Posted on 08/22/2007 9:31:34 PM PDT by NormsRevenge
Budget developments moved so fast and were so uncertain over the past 24 hours that there was no opportunity to offer a clear picture of the situation or suggest what people could do to weigh in. Yesterday rumors of a “deal” circulated but were denied by the Republican leadership. This afternoon, with very little notice, a bare majority of the Senate Republican caucus decided that further negotiations were unlikely to produce any additional progress. Abel Maldonado and Richard Ackerman ultimately combined with the Democrats and voted out this budget. I am afraid that this action places California on a collision course with another Gray Davis-sized fiscal crisis within the next two years.
In a period of strong economic growth, the budget would still run a deficit this year but would have a sufficient reserve to cover it. In 2005 the budget was adopted with a substantial deficit, but a huge revenue surge produced by workers comp regulatory relief ultimately produced a small surplus.
But I’m afraid we are now in exactly the opposite situation – the administration imposed ponderous regulatory burdens last year that are having a decidedly negative impact on the economy. Unemployment is rising, our foreclosure activity is four times the national rate and we actually experienced a net loss of jobs last month – something almost unprecedented for California.
As I pointed out on the Senate floor, if the economy simply doesn’t get any worse and we have the same rate of revenue growth as last year, we could run out of money before the end of the year. And the budget sets in motion a much bigger budget deficit for next year.
It is not all bad news. Because the Republicans held strong in the Senate for nearly a month, they won two principal concessions:
• The governor – who had previously agreed to make $200 million in line item vetoes – has now committed to $400 million in actual spending reductions and $300 million more that is in fact an accounting adjustment that reduces the Medi-Cal reserve.
• The transportation and water bond funds are to be exempt for two years from the impact of the Governor’s AB 32, which makes the use of concrete all but impossible due to its release of massive quantities of carbon dioxide.
THANK YOU to all the people who called or e-mailed or wrote letters during the budget crisis. You steeled the resolve of Senate Republicans and made a material contribution to the small concessions that were won. We also proved that 50,000 activists could make an impact on the public policy debate and we’ll be refining that in the months ahead.
We will also work to respond more quickly to the kind of rapid and fluid conditions that produced the events of last night and this morning, and will keep you advised as the financial picture changes.
Floor Speech: McClintock v. Budget
by Tom McClintock [politician]
http://www.californiarepublic.org/archives/Columns/McClintock/20070822McClintockvBudget.html
The budget package that comes before us today is at least slightly improved over what was put before the Senate the night it walked off the job and went on summer holiday on August 1st.
At least an effort has been made to balance the budget on paper. And that’s something, since we just closed the last budget year with what appears to be the biggest budget deficit in California’s history, a deficit that has reduced the $10 ½ billion budget reserve that we began the last year with to around $4 billion.
My concern is that the reality – particularly given the state’s now brittle economy – is much more troubling than these figures imply.
We can start with the fact that nearly half of the amount the governor has promised to veto doesn’t reduce spending by a single penny – it is a bookkeeping adjustment reducing the Medi-Cal reserve.
But since so much of the budget is based on Enron accounting, let’s just go with the flow and pretend the governor’s line item vetoes are real and will at least take the budget reserve to $4 billion on paper.
That’s not what we’re getting. For example, this budget simply pretends that we took in $700 million more in May, June and July than we actually did. That money doesn’t exist – it never has – but the budget pretends that it does. Property tax and tribal gaming revenues are still inflated by nearly $400 million according to the LAO and the budget still ignores the fact that the governor has already agreed to more than $300 million in salary increases for prison guards this year.
So the actual budget reserve – even pretending the line item vetoes are real — is just $2.7 billion. And that is a paper thin margin to cover the governor’s other risky assumptions, starting with the cheery assurance that California’s economy will produce twice the rate of revenue growth this year as it did last year.
It’s possible – I suppose. We were spared a serious budget deficit in 2005 by a sudden surge of revenues. But I think that is highly unlikely to happen this year, given the draconian regulations that have been imposed on our economy over the past year.
