Conservatives are all abuzz with the righteous anger of the rich. Surely the will flee the state if taxes are increased, or so goes the logic of people like former LA Mayor Richard Riordan:
The rich (and I am one of them) already have their mansions, airplanes and yachts. There is nothing morally or ethically wrong with increasing their taxes. But if the burden becomes too great, the rich will simply take their money (and the taxes they pay and the jobs they create) and move elsewhere. And it is the poor who will be hurt by such an exodus.(LA Times 3/29/09)
Leaving aside the fact that there isn't really any evidence that increased taxes really causes people to flee, Riordan's anecdotal and unsupported references to 1950s Britain aside, the argument really doesn't hold the water that conservatives want it to hold. The rich can cut back on expensive vacations and other luxury costs, but it isn't so easy for the poor to cut costs. You can only cut your food budget so low if you want to provide adequate nutrition for your family.
And today, the Times provided an interesting perspective on the story:
A few days later, [the homeless couple] were on a bus headed to Denver, where a relative had agreed to take them in. To their surprise, a local nonprofit group had agreed to pay for their one-way ticket out of town.
Since January, the Grace Resource Center has offered to cover transportation expenses for homeless people to return to their home states or wherever they have families or other means of support. So far the group has spent about $2,500 to help more than a dozen people leave Lancaster through the Opportunity Bus Pass Program. (LA Times 3/30/09)
Whether California is losing population is still up in the air, but California is not the same place that the Okies came to settle during the Depression. If anything, we are the New Oklahoma. We're running out of water and once fertile land is no longer viable. There are no jobs, and cities are now just raising the white flag in hopes that people will just move along.
I don't fault the Center that is doing the Bus program, it isn't an unreasonable idea to reunite people with their support systems. Despite the mayor's quotes about trying to pawn off the homeless in other areas, this is a time when people are forced to cede some independence in the name of thrift. That means making sacrifices that we aren't used to making.
But what happens when our economy rebounds? How do we build the economy of tomorrow if everybody's heading for the exits?
A couple quick updates to stories we've been following:
• The State Senate today approved two bills relating to unemployment insurance on a near-unanimous vote. The bill (AB 23x3) to extend benefits for an additional 20 weeks using federal stimulus money passed 38-0, and the bill (AB 29x3) changing eligibility requirements to allow seasonal workers to benefit from unemployment benefits, also with federal money, passed 37-1. The latter bill needs to go to the Assembly for concurrence; the former will go right to the Governor. Sen. Gil Cedillo remarked in his release:
"Our immediate action on this issue was necessary to help almost half a million unemployed Californians stay afloat. These bills put to use the estimated $3 billion dollars in federal stimulus monies made available by the American Recovery and Reinvestment Act (ARRA)," remarked Cedillo. "We have a tremendous opportunity to turn our economy around and put federal dollars to work for California. The bipartisan leadership today highlights what we are able to accomplish when we focus on results," Cedillo added.
At least 76,000 people whose benefits would run out on April 11 would see immediate relief. It appears the Governor, after hedging, will sign both bills, but we shall see.
• As early as tomorrow, says Marty Omoto, we may have a decision from the Finance Director Mike Genest and Treasurer Bill Lockyer on whether the state will receive enough stimulus funding to "pull the trigger" that would reduce some of the worst cuts in February's budget, and eliminate some of the tax increases.
The determination by the State Treasurer and Department of Finance Director is crucial on whether major permanent cuts happen or not to several critical programs that serve hundreds of thousands of people with disabilities, mental health needs, the blind, seniors and low income families. While there has been no official word on what the State Treasurer or the Finance Director will report, most observers feel that the likely news will not be good.
If you want the details on the cuts at risk, read Marty's post. Given the fact that the Legislative Analyst already foresees an $8 billion dollar hole in the budget, and that the special election poll numbers are tanking, which would add another $5-$6 billion hole, I would expect the bad news as well. Because of the murkiness of what money counts toward the General Fund and what doesn't, there's a fair bit of room for politicking in there.
For several months, I have noticed a lack of context from the press when discussing California's housing situation. Sales of new and existing homes were rising, yes, but for a very good reason - all the bargains created by a spate of foreclosures. In fact, the correlation matches up perfectly - the regions with the highest sales also have the lowest prices. An example is the High Desert region, with a 203.1% increase in sales year-over-year, but a median price of $121,970, the lowest in the state. The latest data on home sales shows a 41% decline in price year-over-year. Bloomberg's story reinforces the theory that only foreclosures are selling. Does this mean that property values have decreased by a concurrent amount? Not necessarily. But it does mean that a non-foreclosed home in this distressed market has virtually no chance of selling, making it impossible to find the bottom of the market. The price of foreclosures does affect the price of all homes, which is why stopping foreclosures is so important.
California unemployment will peak at just over 12 percent late this year, setting a modern record, according to the latest forecast from the University of the Pacific.
