The Swarm

Actually, it is really dog bites man, because California has always repaid its bonds. But it still might be shocking to anyone who is casually following the state's finances. Anyway, it was surprising enough that Tom Dresslar from the Treasury's office felt compelled to publicize it in a short news release:

Today the State paid investors on time and in full $3.94 billion in principal and interest on RANs (Revenue Anticipation Notes) we sold in October 2008.

 

I find it beyond strange that the fight over the next budget fix is coming down to a battle over a rainy day reserve. The reserve in question does not even exist, and probably never will. The state is billions in the red. The "reserve" really was just Schwarzenegger's way of saying here are the cuts needed to balance the budget using my revenue projections, and here are the cuts needed using the LAO's projection, which says we will have about $3 billion less to spend. The Democrats are raising hell about that extra $3 billion. But in doing so, are they saying that the rest of the governor's budget is not offensive to them? In other words, they can resolve a $21 billion shortfall without raising taxes, but not a $24 billion shortfall? That's hard to believe. In any case, it seems as if the governor has pulled a fast one on them if they are willing to declare victory after killing a reserve that never really existed.

Wow. May is not a big month for tax collections, but still, income and corporate tax receipts down about 25 percent from the levels projected in the May Revision, just a few weeks before. That can't be a good sign. Sales tax, meanwhile, was down a relatively tiny 3 percent. Controller John Chiang reports on the cash situation here. He says the state is down to 50 days on the checking account before he has to start triaging the bills again.

Wow. May is not a big month for tax collections, but still, income and corporate tax receipts down about 25 percent from the levels projected in the May Revision, just a few weeks before. That can't be a good sign. Sales tax, meanwhile, was down a relatively tiny 3 percent. Controller John Chiang reports on the cash situation here. He says the state is down to 50 days on the checking account before he has to start triaging the bills again.

Wow. May is not a big month for tax collections, but still, income and corporate tax receipts down about 25 percent from the levels projected in the May Revision, just a few weeks before. That can't be a good sign. Sales tax, meanwhile, was down a relatively tiny 3 percent. Controller John Chiang reports on the cash situation here. He says the state is down to 50 days on the checking account before he has to start triaging the bills again.

For the first time in Gov. Arnold Schwarzenegger's numerous visits to The Bee's editorial board, I noticed that his security entourage - and it's a big one - includes a dog.

Taz, a German Shepherd, Belgian Malinois mix was posted outside the 3rd floor editorial board room.

To guard against what, exactly? Not drugs, it turns out.

The CHP handler teamed with the dog told me the dog was a bomb sniffing dog. Taz did a very good job. There were no blow ups, metaphorical or otherwise, during the editorial board's first ever live webcast meeting with the governor.

 

Join us live Friday as the Sacramento Bee editorial board questions Gov. Arnold Schwarzenegger. Watch the discussion, and participate by sending your questions. It starts at 11 a.m. Friday at www.sacbee.com/live. Or, e-mail your questions for the governor in advance to topics@sacbee.com.

I want to challenge a bit of conventional wisdom about the state's once and future habit of "borrowing" from local government or from special funds, such as those set aside for transportation.

I don't think we should call this kind of policy choice borrowing, or even think of it that way.

The state and all of its cities and counties are governed, utlimately, by the same people: us. I live in the city of Sacramento. I also live in the county, and in the state of California. I pay taxes that are collected and then disbursed to each of these entities.

If the state "borrows" $10 million from the city of Sacramento for three years, what is really happening is that state legislators are making a policy choice. They are saying, in this time of crisis, that the tax money that used to be going to the city would be better spent going for health care or prisons or education. The city council might not like this. I might not like it. But it is not as if the state is some alien creature or foreign government. It is us. And the money is ours.

In the case of the transportation fund, the misapplication of the concept of borrowing is even clearer. The transportation budget is part of state government. So in that case, the Legislature is simply saying that, in this time of crisis, they think one part of state government is more important than the other. Yes, the voters passed a measure walling off a piece of the tax collections for transportation. Then they passed another saying the Legislature could shift that money in a crisis but would have to "pay it back" within three years. So if the Legislature does this, it is really saying we think education, or whatever, is more important today than building more roads, but we think (or  hope) that in three years we'll have enough money to pay for schools and more roads, including the roads we didn't build this year.

Think of your own family. Suppose you set up a college fund for junior and started contributing 5 percent of your salary to it every year, with every intention of doing so for 18 years. Then, after 5 years, your salary was cut 10 percent. You no longer have enough money to pay your mortgage, buy your food and set money aside for college. Do you starve, move, or stop paying into the college fund? And if you stop paying into the college fund, are you being irresponsible, and are you "borrowing" from your children. I think not, on both counts.

We are so used to binding the Legislature up in fiscal knots that we have forgotten what the Legislature is actually trying to do: govern the state, set priorities, manage our tax dollars. I've been as critical of them as anyone, but maybe we ought to give them the tools to actually do their jobs before we start screaming about what a lousy job they do.

 

 

 

 

 

 

 

 

 

 

 

It's not just Republican governors who butt heads with the SEIU, the big public employee union. Down in San Francisco, Mayor Gavin Newsom just got handed a big setback when the union rank and file rejected an agreement he negotiated with union leaders to save $90 million in next year's budget. Now the mayor is poised to order layoffs and perhaps declare a state of emergency so he can unilaterally cut their pay. And he is refusing to support a proposed ballot measure to raise taxes in November. Even San Franciscans, he says, won't support a tax increase to pay for other peoples' raises. Interesting times. Here is an account of the latest development in the Chronicle. 

This 10-minute Reason.tv documentary deconstructs the history of Schwarzenegger's transformation from tax cutter to tax-raiser. It's actually surprisingly sympathetic to him, portraying the governornater more as a victim of the powerful public employee unions than a sell-out. Former legislator, now Congressman Tom McClintock plays a starring role.