I am voting NO on all of the propositions in the May 19, 2009 special election. The legislature needs to do the job it was elected to do. If not, then every one of them not willing to compromise in good faith should resign.
What will it take for the California legislature to do its job? Instead of passing a budget, it delayed the hardest decisions and deferred to voters. At what cost? The propositions do not even balance the budget or structurally change how budgets are made or how money is spent. The propositions only move money from one set of pots to to another in a apparently symbolic move. It is like moving deck chairs on the Titantic as cold Atlantic waters stream into a big gash in the side of the boat. Hello, there are structural problems causing California’s budget woes! Worse, these are temporary measures that delay or exacerbate the problems faced by the state government. Really, what do passing these initiatives get us?
“Republicans pitched most of the plans to help deal with the deficit — which is expected to hit $8 billion by summer — but even some from moderate Democrats were rejected.
State officials have projected the midyear budget shortfall as a result of the recession. And if voters reject the budget-related ballot measures in the May 19 special election, the deficit could top $14 billion.”
via State will need to borrow more than $20 billion S.F. Chronicle.
“California will have to borrow more than $20 billion unless state leaders close another multibillion-dollar deficit that will deepen if voters reject budget-related ballot measures on May 19, according to a report Thursday by the nonpartisan Legislative Analyst’s Office.
In addition, California may have to pay hundreds of millions of dollars in additional borrowing costs as a result of the banking crisis. In previous years, the state was able to secure lower interest rates by purchasing loan guarantees from commercial banks.
But banks have told state finance officials that they can at best back about $1 billion in loans, far short of the state’s borrowing needs, said Tom Dresslar, a spokesman for state Treasurer Bill Lockyer.”
The articles say so much more than what I flash here. Really, they are worth reading to educate yourself. Really, these propositions do little to help the situation.
Without significant budget-balancing and cash management actions by the Legislature or unprecedented borrowing from the short-term credit markets, the state will not be able to pay many of its bills on time for much of 2009-10.
- $23 billion: Amount in loans from private investors needed in the fiscal year beginning July 1 if voters reject the May 19 ballot measures and the Legislature does not act;
- $17 billion: Amount in loans from private investors needed if voters approve the ballot measures
- $14 billion: Budget shortfall if voters reject Propositions 1C, 1D and 1E (i.e. the measures bring in $6 billion to budget).
- $8 billion: Budget shortfall if voters approve Props. 1C, 1D and 1E
And here are highlights from the Official Voter Information Guide distributed by the Secretary of State followed by my commentary, labeled [DFB]. Highlights are mine.
- “Possible greater state spending on repaying budgetary borrowing and debt, infrastructure projects, and temporary tax relief. In some cases, this would mean less money available for ongoing spending.”
- [DFB] In other words, we will borrow money now but we will be required to pay more for debt servicing and paying interest on that debt in future budgets. Moreover, we will need to cut spending in future years to pay for our budget woes now. Where will that money come from?
Proposition 1B: Fiscal Impact:
- “Potential state savings of up to several billion dollars in 2009â??10 and 2010â??11.””Potential state costs of billions of dollars annually thereafter. “
- [DFB] There are no estimates attached to this future cost. The voter guide says “it is difficult to know how this measure would change the state’s finances.” Voter Guide, page 21.
- “Impact on 2009â??10 State Budget: Allows $5 billion of borrowing from future lottery profits to help balance the 2009â??10 state budget.”
- “Impact on Future State Budgets: Debt-service payments on the lottery borrowing and higher payments to education would likely make it more difficult to balance future state budgets. This impact would be lessened by potentially higher lottery profits. Additional lottery borrowing would be allowed. “
- [DFB] Get this part: “would likely make it more difficult to balance future state budgets”? Yes, the authors of this measure are trying to address a difficult to pass budget by hamstringing future legislators by making it difficult to balance/pass future budgets. Isn’t that how we got into this mess? It infuriates me to no end to see this level of misfeasance. [bleeped out so I do not make a statement against my penal interests – sorry, I had a Criminal Procedure exam earlier this evening ;)]
- “Redirects existing tobacco tax money to protect health and human services for children, including services for at-risk families, services for children with disabilities, and services for foster children. “
- [DFB]: This is an example of moving money from one pot to another. It is temporary and lasts five years. What happens in five years? This whole mess begins anew.
- “Amends Mental Health Services Act (Proposition 63 of 2004) to transfer funds, for a two-year period, from mental health programs under that act to pay for mental health services for children and young adults provided through the Early and Periodic Screening, Diagnosis, and Treatment Program.”