Recovery will come slowly. Unemployment won't sink back into single digits until late 2011, or some two years after the recession is expected to officially end, according to a forecast released Tuesday by UOP.
There's typically a considerable lag between the beginning of an economic recovery and a drop in the unemployment rate, as companies are slow to re-hire even after business perks up.
We're talking about two more years, at least, of significantly reduced revenue collection rates. All the homes selling for pennies reduce the overall property tax revenue. No projection of future revenues can reasonably be believed in this environment. And so we'll continue to see yawning gaps, with a governmental structure woefully equipped to deal with them. The so-called "reform" of Prop. 1A, to hoard revenue in positive economic years to use in down years, will be inoperative for the foreseeable future, and even when the economy retains balance, the revenue forecasts for any spending cap will be increasingly based on these horrible years, leading to a disaster without end.
In years when revenues fall short, the state could use the reserve to cover spending up to the prior year's level, plus an adjustment for growth in population and the Consumer Price Index.
But increases in the state's senior population and health care costs have been outpacing both those measures, said Jean Ross, executive director of the California Budget Project, a nonprofit organization that focuses on the effect of budget policies on low-and middle-income Californians.
Moreover, Ross noted that under Proposition 58, the 2004 ballot measure, the state will continue to send 3 percent of revenues to the reserve, which would be subject to the tighter controls of Proposition 1A.
"It takes 3 percent off the top of the budget, and we don't have that," Ross said.
Ross and Michael Cohen, a deputy legislative analyst who studied the measure in depth, both said Proposition 1A could force revenue into the reserve even in years in which the state faced deficits.
My guess is that this is why the AFSCME local 2620 voted to support the measure and others on the ballot, while the overall union called for rejection. The lure of easy money might sound nice for the locals, but unions with experience with spending caps in other states know that they accompany disaster.
Simply put, the state's in an enormous amount of trouble and has no structures to deal with it. This argues strongly for blowing up the boxes, for real this time, and starting over, by repealing the rules that subject the budget to tyranny and building a new vehicle for reform.
(Assembly Bill 23xxx, the employment benefits extension bill, passed the Assembly. I added the Speaker's video discussing it. - promoted by Brian Leubitz)
There are two bills likely to come up for vote this week that would allow California to receive billions in stimulus funding, both of which have been subject to Yacht Party obstruction thus far of the Mark Sanford, Sarah Palin variety.
First up is the unemployment benefits extension bill which Republicans rejected last week. There are actually two separate measures, one which would extend benefits and one which would increase the pool of people eligible for those benefits, but the extension is the one that will be voted on as soon as today. Kudos to the SacBee for noting that the Governor has taken no position on these bills, despite the bromance rhetoric about the President and the stimulus.
The Assembly is expected to vote this week, probably today, on a bill that would pave the way for California to extend its lifeline for out-of-work residents by five months at federal expense.
The measure would ensure an extra $2.5 billion to $3 billion in federal funds for emergency benefits at a time when California is mired in recession, with an unemployment rate above 10 percent.
Passage would mean $6,140 in additional benefits for an out-of-work person receiving the state's average benefit of $307 per week. Benefits range from $65 to $475, based on previous income earned [...]
Gov. Arnold Schwarzenegger supports both concepts but has not taken a position on specific legislation, aides said.
Schwarzenegger has "no position" because the Chamber of Commerce doesn't like anything that could lead to higher corporate taxes, and they hold the puppet strings on our last action hero. The vote on this has yet to be recorded in the Assembly, so we shall see what the Yacht Party decides.
The second bill, currently in the State Senate, concerns Medi-Cal eligibility requirements that would open up even more federal funding.
Although California is slated to receive more than $31 billion in federal money, a change in eligibility rules for Medi-Cal made as part of this year's budget prevents California from qualifying for more than 25 percent of those federal funds.
In order to do so, the state must have the same Medi-Cal eligibility rules today as those in place July 1, 2008.
The problem was caused by an attempt to save $70 million by changing eligibility rules for children receiving care from Medi-Cal was contained in the 85-day record late budget signed by Gov. Arnold Schwarzenegger last September.
Under the change, children must fill out a report every six months confirming their continuing eligibility along with their parents who were already required to fill out such a report prior to the change in law.
Critics of the requirement say that most of the children who lose eligibility do so because they forget to turn in the paperwork, not because they actually lose eligibility. Sorting out such issues increases Medi-Cal costs to counties, who administer the program locally.
To get the federal money, the state must change the law before July 1, 2009 so that kids don't need to fill out the report. The bill would do that.
Let's be entirely clear - the Administration was banking on oversights from poor families who qualify for Medi-Cal to save the state money. That's borderline immoral and it ought to be addressed. Elaine Alquist is carrying the bill in the Senate, and on this one, Schwarzenegger has seen the error of his ways and promises to sign it. Will the Yacht Party follow suit, or prefer budgeting by forcing bureaucratic red tape on the poor?
