Governor Jerry Brown announced this week that the deficit has ballooned to a monstrous $16 billion dollars, an amount equal to 17 percent of the state’s entire general fund.
So, California’s self-perpetuating job killing machine continues:
The state continues to have a stagnant economy due to the financial crisis of 2008 and hideous economic climate created by ridiculous amounts of government red tape. Accordingly, businesses flee the state or can’t add new jobs. Revenues drop. However, California’s budgets are predicated on budget gimmicks like wildly optimistic “revenue projections” that never materialize because the economy is so bad. Shockingly, when these revenue projections turn out to be woefully inaccurate – we are short $2 billion in tax revenues – cuts to services become inevitable.
Governor Brown’s real concern? That if his $8.5 billion dollar tax hike doesn’t pass the cuts will be worse.
This delusional bit of logic underscores Sacramento’s credibility deficit as well revenue deficit. California’s revenue forecasts are a pure fiction given the state’s economic climate. So how can voters trust that the massive tax hike on the “rich” will be “temporary” and that it will satisfy Sacramento’s insatiable thirst for a revenue stream of other people’s money to spend, spend, spend? They can’t.
When the state relies on personal income tax on the highest 1% of earners, it makes the budgetary process a wild rollercoaster ride with little stability or predictability. The latest tax hike will make California even more dependent on this fickle revenue stream, not to mention that it is another nail in the coffin of economic recovery.
While I am adamantly opposed to another enormous tax hike, I continue to advocate that the voters be offered a sane range of choices come November. In addition to Governor Brown’s tax hike, 2 crucial reforms should be allowed on the ballot for voters to consider.
The two biggest threats to a real California economic recovery are the looming $500 billion pension costs faced by the state, counties and municipalities and the continuous out-of-control spending by politicians in Sacramento. Governor Brown and Republican’s pension reform measure should be placed on the ballot as well as a “hard” spending cap – literally spending cannot outpace revenue. It remains to be seen if a single Democrat will support the pension reform proposal or give it a proper hearing in Sacramento. The spending cap proposal also faces a very hostile Legislature that doesn’t want any impediment to unrestrained spending.
Let the voters decide. They can make an informed choice only if they have a complete range of choices before them. These decisions are crucial to California’s future economy.