- “The proposed temporary redirection in Proposition 63 funding would make less money available for mental health programs. To the extent that such programs are reduced, state and local governments could incur added costs for homeless shelters, social services programs, medical care, law enforcement, and county jail and state prison operations. The extent of these potential costs is unknown and would depend upon the specific programmatic changes that resulted from the redirection of Proposition 63 funding.”
- [DFB] This is another temporary measure lasting two years that moves money from one pot to another. As the analysis shows, there is a big budget gap that will be left for cities and counties to make up, perhaps from thin air.
- “Encourages balanced state budgets by preventing elected Members of the Legislature and statewide constitutional officers, including the Governor, from receiving pay raises in years when the state is running a deficit.”
- “Minor state savings related to elected state officialsâ?? salaries in some cases when the state is expected to end the year with a budget deficit.”
- [DFB] This is like being bitten by a minnow. A Delta smelt, perhaps? It lacks teeth big enough to pierce the skin. Worse, it will have a negligible effect on the budget. I’d rather see a sliding scale that forces the legislature to deliver a structurally balanced budget by July 1. Every week after would see a 10% reduction in pay for that period. If a legislator was paid $100,000 per year they would be paid based on $90,000/year the following week and $81,000/year the following week. At week 29, they would be paid based on $5,233/year salary. See the chart below. Now that ought to get their attention in contrast to the slap with the pinkie finger the legislature has given itself.
Of course I only cherry picked the items that caught my eye or that I should call attention to. Read the propositions yourself.
To be fair, voters are part of the problem. We have tied the hands of the legislature with proposition after proposition to support our pet projects, idealogical views, and pocket books. What we have collectively done is force legislators to do the equivalent of cloud seeding. Fortunately, we’ve had a prosperous enough time where money came easily in coincidental alignment with those revenue seeding experiments. Now, the magic is gone and we need to fess up to reality. Money does not grow on trees or fall from the sky. Debt is not cheap. And California’s budget is a briar patch that needs to be dethorned.
There should be no “third rail” to this debate. That overused political colloquism should go out the window in this conversation. There is nothing that should be held too sacred in conversations about how to fix – how to truly fix – the state budget. Prop 13, Prop 98, Prop XX, all need to be considered without reservations. It may take a vote of the people to undo some of the mess we created but at least put something valuable and constructive for us to debate and vote on instead of something from a sewage plant, spit-shined and treated like Cinderella’s glass slipper. At the end of the day, the conversation must be about the balance sheet: revenue versus expenditures; and how to make each more stable and controlled.
I personally do not mind paying taxes. After all, I prefer not to live in anarchy, like to drink clean water, drive the roads, ride the rail, etc. All those are paid by my tax dollars. That doesn’t mean don’t care where those tax dollars go. One place I do care about is how much we pay for interest payments and loan servicing. In Sacramento, they call it Debt-Servicing.
As of November 2008, debt-servicing is expected to cost us about $6 billion this fiscal year, or about 5.8% of the state’s revenues. Since the early 1990’s debt-servicing generally cost between 3 and 5% of revenues. It is now expected to reach 9% or more in the next 5 years. And since the last set of projections made in November 2008, the special election was set and we are now urged to increase that debt service ratio further. Proposition 1C will cost us $350 to $450 million more each year for debt-servicing. The governor and Department of Water Resources are also drumming up support for $20 billion in upgrades to our water infrastructure (Peripheral Canal, part II). That would potentially cost $1.3 billion per year more in debt servicing. Those are not figured into the numbers, either.
More costs are expected. Worse yet, CALPERS “has been reporting an expected rate of return of 7.75 percent for the past eight years, and 8 percent before that…. Its annual return during the decade from Dec. 31, 1998, to Dec. 31, 2008, has been 3.32 percent, and last year, when markets tanked, it lost 27 percent.” (via Bloomberg). We’ll need to borrow to bail it out as well since the pension fund is guaranteed by the state treasury.
viaÂ California’s Fiscal Outlook: LAO Projections 2008-09 Through 2013-14 (issued Nov. 2008)
“The Spending Forecast. General Fund spending for debt service on bonds used to fund infrastructure is estimated to be $4.3 billion in 2007â??08, $5 billion in 2008â??09, and $5.9 billion in 2009â??10. In total, debt service is projected to grow at an annual pace of 9.9 percent annually over the forecast period.
