Sunday, May 16, 2010

The Kalifornia Solution

A lot of states are coming to a fork in the road; how to live within their budget. Here in California, teachers, firemen and police have already gotten their budgets trimmed. Now it is time for deeper budget cuts or entertain the idea of raising taxes.

Here is a breakdown of present expenditures:

The Republicans are dead set against tax increases and more or less figure if you pay no taxes in, you’re first in line to lose benefits. In essence, it's the free stuff that the poor qualify for.

The Democrats on the other hand, want to raise taxes on the rich and big business and leave entitlements alone. Needless to say, the Democrats are not after the Big business vote. By God, make those fat corporations pay their fair share, rah rah rah! (I might sound a bit biased here, but show me a business that pays taxes, it's passed on to the customer)

We have two political philosophies that differ immensely. California’s problem is a financial one created by an economy that has gone sour. If the economy was in good shape, this problem would not exist.

The question arises, will either political view, result in a solution? Sadly, probably not. From looking back at history, raising taxes in hard times (the Democrats plan) brings in less revenue and stifles the creation of new businesses. Of course if you are poor and your entitlements get cut (The Republicans plan), you will vote for the Democrats to get them back. Both perspectives appear doomed to failure.

Where else can the state governments cut? There are limits here; people expect and demand services for their tax dollars. The part of the budget that might end up being cut could be welfare and health care.

Governator Schwarzenegger is suggesting elimination of some welfare programs. However it seems more likely that California residents might see an across the board cut in welfare benefits of say 25% this year and another 25% the following year. This would put our state in line with the benefits other states pay. We could also see major cuts in health care. Health care for kids could flat out disappear.

And as if it couldn't get any worse, new laws will prevent four million Arizona "tourists" from their annual trek to the San Joaquin Valley in California to harvest vegetables this year (a definite crimp on "tourism"). This should have no adverse effect on this years bumper pot crop.

It kind of looks as if those that don't help row and bail water out of the boat, get to swim along side.


Tyrone said...

I love that Kahlifoania seal. LOL

I've been saying this a lot, lately: the "in" word for this decade... austerity.

It's becoming quite natural to hear it, now. The conditioning begins!

Jim in San Marcos said...

Hi Tyrone

The seal is catchy, I've used it before on a previous missive. I stumbled across it and there was no credit line. I have no idea who put it together.

Austerity could be the new word for the decade, but I hear an echo in the background saying "not me!"

It's kind of like getting a real bad sunburn. You suffer for a while, but you do get better.

Tapped out taxpayer said...

Sorry to disagree with you, but teachers have not really participated in the cuts.
Average teacher salary in CA. is $70,430,per NEA,highest in the nation.
In Alameda, CA. teachers are pushing for a parcel tax of nearly $1,000.per home, and up to $9,000per apt. bldg. or commercial property. This will allow teacher salaries and pensions to increase unaffected by the recession(parcel taxes can be used for salary and pension increases- bond issues can not.)
Firemen are also pushing for a law that has a "minimum staffing level",in order to maintain their overtime and generous pensions.
The entitlement mentality is alive and well.

2rational in Lima,NY said...

We have a very similar story in NY State.

Our government is looking at a $9.2B deficit. We are operating without a budget since 4/1/2010 on emergency bills. Our Governor decided to furlough State Workers for one day a week (20%). Three Unions went to court and obtained a stay for now.

State revenues are dropping, tax increase - highly unlikely. Cutbacks, an uphill battle! Governor is NOT running for re-election.

The only major change this summer will be - 55 State parks will be shut down. No parcel tax that I have heard of, yet.

What is the possibility of another round of Stimulus in time for the Nov elections? Ben could rationalize the next round of stimulus on the unforeseen effect of the cumulative European austerity!

2rational in Lima, NY

Jim in San Marcos said...

Hi Tapped out Taxpayer

The budget for education, has been cut drastically, I think that teachers salaries have been cut about 5% in the Poway area. I featured the head of the Poway Unified School District Mr. Don Phillips in two blog articles. Both were letters he sent to the teachers and employees of the school district.Here are the links: Dec 11 and Feb 11

The two letters are only 3 months apart. The obvious deterioration of Poway's school budget over that short period of time is startling to say the least.

I think is is only a matter of time before we get to trimming salaries and retirement benefits for the teachers, firemen and police. Thats next after welfare gets trimmed.

What most people in the state will not accept, is there is not enough money to pay everyone their present salary and that goes double for retirees.

At some point, a college graduate has to earn more than a firefighter and that's not the case right now. It will have to change, California is broke. We can't pay more for brawn than brains, it makes no sense.

Thank you for your comments.

Jim in San Marcos said...

Hi 2Rational in Lima NY

I grew up close by in Pittsford New York and spent a lot of time sailing on Canadagua lake. Great area to live in.

California and New York are the two biggest states as far as state budgets go.

There isn't any good news coming out of this mess, it looks like it is going to get worse before it gets better.

Thanks for the info and take care.

AIM said...

I believe The Governator has failed us. The corrupt democrat welfare oriented government officials have overwhelmed him. He better go back to the movies, at least there he always wins and is the hero.

