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| STOP Spending OUR Money: An Analysis of the 2009 California Fiscal Crisis
Written by Sevan Zulikyan
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Sunday, 16 August 2009 22:55
The State of California, like many Americans during the dotcom boom of the late 90’s and the recent housing boom, spent money like there was no tomorrow, but with the economic meltdown in late 2008, the members of the California legislature have still not learned their lesson.
While most Americans started scaling back on their expenses immediately after our economy was on the brink of disaster, the leaders of the California legislature have just recently acknowledged, albeit scornfully, that they have a spending problem and not a “revenue problem” like they advocated during the debates for the current fiscal budget. And by revenue, what they are really saying is taxes; the legislature believes that Californians are not paying enough taxes. In February of this year, the California Legislature voted to “temporarily” raise our car tax, income tax and sales tax in an attempt to close a $16 billion budget shortfall due to lofty revenue projections that did not pan out. You don’t have to be an economics major to know that the worst thing government can do during a recession is to raise taxes. For example, those who have already received their auto registration fees know that it will cost twice the amount to register our cars the next two years than it did the year before. As for the sales tax, as of April of 2009, the sales taxes was increased by 1%; those of us in Orange County are now paying 8.75% while our neighbors in LA County are paying 9.75%. Meanwhile the 1% increase officially moved the sales tax to 9.25% and LA county also approved an additional 0.5% increase to build the “Subway to the Sea”, which is a boondoggle of a story for another day. This “temporary” tax increase will span two years only as the voters turned down a set of propositions in May that would have further extended the taxes for an additional years. I say “temporarily” because when has the California legislature ever rolled back tax increases? On May 19, 2009, the California electorate overwhelming turned down propositions 1A-1E. Proposition 1A (sold as a budget balancing proposition but which would have extended the tax increases for an additional three years) was handedly defeated 65.4% to 34.6%.[1][2] The electorate sent Sacramento a powerful message that California had a spending problem and the taxpayers were not going to pay anymore. In a Rasmussen poll taken on July 22, 2009, when asked which is a bigger problem in California, 78% of those who responded said that the Politicians are unwilling to control government spending while only 13% responded that the votes are unwilling to pay enough taxes.[3] Seventy-eight percent of those polled agree that the Sacramento politicians have a spending problem and that they are unwilling to control government spending; the numbers don’t lie. From April of 2000 to January 2009, California’s population grew from 33,873,086 to 38,292,687 or by roughly 11.5%[4]. During the same time period, the California General Fund Budget increased from $78,815,938,057 to $103,4000,760,000 or in increase of 23.77%.[5] While the CA population increased by 4 million, budget spending has increased by a factor of 6 to $24.5 billion during the same time frame. The biggest increase in spending occurred during the prosperous 2005-2006 and 2006-2007 fiscal years where the General Funds Budget grew 15% and 11% per year respectively. Rather than save money in a “Rainy Day” fund, the Legislature spent money, expanded social programs, and hired more state workers. They committed billions of dollars of pension guarantees to state workers blindly assuming that the housing boom was going to last forever. Spending in General Funds outpaced the population increase, yet the quality of life in California has decreased significantly over the years. There is no “revenue” (a.k.a. tax problem) in California but rather the Legislature has a spending problem. It is easy to spend other peoples’ money without thinking twice - but enough is enough! In July of this year, the Legislature once again had to revise their budget to address an even wider budget shortfall of $24 billion. This time the Legislature got it right and rather than raising taxes, they made some real cuts from the general budget. While the current revision still contains an estimated $8 billion in budget gimmicks, the Legislature did make $15 billion in real cuts from the general funds. I acknowledge that the cuts to many of the social programs will harm many, but we cannot sustain overspending especially when it outpaces the population increase. We have all reduced our spending during this recession and it is time that the California Legislature does the same. They must come to their senses and permanently reform their free spending ways before they irreparably tarnish our once golden sate. Every county in California, whether predominately Republican Orange County (76% No to 24% Yes) or Democratic dominated San Francisco County (53.9% to 46.1% Yes) voted “No.” [1] Official Election Results obtained from the California Secretary of State Website. [2] Official Election Results obtained from the California Secretary of State Website. [3] Rasmussen Reports - www.rasmussenreports.com. [4] California Population Estimates obtained from the US Census website. [5] CA Budget figures obtained from the Sunshine Review – www.sunshinereview.org |
