Plan A to help reduce the projected $20-plus billion state budget deficit appears to be asking the Feds to send tax money that comes from California taxpayers back to the state. It is a justifiable request but there better be a Plan B.
Leaks prior to the release of the state budget indicate a big piece of the budget fix will be a request for the Feds to waive rules requiring matching state funds to acquire federal dollars for certain programs. Governor Arnold Schwarzenegger will argue that California is a donor state, meaning the Golden State continually sends more money to Washington in tax revenue than it receives back in federal program grants. Now is the time to balance that inequity, the governor will argue, and at the same time help balance the state’s books.
Reports claim California receives only 78-cents for every dollar that the state’s taxpayers send off to Washington. California has been a donor state for quite some time. One website indicates that over the past two decades California ranked as the number one donor state in the nation.
The governor and legislative leaders will seek federal money in hopes of avoiding deep spending cuts or tax increases. Such an effort has been advocated before in California with little success. In fact, I made the same pitch, myself.
Following the Northridge earthquake sixteen years ago a number of legislators supported raising taxes to pay for rebuilding after the quake. The earthquake occurred during the last great recession that crippled California. In a Los Angeles Times op-ed, I argued against a tax increase during the recession but for the Feds sending back some of that money we sent to them. The headline on the piece summed up the matter nicely: It’s Our Money, Not a Gift from Washington.
However, the chances that Washington will change its ways and return California’s money during these difficult days are pretty small.
First, other state governments are trying the same approach, pleading poverty and seeking federal help. As an example, Michigan’s House of Representatives unanimously passed a resolution recently asking Congress to end Michigan’s donor state status.
Second, California’s notoriously fractious congressional delegation does not present a unified front to the check writers in Washington. California’s congressional members rarely meet in the same room and hardly ever work together to promote the state’s interest.
Then there is the very real anti-California bias that works against the state in congress. It has been referred to as the ABC campaign: Anybody But California. While California has the largest congressional delegation, members are certainly outnumbered by the combined members from all the other states.
So while the governor and legislative leaders have good arguments to approach the federal government they better have a Plan B and even a Plan C ready to go to close the budget gap.