Worrying about California's budget crisis, I've been humming REM's "It's the end of the world as we know it (and I feel fine)." As a golden state native, I always imagined the end would arrive with a massive earthquake plunging everything west of the Sierras into the sea. Now I realize that California is dying the death of a thousand cuts.
The California legislature and Governor Arnold Schwarzenegger can't agree on a plan to fix our massive budget deficit, projected at over $40 billion. As a result, $5 billion in infrastructure projects have already been halted. At the end of February, the state won't be able to pay its bills and will start issuing IOU's.
California's problems began in 1978 when anti-tax zealots passed "proposition 13." This froze property taxes at one percent of assessed value and required a two-thirds legislative majority to raise state taxes and pass a budget. (California is one of only three states to require a two-thirds super majority to pass a budget.) While California has increasingly become a blue state, there are not enough Democrats in the legislature to provide a two-thirds majority: the Senate has 25 Democrats and 15 Republicans and the Assembly has 51 Democrats and 29 Republicans.
California's legislative districts are gerrymandered to the extent that most Democrats and Republicans are in safe seats. Thus, even though Democrat Barack Obama won California by over 3 million votes (61 percent of the vote), there are still enough GOP enclaves that changing the composition of the legislature is very difficult. In addition, The Republican legislators are rabidly ideological; they've taken a pledge not to raise taxes, signed on to the agenda of "Americans for Tax Reform," a conservative Washington advocacy group. While Democrats attempt to negotiate, Republicans refuse; their only proposal is to reduce the size of government, regardless of who gets hurt.
Theoretically, Republican Governor Schwarzenegger could break the California budget impasse. He recognizes the budget cannot be balanced without new sources of revenue from tax or license increases. Unfortunately, Schwarzenegger is not a leader. He has been ineffective dealing with Republican legislators, many of whom see him as a turncoat. Assembly and Senate Democrats have been frustrated by the Governor's erratic negotiating style agreeing to something one day and then backing off the next. (Schwarzenegger is so unpopular that he would not win reelection in 2010, but he can't run again because of term limits.)
Given these factors, it is unlikely that there will be a budget agreement anytime soon. The impact will vary across the state. The most visible consequences will be in public education (40 percent of the budget) where many employees will be paid with IOU's and others will be laid off. The absence of state funds means that many operational expenses, such as utilities, will not be paid. Well-to-do cities, such as Berkeley, will tap local resources to keep schools functioning, but in poor municipalities, such as Richmond, there will be dire consequences.
28 percent of the state budget provides assistance to needy families and individuals. The stalemate means that cash-assistance to low-income families will be suspended, as will supplementary income checks to the elderly, blind, or disabled. Again, well-to-do cities may draw upon local resources to help the needy, but poor communities won't have this option.
9 percent of the California budget goes to the category of "Business, Transportation, and Housing." Having no budget means that state-funded construction will cease, as well as routine maintenance on highways, bridges, and public facilities. Operation of the Department of Motor Vehicles will be curtailed and the Highway Patrol might also be affected. (The state courts will determine which public employees can be paid with IOUs.)
7 percent of the budget goes to "Corrections and Rehabilitation:" the majority to service the nation's largest prison complex. 5 percent of the California budget goes to "Legislative, Judicial, and Executive." After February, judges, legislators, and the Governor might be paid with IOU's, as could be correctional officers.
Democrats are preparing a ballot initiative changing the state constitution to allow a budget to pass by a simple majority. Unfortunately, this measure won't reach voters until the primary election held June 8, 2010. By then there will be sufficient outrage that the constitutional change is likely to pass.
In the meantime the economic situation in California will be grim. It's likely that intransigent Republican legislators won't back down until the situation hits rock bottom: there's a huge increase in the homeless, some schools close, and convicts are released from prisons because of the lack of funds to care for them. In the meantime, the California unemployment rate (currently 8.4 percent) will double. Incalculable damage will be done to California's infrastructure and the impact of the recession will be accentuated throughout the state.
It's likely the golden state will never fully recover. A tyrannical minority has caused the end of California as we know it.