Monday, May 14, 2012

California enters the death spiral - Jennifer Rubin in the WashPost: "We don't all wish to be California."  Jerry Brown banked on hope and delusion (not necessarily in that order) in the belief that a suddenly-improving business climate would lead to revenues that would forestall painful budget cuts.

Alas, the tax revenues did not materialize and spending continued unchecked.  Now California is facing not the $9 billion deficit it expected but a yawning $16 billion hole.  In other words, the budget cuts coming that were once just painful will now be excruciating and Gov. Brown wants raise taxes in the state with the 48th worst business tax climate.  Good luck with that plan, buddy.


Anonymous said...

It's hard to believe that Jerry Brown hasn't yet fixed the mess left behind by Arnold Schwarzenegger, who was left high and dry by Gray Davis, who was gifted a "hi there" 70% budget hit from Pete Wilson. It's... it's almost as if the state's legal mandates and 35 years of "not another penny" referendums and initiatives have had some kind of fiscal effect that defies Republicans and Democrats alike.

Meanwhile, the Cato Institute's favorite state Texas (low taxes, low service, low spending, #1 in job creation according to Rick "Government can't create jobs" Perry, 9th best business tax climate) has a yawning deficit of $27 billion. Texas' hole is only that small because the legislature used over $6 billion in stimulus money to patch up a shortfall two years ago. It would seem that delusion comes in all climates.

Eric at work said...

All the references I find to a $27B deficit are from early 2011. This more recent article indicates Texas has a $4B deficit but has $6B in its Rainy Day Fund.

And they did it without begging Texans to allow their taxes to be raised "temporarily."

Anonymous said...

No, actually, Texas passed an emergency "one-time" $4 billion revenue bill last year. No begging was involved.

The state's "rainy day fund" was at $9.4 billion one year ago; $4 billion was drained from it in 2011. Texas also applied $6 billion of federal stimulus money to its deficit. Another $5 billion in Medicaid debts are omitted from Texas' budget, with the intent to ultimately pay them using an increase in "future revenue."

A restructuring of the state's business tax, along with a lowering of the school property tax, has left Texas with a "rolling" $10 billion structural deficit that will reappear each year unless, again, predicted "future revenues" pay the tab.

Texas, which already ranked 50th in per capita spending by state, has also cut $1.3 billion in school district grants, and used some creative accounting to shift another $2.3 billion in payments by one day, thus taking the cost off the 2012-2013 budget (and onto the 2013-2014 budget). The current education budget is calculated on the assumption that Texas, one of the fastest-growing states, will see zero growth in the amount of school children.

It takes a Potemkin village said...

The theme song of Texas's "4 billion dollar" budget deficit:

Eric said...

Wow, this Texas you speak of must be a terrible place, using budget gimmicks they would never dream of in California.

And yet, somehow, it has the highest job and population growth in the country. Which means Texas can hope to see future corporate and personal income tax revenues to cover their deficit, unlike certain West Coast states except for Washington and Oregon.

Anonymous said...

According to Goldman Sachs, overregulated, overtaxed, overspending California has a higher rate of job growth than Texas.

Fully 80% of Texas' job growth from 2007-2011 went to immigrants. 93% of the 80% were not citizens. Half of the 80% were illegals.

Meanwhile, the share of working-age natives holding a job in Texas dropped from 2007-11 by 5.6%. The "dramatic deterioration" of Texan employment "was similar to the rest of the country."

Anonymous said...

5.6% proportional to those working, 4% of the total state demographic.

Nigel Tufnel said...

Gosh, Vike, it does sound swell in Texas. With all the jobs and such down there I'm sure it's been tempting for you to pack up the family and get the heck out of the People's Republic of Massachusetts. I'm sure the schools, health care, etc., would be just as good in the Lone Star State as up here.

Thank you for staying to help lead us out of this wilderness. You are the goy Moses, my friend.

Eric at work said...

Isn't that the "love it or leave it" argument so popular with the Sixties-era Right? As you know, I have a job here with kids in school. But Florida's 0% income tax is calling after retirement.

All I'm saying is that by delaying difficult choices now (California, Social Security, Medicare, public pensions) there's the risk of much greater disruption later (Greece.) People are already "voting" with their feet; look at the 2010 census for guidance.

Nigel Tufnel said...

We're happy to have you here in the Bay State, and we enjoy chuckling at your fruitless votes for the GOP candidate every fourth November. We have assimilated you. Resistance is futile.

The real story is that it costs money to maintain the standard of living and/or fight the wars that people want. Just be willing to pay for it.

They get what they pay for in Texas, and I'd be willing to bet you don't want it, precisely because you want the best for your kids.

In Greece they demand services, but it is the national pastime to avoid paying taxes.

Florida is great for old folks because it has warm weather, plenty of drug stores and no income tax, but the schools are subpar and crime is rampant. You'll go there when you retire because you won't be worried about schools.

Uno hombre, uno vote said...

As the above details of Texas' job creation miracle show, the secret of the state's population growth is less people voting with their feet, and more personas votando con sus pies.

Texas has the highest number of minimum and below-minimum wage jobs in the United States. But when you convert that pittance to Mexican pesos, it starts looking better.