Taxable Talk

State Senator Abel Maldonado (R-Santa Maria) broke ranks with the rest of the California Senate Republican Caucus and voted for the bad budget bill. With his vote, the 2/3 majority was obtained and the budget was sent to the State Assembly. It passed the Assembly early this morning.

A few changes were made in order to buy persuade Maldonado to change his vote. First, the state will hold open primaries for state offices. Rather than the Republican and Democratic parties holding their own primaries with the winners facing off in the general election, the top two vote-getters will face a run-off in November. There are, though, major constitutional issues regarding an open primary in California. An open primary law for presidential elections was thrown out by the State Supreme Court a few years ago. This law will undoubtedly face similar challenges.

Second, the gasoline tax increase ($0.12/gallon) has been removed from the measure. However, gasoline prices will increase as the sales tax, which does apply to gasoline, will be going up by 1%.

Third, the legislature agreed to stop itself from getting a pay raise if the budget is late. The legislature refused to stop itself from being paid—just the pay increase was put on hold.

As I’ve said before this budget is the equivalent of putting a Band-Aid on a patient needing open heart surgery. California needs to drastically cut its spending. The $15.4 billion in budget cuts in this bill are superficial and will not fix the systemic state deficit. Come June, I believe the legislature will have to deal with a $6 to $10 billion shortfall. The new tax increases will not raise what is projected (tax increases never raise the intended amounts). Will California’s legislature have the guts to address the systemic issues (a bloated bureaucracy, duplicative programs with the federal government, and programs that a state should not be running) that cause the budget deficit?

I think we’ve seen the answer. Unfortunately, pigs don’t fly.

Last night I attended my monthly continuing education meeting. Lynn Freer, the head of Spidell, believes that sooner or later the bad budget bill being debated in Sacramento will be approved. I’m hopeful that they’ll throw it in the trash can, because what we need to do is very clear: real spending cuts.

Take a look at this chart from the Tax Foundation:

This is yet another case where a picture tells everything you need to know.

Revenues have been increasing, yet spending has zoomed higher and higher and higher. Spending cuts—deep, real spending cuts—must be made. The budget under consideration contains more borrowing and more bad assumptions. What happens when taxes go up? Tax revenues go down. If this budget is passed come June there will be more debates about the budget because California will be looking at another $6 – $10 billion deficit.

Hopefully the Republicans will stand firm and vote down this bad budget. In what I think is a hopeful sign, Senate Minority Leader Dave Codgill (R-Modesto) has been voted out and replaced by Dennis Hollingsworth (R-Murrieta).

The Sacramento Bee has an online calculator to show you how much the budget will cost (if approved). For a typical family earning $100,000, with two cars worth a total of $20,000, commuting 35 miles a day (total), and with two children, this budget would cost $1,197. That’s about $100 a month—far more than the benefits from the porkulus stimulus that was signed into law yesterday.

Do our legislative leaders in Sacramento have the guts to actually look only at budget cuts? No. Might they be forced down this road? Only time will tell.

As of this writing there’s no budget in California (doesn’t this sound familiar). That doesn’t mean that when I wake up in the morning that there won’t be a budget but it appears that the Democrats still need one more vote to pass the bad budget.

Jerry Pournelle, the science fiction author, had some cogent thoughts about California’s situation:

It’s not so much that the voters vote themselves largess from the public treasury, although that certainly happens; it is that those with a particular interest, such as civil servant including teachers and prison guards unions will always organize effectively while those who are affected less directly won’t, and the result will go in one direction.

I’ll repeat another learned mind: Whatever you have, spend less. It’s a lesson that California’s elected leaders need to learn.