As a result of those regulations, we’re watching unemployment increase rapidly, our foreclosure activity is growing FOUR times faster than the nation, job creation which had ground to a halt last month is now negative –we’re actually losing jobs month over month. And yet we’re expecting revenues to grow twice as fast as they did last year.
If the economy simply doesn’t get any worse and we have the same rate of revenue growth as we had last year, the result will be a $3.3 billion shortfall – enough to completely overwhelm the remaining reserve.
And that’s just the beginning of the risky assumptions:
The Legislative Analyst warns that we have not adequately budgeted to meet our health care obligations to retired state employees – plan on a big overrun there.
Financial experts are warning that the sale of the Ed Fund could fall as much as $800 million short of the billion dollars than is budgeted – if the feds approve it at all.
The federal courts are not likely to turn a blind eye to continuing the practice of looting safe deposit boxes and retirement and college funds to the tune of $700 million a year that this budget depends on.
We’ll be very lucky if this paper thin safety net of $2.7 billion can cover all these contingencies – and many more like them.
But because this budget also robs future budgets of revenue, while sticking them with added costs, it sets in motion a budget deficit of at least $5 ½ billion that we will be confronting just five months from now when the next budget is submitted in January.
Corrections made now could avert more difficult decisions next year — and here’s the fine point of it: If we can’t even genuinely reduce spending by even $700 million after three weeks of impasse – how do we expect to confront the $5 ½ billion budget deficit looming just over the horizon?
That’s an important question, because today we set in motion events that will require far more difficult and painful decisions starting just five months from now in what is likely to be a much worse economy.
I am afraid that with this vote, for the second time in a decade, this state is being driven to another Gray Davis-sized fiscal crisis that this vote makes inevitable for exactly the same reasons: Lack of restraint in good times combined with a lack of discipline in bad times.
Thumbs up for Tom McClintock. A Ronald Reagan kind of man from Ronald Reagan’s state.
Yes, Tom is a good man that was ready to do what needed to do be done and still is.
—
Notes on California
A daily blog by Senator Tom McClintock
As always two thumbs up for McClintock and also the citizens that made the phones call and emailed.
As always two thumbs up for McClintock and also the citizens that made the phone calls and emailed.
PING!
McClintock Ping List.
Please freepmail me if you want on or off this list
BTTT for Tom McClintock
which makes the use of concrete all but impossible due to its release of massive quantities of carbon dioxide.
Hadn't heard about this one. I'll have to check it out. McClintock gets on the Armstrong and Getty show occassionally. It's always a treat to listen to him live.
Not sure what word best describes this state's underlying pathology at the hands of Democrats- socialism seems inadequate to describe the feathering of nests occupied mostly by state employees, agencies, and bureaucrats. Governmental run-amokism? Spaztic Spenditous?
If government were a stock, I'd be very bullish.
Villaraigosa insists his "sanctuary city" of L.A. is OK, yet we all know the damage it has brought to this area. Do you think we'll ever have another Prop 187 that could stand up to a judge? One lone judge threw out our votes, calling Prop 187 "unconstitutional", yet California taxpayers/homeowners are drowning, and illegal immigration is one of the culprits. Everyone knows it, but most of the politicians remain mute when illegals are mentioned, including our U.S. Senators and most of the Reps.
Illegals are the protected class in California. Who will protect the taxpayers of this state?
This should give you a start:
Tom McClintock: Arnold can't give us 'green' cementThe governor's dueling promises
CA: The Man Behind the Curtain (Tom McClintock on CARB firing)
Abel Maldonado and Richard Ackerman are the two scumbags who sold California down the river.
I certainly hope the Senate GOP caucus knows how to dispense with those two pieces o.s.
Proud to have supported Tom McClintock.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
BTTT
Ping me when there is a RINOld recall initiative started. :-]
Speaking of property tax revenue, how long before county assessors are deluged with requests from newer home owners for downward adjustments to their tax burden cutting funds to schools and adding to the budget deficit...
Thank you!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.