New Republic Embraces Fiction of California’s Balanced Budget

ae8aprop30 New Republic Embraces Fiction of California’s Balanced Budget

When The New York Times
began the
narrative of California’s alleged economic recovery, reporter
Adam Nagourney was at least vigilant enough to moderate his claims
with plenty of hedging about the state’s still-high unemployment
numbers, erratic revenue outcomes and the ever-present pension
crisis.Not so at the New Republic. According to David Dayen,
the crisis is all over and it’s all
thanks to progressives! Dayen begins:
Earlier this month, California Governor Jerry Brown strode to a
podium in Sacramento and said something that, a few years ago,
seemed as unlikely as a UFO landing atop the state Capitol: The
initial projection for the state budget showed a balance. In fact,
for the 2013-2014 fiscal year, there’s a surplus of $851 million.
The nonpartisan Legislative Analyst’s Office, which just a couple
months earlier estimated a deficit of $1.9 billion, concurred with
the governor: Revenues matched expenditures in the initial outlook
for the first time since before the Great Recession.
This was a surprise, to say the least. After all, in 2009,
California carried a deficit as high as $42 billion. Marathon
all-nighters in the legislature and unsatisfying 11th
hour deals were commonplace. At one point the state paid
obligations with IOUs because it ran out of money.
You can’t use projections to declare an economy sound again. You
simply can’t. Interesting how Dayen went all the way back to 2009
for a deficit number when the state was carrying a $20-something
billion deficit just
last year. Why? Partly because the state had incorrectly
projected its pending state income tax revenue for 2011 filings and
came up billions short in the spring.The Reason Foundation’s Leonard Gilroy noted at’s
Big Government
what really happens with California’s budget. They almost
always declare that it’s “balanced” and then adjust downward as
reality asserts itself and makes a mockery of the projections:
Last November, for example, California’s nonpartisan Legislative
Analyst’s Office
wrote, “The 2012–13 budget assumed a year–end reserve of
$948 million. Our forecast now projects the General Fund ending
2012–13 with a $943 million deficit.” …
To make his budget proposal look balanced this time around, Gov.
Brown makes another series of optimistic assumptions, including
that the tax increases California voters approved last November
won’t hurt the economy and the state’s economy and tax revenues
will grow; that California’s millionaires, hit with higher taxes
again, won’t pack up and move to low-tax states; that California’s
housing market will improve and home prices will go up; that
President Barack Obama and Congress won’t do anything to hurt the
national economy; and that the stock market will rise.
We still don’t have an answer for what will happen to education
budgets if the revenue projections are off (beyond the fact that as
pointed out
earlier today, a big chunk of the money for the tax increase
meant to go to schools is not actually going to schools).Dayen credits the state’s progressive movement for fixing
California’s budget by marginalizing and essentially eliminating
political opposition:
Until 2010, the legislature needed a two-thirds vote to both
pass a budget and raise taxes, leading to several incidents of
brinksmanship with Republicans, who gerrymandered the state just
enough (in a corrupt bargain with the majority Democrats) to hold
on to a bit over one-third of the legislative seats. Robbed of the
tools of budget-balancing, majority Democrats had to make painful
concessions in order to get Republicans to pass a budget.
Piece by piece, reformers started to dismantle these obstacles,
using the state’s ballot initiative process. In 2008, voters
approved an independent redistricting commission to break the
incumbency protection racket and make the legislature look more
like the electorate.
Er, in 2008, registered Republicans comprised just a little less
than a third of the
California electorate. And no doubt a significant number of the
20 percent independent voters probably vote Republican in any given
election.And the new redistricting intended to break the “incumbency
racket”? Three whole
incumbent state legislators lost their seats in 2012. And
thanks to the state’s new top-two runoff system, two of them were
Democrats who lost to other Democrats. The redistricting certainly
did change the electorate representation, but it had nothing at all
to do with getting rid of incumbents or making districts more
competitive.Dayen’s remarkably curious explanation of California’s budget
woes focuses entirely on the state’s inability to just raise taxes
whenever it wants to:
California’s recent budget problems resulted from the deepest
economic downturn since the Great Depression. But the state’s
difficulty in addressing them was as much a political crisis as a
budget crisis. Since the passage of the notorious anti-tax Prop 13
in 1978, which capped property tax rates and made it nearly
impossible to raise revenue through the legislature, California has
been locked into a revenue structure that, outside of boom times,
proves too small to finance the public services that residents
desire.  Several tax cuts during the late 1990s dot-com boom,
and a huge $5.5 billion annual cut to the vehicle license fee
passed by Arnold Schwarzenegger in 2003, only exacerbated this
“The public services that residents desire” is a nice, vague
obfuscating way of talking about government employee costs without
having to actually address that significant, serious budget
problem. In fact, it doesn’t mention employee costs at all. It also
doesn’t mention the word “pension,” even once. In this lengthy
analysis of California’s alleged fiscal recovery it makes
absolutely no mention at all of the state’s greatest source of debt
and the greatest threat to the state’s actual recovery. The
California Public Employees’ Retirement System (CalPERS) recently
reported it has recouped billions in investment losses (despite
posting dismal returns for the past couple of years), which is
good. But according to accounting figures by Moody’s Investment
Service, the state may be sitting on about
$300 billion in unfunded pension liabilities, with another $100
billion needed for retirement health care.  Gov. Brown’s
budget does address making dents in a $28 billion
wall of debt, but those debts are completely separate from the
state’s pension bomb, one that Dayen doesn’t even acknowledge.He does, of course, talk about austerity and budget cuts, which
should set off any Californian’s bullshit detector:
But while progressives put the coalition in place to move past
austerity politics, Governor Brown largely kept in place the
austerity budgets of previous years. The exception is education,
where in many respects the state’s hand is forced: because of a
formula set years earlier by Proposition 98, education spending
must rise proportionally with increases in the overall budget. But
much of the rest of the budget remains flat, particularly for
social programs like welfare-to-work, healthcare for the poor and
elderly, and child care, where the state has cut $1 billion over
the past four years, enough to accommodate 110,000 families. At one
point during the darkest days, legislative Democrats, quick to
prove wrong taunts about overspending, unfurled a 150 foot-long
scroll listing $19 billion in cuts they adopted from 2003 to 2008.
Most of that scroll has not been rolled back.
Here’s a couple of graphs of
state spending from 2007 to 2012 courtesy of those few
obstructionist Republicans left working at the state
legislature:Somebody show me where the austerity is on those charts. Brown’s
latest budget has a five percent increase in spending.Now if Dayen wants to argue Californians are getting less bang
for their buck when it comes to “public services,” we can certainly
make that case. Talking about such matters, though, would require
progressives to stop ignoring the elephant in the room – where that
increasing government spending is actually going.Oh, also, Dayen makes no mention of that godforsaken, stupid
train, which is likely to take any recovery down with it should
Brown actually commit any more state money to it. But that issue,
again, would require addressing the matter issue of union patronage
in state government spending.

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New Republic Embraces Fiction of California’s Balanced Budget

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