Is California Gov. Jerry Brown's 'ransom' budget an empty threat?

[Bad_Daddy 2,209]

http://news.yahoo.com/california-gov-jerry-browns-ransom-budget-empty-threat-220536855.html

California Gov. Jerry Brown proposed a state budget Thursday that would cut $4.8 billion from education – but only if a ballot initiative to raise taxes fails. Problem is, legislators are balking

By Daniel B. Wood | Christian Science Monitor – Fri, Jan 6, 2012

There is little doubt, political analysts say, that California Gov. Jerry Brown (D) intended to frighten state voters with the budget he proposed Thursday. What is less clear is whether his new ultimatum is essentially an empty threat.

Facing a $9.2 billion deficit, Governor Brown warned Thursday that the state would have to cut $4.8 billion from education if voters did not pass his ballot initiative to raise taxes on rich Californians.

“He is forcing voters to decide which pain they prefer: severe program cuts, including in both the education and corrections systems, or wrenching tax increases,” says Villanova University political scientist Lara Brown.

RECOMMENDED: Why America won't raise taxes

But California has earned Standard & Poor’s worst credit rating for a US state precisely for its repeated refusal to address the structural imbalances in its budget, and it is by no means certain the Legislature would swallow Brown’s bitter pill even now.

Brown’s proposed $92.6 billion spending plan unveiled Thursday is intertwined with his ballot initiative. The initiative would raise $7 billion by raising the tax rate on Californians making at least $250,000, and by increasing the state sales-tax rate from 7.25 percent to 7.75 percent. The hikes would expire after five years.

If the initiative fails, however, Brown's budget plan has a trigger to automatically cut $4.8 billion from education.

Political scientist Dan Schnur told Bloomberg News that this trigger was "the most expensive ransom note in California political history." But Brown denies that he is trying to strong arm voters.

“When they asked Willie Sutton why he robbed banks, he said, ‘because that’s where the money is,’ ” said Brown in a press conference Thursday.

Noting that 40 percent of the state budget, by law, is earmarked for education he continued, “Well, education is where California’s money is.”

But getting the Legislature to back such a plan is another matter.

Republicans blocked a bid by Brown last year to raise taxes, and they are gearing up to block his budget now. They say growing state tax revenues show that holding taxes low has stimulated the economy.

“It is disappointing to see Governor Brown propose yet another reckless budget scheme,” said Assembly Republican leader Connie Conway in a statement. “We believe Sacramento’s focus should be growing the economy and getting spending under control, not trying to raise taxes.”

But there are signs that Democrats might be digging in as well – and the Brown budget would fail without Democratic support. At issue are proposed cuts to health and welfare services even if his tax initiative is passed.

"Legislative leaders are already declaring the onerous cuts will not be passed easily,” says Barbara O’Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento, in an e-mail.

But she adds that the budget is “an honest appraisal of what the budget will look like without revenue increases in November,” and that voters seem to side with Brown – prioritizing education over health services.

“Polling indicates that voters are willing to increase revenues to avoid cuts to education,” she says.

One key unknown is where the economy goes in the first half of 2012. If things go better – and more revenue comes in – pressure for both cuts and taxes decreases.

“Jerry Brown and the rest of the state thought that the economy would be doing better by now than it has,” says Robert Stern, former president of the Center for Governmental Studies. “He is desperately hoping that the recovery will be evident by summer and that people will have more confidence in state government and him so that they will pass his measure. If not, education will take a huge hit and so will Brown.”

Brown is in a tough spot no matter which way he turns, adds says Jack Pitney a political scientist at Claremont McKenna College.

“In the longer run, he can't get the voters to raise taxes until he convinces them that he's made deep cuts,” Professor Pitney says. “But will the Legislature accept the cuts?”

“The Senate [Democratic] leader says he wants to hold off and see if revenues will go up,” he adds. “Maybe that will happen, but might an uptick in revenues in the spring diminish the public appetite for a tax increase in the fall?”

RECOMMENDED: Why America won't raise taxes

Edited January 8, 2012 by Why_Me

[I AM NOT THAT GUY 5,715]

Not worried. The harder they try, the more they fail. The more they fail, the lower taxes become as all these "emergency" funding measures continue to expire.

