Congressional Bankruptcy Rumblings Worry California
Remember way back last February when Carly Fiorina suggested that California may want to think about filing for bankruptcy and the state’s political mavens erupted in peals of laughter?
“Rookie mistake,” they solemnly declared. “Everyone knows states can’t declare bankruptcy.”
Time to stop laughing. Turns out that the GOP Senate candidate might not have been wrong, just early.
A New York Times story last week reported that some Washington Republicans are quietly looking into the possibility of changing the federal bankruptcy law to let states file for protection from their creditors, as cities and counties have been able to do since the 1930s. The idea is that by filing for bankruptcy, states can unilaterally dump union contracts, slash pension plans and make other needed cuts to get out from under their crushing debts.
Jerry Brown, Your Messengers Are Killing Your Message
Gov. Jerry
Brown’s $12 billion tax plan will be defeated at the ballot box if he doesn’t
quickly take control over who is delivering his message. In the past few weeks,
former Assembly Speaker and current partner at Mercury Public Affairs, Fabian
Nuñez, and Assemblyman Gil Cedillo have made the media rounds promoting the
need for higher taxes, despite their recent personal controversies continuing
to weigh on people’s minds.
In late
December and mid January, Univision on its thirty-minute statewide political
show, Voz y Voto, aired some extensive interviews with both Nuñez and Asm.
Cedillo. They each discussed the
budgetary problems faced in California: the unemployment rates, the housing
crisis, whether business would flee the state if taxes were raised, and their
views on the current deficit.
As Nuñez
stated that, "we need to find creative ways to get revenue from those that have
it, to balance the budget," Asm. Cedillo was out promoting the view that,
"taxes are not high here" and that the only reason California voters recently
rejected tax increases was because "the truth is the public doesn’t know
reality."
Make California an Enterprise Zone
The budget recently proposed by Governor Jerry Brown contains difficult, but much-needed spending cuts. It more or less seeks to balance revenues with expenses—a challenging task for a state confronting a $25.4 billion budget gap.
That being said, Brown’s budget is foolish. Why? Because it does nothing to improve California’s dismal jobs climate. Instead it would make California even less competitive in the battle for jobs.
For six straight years, California has ranked dead last in an annual survey asking CEOs which state is the best for business. A growing number of businesses are fleeing the state or choosing to expand elsewhere. It should come as no surprise that California’s double digit unemployment rate continues to be among the worst in the nation. We are losing the battle for jobs.
As jobs go, so go state revenues. But most policymakers and academics in Sacramento don’t seem to understand that in order to have revenues, we need a healthy, vibrant economy that creates well-paying jobs for Californians. Tax hikes only serve to worsen California’s long-term budget woes. Voters instinctively understand this, which is why they’ve rejected every proposed tax increase on the state’s ballot since 2004.
Jerry on a Leash
Governor Brown has submitted a budget that he claims includes drastic spending cuts. And he has dropped the other sandal by announcing he will also seek massive tax hikes, a package of increases that are essentially the same as those overwhelmingly rejected by voters in May of 2009.
While the expert analysis of the budget plan continues, it has already become obvious that a number of items described as “cuts,” do not represent a decrease in spending, just tricky bookkeeping. For example, Brown shows a billion dollar pay down on the deficit by raiding the voter approved Proposition 10 tobacco tax that goes to support children’s services.
However, one does not need a green eyeshade to see that two areas of state spending that are being held sacrosanct are K-12 funding and prisons. In fact, if Brown’s plan is approved, the prison budget will be expanded from $8.9 billion to 9.1 billion, even though California already spends over twice as much per prisoner than does Texas, and much more than the national average.