June 29, 2009 $24 billion short?
Governor Schwarzenegger and the California Assembly continue to face some incredibly difficult policy decisions in their attempt to balance the California budget — amidst a $20+ billion shortfall. The LA Times describes the debate between within the Assembly and with the Governor last week as, “the Dance of Death, the Kabuki or the Summer Follies.” Whatever it is called it is clear their are no easy answers.
So how did California find itself in such an enormous hole? Much of it has to do with the structure of California public finance, a faulty structure that at some point was going to be exposed as inadequate at generating sufficient revenue to sustain services. Here are a few of the problems:
- Two-thirds rule: California is one of only three states that requires a 2/3 majority vote in each legislative body to approve the budget.
- Ballot-box budgeting: The initiative process in California has allowed citizens to mandate funding for a variety of single-interest issues
- Prop 13: Restrictions with the property tax has increased California’s dependence on more volatile revenue sources.
Here are a couple of interesting recent articles related to California’s incredible budget shortfall…
- California Budget Overview (LA Times)
- To fix the budget, first fix the state (LA Times)
- Why does California’s budget matter? (LA Times)
- What will be the ripple effect if the 8th largest economy in the world stops paying their bills?
- Little sign of California budget compromise (Business Journal)
Also if you want to empathize with California policymakers try to balance the CA budget with his intereactive tool…State Budget Balancer. I balanced the budget with $12 billion in increased taxes (Gas tax, alcohol tax, commercial property, oil severance, broading the sales tax base) and with $12.8 billion in cuts. Although I am pretty sure no elected officials would be elected with this budget…but that might be the reality for many CA politicians anyway.