[Bad_Daddy 2,209]

http://articles.latimes.com/2011/feb/26/local/la-me-state-debt-20110226

February 26, 2011|By Shane Goldmacher, Los Angeles Times

Debt takes a huge chunk out of California's beleaguered budget

After a 10-year borrowing binge, the upcoming budget is expected to spend more on debt than public universities or state parks. Next year's repayments — $7.65 billion — could make up a quarter of the deficit.

Reporting from Sacramento — Closing California's deficit this year would be immeasurably easier if the state weren't paying for a 10-year borrowing binge.

Without that tab, officials could scrap plans to close state parks, force nearly a million low-income children to go without eye care and take in-home aid away from hundreds of thousands of elderly, blind and disabled residents.

But the state has had an insatiable appetite for debt in recent years. In the last decade, the debt per resident has tripled, to $2,362, according to the credit-rating agency Moody's Investors Service.

That means for every household of four, California owes nearly $9,500 — more than the government spends to put a child through a year of school. In the next budget, the amount devoted to debt repayment is expected to exceed the money invested in California's prized public universities.

Borrowed money has proved politically irresistible in Sacramento, a safe middle ground for politicians in the constant war between Democrats and Republicans over taxes and service cuts. Campaigns for bonds often herald them for providing projects and services without new taxes.

Voters have approved borrowing in the last 10 years for such causes as stem-cell research ($3 billion), high-speed rail ($10 billion), and parks, water and the environment ($14 billion). They even took on $15 billion in debt to paper over a deficit that Gov. Arnold Schwarzenegger said would never reemerge — something economists have scolded the state for doing.

Because of its rock-bottom credit rating, California pays a premium for its loans. Taxpayers must fork over roughly $2 for every $1 borrowed — about 20% more than top-rated states, said Matt Fabian, an analyst at Municipal Market Advisors, a bond research firm.

Gov. Jerry Brown has called for a moratorium on the sale of bonds this spring to slow the accumulation of debt. He proudly proclaimed in a brief interview that he is "a person of zero debt" because of its costs.

Still, the governor said, "people want a fireman to put out their fire, they want a policeman to keep the gangs out of their neighborhoods, and they want things done."

"You've got to get more money," he said recently on his way to a meeting with the state treasurer. "We can't get it always by taxes, so we get it by bonds."

Legislators have already placed an $11-billion water bond on the 2012 ballot. Nearly $1 billion in earmarks for such items as bike paths, museums, visitor centers and tree planting in key legislators' districts were inserted to grease its passage.

Stem cell officials are mulling going back to voters next year for another bond. And education lobbyists are working the Capitol corridors to promote a 2012 school construction bond that would be the fourth in a decade.

Scott Pattison, director of the National Assn. of State Budget Officers, said the state needs to prioritize its borrowing — and fast.

"You can't have it all," Pattison said. "It's simple math."

Now the bill is coming due.

Back in 2000 — in the heady days of surpluses — lawmakers placed a then-record $2.1-billion parks bond on the ballot rather than spend from the general fund to acquire undeveloped land and spruce up existing parks.

Among the projects the borrowing funded were a bowling alley in Stockton, a bee colony and otter pond in San Mateo, and a dinosaur plaza in Santa Ana, complete with a giant replica Tyrannosaurus rex. About $1.2 million went to buff up a bear exhibit at the Folsom City Zoo Sanctuary near Sacramento. Caves were retrofitted with heated concrete because the cold "gets a little tough on the bones of the animals as they age," said Robert Goss, the city's parks and recreation director.

An 8-foot-by-20-foot therapy pool was also installed so the bears could "swim against the current to force them to exercise an injury or arthritis," Goss said.

Now taxpayers are spending an estimated $144 million each year to pay off that bond — more than what Brown has budgeted for California's 278 state parks, which are threatened with closure, reduced hours and fewer rangers.

Some borrowing is designed to help a specific interest.

A consortium of eight private hospitals, the California Children's Hospital Assn., wrote and campaigned for bond measures in 2004 and 2008 that could net the facilities up to $172 million each. The bonds were drafted in such a way that the hospitals would be eligible for 80% of the money.

"The children's hospital bond doesn't raise taxes," actress Jamie Lee Curtis said in a 2008 TV ad. "It saves lives."

Miller's Children's Hospital in Long Beach spent nearly $700,000 promoting the 2004 bond and has received $73.9 million of the proceeds, according to a 2010 state auditor report.

Repaying the two bonds will cost taxpayers an average of $114 million a year for three decades, according to legislative analyses.

