Now the Budget Grumbling Can Begin
After more than two months of wrangling, Gov. Arnold Schwarzenegger and legislative leaders have signed off on a tentative deal that closes the state’s $26.3 billion budget deficit.
Now the real grumbling can begin.
Although details of the agreement, which was announced Monday evening, haven’t been released, enough broad outlines have leaked to show who won and who lost. The moaning will only get louder as the budget numbers solidify.
Actually, with the state’s current economic nosedive, there aren’t any real winners in the new deal, which revises a budget signed only months ago. Some groups, however, get hurt less than others.
Schools – and the education lobby – showed that they still pack plenty of political clout in Sacramento. Although there was no way they could avoid billions of dollars in cuts for next year, the final agreement ensures that they will be repaid at least $9.5 billion to make up for trims in recent years.
World Series or Super Bowl?
We’re still waiting for the details, but the only real
question about this budget deal is exactly how short its shelf life will be.
Or to put it another way: Will
state leaders be negotiating another budget by the World Series (late October)
or by the Super Bowl (early February)?
No
one knows. But the economic collapse of California continues. If tax revenues
continue their decline (and the decline has outpaced nearly all estimates),
we’ll need another set of budget "solutions" and soon.
It’s
already plain that this budget doesn’t really balance. There’s no political
constituency for that kind of honesty. So we get billions in gimmicks – and
gimmicks make some sense in a recession; if you’re going to do deficit spending
in disguise, this is the time. But it would have made more economic sense to
limit some revenue cuts (particularly in programs that put cash in the hands of
citizens quickly, and thus stimulate the economy) and fill those budget holes
with sin taxes.
Government unions submit tax increase initiative to AG
Government employee unions and their liberal allies have mobilized to submit for title and summary a ballot measure that would repeal three tax incentives that bolster California’s competitiveness and improve fairness.
First on their hit list is an important change in how multistate companies calculate their taxes that will make California more attractive for growth and investment. The Legislature agreed to reward companies who invest in new facilities and jobs in California by reducing the weight that those two factors contribute to a company’s tax liability. Current law creates the perverse situation where companies that simply invest in more jobs or property here see their tax bills increase.
The second change conformed California law on tax losses to common practices by the IRS and other states. Taxpayers pay taxes on income (profits) and can write off losses. But for many, their business cycles do not match the arbitrary dates of a tax year. The IRS recognizes this fact of economic life and allows taxpayers to write off losses back two tax years and forward up to 20 years. (The latter is particularly helpful for businesses with long gestation periods, like biotech.)
Migden Should Pay Back California
At a time when California can’t afford to pay its employees, vendors or bills, the state now has to pay hundreds of thousands to a Vallejo woman injured when then state Senator Carole Midgen rammed her from behind after an erratic driving spree that had eight people calling 911. With state officials are calling on us to identify government waste, we need look no further than this case.
At a time when services are being cut and taxes proposed, Californians are covering costs for a former elected official who was not obeying the law at the time of the accident. In 2007, Ms. Migden pled no contest to misdemeanor reckless driving after the incident in which her state car repeatedly banged the median on Interstate 80, weaved across lanes and rear-ended another car after narrowly missing several other vehicles. This 30 minute joy ride has ultimately cost the taxpayers of California $335,000 in a settlement and another $25,000 in property damages. Meanwhile, Migden was sentenced to two years of court supervised probation and paid a whopping $710 in fees for the incident.
Even after her wild ride, Midgen was appointed by Governor Schwarzenegger to the California Integrated Waste Management Board (CIWMB) and earns roughly $132,000.