Last week I took a look at the growing Bushville on the American River in Sacramento, which has been garnering national attention as a powerful symbol for these troubled economic times. It was clear at that time that the city government led by Mayor Kevin Johnson needed to do something to ameliorate the situation. The decision has been made.
Sacramento Mayor Kevin Johnson promised to first make alternative shelter space available for the estimated 150 men and women who inhabit the squalid encampment near the American River, at the edge of the city's downtown.
Johnson, who toured the area with California Governor Arnold Schwarzenegger a day earlier, said he hoped to have the ramshackle settlement cleared of tents and debris in the next two to three weeks.
"We want to move as quickly as we can," he told a news conference, insisting the city was determined to treat the tent dwellers with compassion.
"They are people out there. We have to do whatever we can do," he said. "We as a city are not going to shy away from it. We're going to tackle it head-on."
Advocates for the homeless applauded the mayor's action. Municipal authorities in Sacramento have been debating the fate of the tent city for weeks.
150 seems like a very low number, when news outlets have reported as many as 1,200 homeless staying in the encampment. Of course, that could simply be a matter of media overhype (local shelter organizers apparently fed this as well). However, even if the numbers are correct, finding shelter space for 150 deals with those made homeless as of today. With unemployment skyrocketing, there will be more left homeless tomorrow. And next week. And next month. While most in the encampment did not fit the profile of the "recession homeless" (a closer look reveals that the tent city grew out of multiple closures of other shelters, which is probably because of the recession anyway, so we can go around and around on this), such a group does exist and will need help over the next year as the state struggles. The fact that so many homes lie vacant and are owned by Fannie Mae and Freddie Mac, i.e. the US taxpayer, suggests there are solutions to this problem beyond the short term if creative solutions are made.
California's unemployment rate now stands at 10.5%, the highest since the Reagan-Volcker recession of 1982-83, which itself was the highest since the 1930s.
Of course, this rate is based on the federal U-3 rate, which many observers consider to be a not exactly accurate picture, since it excludes involuntary part-time workers and those who have given up actively seeking work. One analyst argues that if you try and reckon the CA numbers based on the broader U-6 measure (which does include those kind of workers) California's true unemployment rate is nearly 20%.
In some counties even under the current EDD reckoning unemployment is already above 20%, in mostly agricultural counties where unemployment is at Steinbeckian levels - 26.6% in Colusa, 24.5% in Imperial, 16.2% here in Monterey.
And yet the Yacht Party continues to argue that we don't need the federal unemployment stimulus, and Obama's new BFF Arnold Schwarzenegger is content to soak up the media adulation for not acting like Mark Sanford despite not having actually provided leadership to break GOP opposition in the Legislature and sending mixed signals from his own staffers.
The recent stock market rally dead cat bounce has led some to believe that the worst may be behind us. But as 26,000 teachers get ready to be officially fired and as unemployment benefits remain too little for too brief a period, it seems clear that the abyss still has no bottom.
"When have you ever seen a president be that out there?"
That was a mesmerized Arnold Schwarzenegger after Obama's town hall meeting.
"I've never seen that," Schwarzenegger said to a couple reporters as he and his wife, Maria Shriver, tried to make an exit. "Usually people are so guarded. The aides are always so guarded. They're so afraid that you will blow it or that you will make news that's unintended and all those things."
Schwarzenegger continued to gush about Obama.
"But I think he's so smart," he said. "He's so clear with his thinking and he's so well informed and has been dealing with policy in all this and is also very philosophic it's almost like. I think he's just like - I think it's beautiful."
Given his record, I can see why Arnold would be so enchanted by a politician who actually knows the issues he talks about.
He accompanied the President back to Washington today for talks on infrastructure. Maybe someone in the White House will ask him why his staff is leaning toward rejecting stimulus money for extended unemployment benefits, and why he has given no public position.
I read where Assembly Goopers by one vote blocked the extension of Unemployment Insurance (UI) benefits, which would be paid for entirely by federal stimulus money. The extension would have added 20 weeks for the very long-term unemployed, increasing the possible benefit period from 59 weeks to 79 weeks.
Recall that UI benefits are some of the most stimulative of all programs, returning almost $2 in impact for every dollar spent. The Yacht Party membership is all about talking about helping the state, but when funds show up that can help people stay in their homes and keep food on the table, they turn a deaf ear.
Will we get some leadership from Governor Arnold. He famously derided some other Gooper governors for saying they would refuse stimulus funds for UI benefits, but he is SILENT now.
California is among the top two or three states in the number of unemployed. Our unemployment is over 10% and hundreds of thousands more are out of work but simply not included in those figures because they no longer receive UI benefits.
Many of the folks hardest hit by the downturn are those who lost their jobs early in the recession; a year or more ago. They will run out of UI benefits in the next few weeks.
AP reports on it here: http://www.dailynews.com/ci_11...
