Good Article from This Morning's LA Times About Why California State is in Trouble and How To Fix It

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

Five recommendations could help, including updating the tax structure, ending the two-thirds majority rule, reigning in initiatives, building a serious rainy day fund and getting real oversight.

By Evan Halper, LA Times

Reporting from Sacramento -- In this economy, every state is hurting. Unemployment is in double digits, tax receipts are taking a dive and deficits are piling up. But, once again, California seems to be in a class of its own when it comes to financial dysfunction. The problems here eclipse those elsewhere.

California has the distinction of being the only state that is constantly running out of cash. California is the only one pleading with the federal government to backstop an emergency borrowing plan. California is the only state that never completely closed its deficit from the last economic downturn -- the one that began in the beginning of the decade -- with the hangover from that neglect hobbling efforts to solve the latest crisis.

The state has become a laboratory for what not to do when it comes to managing finances. The online news journal Stateline.org, which state government wonks look to for news on the latest policy trends, recently published a guide of sorts for bureaucrats and analysts who want to keep their state from becoming another California. Rest assured, the piece advised, most states are not likely to find themselves as troubled as the Golden State any time soon.

Size is a factor. "You are talking about the eighth-largest economy in the world, so the numbers involved are just so monumental," said Sujit CanagaRetna, a senior fiscal analyst with the Council of State Governments in Atlanta. "The largeness of the problem makes it more intense."

But there is also so much more.

The oft-cited waste and abuse is a problem, but the deficit is bigger than the entire state bureaucracy.

California could fire every state employee -- including those well-paid prison guards and university professors -- close every government office, stop all travel and even cease the purchase of paper clips without closing the budget gap. The government would be gone but the deficit wouldn't.

"When you have a budget gap of $20 billion plus, cleaning up waste and abuse just isn't going to fix it," said Susan Urahn, managing director of the nonprofit Pew Center on the States.

The runaway spending is caused largely by an ever growing group of Californians making use of basic state services as the cost of those services escalates. Since Gov. Arnold Schwarzenegger took office, for example, the amount the state spends on Medi-Cal health insurance for the poor has grown more than 40%, from under $10 billion annually to more than $14.4 billion. Spending on community mental health services has nearly tripled, and the state's program that provides services for the disabled leapt from a $1.6-billion annual expense to nearly $2.4 billion.

This has happened despite efforts by the state to contain costs. Primary care doctors, for example, are paid just $26 for an office visit with a Medi-Cal patient. There is no simple way to seriously limit these healthcare costs short of eliminating the benefits for hundreds of thousands of Californians.

The same scenario holds true for prisons, where state spending jumped from $6.5 billion to nearly $10.5 billion under Schwarzenegger. The federal courts mandated much of that spending after ruling that the state's prisoners have been widely mistreated. The alternative to spending the money is releasing tens of thousands of inmates and parolees.

Similar challenges confront other big states too. Yet few of them have plunged into the same condition of financial despair. They move quicker to spot and confront financial problems as they arise. Here, problems mount fast and then are left to fester as political leaders bicker.

The backbone of this inertia is a patchwork of state policies that work against good fiscal management. That these underlying mechanical issues with state government are fueling the problem is no secret. Legions of blue ribbon commissions, nonpartisan think tanks and elder statesmen and stateswomen have provided blueprints for fixing them. A fresh round of such reports is being worked on now. Among the likely recommendations:

Updating the tax structure

California is extremely reliant on personal income taxes to fund government. It is a source of cash that is unpredictable and subject to huge swings. When the stock market is soaring, it is great for the state.

California's millionaires and billionaires contribute wads of capital gains taxes in those good years, and the state has consistently used that money to grow programs.

The richest 1% of residents end up contributing half of all the personal income tax the state collects. As soon as the economy takes a dip and the stock market stalls, the money stops flowing and the state plunges into a crisis.

Ending the two-thirds rule

Only two other states require two-thirds of its Legislature to approve a state budget. The rule was put in place here as part of Proposition 13 during the tax revolt of 1978. The idea was to make it exceedingly difficult for the Legislature to raise taxes. And it is. But it also has become exceedingly difficult for lawmakers to merely do their job and get any spending plan in place -- with or without new taxes.

