Monday, December 01, 2008


Dick Spotswood |Marin Independent Journal Staff Report

November 30 -- DUE TO THE LOOMING FINANCIAL DEPRESSION and decades of fiscal irresponsibly, California's state government is effectively bankrupt. The great danger is that a cascade effect will soon drag down not just the state, but some cities and counties.

It's now evident that our moderate Republican governor, Arnold Schwarzenegger, is unable to pull the state out of the mess. It isn't so much his unwillingness to act, as an organizational and political landscape where leadership it is almost impossible.

The governor's weakness is matched by Karen Bass, the inexperienced new Democratic Assembly speaker, and Republican minority leaders at war with the governor and incapable of saying anything but "no" to every suggestion.

The only hopeful sight is incoming Senate President pro-tem Daryl Steinberg.

With a first-class intellect and a reputation as scrupulously honest, Steinberg is a standout in the Capitol wasteland. Lacking statewide ambitions, the Sacramento Democrat is one of the few key legislative players who sees the big picture and has his ego in check.

The question is whether the new Pro Tem has the political guts to level with Democratic-leaning interest groups, including the education establishment and public employees unions, to accept the fiscal reality that preserving existing public employment requires even more budget cuts.

Understand that the federal government has more alternatives at its disposal than does any state or municipality. It can borrow almost without limits and operate in a deficit mode during the near term. States, cities and counties, by their nature, need to operate with a balanced budget. When the money runs out, they literally shut down.

California faces a two-year $28 billion gap between revenue and expenses. A pessimistic state Sen.-elect Mark Leno reports that prospects are so bleak that California will soon sport the lowest credit rating of any state. That means an inability to sell bonds to finance recently approved infrastructure improvements essential to get California's economy back on track.

Raising taxes while simultaneously making Draconian cuts in services is inevitable. If the state doesn't do both soon, it will be broke by early spring. That will cause the next domino to fall.

Local governments, including Marin and its 11 municipalities, will lose state money essential in making their budgets balanced.

Thanks to hyper-partisan politics coupled with a bad law, California finds itself at an impasse.

This dysfunction is due to a legislature divided by colliding imperatives. Its majority consists of progressive Democrats beholden to public employees unions and governmental service recipients. The Demos have at least surfaced a proposal to cut services and raise taxes on a formula of $1 in cuts for $1 in new taxes. It's not enough, but it's a decent start.

The truth is that getting the state back in the black requires a "$2 of cuts for every $1 in new taxes" formula.

This political divide is magnified by a law "enjoyed" by only two other states. To pass a budget, two-thirds approval of both the state Senate and Assembly is mandated. Since neither party has the needed super-majority, gridlock inevitably results.

Crushing their credibility, Republican legislators refuse to propose an alternative budget outlining precisely where they would make the $28 billion in cuts they blithely advocate.

The way out of this maze requires at least one final concession by Democrats: Freeze state and local public employee compensation. Democrats like Steinberg can push such a hard choice only if Republicans reciprocate and acknowledge that targeted tax increases are a necessary price to pay for state solvency.

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