I live in California and can personally testify to the rampant abuse of government benefits. Two examples:
- The state and its cities are extremely generous (with taxpayers’ dollars) to their public employees. San Francisco, as an example, fully funded the retirement benefits of city employees after only five years of service! In 2008, voters finally approved a measure to end the practice. However, 1 out of every 3 San Francisco city employees still drew a salary of $100,000 or more in 2009. The city’s projected deficit for the 2010-11 fiscal year is $522 million.
- My friend Stephanie, who’s a walking stereotype of a leftist (feminist, “goddess” wiccan, loves Hugo Chavez), has figured out how to work “the system.” She works at a temp job until she’s laid off, collects unemployment, then looks for another temp job only when the unemployment benefits run out. This recession is the best thing that ever happened because Congress keeps extending her unemployment benefits. It is now 3.5 years since she last worked.
Below are excerpts from Barrie McKenna’s article, “California on ‘verge of system failure’,” in Canada’s Globe and Mail, June 18, 2010:
Arnella Sims has seen a lot in her 34 years as a Los Angeles County court reporter, but nothing like this. Case files piling up by the thousands, phones ringing off the hook, forced midweek courthouse closings and occasional brawls as frustrated citizens queue for hours to pay parking fines. “People think we’re becoming a Third World country,” said Ms. Sims, 55. “They don’t understand.”
California is looking at a gap of $19-billion (U.S.) this year and $37-billion next year on a roughly $125-billion-a-year budget. Local governments, including the City of Los Angeles, are in similarly dire financial straits and are now scrambling to shed workers and services.
It’s a story that’s being repeated all across California – and throughout the United States – as cash-strapped state and local governments grapple with collapsed tax revenues and swelling budget gaps. Mass layoffs, slashed health and welfare services, closed parks, crumbling superhighways and ever-larger public school class sizes are all part of the new normal.
California’s fiscal hole is now so large that the state would have to liberate 168,000 prison inmates and permanently shutter 240 university and community college campuses to balance its budget in the fiscal year that begins July 1.
Think of California as Greece on the Pacific: bankrupt and desperately needing a bailout. “We are on the verge of system failure,” warned Jean Ross, executive director of the California Budget Project, an independent think tank based in Sacramento.
None of this would matter much to anyone outside the not-so-Golden State except that California’s budget crisis is a harbinger of a grim dilemma that all Americans will soon confront. The country has built an elaborate and costly government machine, tied to a regressive tax system that can’t generate enough revenue to pay for it all.
…Experts say the U.S. government will inevitably have to come to the rescue, using its borrowing clout to save the state from near-bankruptcy or devastating service cuts. Do nothing, and the entire U.S. economy could be put at risk. California, like the country’s banks, may be too big to fail.
…And California isn’t alone in angling for a bailout. U.S. states are facing shortfalls totalling nearly $300-billion in 2010 and 2011; they also must wrestle with hundreds of billions more in unfunded pension obligations to their workers. “There are a few Greek crises brewing among the United States of America,” said economist Ed Yardeni of Yardeni Research Inc.
The task is made all the more difficult because California and virtually all other states are barred by legislation from running operating deficits, forcing them to balance their budgets annually by slashing spending, raising taxes or both. Typically, states can only borrow short-term funds, or for capital projects.
Billionaire Warren Buffett, who advised U.S. President Barack Obama during his White House run, suggested recently that a Washington bailout of California and other troubled states is inevitable. How, he wondered, can Washington deny California after saying yes to General Motors, AIG and dozens of banks. “I don’t know how you would tell a state you’re going to stiff-arm them with all the bailouts of corporations,” Mr. Buffett said. The alternative for many state and local governments may be default. Mr. Buffett said many state and municipal bonds are only triple-A rated because investors assume there’s a federal backstop. “If the federal government won’t step in to help them, who knows what [the bonds] are,” he said.
California’s credit rating is already the lowest of all 50 states.
…In the mid-1970s, California property taxes were soaring, along with real estate values, and incomes couldn’t keep pace. The result was a campaign, financed by L.A.-area apartment landlords, that culminated in the now-infamous Proposition 13 ballot initiative in 1978. Prop. 13 rolled back and capped both residential and commercial property tax rates at 1975 levels. And it virtually guaranteed that only a revolution would reverse the measure. Proposition 13 imposed a two-thirds majority requirement for all tax bills and required local voters to approve all municipal tax increases. California put itself in a straitjacket that it hasn’t been able to get out of,” Occidental College’s Prof. Dreier explained.
In the years since Prop. 13, California has come to the rescue of local governments, taking on ever-greater responsibility for schools, low-income health care and welfare. And it has paid for all that with volatile sales and income tax revenue, making it tough to balance its budget when the economy stalls. “A lot of people predicted doom and gloom in 1978. It just took a long time,” said John Tanner, executive director of Local 721 of the Service Employees International Union, which represents 85,000 government workers in Los Angeles and throughout Southern California. Prop. 13, according to Mr. Tanner, has put schools, courts, parks and a raft of other government services in a downward spiral. “We are at an unacceptable place right now,” he said.
…The tax structure may be badly flawed. But even union activists acknowledge that repealing Prop. 13 outright is probably a non-starter. Recent polls show support for keeping a lid on property taxes remains strong, in spite of the budget crisis. Experts say tax reform is the only option for California, short of a massive and unprecedented shrinking of government. And that requires an “open conversation” between voters and their elected leaders, and almost certainly higher taxes, according to Ms. Ross, the economist. If you want good schools, you have to pay for them,” she said. “Cutting taxes doesn’t raise revenue.”
That kind of talk angers Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, named after the L.A. homeowner who led the Prop. 13 campaign and dedicated to ensuring it’s never overturned. He said California is a high-tax state with generously paid government workers, and recession-weary taxpayers have no money to pay more. “The bank is empty,” Mr. Vosburgh complained. “We have tried to be all things to all people and we can’t afford to do that any more.”