GOP lawmakers, a minority in the Legislature, tend to use the influence they have over the budget to renew policy demands that had been neglected for much the year. Democrats complain they are being extorted for budget votes. Gridlock follows. Nothing happens until the state stops paying its bills or comes close to it.

Lawmakers rush a budget onto the governor's desk that uses borrowing and other gimmicks to paper over much of the problem. The cycle repeats itself.

Reigning in citizen initiatives

Voters have created a complicated and conflicting web of spending requirements and tax limitations. They have told the state to borrow billions for new programs without any plan for repaying the loans.

Last week's special election embodied the problem. Voters refused to reallocate money they had previously ordered spent on mental health and children's programs, but they also refused to raise revenues with tax increases and a plan to borrow against the lottery.

Building a serious rainy day fund

The one we have is full of escape hatches. It is regularly raided, leaving nothing to tap when the state finds itself in the kind of jam it is in now.

Getting some real oversight

Other states kept careful track of how well every program is functioning, requiring department heads to meet a strict list of "performance standards" or risk losing money. California has resisted this for years.

evan.halper@latimes.com

Times staff writer Michael Rothfeld contributed to this report.

http://www.latimes.com/news/local/la-me-ca...story?track=rss

[Ban Hammer 13,395]

end result - i see higher state taxes in steven's future.

[Pooky 3,804]

The citizens of California want the State to provide, but are not prepared to afford the State enough money to pay for all that they want.

Irresistable Force vs. Immovable Object, anyone?

I'll let you decide which is which.

What the citizens of California need is a reality check - either they ask for less, or pay for more. Which will it be?

[natty bumppo 297]

The citizens of California want the State to provide, but are not prepared to afford the State enough money to pay for all that they want.

Irresistable Force vs. Immovable Object, anyone?

I'll let you decide which is which.

What the citizens of California need is a reality check - either they ask for less, or pay for more. Which will it be?

Door #3 ... they will ask the Fed Gov't for a freebie

[SMOKE 1,426]

The citizens of California want the State to provide, but are not prepared to afford the State enough money to pay for all that they want.

Irresistable Force vs. Immovable Object, anyone?

I'll let you decide which is which.

What the citizens of California need is a reality check - either they ask for less, or pay for more. Which will it be?

Door #3 ... they will ask the Fed Gov't for a freebie

the banks they use to use to get loans from whenever they had a short fall won't touch'em. so they're asking the fed to back loans. pfft! if the fed does it, 49 more will be right behind them.

[Sofiyya 1,687]

end result - i see higher state taxes in steven's future.

I see more Obamanomics in Steven's future.

[AnaAndDaniel 0]

end result - i see higher state taxes in steven's future.

I see more Obamanomics in Steven's future.

Steven and California will be fine.

California just doesn't settle for running with the pack.

It is simply time to pick ourselves up, dust ourselves off, and begin the job of remaking California.

Daniel

[Sofiyya 1,687]

California has been a problem for too long to be just fine any time soon. It's fast eroding itself into part of the third world. Too many birkenstock wearing granola crunching back to the earth types running things there to be realistic about the future.

[rooster 1]

The real cure would be a MASSIVE earthquake that forced the entire state into the ocean. Problem solved.

[Ban Hammer 13,395]

The real cure would be a MASSIVE earthquake that forced the entire state into the ocean. Problem solved.

[AnaAndDaniel 0]

like clockwork. the haters show up.

you all have a very nice Memorial day weekend.

and please do try to remember those all those who sacrificed for this country.

Daniel

[Ban Hammer 13,395]

like clockwork. the haters show up.

you all have a very nice Memorial day weekend.

and please do try to remember those all those who sacrificed for this country.

Daniel

which is some of us posting in this very thread.

Edited May 23, 2009 by charles!

[Niels Bohr 72]

If California can pay for Earthquake damage, they can also pay to get out of this mess.

[Peikko 1,575]

California has the Govenator. It can not fail. Besides, all our stereotypes will gang up together against the haterz, you'll see.

[I AM NOT THAT GUY 5,715]

We have decided to solve California's problems the way we solve all our problems: