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Wednesday, May 20, 2009

California's Budget Proposal Goes Down In Flames

California voters rejected yet another budget proposal that Governor Arnold Schwarzenegger and the state legislators put together.

The measures, which would have prolonged tax increases, capped state spending, earmarked money for education and involved the state in a complex borrowing scheme against its lottery, were rejected by roughly 60 percent of those who voted. The failure of the measures, combined with falling revenues since the state passed its budget, leaves California with a $21 billion new hole to fill, while foreclosure rates and unemployment remain vexing problems here.

“Tonight we have heard from the voters, and I respect the will of the people who are frustrated with the dysfunction in our budget system,” Governor. Schwarzenegger said in a prepared statement. “Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions,” Mr. Schwarzenegger said.

In a firm rap on the knuckles, the voters did pass one measure, which would prevent legislators from giving themselves a pay hike when the state is running a deficit.

The one measure to pass, which would prevent legislators and statewide constitutional officers, including the governor, from receiving pay rises in years when the state is running a deficit, was approved by more than 75 percent of those who cast ballots, demonstrating the overwhelming disgust many Californians say in polls that they feel toward elected officials in a time of deep budget paralysis.

Interestingly, NewsBusters points out what ABC regular, George Will had to say:

Columnist George Will, a regular on ABC's own This Week, pointed out in a May 3 column what Marquez omitted -- that the state government has hardly been starving for money: “If, since 1990, state spending increases had been held to the inflation rate plus population growth, the state would have a $15 billion surplus instead of a $42 billion budget deficit.” In addition, in Arnold “Schwarzenegger's less than six years as Governor, per capita government spending, adjusted for inflation, has increased nearly 20 percent.”

Despite that, the LA Times blames the voters for the severe crisis California faces, headlining with "California voters exercise their power -- and that's the problem."

The measures that were rejected:

The central measure, Proposition 1A, would have increased the state’s rainy-day fund but also restrict spending in future years, and extend several temporary taxes. Proposition 1B, which was connected to 1A, would have required $9.3 billion to be paid to education to make up for shortfalls in spending levels set by a voter-approved proposition in 1988. Voters indicated in polls earlier this month that they had a distaste for protracted taxes, caps on spending during inflation periods and general legislative and gubernatorial will.

The other failing propositions were 1E, which would have redirected money guaranteed for mental health services to the state’s general fund; 1D, a similar measure using money earmarked for early childhood programs; and 1C, which would have modernized the state lottery and permitted the state to borrow from future profits.

Before the vote, H/T to Michelle Malkin, Schwarzenegger begged the voters to pass the measures and not to make California "the poster child for dysfunction", but Malkin rightly makes the following point.

After years of binge spending, open-borders welfare expansionism, environmental extremism, unchecked unionism (read: SEIU) and hostility to businesses, it’s a little late to try to prevent California from becoming “the poster child for dysfunction,” isn’t it?

Next stop, Washington, seems Arnold needs a bailout.... how about that, trying to get the rest of the country's tax payers to pay California's bills via TARP funds.

California Treasurer Bill Lockyer on Wednesday formally requested federal help to backstop a wave of short-term borrowing the cash-strapped state will need to undertake this summer.

In a letter to U.S. Treasury Secretary Timothy F. Geithner, Lockyer asked the government to in effect guarantee the state's debt against default, so that investors would be willing to provide the financing at reasonable interest rates.

Megan McArdle asks if California is too big to fail?


She explains why too.

So what about California? A reader asks. Ummm, that's a tough one. No, wait, it's not: California is completely, totally, irreparably hosed. And not a little garden hose. More like this. Their outflow is bigger than their inflow. You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession. You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets. Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!

There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice. But actually, we do have a choice: we could let them go bankrupt. And we probably should.

I am not even religious and I am sitting here saying AMEN!

No matter... Obama will probably bail them out anyway, after all, what is another $20+ billion on top of his already massive spending plans?

You would think our politicians would start understanding that you cannot keep spending money you do not have.