

      Hm. Very interesting article. Thanks Ben. It would make sense that the excess would/should be turned over to the general fund, but I guess we’ve voted ourselves into a corner, so to speak.

      Something I forgot to mention earlier, two other things add to the mix:

      1. We have an enormous, uncounted and/or uncountable illegal population.

      2. We have the largest population of any state, and we offer so many more services and “amenities”, for lack of a better word, than probably most other states. I don’t think it’s really fair to compare CA to other states, because we’re just so much more massive. Almost like our own country, in a way. For example, I’ve heard people mention car tags are much cheaper in Oregon. Yeah, but Oregon has only 3 million people and fewer illegals requesting services. Hell, the County of Los Angeles just by itself has, what, 7 million? More? Apples to oranges.

      • Ryan Mount says:

        > I guess we’ve voted ourselves into a corner, so to speak.

        In California, our problems are largely self-inflicted. On the national stage, it’s more complicated.

    • SR Jones says:

      Ben, the LAIF functions like a savings bank for local agencies like the county, cities and some special districts. The funds are no more “sitting idle” than the funds you’ve got on deposit in your savings account. They don’t belong to the State, and consequently can’t be used to pay toward next year’s budget.

  8. Ben Emery says:

    SR,
    If it is a savings count for local agencies it should be readily available but it isn’t. The one thing the funds can be used for is investment. The main problem with the economy is $3 trillion being withheld on top of the big banks taking 0% interest money from the Fed and buying government bonds at 3-5% instead of inserting it into the functional economy. Lets invest in a Bank of California that would fund local municipalities through 1% interest loans for infrastructure projects. Get our local economies going again while at the same time taking the role of controlling money supply away from the Federal Reserve. One of the pluses of being the world currency is the US has more than enough money in circulation to sustain us for years to come. It would help with inflation and add value to the dollar. One state does this (North Dakota) and it had a surplus for the fiscal year 2010 and an unemployment rate around 4%.

    • Michael Anderson says:

      “One state does this (North Dakota) and it had a surplus for the fiscal year 2010 and an unemployment rate around 4%.”

      Ben, this is mostly due to the Bakken: http://en.wikipedia.org/wiki/Bakken_formation

      • John says:

        The long-term solution is wealth creation which is what has brought ND back.

        California has incredible opportunities IF we muster the will to use our resources. We have vast forest resources, gold and rare earth mining opportunities AND lots and lots of oil and natural gas.

        Perhaps we need to shift the “tax the rich” slogan to one that says, “tax the resources.” It would be a win-win.

        John

  9. Greg Goodknight says:

    Since 1959, Democrats have controlled the California Assembly, and the budget, for all except for 3 years. Three years of R’s, fifty years of D’s.

    From the time I started voting, in ’72, Democrats have controlled the Ass’y except for a short period from June ’95 to Nov ’96. Now tell me, how the state’s financial mess is largely the fault of a Republican governor or two?

    The finances of the state have been rolling downhill since Jerry Brown V1.0 gave public employee unions the power of collective bargaining for pay and benefits. So far, the legislature has not implemented the requests of Jerry Brown V2.0 and it’s unlikely the will, nor will voters likely be in a mood to raise their own taxes in November.

    We live in interesting times and bankruptcy is the only way for the state to start over. There is no political will to cut spending, and spending that can’t go on much longer won’t go on much longer.

  10. Which comes first, the state government, or the global economy, run by the multinats, when it comes to discussing how California ran low on money?

    • Greg Goodknight says:

      What an inane comment, below even the usual Keachie standards.

      The state of California is going (some say is already there) bankrupt by spending more money than they had to spend. If they had managed to collect more, their history shows they’d have spent even more than that.

      The current trajectory was set when Gray Davis and the Assembly, faced with a tax windfall from the capital gains in Silicon Valley during the internet boom, didn’t just spend the money on needed one time capital projects, but used it to start ongoing spending on entitlement programs that didn’t end with the internet bust.

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