California Voters Respond To Deficit

California’s in a major crunch right now, as property taxes — a windfall the last several years — have turned into a drought:

California Governor Arnold Schwarzenegger said his state’s finances have deteriorated so rapidly that a budget he signed just six weeks ago has already fallen into a $11.2 billion deficit and taxes must be raised.

Schwarzenegger ordered lawmakers into a special session to consider ways to close the gap. He proposed increasing the sales tax by 1.5 percentage points for three years as well as raising oil severance and alcoholic beverage taxes and motor vehicle fees. In all, taxes and fees would increase $4.7 billion while spending is cut $4.5 billion.

“We have a dramatic situation here and it will take dramatic solutions to solve it,” Schwarzenegger, a 61-year-old Republican, told reporters in Sacramento. “We must stop the bleeding.”

California has been hard hit by the housing-market rout and the worst financial crisis on Wall Street since the Great Depression. The state leads the nation in foreclosures and its unemployment rate reached 7.7 percent last month, the fourth highest in the country. Double-digit declines in stock markets have sapped tax revenue from income and capital gains.

So how have the voters responded? By taxing and spending and borrowing and spending.

First, taxing and spending:

Measure R, the half-cent sales tax for transportation projects, was still being narrowly approved after counting and adding 159,849 ballots Friday to the results of Tuesday’s election.

Initial results of Tuesday’s election showed Measure R — which requires a two-thirds majority vote for approval — narrowly passing with 67.41 percent of the vote. The updated tally released Friday shows the measure passing with 67.22 percent of the vote.

Measure R would generate an estimated $40 billion over the next 30 years to fund transportation and transit projects across the county.

Always fun to see people vote 30 years of additional taxation on themselves. But at least by voting to tax themselves, they’re being honest about it…

…Not like statewide voters, who have decided instead to tax their children and grandkids:

Before the final ballots had even been tallied, high-speed rail advocates in California were getting down to work, laying the foundation for a bullet train that will link San Francisco and Los Angeles as early as 2020.

Voters on Tuesday approved the Safe, Reliable High-Speed Passenger Train Bond Act, more commonly known as Proposition 1A, by a margin of 52 percent to 47 percent. The law authorizes the Legislature to issue almost $10 billion in bonds to fund the first phase of an 800-mile high speed rail link between Northern and Southern California. Advocates of high-speed rail hailed the victory as a watershed for high-speed rail in America.

Ah yes, bonds… The financial instrument that allowed supporters of the high-speed rail project to boast that this $9B for the project will come “WITHOUT RAISING TAXES.” This, in a state with a bond rating of merely A+ (which, to those of you who think an A+ is good, is only the 5th-best bond rating available) — a far cry from the AAA rating enjoyed in the past.

Even worse, they only authorized enough bonds to start the project. After cost overruns, governmetn graft and corruption, environmental impact studies, and all the other losses in the process (legal fees due to eminent domain, I’m sure), $9B might get them from San Francisco to about Redwood City. By the end of the process, I think $100B will be a conservative cost for this project.

California is crumbling under the weight of decades of bad decisions. Our voters have just increased the burden.

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  • Brittanicus

    THEY SAY THAT WHEN CALIFORNIA CATCHES A COLD, IT SPREADS QUICKLY TO EVERY CORNER OF THE UNITED STATES?
    California is $11 billion dollars in the red, attributed to the illegal alien invasion of LOS ANGELES. So now they are looking for ways to cut programs, so has gone the rest of the country. CUT OFF STATE WELFARE PAYMENTS TO ILLEGAL IMMIGRANTS. 37 million people illegal aliens here, according to Tucson sector Border Patrol union local 2544–NOT 13 MILLION, AS THE NUMBERS HAVE BEEN MANIPULATED BY THE LIBERAL NATIONAL PRESS AND SPECIAL INTEREST LOBBY.

    An additional half-million coming every year. A massive financial impact on our economy by importing the worlds poor.

    TELL CALIFORNIA’S TAXPAYERS TO PASS (H.R.1942), TO TERMINATE ALL FREE WELFARE HANDOUTS TO ILLEGAL ALIENS! The corrupt LIBERAL-politicians and judiciary stole your future away from you by pandering to illegal foreign nationals. http://www.numbersusa.com for facts not lies.

    Write or e-mail California representative or state senator TODAY! NOW! at http://www.assembly.ca.gov/clerk/MEMBERINFORMATION/memberdir_1.asp

  • TerryP

    The real problem will come when they start asking the rest of us to bail them out and I am pretty sure that Obama and his clan will have no heistation in just giving them our money to cover their bad decisions. Their bad decisions will just keep getting worse.

  • http://thelibertypapers.org/ Brad Warbiany

    Terry,

    You’re absolutely right. If they think AIG is too big to fail, wait until California is in danger. Maybe a repeat of assumption of state debt?

  • Paul

    Brad,

    What’s the likelihood of California failing? And to what extent? It’s a troublesome thought, and I’d like to hear more details about this theory.

  • http://thelibertypapers.org/ Brad Warbiany

    Paul,

    I’m not saying necessarily that California will fail. California currently receives roughly $100B in tax revenues each year, and their debt is about $60B (near as I can tell), with quite a bit “on tap” for programs that have been authorized but haven’t commenced borrowing.

    This is now occurring in a major housing price slump and capital gains slump, which is savaging the state’s finances. The first linked story above is California’s attempts to close an $11B budget deficit.

    It might be a positive thing if the voters here decided to be a little bit more thrifty, but the results of Prop 1A show that’s not the case.

    So what do we have?

    1) A state that’s heavily in debt and increasing their burden.
    2) No political will to reverse the above.
    3) Unlike the US Government, California must tax to pay their debt, and does not have their own monetary printing press.

    The US Government is $10T in debt on about $3T in revenue per year, but they’ve got the trump card in that they can print their way out of debt. California cannot.

    Should such financial mismanagement continue, I would *NOT* be surprised to see individual states running to the Feds for a bailout. It might not be a true “failure” of those states, but then the Feds have shown that they’ll step in to avert failure, not just to clean up after one.

  • Akston

    The US Government is $10T in debt on about $3T in revenue per year, but they’ve got the trump card in that they can print their way out of debt. California cannot.

    Should such financial mismanagement continue, I would *NOT* be surprised to see individual states running to the Feds for a bailout. It might not be a true “failure” of those states, but then the Feds have shown that they’ll step in to avert failure, not just to clean up after one.

    So California can still effectively print its way out of debt. They just have to do it indirectly by asking their Uncle Sam to print some up for them.

    I don’t live in California, but I’m more than happy to help out by paying more for everything I buy and devaluing my savings for you guys. Least I can do.

  • http://pith-n-vinegar.blogspot.com/ Quincy

    Akston –

    Much appreciated, as a citizen of the fair state. In addition, could you send over a few thousand bucks so Brad and I can buy some spraypaint and start tagging things with “TANSTAAFL”?