I first wrote about an Ontario-area Bushville, a tent city of foreclosed Americans, almost a year ago. At that time, it became too big to sustain itself, as people from across the country moved to the tent city to live. The city required that only residents of Ontario be allowed to stay.
A tent city is burgeoning in Sacramento, Calif., prompting local officials to consider whether such an encampment should be made permanent, with plumbing and all.
The primitive settlement sits in the shadow of the state capitol and is home to about 300 people who have no toilets or running water, creating unsanitary conditions that advocacy groups worry could promote diseases like cholera. With the downturn in the economy and more working-class people losing their jobs and their homes, the tent city is expanding [...]
This tent city is in a place of great natural beauty, between two rivers, with birds and open sky and a relatively mild climate. Homeless people have lived there for years, largely unseen, but as more working class people move in, the tents are multiplying and becoming harder to ignore.
The official count of homeless people in Sacramento is 1,226 people, and they are spilling out to the tent city because the housing shelters are full; one of the shelters is turning away more than 200 women and children a day.
Perhaps the most unbelievable part of this is that 10% of rental housing units in Sacramento, and almost 5% of owned units, are VACANT. We have nobody in the houses and people living in the tents by the river. And yet the housing owned by the Sacramento Housing and Redevelopment Agency is maxed out. It's very upside-down.
I agree with Charles Lemos that this is a test of our humanity and values as a people. Fortunately, the generosity of ordinary people is extending beyond the policymakers. Since a story on the tent city appeared on Oprah and the Today show, donations have been pouring in. Portable toilets and a dumpster have been installed.
But that's a temporary solution. While $2.3 million is coming into Sacramento to deal with homelessness through the federal stimulus package, that's not going to be enough if foreclosures continue to rise. In February, the number of homes threatened went up 30% year-over-year and up 6% since January, despite several large banks agreeing to a temporary moratorium. Five of the top seven areas for foreclosures are in California - Stockton, Modesto, Merced, Riverside-San Bernardino and Bakersfield. While the first wave of subprime failures has already occurred, with unemployment still soaring we are starting to see unemployment-based foreclosures as a second wave. So I don't see any letup anytime soon, and Sacramento is going to have to meet this challenge of dealing with the wreckage of the Bush regime.
Recession-related job losses are threatening health coverage for many families. To help workers maintain their health coverage while they are between jobs, the American Recovery and Reinvestment Act (ARRA) provides a 65% reduction in the premiums payable by involuntarily terminated workers and their families for health care continuation coverage under COBRA. This premium reduction will last for up to 9 months. Workers who have been involuntarily terminated during the period from September 1, 2008 through December 31, 2009 and their families are eligible. This premium reduction also applies to health care continuation coverage that may be required by states for insurance policies sponsored by small employers (so called state mini-COBRAs) and public employees. This provision will help 7 million people maintain their health insurance by providing a vital bridge for families when workers have been forced out of their jobs as a result of the recession.
That's California's unemployment rate as of January, a 1.4 percentage point increase (i.e. an enormous leap) over the December numbers, and a big increase over the 6.1% rate as of January 2008.
The Employment Development Department will not release the county-based stats until next week, but based on earlier reports we can assume that the hardest-hit parts of the state are those that happen to be represented by Republicans - the Central Valley, which is suffering from a grapes of wrath kind of economic crisis as well as Sacramento, which is being hit hard by the Republican attack on government. Spending cuts have wide consequences.
This is the bitter harvest of 30 years of flawed policy. Since 1978 California has not only embraced an economy based on debt, but thanks to Prop 13's tax rules and its conservative veto, has forced the state government to rely on that debt.
That has made California more vulnerable to this crisis than almost any other state in the union, aside perhaps from Michigan (which has been in a Depression for a few years now).
Just as President Obama reminded Americans earlier this week that the current crisis was created by Republican policy, we have to remember that because of the conservative veto and a Republican governor, we too are suffering.
Something to keep in mind when Meg Whitman or Steve Poizner come calling, offering cures worse than the disease.
Welcome to furlough day, that time of year twice a month where state workers take a (government-imposed) break, stopping to smell the roses, think about the good times, and just be.
Scores of state offices will be closed today as more than 200,000 workers take their first unpaid day off in response to California's deepening fiscal crisis.
That means Californians won't be able to take a driver's license test or conduct business at some state office buildings [...]
Among the closed offices will be all Department of Motor Vehicles outlets, Fish and Game, Food and Agriculture, Social Services and the Commission on Teacher Credentialing.
The Department of Mental Health will be closed, but mental hospitals will remain open. Workers Compensation offices will be closed.
State parks, which generate revenue from entrance fees, will remain open, as will state courts, the secretary of state's offices, California Highway Patrol offices and campuses of the University of California, Cal State and California Community Colleges. Public safety employees are exempt from the Friday furloughs and can schedule their days off differently.
I particularly enjoy that the Governor's Office of Emergency Services is closed. Good thing no emergencies happen on a Friday! I'd ask Arnold's press secretary about that one, but he's probably not working today.
