Friday Dec 10 2010
Ruffalo: State has nearly terminal case of financial shorts
Looking Behind the Scenes
In reporting on Wednesday’s town-hall style meeting about the state budget crises, the Associated Press called Governor-elect Jerry Brown’s efforts “the opening act.” Hopefully, the operative word here is “opening” rather than an act. That Sacramento meeting was by invitation only, but one of those on the A-list was Auburn City Manager Bob Richardson, who termed the proceeds “constructive.” Interesting word that, “constructive.” It’s usually used tossed around by diplomats whenever a meeting or discussion went nowhere and all concerned desire to put a smiling face on things. “No, it was constructive,” Richardson insists, adding that he felt it was useful not only to find out just how bad things were, but what Sacramento felt like doing about it. “To be honest, there weren’t that many possible solutions discussed, but the governor-elect told us at the start of the meeting it was going to be an information-sharing event,” Richardson said. Turns out the news was not good at all. Seems that the deficit continues to rise, which one would hope is an oxymoronic statement, but unfortunately isn’t. And if seeing the deficit balloon from about $25 billion to a bit more than $28 billion wasn’t bad enough, there’s more. “That new figure doesn’t count everything,” Richardson said, going on to say that there is more than $10 billion in red ink for the state’s unemployment insurance fund, to say nothing of the estimated half-trillion bucks that the state is on the hook for in unpaid future pension costs. That pension time-bomb has been ticking for a long, long time without any state legislator having the fortitude to provide the solution. The answer always is to kick the can down the street, but now we learn we can’t even afford the can. Richardson said that those attending the confab got the picture that one big reason for the fiscal mess is that “when the high-tech bubble popped, the state never changed its spending habits,” which made short work of any reserves on hand. So it should be no surprise that California currently has the lowest bond rating of any of the larger states. In fact, commentary given during the meeting quoted the bonding agencies as saying California’s financial problems stem from “reliance on one-time solutions, deficit borrowing, persistent structural imbalance, inflexibility imposed by voter initiatives and a partisan policy-making environment.” Other than that, things are fine. Need some examples? Consider that despite the completely dismal economic news, state voters recently passed an initiative calling for $21 billion in bonds for a high-speed rail line. In case you don’t know it, that $21 billion price tag will double or even triple once the long-term interest payments are made on those bonds. As for inflexibility, the Democrat leadership in Sacramento has already submitted legislation repealing some of the more-recent budgetary cuts, and has declared education — which gobbles up more than half of every state tax dollar — off-limits for future cuts. According to Richardson, Brown insisted “we are all in this together,” but if the past is indeed prologue, than the correct statement should have been “somebody, other than us, needs to pay for this.” And all of us know exactly who that somebody is. As the late, great Walt Kelly might have observed: “We have met the taxpayer and they is us.” We all know how it works. The state has a nearly terminal case of the financial shorts, so will immediately look to the counties, which in turn will gaze longingly at the cities. You know what they say in the sewage industry about the effects of gravity. That meeting provided a few clues to that effect, pointing out that “47,000 Californians are incarcerated each year on state sentences of 90 days or less (sic),” going on to add that those short-termers need to be housed by the various counties. Naturally, the counties will be expected to pick up the tab. Don’t appear shocked (shocked!) when the state again raids county and city coffers, establishes newer and larger charges for state services (needed or not) and despite Brown’s campaign promise, starts hiking any tax and fee it can. As is usually the case, the state will try to spread costs any way it can, which Richardson predicts “will bring a new level of distress on (local governments).” He also said that if the state is counting on increased revenues as a way out of the mess, which appears to be the case, it really shouldn’t. “Not when the housing decline hasn’t slowed and there’s going to be a decline in the commercial real estate market. Then consider what will happen with higher energy costs caused by a declining dollar along with the state’s new cap-and-trade laws,” he said. Don’t know about you, but learning all this makes me feel as if it’s a very short trip from Bedford Falls to Pottersville. Jim Ruffalo’s column runs Sundays in the Journal. Reach him at email@example.com.