California faces its day of fiscal reckoning

[DEDixon 39]

WHAT THE DEMS HAVE DONE TO CALIFORNIA.............

SACRAMENTO, Calif. – The day of reckoning that California has been warned about for years has arrived. The longest recession in generations and the defeat this week of a package of budget-balancing ballot measures are expected to lead to state spending cuts so deep and so painful that they could rewrite the social contract between California and its citizens. They could also force a fundamental rethinking of the proper role of government in the Golden State.

"The voters are getting what they asked for, but I'm not sure at the end of the day they're going to like what they asked for," said Jim Earp, executive director of the California Alliance for Jobs, which represents the hard-hit construction industry. "I think we've crossed a threshold in many ways."

California is looking at a budget deficit projected at more than $24 billion when the new fiscal year starts in July. That is more than one-quarter of the state's general fund.

This week, voters said they no longer want the Legislature to balance budgets with higher taxes, complicated transfer schemes or borrowing that pushes California's financial problems off into the distant future. In light of that, Republican Gov. Arnold Schwarzenegger has made it clear he intends to close the gap almost entirely through drastic spending cuts.

The governor's cutbacks could include ending the state's main welfare program for the poor, eliminating health coverage for about 1.5 million poor children, halting cash grants for about 77,000 college students, shortening the school year by seven days, laying off thousands of state workers and teachers, slashing money for state parks and releasing thousands of prisoners before their sentences are finished.

"I understand that these cuts are very painful and they affect real lives," Schwarzenegger said. "This is the harsh reality and the reality that we face. Sacramento is not Washington — we cannot print our own money. We can only spend what we have."

He also has advocated selling state assets to raise cash, including the Los Angeles Memorial Coliseum and San Quentin State Prison.

The Democrats who control the Legislature do not want major spending cuts, but so far they don't have a plan for closing the deficit. And if their solution is higher taxes and more borrowing, they will probably not have enough Republican votes to get the two-thirds approval needed for passage.

The crisis is a sort of political comeuppance for Schwarzenegger, who took over a state with a projected $16 billion gap in 2003 and promised to end California's "crazy deficit spending."

The gap has two primary causes: The state has been living beyond its means for years by spending generously on all sorts of programs that the voters, the politicians and the special interests wanted. And the recession has hammered California's economy.

Personal income declined this year for the first time since 1938 and unemployment is 11 percent, one of the highest rates in the nation. Nearly $13 billion in tax increases and $15 billion in cuts enacted earlier this year, as well as billions in federal stimulus money, have not been enough to make up for the drop-off in revenue.

"This is the year everything has fallen apart," said outgoing Assembly Minority Leader Mike Villines, a Republican from the Central Valley. "We don't have an alternative. We're literally at the day of reckoning and have to cut it all out."

The drastic cuts that appear to lie ahead will, by accident, accomplish the stark reduction in state government that many Republicans have long advocated.

"We should have been limiting the growth of government for years," Villines said.

The crisis also has prompted talk of a complete overhaul of the way California government operates.

A group of business leaders and good-government groups has begun the process of calling for a convention to rewrite the California Constitution.

A separate commission is expected to release a proposal to rework the state's tax structure, which is vulnerable to booms and busts in California's economy because it relies heavily on high-income earners. The state also has few limits on what state government can spend and a small rainy day fund that can easily be raided by the politicians.

Former Assembly Speaker Bob Hertzberg, a Democrat who has joined a group seeking to change the state's budget system, said too many services that used to be performed by local governments have been taken over by the state because of a landmark 1978 ballot measure that drastically limited property tax revenue. Hertzberg said the programs, and the money, need to be sent back to counties and cities.

"The real problem of California is that we need to bring government closer to the people, so that the role of the state is much narrower. We need to focus on big-picture stuff," he said.

In the near term, the huge cuts that are about to hit will probably affect nearly every one of the state's 38 million residents. Schwarzenegger's latest budget proposal, for example, would eliminate health care coverage for more than 2 million people, about 1.5 million of them children, said Anthony Wright, executive director of Health Access California.

"It would place their families in financial jeopardy for any ailment, injury," he said. "A child won't be able to see a dentist if they have a toothache or see a doctor if they don't have the ability to see the blackboard at school."