The other offices that are closed are the Employment Development Department and the Unemployment Insurance Appeals Board. The salaries of those employees are largely paid by the US Department of Labor, and so, while very little or no money will be saved, the jobless will find it harder to collect, which is probably the point.
Over the objections of the federal government, workers handling jobless assistance claims and appeals have been ordered by Gov. Arnold Schwarzenegger to go on furlough -- even though nearly all their salaries are paid by the U.S. Labor Department, and their days off will save the state very little or no money.
In a letter late last month, the department warned that furloughs could worsen the state's current "below standard performance" in meeting criteria for the timely handling of unemployment claims and appeals.
Failure to comply with the department's demands could violate Social Security laws, said the letter's author, Richard C. Trigg, regional administrator in San Francisco of the Labor Department's Employment and Training Administration.
The governor's office said it was unmoved by the federal concerns.
Now that's the spirit of the furlough holiday season!
Somebody should ask Arnold if he's closing the unemployment office so people can't get their benefits. Maybe on Monday. Because, you know, he's a state employee, so he must be off today.
...I would actually be OK with a 4 day, 10 hour work week that would save on energy and transportation costs and increase employee satisfaction as well as recruitment for state jobs. And if employees staggered their time off, government offices could stay open full-time. But this blanket furlough and pay cut is nuts.
During the 1929 crash and subsequent depression, there was no safety net. The unemployed drifted across the American landscape, simply looking to make a poverty wage that would at least allow them to purchase food. They collected in Hoover Towns across the country. But little help came until FDR's New Deal.
Past is not only prologue here, but also rapidly becoming present. It's not enough that Bush's equivalent of Hoover Towns are springing up across the country (and especially SoCal), but our safety net is nowhere to be seen. From the LA Times:
Tens of thousands of jobless Californians, rejected for unemployment benefits of up to $450 a week, are awaiting action by a state appeals board swamped with cases, hindered by delays, mired in bureaucracy and tinged with scandal.
Although the Unemployment Insurance Appeals Board is supposed to decide within 30 days whether the state wrongly denied an individual's jobless benefits, less than 4% of complaints are finished by then, the U.S. Department of Labor says. (LA Times 2/2/09)
Interestingly enough, I was actually doing a bit of research on the subject. On occasion, I receive story ideas for the blog. People email suggesting problems with the state or with political figures. Many amount to nothing. Over the past weeks I've received several emails about the mess at the Employment Development Department.
I am told of a dysfunctional system that harshly punishes clerical errors on the part of somebody who has recently been through the traumatic experience of losing their job. The department is overworked and overloaded. They do not return phone calls and it becomes next to impossible to actually correct problems.
And the numbers bear this out. By law, appeals are supposed to be resolved in 30 days, and that is clearly not happening. Over 68,000 Californians are awaiting appeals on being denied unemployment, and the feds have demanded a resolution and improvement in processing time.
At some point if our safety net is so riddled with holes, is there in fact a safety net at all?
The accounting gimmicks and clever tricks have reached their end. Sacramento is out of money.
(John) Chiang, whose office writes the state's checks, says California is about out of stopgap tricks to pay its bills and keep all its programs running.
The controller says California is down to Plan D on its checklist of paying bills. Its cash reserves are piddling; the special funds it borrows from are tapped out, and no one in the private sector is going to lend it any cash at a reasonable interest rate.
That leaves what in state government circles are called "payment deferrals" and what in real life is called "stiffing your creditors."
In this case the creditors include income taxpayers expecting refunds, college students waiting on state aid, counties that operate public assistance programs, and companies that sell goods and services to state agencies.
Chiang has said he won't write $3.7 billion worth of checks for those and other state programs if legislators and the governor haven't reached a deal by next Sunday to close the budget gap.
The overarching problem here is a tax system that is too closely aligned to the boom and bust cycles of the national economy. That is protected by the 2/3 rule. And the result is a state that lurches from one crisis to the next, seemingly without end.
Well, the end is pretty much near. The state may not declare bankruptcy, but that will be functionally the case. And while IOUs may be a couple months down the road, the payment deferrals are going to put a lot more people out of work. The counties and various agencies aren't in the financial position to float by until some revenue floods in.
Of course the fact that IOUs still may be a few months away is of limited consolation to those who will be out of luck if Chiang pulls the no-payment trigger next week.
"For the first time in my career, there are counties facing the reality of just not being able to front the state the money to keep these programs operating," said Frank Mecca, executive director of the County Welfare Directors Association.
Mecca, who has been in the human services field for 20 years, said counties are facing a double whammy: Revenue is withering while needs are blossoming.
This is at a time when we're seeing jobless rates as high as 15% in some counties, and over 10% in 31 of the 58 counties in the state.
That stimulus spending from the federal government, perhaps $21.5 billion over two years, can't come fast enough. But if there's not a solution in the next week, it may not matter. The damage will be done and the pain will spiral out of control.
