Bankrupting California

In search of the ever-elusive free lunch, California government increased spending in the last four-and-a-half years by nearly 40 percent, well above the 21 percent combined increase in state population growth and inflation. Governor Gray Davis, who entered office in 1998 with a $10 billion surplus, just signed a budget designed to reduce a nearly $40 billion deficit. That’s right, $40 billion, a deficit larger than the combined deficits of the other 49 states!

More than 1.6 million voters signed petitions forcing, for the first time in the state’s history, a governor recall election. Critics cry foul, because the governor “committed no crime.” But the California constitution allows a recall election for any reason deemed sufficient by voters who sign petitions. This includes incompetence and failed leadership. Consider:

— In the governor’s first four years in office, spending increased 36 percent, far higher than the 5 percent annual increase in the state’s population and inflation.

— As a quid pro quo for campaign contributions from state employees, California employees such as fire fighters and police officers can now retire as early as age 50, with 90 percent of their salary — among the most generous pensions anywhere.

— Although, by law, tax hikes require two-thirds legislative majority, the governor, by fiat, tripled the state’s car tax.

— The governor signed a bill to require employers to grant paid family and medical leave.

— Most California businesses saw their workers’ compensation premiums double and even triple, while increasing payouts, despite the fact that the number of claims filed actually decreased.

— The state already imposes up to 9.3 percent state income tax, among the country’s highest.

— California’s sales tax is 7.25 percent — the nation’s highest — with some counties adding on even more.

— During California’s so-called energy crisis, the governor dragged taxpayers into the power business. According to the San Francisco Chronicle, ” . (E)xperts estimate that California paid about $40 billion too much for power in 2000 and 2001 as energy firms jacked up prices. Adding in the $10 billion of overcharges from the long-term contracts would bring the state’s tab for the energy crisis to $50 billion.”

— Despite the governor’s declared “freeze” in hiring, he added 44,000 people to the state payroll.

— For the first time since 1940, California lost residents to other states. Over the last several years, many businesses left California for business-friendly states like Utah and Nevada, resulting in a loss, since 2001, of nearly 300,000 jobs in manufacturing alone. This hurts, because, in a state of over 30 million, with almost 15 million tax filers, 11 percent of California taxpayers — those earning more than $100,000 per year — pay 80 percent of the state’s income tax, while the top 5 percent pay nearly 70 percent of income taxes, and just 330,000 “high-income” taxpayers — the top 2 percent — shoulder about 50 percent of the state’s income taxes.

But, even worse, some Democratic politicians blatantly and cynically wanted the budget crisis to worsen. Why? As mentioned, California law requires a two-thirds legislative majority to hike taxes. While Republican intransigence ultimately produced a budget without an increase in the state’s already high sales and income taxes, this frustrated Democratic lawmakers who wanted to close the budget deficit by increasing taxes. At a “budget crisis” strategy session in Sacramento on how to drum up support for a ballot initiative that would let the Legislature increase taxes with just a 55-percent approval vote, 11 California Democratic members of the Assembly inadvertently left their microphone open. The remarks — transmitted to 500 “squawk box” speakers — allowed fellow lawmakers, lobbyists and others to hear their meeting.

Hyper-liberal Assemblywoman Jackie Goldberg (D-Los Angeles) said, “Since this is going to be a crisis, the crisis could be this year. No one’s running (for re-election). And maybe you end up better off than you would have, and maybe you don’t. But what you do is you show people that you can’t get to this without a 55 percent vote.” Fellow Democrat Fabian Nunez (D-Los Angeles) said, “If you don’t have a budget, it helps Democrats. If you don’t have a budget, it helps Democrats on the 55 percent (initiative). The folks that are heading up the anti-recall effort think if you don’t have the budget, it helps Democrats in the recall effort.” When a staffer burst in to inform the lawmakers about their “hot” mike, Goldberg said, “Oh,
(expletive) (expletive).”

The recall already accomplished two big things. First, while the newly passed budget includes borrowing, fanciful assumptions and accounting tricks, it failed to include — as the governor wanted — an increase in either the state income tax or the state sales tax. Second, as the recall effort gained steam, the governor backed down from a threatened lawsuit to overturn the two-thirds super-majority required to raise taxes.

Score two for the tax-weary voters. Or, as lawmaker Goldberg might have put it, “Oh, (expletive), (expletive)!”