Is California A Window Into Our Future? I Hope Not

by Dick Baynton

Governor Jerry Brown received news that California is #50 in a business magazine that ranks business climates of the states. The good news is that the state can’t be lowered in future rankings!

Governor Brown (D) estimated the Golden State’s budget deficit at $9.2 Billion in January. The recently revised estimate of $16 Billion was just a mere 73% higher. April tax collections were down $2.44 Billion, 20.2% below projections. To help fill the budget holes in revenues, the public-employee unions are backing a bill that will raise sales tax rates to 7.5%. Another provision of this dead-end idea is to increase the top income tax marginal rate from 10.3% to 13.3%.

Tax hikes may not fill the gap in the budget however, as a recent study shows that businesses moving out of California has increased five-fold since 2009 due to regulation and high taxes.

Stockton, a city of 290,000 about an hour east of Oakland is on the verge of bankruptcy. It will be the largest bankruptcy (Chapter 9) by a city in the US (so far). The city suffers from a high rate of foreclosures. Unemployment has risen to 15%; the violent crime rate is second –highest in the state. The $35 million city hall has been repossessed. Stockton has $800 million in unfunded liabilities for pensions and retiree health benefits. This debt will grow at the rate of 7.5% or $60 million annually.

With a population of more than 37 million and a GDP of $1.8 Trillion dollars, about the size of Italy’s, California’s unemployment stands at 10.8%. In 2006 when the economy was more promising, the Legislature, in cahoots with environmentalists, passed AB32 intended to become a model for the nation. The law, offering new greater regulation is now expected to raise energy costs that will reduce the state’s GDP by up to 8.9% by 2020 or close to $450 Billion. The cost for each California family will be about $2,500 in higher energy costs.

The California Senate just voted to approve a $4.5 Billion bond issue to fund high-speed rail between LA and San Francisco. Critics of both political parties have said that after the first section into Central Valley is accomplished, the line will probably never be finished. Although the state receives a Federal grant amounting to $3.2 Billion, they will need to come up with more billions from a budget that is filled with impossible funding gaps. Florida, Ohio and Wisconsin have all rejected Federal grants for high-speed rail.

Is California a microcosm for the challenges that lie ahead for the USA? The California Governor has no experience in running anything but political bureaucracies. Hand-in hand with a compliant Legislature, spending is $30 Billion higher than in the 2007-2008 budget cycle, sources of revenue (taxes) continue to increase and entitlements become a way of life for vast segments of the population.

On the national political scene, there is a dearth of government officials with experience outside politics and academia. Are we teaching young people and those lost in the fog of welfare how to fill out public assistance apps when we should be showing them how to fill out education and job apps?

Taxpayers and politicians may be suffering from ‘role-reversal’. Voters elected candidates to create a transparent environment that encouraged innovation and self-determination. Taxpayers are now being told about cumulative public debt and shoddy policies that were created in the opaque galleries of city halls, state houses, legislatures and Senate and House chambers.

A great future lies ahead for the USA, but only when and if our citizen-lawmakers start practicing fiscal discipline with accountability rather than vote pandering for vanity and power.