California's unemployment rate jumped nearly a full percentage point from November to December, settling at 9.3 percent, the highest rate in 15 years.
Only a year earlier, in December 2007, unemployment was 5.9 percent, according to twin surveys by the California Employment Development Department.
My guess would be that double-digit unemployment is on the way by next month, February at the latest. Because the greatest problem with state government is that the tax structure is too closely tied to a boom-and-bust economic cycle, with no stable revenue sources (2/3 just enforces that insanity), less jobs means less income tax revenue, so watch that commonly cited $41.8 billion dollar budget deficit number to expand greatly. So a lot of money from that State Fiscal Stabilization Fund will just fill the hole between assumed revenues and reality. Then people who are trying to count on any money source are going to get an IOU in the mail instead of their tax refund.
Check out the new video by AFSCME as part of their Make America Happen campaign. The video reminds us that we have overcome financial crisis before, and we can do it again. It compared FDR's solutions to the Great Depression with Obama's plans to tackle our current economic crisis.
As AFSCME President Gerald McEntee pointed out in his Huffington Post piece yesterday,
"President-elect Barack Obama's call for bold action and civic engagement in response to our present crisis echoes FDR's inspiring call to pull the nation out of the Great Depression and forge the New Deal. The video shows how our nation triumphed over economic crisis once before and can do so again by reinvesting in public service, providing health care for all Americans and growing the middle class."
With a severe economic recession, an unemployment rate that reached 7.2 percent in December and continues to grow, and with more Americans falling into poverty, Americans are demanding action. Please sign our petition and make your voice heard.
The Make America Happen Campaign is dedicated to helping President-elect Obama revitalize our economy, provide health care for all, and strengthen the middle class. Our best days are still ahead of us.
You don't have to constantly refresh or check your RSS feeds for the next couple days - budget talks have been called off for Christmas. There is a meeeting between the Big Three tentatively scheduled for Friday.
In my view, just that we're talking about a Big Three instead of a Big Five is progress, suggesting that the Gov will go along with the work-around budget if he can save face on a few "stimulus" items (like, you know, taking people's overtime and meal breaks away. They can eat while working!). The Governor never appeared in a movie about schizophrenia, but that's how he's been acting the past few days, holding press events at key sites where infrastructure improvements are being shuttered (a levee in Sacramento, the 405 Freeway in Karen Bass' district in LA) blasting the legislature, while at the same time claiming that progress is being made toward a budget solution.
During a press conference along Interstate 405 in Los Angeles, the Republican governor said he and Democratic leaders made "some great progress" Sunday and that it may only take two more meetings of the same sort to reach a compromise this week. Schwarzenegger had been calling for a solution by Christmas, though he acknowledged Monday that a legislative vote would not take place until next week at the earliest.
"It could easily be that before Christmas Eve or Christmas Day that we have an agreement, that the legislators can be brought back between Christmas and New Year's to vote on it," Schwarzenegger said.
(UPDATE: Kevin Yamamura reports that the negotiations have come down to three issues: "rollback of environmental review for construction projects, greater use of private investment and contractors, and deeper spending cuts, including those affecting the state work force." These have almost no impact on the budget as a whole - you're talking about cutting two state worker holidays - and are designed only to reward private business interests. Arnold has always been in the pocket of the Chamber of Commerce.)
You'll notice that none of these press events are being held in front of any state employee offices. That's because, in general terms, people don't look kindly on mass layoffs and cutbacks right before Christmas. It gives them the impression that the person making those layoffs is kind of a Scrooge. Of course, the immediate halt to all public works projects, at a time when we should be encouraging stimulus projects of this type, also have an impact on jobs. Not only does every contractor working on those projects get fired, but vendors get stiffed for work that they've already completed, leaving the state open to lawsuits. The Governor should kind of be ashamed to stand in front of any backdrop with cancelled projects behind him, considering his epic mismanagement is partly to blame. This is particularly true when considering that the voter-approved infrastructure work is vital to public safety and the state would undoubtedly be liable in the event of catastrophe.
Communities nationwide have repaired fewer than half of the 122 levees identified by the government almost two years ago as too poorly maintained to be reliable in major floods, according to Army Corps of Engineers data.
State and local governments were given a year to fix levees cited by the corps for "unacceptable" maintenance deficiencies in a February 2007 review that was part of a post-Hurricane Katrina crackdown. Only 45 have had necessary repairs, according to data provided in response to a USA TODAY request. The remaining unrepaired levees are spread across 18 states and Puerto Rico - most in California and Washington.
The Governor is cleverly casting this as a problem of "the legislature" hoping nobody will notice that he performed the veto, he blocked the very plan that could get these projects restarted.
