California State Affairs

May 18, 2009

By Padmini Arhant

Special Election:

Sacramento is struggling with the fiscal budget crisis and dependent on California voters to help the legislators finalize on the tax hikes and spending cuts through ballot measures scheduled on Tuesday, May 19, 2009.

There are important issues on the ballot awaiting voters’ yah or nay that deserve attention.

Proposition 1 A: Controlling state spending, extending temporary taxes 2 years – Yes (due to status quo).

Hard times teach all a lesson to review, reflect and respond to the situation. In the current crisis – the polarization among the majority and minority with the two-third majority vote compliance creates gridlock in the legislative matter. In addition, the deepening state crisis has little room for negotiations, hence requires prudence in the legislations.

Those in favor of spending cuts justified in their position as long as the cuts are not affecting the vulnerable groups like children, elderly, disabled, mentally ill patients and vital programs such as K-12 and community college education. The possible areas for funds diversion or elimination should be the ones that are no longer valuable in revenue or benefit to the community at large. Often, previous budgets might have funding for a particular project or service that might be redundant and need re-evaluation prompting to either replace or discard, as it may be appropriate.

Temporary tax hikes for two years is a reasonable measure to deal with the economic realities including the credit crunch by the service oriented government sector.

Proposition 1B: Restoring $9 billion owed to schools – a resounding Yes.

As stated earlier in the blogposts titled Balancing California Budget and California Budget Deficiencies on this website, it’s improper to classify funding towards education as ‘spending’ rather than ‘investment.’

K-12 and college education is the foundation for any economy. The work force being the engine of the economy dependent on quality education and training essential to succeed in the highly competitive global economy.

Investment in early education and community college as well as state universities is an absolute priority without exception to eliminate socio-economic disparities contributing the related problems…poverty, disease, crime etc.,ultimately affecting the general economy.

Proposition 1 C: Borrowing $5 billion from future lottery profits – Yes (Based on reality).

Prop. 1A principle applies over here. Borrowing funds in the financial market with severe liquidity crisis is a challenge and any available avenue to salvage the budget deficit is a better strategy.

Proposition 1 D: Diverting the money earmarked for children’s services – Positively NO.

Again, the service adequately qualifies as an ‘investment.’ Children are the future and depriving them from programs benefiting their welfare is counterproductive.

Proposition 1 E: Diverting money from care for mentally ill – NO (Not a viable option).

Despite being immoral to marginalize the feeble for the sake of able, expecting positive outcome from diversion is a misconception.

Proposition 1 F: Denying raises to lawmakers, governor – Unequivocally Yes.

Compromises and sacrifices serve the society well during difficult times particularly when it happens from the top bottom rather than the other way around.


Budget Deficit Reconciliation:

According to news reports, the budget deficit laid out in two scenarios – Ballot measure approval or failure.

Upon approval the deficit stands at $15.4 billion, contrarily the failure would yield a staggering $21.3 billion through mid 2010 and could get worse if the revenue projections do not correlate with actual earnings around that time.

The estimated total budget for the fiscal year starting in July 2009 is $84 billion.

Obviously, the disproportionate combination of revenue loss and investments/expenses yielded a stalemate.

The economic downturn led to the severe loss in tax revenue directly affecting the funding for various services and programs. Meanwhile, the recipients and beneficiaries of the services remain constant or increased since the last budget.

California confronted by the urgent action to resolve the financial crisis. Government organizations are predominantly service sectors engaged in providing public services to the residents of the state, counties and cities. In such atmosphere, the only and perhaps the major source of income is taxes collected from individuals, corporations, levies, fees and other charges that may be applicable on various items.

When the economy slides rapidly as it has since 2007, it drastically affects the income source via taxes. Unfortunately, the percentage of population receiving the services that typically represents investments/expenses, do not always drop to accommodate the economic decline.  If anything, it either remains unchanged or rise gradually increasing the burden on the budget.