Good summation of this right here:

Anonymous said...

Good article.

Sorry if this insults any of you but I don't care.

Public unions are one of our biggest problems. Politicians are afraid of them. Down with the high salaries, high pensions and all the other benefits. It's time to get real and think about the nation instead of your own selfish selves. Union bosses who keep pushing in the wrong direction are a liability to our country.

Jim in San Marcos said...


Thanks for the link. I think Schwartzie is doing fine. All he did was give the Republican side of where the cuts should lie. The Democrats can't pull an Obama here and sneak in something uncompromised, they are going to have to fish or cut bait.

Schwarzenegger says he will not cut the State Parks budget. Guess what the first thing that the Democrats will want to cut??--State Parks.

In a worse case scenario, if the legislature does nothing, it's Bankruptcy for California. It kind of solves the budget problem, no one gets paid.

Jim in San Marcos said...

Hi Anon 4:34

Glad you liked the article. I tend to agree that unions in general are a problem, they are out to improve the members wages, I can't really fault them for being successful in that respect.

As for public unions whose paychecks are cut out of tax money, I think we can blame the legislature. 20 and 30 years ago, they signed off on benefits to be paid in retirement. Nothing got raised on their watch. Now the bill is coming due and the money isn't there.

Everything was OK until we ran out of funds to finance these plans. It was only at that point that people took notice as to what these government employees were being paid.

It's going to change, the state government retiree plan will go bankrupt in a timely manner. The max that the Fed pays out in bennies for failed plans is $43,000 per year. Retirement may not be an option for people in Cal$forn$a.

Thank you for your comments

Tyrone said...

Schwarzenegger says he will not cut the State Parks budget. Guess what the first thing that the Democrats will want to cut??--State Parks.

Cut State Parks? Oh, yeah. Last time they talked about this...

State Park Closures Could Cost Tens of Millions
The governor's plan to close more than 100 state parks could end up costing tens of millions of dollars, the San Jose Mercury News reports. An internal memo written by lawyers in the state parks department warned that the mass closure of parks could prompt private vendors to sue the state for lost profits. Those concessionaires generated $89 million in gross sales last year. In addition, park closures could open the state to liability if people are injured or set fires while trespassing in closed parks.


Jim in San Marcos said...

Hi Tyrone

Reading between the lines, you're going to have to bring your own toilet paper when you go camping from now on.

It reminds me of the Forest Ranger talk on protecting yourself from bears. He advised everyone to wear a bell (to warn the bear) and to carry a tear gas spray (to repel them). Somebody asked how to tell the difference between a black bear and a Grizzly. The Ranger said examine the bear droppings. The black bears droppings are full of seeds and plant matter whereas the Grizzly bears droppings smell like tear gas and have little brass bells in it.

I do hope they keep the camp grounds open. Using a tent is better than a cardboard box on a city sidewalk. The rich aren't the only ones that can "afford" to go camping.

Take care

Rob in NS said...


This may seem a little off topic but I thought it was funny. Last week I was watching the talking heads on TV were discussing the Greek bailout. They made the analogy that the one Trillion euro rescue package was just a PanzerFaust in their back pocket to be used if only needed. The guy on TV said that analogy was originally used by Hank Paulson when they were getting TARP passed.

I don't know why I bother going to movie theatre to watch comedies when I can watch this for free. I say this because if I remember my WW2 history correctly the PanZerFaust although effective did not ultimately hold back the Sherman's and T-34's on the drive to Berlin. I suspect that in the end the analogy these people are using here will prove closer to the truth than they expect.


2Rational in Lima, NY said...


It will be a tad difficult to reduce or take away the pension already earned in NYS because the state Constitution bars reducing pension benefits once granted. So the Pension fund cannot go bankrupt as long as the state has residents it can tax. (in theory)

Do you think the feds will allow NYS to go bankrupt?

2Rational in Lima, NY

Jim in San Marcos said...

Hi 2Rational in Lima

I haven't been following the retirement data for New York. So I am not sure how bad off they are.

The Feds could take a two step approach to a New York bankruptcy. Let it happen and let the court receivers determine what gets paid. Then the Fed could come in and guarantee the bonds. I'm putting together my next missive on the retirement pension crisis.

One thing to keep in mind, these benefits were made with an assumption of interest rates in a range of 6 to 12 percent. We are looking at 0 to 2 percent. It doesn't take a math major to figure that the interest income generated will not be close to planned. They will be 65 to 75 percent off target.

It is hard to say what will happen with either state. With the Airlines, that went into bankruptcy, the retiree with a 20K pension took a small hit compared to the pilots who got a 50% haircut.

Jim in San Marcos said...

Hi Rob

That's funny. PanzerFaus didn't ring a bell until I googled it. Bazooka--that use to be my favorite brand of bubble gum.

I guess if you want to blow a bigger bubble, you need more gum;>)

Rob said...


I wonder sometimes if the talking heads on TV are saying stuff like that to see if we are paying attention. I have funny feeling that the oligarchs are getting a little nervous this week watching the stock markets.

I think the endgame with all this is near. It looks from my seat like it's only boys and old men that are still standing to throw into the fight.


From Sunny Nova Scotia