[Bad_Daddy 2,209]

Not worried. The harder they try, the more they fail. The more they fail, the lower taxes become as all these "emergency" funding measures continue to expire.

Don't pay your bills and you go t*ts up. California can't even manage to pay a ten year old debt let alone next years bills. You can't keep giving costly breaks to illegals that cost your state tens of billions of dollars and then tax the dog ####### out of the residents that actually pay taxes to keep your fantasy alive. You get tax payers leaving that sinking ship of a state and your left with a bunch of illegals that don't pay #######, but they receive the benefits.

You can make $100, pay out $105 and expect to survive. It just doesn't work that way. You can pretend the problem is going to go away but in reality it's time for California to pay it's bills. Don't spend what you don't have and you won't have this problem.

Edited January 8, 2012 by Why_Me

[I AM NOT THAT GUY 5,715]

California cannot run a deficit. Every state except Vermont has to balance their budget every year.

When a state, other than Vermont, runs out of money, they stop writing checks.

[Bad_Daddy 2,209]

California cannot run a deficit. Every state except Vermont has to balance their budget every year.

When a state, other than Vermont, runs out of money, they stop writing checks.

So what your saying is California will stop paying it's bills because it's billions of dollars in debt? Is that how it works or do you have a link?

[I AM NOT THAT GUY 5,715]

So what your saying is California will stop paying it's bills because it's billions of dollars in debt? Is that how it works or do you have a link?

Happens almost every year like clockwork. Same old, same old. It's raining, or it's cold, students get pissed, every body threatens to strike, lasts a few days, the weather improves, everybody thinks waves, sometime around August the state runs out of money and starts issuing warrants that most banks take because they pay interest, fire season starts, the state slams together a budget deal, the rains come, and we get ready for the holidays.

[Bad_Daddy 2,209]

Happens almost every year like clockwork. Same old, same old. It's raining, or it's cold, students get pissed, every body threatens to strike, lasts a few days, the weather improves, everybody thinks waves, sometime around August the state runs out of money and starts issuing warrants that most banks take because they pay interest, fire season starts, the state slams together a budget deal, the rains come, and we get ready for the holidays.

And what happens with California's debts that run into the billions? How does that debt get paid? Does California just default on those debts? I mean someone has to pay for the monies already borrowed yes?

[I AM NOT THAT GUY 5,715]

The state budget is around $90 billion. They are currently haggling over about $7-9 billion, depending on who is talking.

[Bad_Daddy 2,209]

The state budget is around $90 billion. They are currently haggling over about $7-9 billion, depending on who is talking.

http://articles.sfgate.com/2011-01-19/opinion/27036341_1_debt-ceiling-debt-service-unfunded-pension-liability

How much does California owe?

January 19, 2011|Joe Nation

So how much is the Golden State in the red? At least $265 billion, and perhaps $737 billion, both greater than official state reports suggest.

For perspective, the proposed California general fund budget for next year is $84 billion. In a best-case scenario, per capita indebtedness is more than $7,400. In a worst-case scenario, it is $19,800, nearly one-half the U.S. figure of $45,600. Given those dismal numbers, Californians would be served well by focusing on state finances as much as on federal finances.

[I AM NOT THAT GUY 5,715]

Last year's headline:

California Legislature quickly passes state budget

$86 billion compromise plan closes deficit on time

http://articles.sfgate.com/2011-06-29/news/29715600_1_budget-gap-state-budget-budget-bill

That's early for California. They got it done at the end of June. Somtimes, the budget fight lasts all the way into the new Fiscal Year. That means no money gets spent, and no one gets paid, until they come together and the Governor signs the budget bill.

It's only January. Nobody cares.

Joe Nation? Get real.

[SuperDuper! 230]

Let Jerry Brown cut the public Education to ZERO as far as I'm concerned and save Billion$ in the process.

Caring parents will work 3 jobs each to save up enough to send their kids to private schools, anyways.

Illegal immigration has destroyed the CA public school system K-12 to higher Ed.

Blow it up!

[Bad_Daddy 2,209]

Let Jerry Brown cut the public Education to ZERO as far as I'm concerned and save Billion$ in the process.

Caring parents will work 3 jobs each to save up enough to send their kids to private schools, anyways.

Illegal immigration has destroyed the CA public school system K-12 to higher Ed.

Blow it up!

It's pretty obvious that California cares and does more for it's illegals than it does it's legal residents. Pretty messed up if you ask me.