In California's Budget Crisis, a Political Rorschach Test

As California drowns in a sea of red ink, its budget problems are serving as a political inkblot test. Why does California have a $26 billion ...
by | July 2, 2009

Rorschach1 As California drowns in a sea of red ink, its budget problems are serving as a political inkblot test.

Why does California have a $26 billion hole in its budget that has placed it on the brink of default? Why are its finances in such bad shape that it went begging to Congress and the Obama administration for loan guarantees, a manner of bailout, to save it? Democrats and Republicans have different explanations -- explanations that just happen to support their preexisting notions about the size of government.

California, you see, is either paralyzed by anti-tax ideologues or a cautionary tale as to what happens when tax-and-spend liberals run wild.

A California Republican is likely to start by pointing out that the state has unusually high income and sales tax rates. If government can't live within its means with those taxes, the argument goes, clearly the state has too much government.

The problem, Republicans say, is excessive public employee benefits that politically powerful unions have secured. California, for example, has the nation's highest teacher salaries and prison guards have enjoyed generous contracts.

Republicans also claim other excesses in spending and governmental regulation. Even as the state was suffering through fiscal problems last fall, voters approved $10 billion in bonds for high-speed rail. This was the latest in a long line of ballot measures that obliged the state to spend more.

And, many Republicans will say that illegal immigrants are contributing to the problem. California, according to a U.S. Department of Homeland Security estimate, has close to 3 million undocumented residents.

Democrats see something entirely different. To them, the original sin was California's Prop. 13 in 1978, the initiative that famously reduced and capped the state's property taxes. Prop. 13 didn't just limit a source of revenue. It also limited one of the most stable sources of revenue. The state, Democrats say, is reeling from boom and bust cycles that come from dependence on less stable income and sales taxes.

Democrats also note other structural factors. Budgets can't pass without a two-thirds vote in the legislature, which has meant that, despite Democratic dominance, anti-tax Republicans generally have been able to thwart new revenue sources.

California also has the three strikes rule, which means that convicts sometimes receive long, costly sentences for minor infractions. Finally, many Democrats will note that legalizing and taxing marijuana, something Republicans resist, could bring in as much as $1 billion a year for the state.

There elements of truth to both these arguments, but both sides, with their contradictory views, can't be entirely right. This picture, unlike a Rorschach Test inkblot, must be of something. You can judge for yourself which side is seeing things as they are.

However, neutral observers should be able to agree on one key point. The vastly different evaluations of the situation from Democrats and Republicans are themselves part of the problem. California has become a place where too many politicians fail to see shades of grey. Politicians of both major parties have struggled to compromise.

Last year, the state didn't pass a budget until months after the constitutional deadline, exacerbating the pain of the budget cuts. Some child care centers in the state closed, not because of budget cuts, but rather because there wasn't a budget at all.

This year, legislators came up with a budget in February, but this budget proved out of touch with reality. Now, the fiscal year has begun and the budget gap hasn't been closed. The delay has, for technical reasons, actually expanded the gap by another couple of billions of dollars.

Republicans refuse any tax increases and Democrats want large tax increases. California legislators have to make painful cuts and they're doing it painfully slowly, in large measure because both Democrats and Republicans are so wedded to their partisan views of the problem.

The good news is California's legislative redistricting will be in the hands of an independent commission for the first time in 2011, thanks to a voter initiative. That commission seems likely to produce more competitive districts, which could produce a legislature with fewer ideologues by 2013. That's assuming, of course, that California can make it to 2013.

Josh Goodman
Josh Goodman  |  Former Staff Writer
mailbox@governing.com

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