It’s human nature to assume false sense of security during economic boom that leads to an ill-prepared situation for inevitable budget crisis. Combined with the common error is the ideology of the legislators who hold the crisis hostage to justify their political means. Regrettably, actions of this nature by ‘Kamikaze’ pilots produce devastating results.

Many compelling reasons provided to vote for the propositions served on the ballots scheduled early next week. Obviously, the importance laid on the opportunity to derive $6 billion borrowing from the future lottery earnings to survive the immediate crisis.

The circumstance is somewhat similar to SOS from the protective-gearless team at the cliff edge requesting the rescue squad (the voters in this case) to assist them in descending the slippery slope with minimal skull and bone injury.

Since the solution to the budget crisis relies on the revenue and spending equation, exploring ways to generate the deficit amount- $21.3 billion urgently needed to resolve the crisis. It appears that a wide area in spending cuts reviewed and essential programs and services streamlined to meet the challenge. Any further measures to divert funds from these sources i.e. Prop 1B, D and E, would exacerbate the crisis in the long run. It’s noteworthy that preventive care is always cost effective than cure.

The best alternative is to examine the revenue path to raise income for the burgeoning problem. No matter how one circumvents the situation, temporarily raising taxes is an irreversible reality and the only guaranteed avenue to salvage the deficit debacle.

1. Sales tax on items purchased via on-line is legitimate and widely applied around the world.

2. Gasoline tax would be appropriate around this time, considering the decrease in oil prices

3. In the transportation sector – airport tax, port fees, levies, import duty, quota items,
documentation fees and charges are some areas worth revising.

4. Closing state tax-evasion loopholes to derive income is yet another reliable source.

5. Marginal increase in the parking fees at beaches and parks are attention-worthy.

6. Sale/Leasing government buildings to federal agencies and corporations seeking sports
venues would be suitable for income source.

7. Issuing drivers license and allowing all undocumented workers to register their vehicles
would not only generate income for the state, it would also strengthen state and national
security with the documentation of all residents in the state.

Subsequently, acquiring vehicle insurance by the undocumented workers would minimize the burden on registered owners in addition to stimulating the economy through insurance industry.

8. Entertainment tax receipts from the philanthropic entertainment industry would sufficiently
provide for the deficit cut.

9. In the environmental front – cap and trade emission upon legislation should create opportunity for
state income.

10.The state should not discount borrowing from the federal government given the ‘bailout’ season
prevailing in Washington right now.

11. Among the spending cuts – Abolition of death penalty in California and elsewhere would be a groundbreaking rule aside from being earth shattering for the opponents. Besides reflecting the contemporary modern society, it is morally, ethically and financially right on target.

According to legal professionals directly involved in the state criminal justice system, millions of dollars squandered on the perennial appeals and criminal proceedings leaving the inmates on death row for an indefinite period.  Instead, life sentence without parole and having them involved in the activities that would pay for their upkeep in the prison is the ideal strategy. Prison systems and jails in the state would benefit from a major transformation in serving as the reform and revenue center rather than a medieval archive and a liability on the taxpayers.

The legislators’ iron will to defend their failed policies and ideologies has contributed to the special election event in California on May 19, 2009.  Voters across the state of California must realize that abstinence from voting any time in a democracy is renunciation of personal and constitutional right.  The moral equivalence of discarding the exclusive right would be to entrust life in the hands of the lawmakers primarily responsible for the embarrassing fiscal mismanagement.

Desperate times calls for desperate measures and the electorate have an awesome responsibility towards themselves, families and fellow citizens to exercise diligence and cast ballots in saving the golden state from potential bankruptcy.

Special election is a reminder that two-third majority law in budget and other legislation in both state and federal level best replaced by a simple majority rule for democracy to function efficiently.

Californians can only save California on the brink of collapse on Tuesday, May 19, 2009 with an overwhelming majority approval of the Propositions as recommended above.

Thank you.

Padmini Arhant