Saturday, December 25, 2010

Merry Christmas and Welcome Home Governor Brown

Merry Christmas, Governor Brown. The previous governors and legislators have been so generous that they have dumped 28 billion lumps of coal on you. They used up all sort of gimmicks and tricks to hide the deficits, but they can’t fool the Grinch, the bond market.

Your state now ranks among the bluest of blue states.

That’s the good news.

Now comes the rude awakening.

With the possible exception of Illinois, California is now the reddest of states – at least $28 billion in the red.

California has the lowest credit rating of any state. Even the long suffering Louisiana has a better rating than California. California is tied with Michigan at 12.4% with the nation’s second highest unemployment rate. The legislature is close to destroying California’s greatest contribution to the world, the University of California. The moving van index shows more families moving out of California than moving in. For the first time since the 1920 census, California will not be gaining an additional Congressional seat.

And the legislature doesn’t get it. The leaders keep trying to raise staffers’ salaries. They keep looking to tax increases, euphemistically referred to as revenue enhancements, to balance the ever growing deficit.

The Governor and legislature reached a budget deal in early October, 100 days late, to solve the projected $19 billion deficit. The smoke and mirrors barely made it to the November elections.

Governor Schwarzenegger called on December 6 for a special session of the legislature to solve the state’s now $25 billion deficit. The California Legislature responded by holding perfunctory hearings and then adjourning on December 9 without scheduling further sessions. They refused to deal with the Governor’s suggestions.

The projected deficit now exceeds $28 billion over the next 18 months. It's greater than the combined spending on the state prisons, welfare and the University of California.

The Democrats may not be able to reads a balance sheet, but they can read a calendar. They have 45 days to act under state law, But Governor Brown will be sworn in on January 3, 2011. They are waiting for the new governor. Their time will not be idle though. They are re-examining every statute vetoed by Governor Schwarzenegger to determine which ones to repass and send on to Governor Brown.

Sometimes you reap where you have sowed. One of the significant accomplishments of your first administration was to sign a law allowing public employee unions to engage in collective bargaining.

And they have. Excessive salaries, pensions, vacation days, holidays, personal days. Bell. The story is that 1/3 of all municipal workers in San Francisco earn over $100,000 annually.

Your political problem is that you spent little on your campaign, but the unions spent a fortune. You owe them!

The Democratic leaders of the state legislature love you; they can’t wait for your arrival.

And what are Governor Brown’s solutions to the budget deficits? He had none during the election campaign. He’s announced he’s sick of the band-aid approach which will not work anymore, but that’s it. He has said California is a rich state, and inferentially should be able to afford more. He has also said that everything “is on the table,” which is a code word for more taxes.

He promised though in the campaign that he will not raise taxes without voter approval. The assumption therefore is that he will propose draconian budget cuts, forcing the voters to approve substantial tax increases in a June special election.

He has proposed a $700,000 cut in the budget by eliminating the Office of Inspector General stating that it is duplicative of other offices. The office is occupied by Laura Chick, who is a tireless and effective advocate for eliminating waste and increasing efficiency in the state bureaucracy, and before that in Los Angeles.

That is not a good sign for California’s future.

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