This past election brought, at least, a sense of satisfaction to me and my husband, realizing that we dodged a bullet by moving from California to Tennessee. Because the once golden state is tarnished.
However, this still should be alarming to the rest of the country since what happens in California, sadly does not stay in California, and instead is adopted by more "progressive" states as a model.
The main check on Sacramento excess has been a constitutional amendment requiring a two-thirds majority of both houses to raise taxes. Although Republicans have been in the minority for four decades, they could impose a modicum of spending restraint by blocking tax increases. If Democratic leads stick in two races where ballots are still being counted, liberals will pick up enough seats to secure a supermajority. Governor Jerry Brown then will be the only chaperone for the Liberals Gone Wild video that is Sacramento.
The problem is that if Jerry Brown is a chaperone more in line with the neglectful mother who buys the booze for her underage teen's party, hoping to be in with the cool kids and reclaim a sense of her past glory as a cheerleader.
At the time of this editorial in the Wall Street Journal, it was not yet known whether the Dems had secured a supermajority in both houses in Sacramento; it appears now that they have. And here are the numbers with which they much contend:
Lawmakers have been borrowing and deferring debts for the past decade merely to close their annual deficits, and those bills will soon come due. The legislature has raided $4.3 billion from special funds and deferred $10 billion in constitutionally required payments to schools.
The state has also borrowed $10 billion from Uncle Sam to pay for jobless benefits and $313 million this year from the state disability insurance trust fund for debt service on those federal loans. Democrats have proposed replenishing the state's barren unemployment insurance trust fund by raising payroll taxes on employers. Expect that to happen now.
Then there's the more than $200 billion in unfunded liabilities the state has accrued for worker retirement benefits, which this year cost taxpayers $6.5 billion. The California State Teachers' Retirement System says it needs an additional $3.5 billion and $10 billion annually for the next 30 years to amortize its debt.
The state has $73 billion in outstanding bonds for capital projects and $33 billion in voter-authorized bonds that the state hasn't sold in part because it can't afford higher debt payments. Unissued bonds include $9.5 billion for a bullet train, which will require $50 billion to $90 billion more to complete. Sacramento will also need more money to support an $11 billion bond to retrofit the state's water system, which is planned for the 2014 ballot.
The amounts of debt and unfunded liabilities is staggering. No one wants to buy California's bonds, knowing that they may likely wind up being worth pennies on the dollar. The practice of moving money earmarked for one thing to another is almost like a check kiting scheme, and one that will eventually fail.
And now Proposition 30 has passed and overnight, individuals and businesses with more than $250,000 in earnings owe 30% more in income taxes, since the income tax part is retroactive to January 1, 2012. Prop 30, Brown threatened the voters, was needed lest the schools shut down - but what he did not say was why the money was not there. The fact is, in April of this year he sat, waiting for the tax revenue to come in . . . and it did not. Between April 2011 and April 20, enough people and businesses had left the state to create this deficit, and so Brown put together a budget based on projected income that he would receive by raising the income tax on those remaining in the state. Since, after all, it was moral and just that the "wealthy" should pay their "fair share."
What will happen next? There is talk of making it required to apply sales tax to services (right now, it is just for goods) and non-taxable goods, such as groceries. There is talk of abolishing Prop 13, which kept property tax rate increases at a per annum cap of 2%, thus allowing counties to charge what they think they can get (and for many counties, that could be quite lucrative in increasing revenue).
One thing that is certain to continue to happen is the great exodus of people - and their capital - out of the Golden State. And it will not be just the "wealthy." Jobs are elsewhere now, once businesses leave. Indeed, an article in today's Los Angeles Times reports that Canada needs oil field and construction workers - and they are targeting California.
Hey, the weather won't be as nice - but just as our ancestors had to emigrate when times got tough, suck it up. If Jerry Brown can get on TV and plead with you to increase your tax burden "for the children" . . . look to your own.