Fortunately, grassroots Californians are noticing, and you can see the contours of a coalition forming, perhaps resembling the 2005 special election coalition only with more staying power. Groups like Courage Campaign and the local blogosphere have the reach to engaged communities starving for information. The California Budget Project provides the statistical heft. Labor and environmental groups have the ear of the legislature. And there's a new member of the coalition - former Obama organizers in California who are moving with unusual speed to support a sane budget solution and slam the Governor for his intransigence. At Schwarzenegger's 405 Freeway presser, you can hear a small band of protesters in the background noise. That was organized by Obama volunteers through their new Facebook-like application, CommunityOrganize.com. Pam Coukos distributed a letter-writing tool urging a budget solution. California for Obama has done the same in an email blast, asking it to be distributed to the various volunteer teams. And there is already talk about veterans of the Obama movement running for state and local office.
This is pretty new and early. But you can see how this network of committed organizers can gradually become a state political force, especially if the coalitions are built and networks made between the groups mentioned above. I have long said that what is missing in California is a popular grassroots movement that can go around the media filter and whip up support for progressive values through direct action. It is said that California is too big for such a movement to catch fire, but in political terms, we all know that the state is very small, and a committed movement can make an outsized difference. This won't happen overnight, but we're moving in the right direction. Now we just need a gubernatorial candidate to ride the grassroots wave...
With the Governor and the legislature still no closer on a special session solution on the budget, Controller John Chiang issued a strong warning about the very near future, finally bringing public the possibility of IOUs for state vendors:
"Specifically, my office will be forced to pursue the deferral of potentially billions of dollars
in payments and/or the issuance of individual registered warrants, commonly referred to as IOUs," Chiang said in a letter to the governor and other officials.
"In order to ensure that the State can meet its constitutionally required obligation to schools and debt service, the Capitol's budget paralysis may leave me no choice but to, in full or in part, withhold payments or to issue IOUs to other individuals and entities entitled to state payments. Given the current financial instability of the banking industry, it is highly unlikely that the banks, if they accept the IOUs at all, will be able to do so for any sustained period of time. Consequently, the recipients of the registered warrants may have no apparent options but to hold them until redemption."
Chiang said his office is also pursuing the issuance of "revenue-anticipation warrants," a form of short-term borrowing that carries high interest and heavy fees because it's believed that the state cannot issue "revenue anticipation notes" that would have to be repaid by June.
If it was impossible to sell revenue anticipation notes to lenders, I don't see why they'd accept revenue anticipation warrants, even if they offered the promise of higher interest rates.
It goes without saying that this stalemate, and the prospect of eliminating vital services, comes at the worst possible time, when California's most at-risk citizens need a social safety net the most. The California Budget Project detailed this today in a paper, appropriately titled Proposed Budget Cuts Come at a Time of Growing Need.
More Californians are turning to income support and related programs, such as Food Stamps, WIC, Healthy Families, Medi-Cal, and CalWORKsfor assistance.
Increased demand for public programs comes at a time when policymakers have proposed deep cuts to health and human services programs to close the state's budget gap.
However, prominent economists argue that carefully chosen tax increases are preferable to spending cuts during a recession because "steep budget cuts will exacerbate the economic downturn and harm vulnerable low-and moderate-income"families.
With unemployment rising to the third-highest rate in the nation, with one in five Californians out of work for longer than 27 weeks, with projections of the unemployment rate rising over 9.3% by 2010, with almost a million Californians underemployed (working less than they'd like), with applications for food stamps up 33% over the past year, and with every county in the Central Valley experiencing double-digit unemployment, including an incredible, depression-era 23.4% unemployment in Imperial County in Southern California, the prospect of losing vital services to those affected would be absolutely devastating. And yet that's where we are. County governments are already expecting the worst, to have their funds raided by the state to eventually fill the budget hole, so they're cutting back. The self-sustaining cycle of cutbacks creating job loss creating less revenue creating more cutbacks has already begun. And that's why it's not just bad politics but horrible policy for Schwarzenegger to hold the state hostage for extremely marginal rewards that will almost certainly be overturned once he's out of office anyway. His intransigence, perhaps based on his inability to get anyone in state government to listen to him, is puerile nonsense. But it also really hurts people.
As I've said continuously, the budget mess in California cannot be solved under the current broken system without serious help from Washington. Fortunately federal lawmakers are fighting for state and local government relief for California, done in such a way that we can actually access it without having to put money up front (which is impossible given the current cash-flow crisis).
(As a side note, I want to on behalf of the editorial board thank our friends in the blogosphere for driving attention to our ongoing Calitics budget coverage, in particular paradox at The Left Coaster. I think I speak for everyone in saying we appreciate the links and support.)
I appreciate Bob's sentiment that the time is now to fight the Governor and the Yacht Party and bring some sanity into the fiscal process, but my fear is that the time for that was three years ago, when the successful fight against the special election should have been built upon, and at this point, we're already swirling in the bowl.