The state also faces a related problem: Every year, California borrows money on the bond market to cover its day-to-day expenses and pays it back when tax receipts flow in. But the tight credit market and questions about California's ability to repay its obligations could make borrowing difficult or extremely expensive this fall.

Schwarzenegger and some Democratic lawmakers have asked the Obama administration for a federal loan guarantee — or what some are calling a bailout. The move would be virtually unprecedented and would require the approval of a reluctant Congress.

[Ban Hammer 13,895]

the left coast finds out someone has to pay for all those liberal programs.

[one...two...tree 2,762]

WHAT THE DEMS HAVE DONE TO CALIFORNIA.............

Link?

Nice finger pointing without actually showing any substance that supports your accusation.

[SMOKE 1,426]

WHAT THE DEMS HAVE DONE TO CALIFORNIA.............

Link?

Nice finger pointing without actually showing any substance that supports your accusation.

http://www.msnbc.msn.com/id/30893006//

who is holding the purse strings & holds the majority of seats in cali gov't?...yep thats right, the same party that does in washington & they're still burning up your tax dollars on BS in cali & washington.

[Sofiyya 1,687]

And Californis is still trying to export its misery via emission caps and fuel economy standards, like they work so well for them.

[one...two...tree 2,762]

And Californis is still trying to export its misery via emission caps and fuel economy standards, like they work so well for them.

How's the weather outside, over there in Colorado on this wonderful morning?

[I AM NOT THAT GUY 5,715]

WHAT THE DEMS HAVE DONE TO CALIFORNIA.............

Link?

Nice finger pointing without actually showing any substance that supports your accusation.

[Peikko 1,575]

It reads the same as the LA Times piece, except that it does not point out that even if the Governor eliminated government altogether the gap would still remain vast. This could indeed be a watershed and I believe something good will come out of it (being the glass half full type of person) but to suggest that the problems are all the fault of Democrats is fanciful but typical politics.

[I AM NOT THAT GUY 5,715]

It reads the same as the LA Times piece, except that it does not point out that even if the Governor eliminated government altogether the gap would still remain vast. This could indeed be a watershed and I believe something good will come out of it (being the glass half full type of person) but to suggest that the problems are all the fault of Democrats is fanciful but typical politics.

Not all Democrats. Just one in particular: Gray Davis

[Peikko 1,575]

A sock puppet? Politics in the US is worse than I thought!

[_Simpson_ 250]

Amazing, truly amazing. I cant believe that people are actually trying to say that this situation isnt a direct result of a democrats and there polices, sure its not all the democrats fault but a huge majority of it is, wake up people! How will there ever be change with this kind of denial. California has been living a champagne life style on a beer budget and its about time the sh$t hits the fan.

[Peikko 1,575]

Nice slogans. That deserves a Rep spin of the day nomination. Congratulations.

[_Simpson_ 250]

I dont know about all that, think what you want but seriously you people need to quit it with making excuses for them and trying to minimize there involvement in this

[Peikko 1,575]

I dont know about all that, think what you want but seriously you people need to quit it with making excuses for them and trying to minimize there involvement in this

What people? what excuses? There are excellent state programs that are supported by people from all political persuasions. To throw all these out in some blind "it's an evil Democrat plot" blame game is blind partisanship.

Edited May 23, 2009 by Madame Cleo

[DEDixon 39]

WHAT THE DEMS HAVE DONE TO CALIFORNIA.............

Link?

Nice finger pointing without actually showing any substance that supports your accusation.

Come on Steven, the DEMS have been the majority in the legislature for how many decades? The only thing the repubs can do is block tax increases basically and everything else requires the simple majority, right?

The policies of California, the overall majority of all policies -- how and why California does pretty much everything -- is proudly attributed to the DEMS by the DEMS. California is well known for its liberal ways.

On a national level both US Senators are DEMS. 33 of the 53 representatives in the US congress are DEMS. Repubs have never had a majority in the US congress at the state level. Yeah, I know I'm talking about the US senate and congress and not the local legislating body, but my point is, California is run by DEMS locally and from afar.

How can California's current issues not be fully attributed to the DEMS?