Debtâ??Service Ratio (DSR). [T]he ratio of annual General Fund debt-service costs to annual General Fund revenues and transfers [abbreviated DSR] — is often used as one indicator of the stateâ??s debt burden…. We estimate that:
- The DSR for infrastructure bonds will rise to 7.8 percent in 2011â??12 before falling to 7.5 percent by 2013â??14. Thereafter, it will steadily decline as outstanding bonds are paid off.
- If the stateâ??s deficitâ??financing bonds (known as Economic Recovery Bonds) are included in DSR, it would peak at 9.4 percent in 2011â??12. It is anticipated that these bonds will be paid off following our forecast period, at which time the DSR will drop down to reflect only infrastructure bonds.
As noted in the figure, the DSR we are projecting is considerably higher than in past years. In part, this reflects the sharp fallâ??off in General Fund revenues we are projecting, which has the effect of driving the ratio up for a given level of debt service. It also is important to note that to the extent additional bonds are authorized and sold in future years beyond those already approved, the stateâ??s debtâ??service costs and DSR would be higher than projected above. For example, each additional $1 billion of bonds authorized would add roughly $65 million annually to debtâ??service costs once they are sold.”
Debt is not evil. It is not the work of the devil or some other unearthly creature.
Debt is a useful tool to people and governments to build infrastructure that costs a lot of money up front but lasts for many years and, more importantly, provide the tools necessary to build an economy. Using it to pay down past debts and for operating costs is a misallocation of resources. It puts a the state into a precarious perch and positioned for a spiral downward that is hard to recover from. We should all be mindful that, instead of paying for necessities such as teachers, police, and repaving, we will end up cutting services to pay for the extra debt payments. I think returning to the historical norm should be the goal and will allow us to build and restore infrastructure without putting on too much debt servicing burden.
I think the Catholic bishops are wrong to complain about Notre Dame University inviting President Obama to speak at its commencement ceremonies and honoring him for his achievements. Unlike a church, a university is intended to be an open environment that is tolerant of many different viewpoints. Notre Dame and the dozens of other Catholic universities in the U.S. have built well earned reputations as just such open environments.
Refusing to invite a diverse set of speakers based on a singular issue is clueless, as one bishop characterized Notre Dame’s decision. Do the bishops intend to expel all faculty, students, and staff who disagree with their position on abortion? Will they insist Notre Dame hold back degrees of students who voted for Obama, have had an abortion, supported a friend who had an abortion, or are supportive of a woman’s right to choose? Until they are ready to do either or both, then the bishops should let Catholic universities remain open academic environments, confer honorary degrees based on objective standards, and invite any speakers chosen by the school. God forbid the bishops should take any affirmative steps toward either action because we might just see an outright revolt by university trustees in addition to students choosing other universities. I, for one, would then not qualify to earn a law degree from Santa Clara Law School as I hold similar views to Mr. Obama with regard to a woman’s right to choose and stem cell research.
Need I even go so far as to point out that the bishops are not speaking from a very good spiritual position and the church is already struggling for relevance. This is, after all, the same set of bishops who played active roles in the still-fresh sexual abuse scandals.
AP, Y! News: Notre Dame’s Obama invite riles Catholic bishops.
This coming week, Bishop Thomas Wenski of the Roman Catholic Diocese of Orlando, Fla., will take the unusual step of celebrating a Mass of Reparation, to make amends for sins against God.
The motivation: to provide an outlet for Catholics upset with what Wenski calls the University of Notre Dame’s “clueless” decision to invite President Barack Obama to speak at its commencement and receive an honorary doctorate May 17.
The nation’s flagship Catholic university’s honoring of a politician whose abortion rights record clashes with a fundamental church teaching has triggered a reaction among the nation’s Catholic bishops that is remarkable in scope and tone, church observers say.
At least 55 bishops have publicly denounced or questioned Notre Dame in recent weeks, employing an arsenal of terms ranging from “travesty” and “debacle” to “extreme embarrassment.”
The bishops’ response is part of a decades-long march to make abortion the paramount issue for their activism, a marker of the kind of bishops Rome has sent to the U.S. and the latest front in a struggle over Catholic identity that has exposed rifts between hierarchy and flock.
Bishops who have spoken out so far account for 20 percent of the roughly 265 active U.S. bishops â?? a minority, but more than double the number who suggested five years ago that then-Democratic presidential hopeful and Catholic John Kerry should either be refused Communion or refrain from it because of his abortion stance.