Let's just get you up to date. All infrastructure projects are currently shut down. Unemployment nudged up to 8.4% in November, the state lost 41,700 jobs last month, and up to 200,000 more jobs are on the chopping block from the public works freeze if it continues. Meanwhile the Governor is ordering up layoffs and furloughs for state workers, so just add those on top of the pile. You're likely to see a 10% cut in state employees, and a 10% reduction in the salaries of those who remain. More job loss means less income tax and probably less sales tax, as well as more need for public assistance.
And that's before a budget which could have further reductions to state employee paychecks, elimination of overtime and meal breaks, etc., is signed. Not to mention the billions more in cuts that the Democrats included in their work-around plan which the Governor threatened to veto. Schools, which were slated for $4 billion in cuts in that budget, have already gotten the jump on the state by cutting back their local budgets. After-school sports, libraries, and new teachers are probably all going to go.
This is a nightmare beyond the ability of many, even myself, to comprehend. It's so big that it'll affect everything, and the idea that a ragtag band of liberals have the power to stop the freight train from coming down the track is precious, but I think wrong. This is the accumulation of 30 years of bad policy and worse government structure, and that's not going to be turned around in the time it needs to be to avoid catastrophe. Even George Skelton, poohbah of all poohbahs, admits that the Yacht Party is so nakedly ideological that they have made the state dysfunctional. This work-around budget is good for the time being, but Schwarzenegger is clearly committed to hijacking that process. It's a large game of chicken that none of us can afford. And as I've noted, even balancing the budget - which the work-around does not do - will not necessarily restart infrastructure spending, and even federal help might not be able to do that.
Changing the constitution with a convention is a nice idea, but not so easy in practice, as we all know.
Talk of calling a constitutional convention has been banging around California for at least the last few decades - maybe since 1851, for all I know - and it's gotten a lot louder recently. Here, however, is the rule for calling a convention:
The Legislature by rollcall vote entered in the journal, two-thirds of the membership of each house concurring, may submit at a general election the question whether to call a convention to revise the Constitution. If the majority vote yes on that question, within 6 months the Legislature shall provide for the convention. Delegates to a constitutional convention shall be voters elected from districts as nearly equal in population as may be practicable.
In plain English: you need a two-thirds vote of the legislature to put an initiative on the ballot and then you have to get it approved by the voters. The problem is that no matter how sweetly liberals might croon about what a convention could do, conservatives all know the truth: the whole point of the thing would be to get rid of our insane two-thirds requirements for passing budgets and raising taxes. Unfortunately, our whole problem is that Republicans control (slightly more than) one-third of the legislature. And if we can't get them to vote for a tax increase in the first place, what are the odds we could get them to vote for a constitutional convention called for the express purpose of making it easier to increase taxes? About zero.
OK, but how about a simple initiative? We could get rid of the two-thirds rule just by collecting signatures and getting a majority vote, right?
Right. And we tried that just a few years ago. Prop 56 was supported by all the usual good government groups and would have reduced the majority needed to pass budget and tax measure from two-thirds to 55%. A bunch of other fluff was added to make it more popular ("rainy day" funds, no pay for legislators if they don't pass a budget, etc.), and in the end.....
....it got whomped 66%-34%. No one was fooled for a second. Everyone knew the whole point was to make it easier to raise taxes, and so it lost in a landslide.
I think a similar proposition to 56 wouldn't crash so hard today, but it would certainly go in as an underdog, because the majority of the state still doesn't understand the consequences of all this failure. It's a "dysfunctional electorate," as K-Drum puts it, as well as a dysfunctional government.
Do we need to fight? Yes. But we need some arms shipments from Washington (metaphorically speaking) before we can do that. A rescue package for the state is desperately needed, and it got a whole lot more so yesterday when the Governor vetoed the work-around.
The unemployment statistics for October at the state level were released today, and as it turns out California lost the third-most jobs in the nation at 26,400. Only Washington and Florida lost more. This puts the unemployment rate in the state at 8.2%. This is a 2.5% increase from one year ago, the largest year-over-year increase since 1982, the last major recession. Worse, in regions of the Central Valley, that number is much higher. Unemployment in Fresno County is 11.2%. In San Joaquin County, 11.1%. In Merced County, 11.7%. In Tulare County, 11.8%. And in Stanislaus County, 11.8%. Those are desperate numbers.
The loss of income tax revenue along with the dip in property taxes thanks to cascading foreclosures is leading more cities to the brink of bankruptcy.
Now two more California cities - Rio Vista and Isleton - are considering bankruptcy protection as an option as they face large budget shortfalls and staggering debt.
While experts caution against ringing the alarm bells just yet, they do say tough economic times could push municipalities already on the brink over the edge.
"I think it's quite possible municipal bankruptcies could become somewhat more common but will still be very rare," said Jason Dickerson, budget and policy analyst at the state's Legislative Analyst's Office. "There are more municipalities that will look at what it means."
We need a massive fiscal stimulus as soon as humanly possible. And that needs to include aid to state and local governments, particularly here in California. We are right on the edge.
