California meltdown

Point / Counterpoint: We can't eliminate the safety net

By Christine Kehoe
2:00 a.m. June 18, 2009

This year Californians have seen up close what a national and international economic crisis can do to a state budget.

The same economic downturn that has led to layoffs, reduced work hours and home foreclosures in every California community has found its way into our state's fiscal picture.

To put it into perspective, consider that California taxpayers contributed more than $100 billion in revenue to the state's budget one year ago. The latest figures show that tax collections have fallen $20 billion since then. People simply have less money in these difficult times, and that means government collects fewer taxes.

In February, the Legislature and Gov. Arnold Schwarzenegger attempted to get a handle on the crisis in a bipartisan manner. While we came together to pass $36 billion of budget solutions – including $15 billion in spending cuts and $12 billion in tax increases – our budget is now as much as $24 billion in the red due to the worsening economy.

It is in this context that the governor proposed drastic budget reductions that would affect all Californians. He called for the closure of most of our treasured state parks, cuts to public schools and to higher education and massive borrowing from local governments.

The governor also proposed adding a $4.5 billion rainy day fund while completely eliminating core programs that serve the neediest Californians.

For instance, the governor would eliminate CalGrant scholarships for students who meet academic requirements but don't have the family income to support tuition to the University of California or California State University.

He would also eliminate the Healthy Families program, which provides needy children with health coverage, and the CalWorks program, which provides temporary assistance to out-of-work Californians provided they are searching for work.

These are options that no one likes. Yet, years of half measures and borrowing and shifting have brought the state to the place it is now. We all know that cuts to state spending are inevitable in this environment. The question is to what degree, and in this debate, degree matters.

To counter the governor, Democrats in the Senate have proposed a budget framework that does its best to minimize program cuts. We want to reduce, but not eliminate, necessary programs.

While we can come together with the governor and Republicans on the majority of the proposed cuts, we cannot completely eliminate programs that provide for the poor, students and the elderly at the time they need it the most. We wouldn't be asked to do so if the governor hadn't proposed a massive $4.5 billion reserve in the coming fiscal year's budget.

Make no mistake, building a rainy day reserve is a smart thing in good times. But these are not good times. Right now we need every available dollar to ensure that the poor mother can get her child in to see a doctor or the laid off worker can eat while looking for a job.

Building a reserve now is like filling a bucket of water while your house is on fire – and then not using it. The reality is that California's house is on fire and we need every bucket of water to put it out.

Another area where Democrats in the Senate differ with Gov. Schwarzenegger is on borrowing from local government. The governor proposes borrowing $2 billion from California's cities and counties. The state would have to pay back the locals in three years.

We are working overtime to avoid taking from local governments. Not only is it yet another short-term solution that will come back to haunt us in three years, it also will exacerbate budget problems at the local level, where cities and counties are struggling to preserve basic services just like the state.

For the past two weeks, a Budget Conference Committee has held open, public hearings on these and other proposals by the governor. In the coming week, the Conference Committee will recommend to both houses a budget plan that cuts billions, reorganizes revenues and spares no one. It will hurt without killing. It will deal with today without taking away tomorrow.

It's imperative that we complete our work in the next two weeks so that any budget reductions we make can head off yet another impending cash crisis that threatens California in July.

There is no question it will be difficult. By the time it's all over, the Legislature and the governor will have cut more than $25 billion in state spending. These are cuts that Californians will notice. Perhaps a park will be closed on a certain day, library hours will be reduced or the line at the DMV will be a little longer.

But we still have more than $80 billion to spend, and we will do it in a way that delivers value for taxpayers. Simply put, we will do the best we can with the money we have.

Kehoe, a Democrat, represents the 39th state Senate District, which includes Del Mar, Lemon Grove and a large portion of San Diego.

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California meltdown

Point / Counterpoint: Worst option is to raise taxes

By Nathan Fletcher
2:00 a.m. June 18, 2009

California is facing a $24 billion budget deficit. While there is no shortage of ideas for how to deal with it, I suggest we learn a lesson from Clyde Jennings, the CEO of Escondido-based J&W Lumber. When I visited his facility recently, Clyde told me about the difficult cuts he has been forced to make in our declining economy, the efficiencies he has found, and how everyone at his 50-year-old, family-run small business has been working longer and harder for less money. This story is not unique – it is shared by millions of California families and small businesses.

In dealing with our $24 billion deficit, California needs to follow Clyde Jennings' example – make tough reductions, find efficiencies and work harder.

We didn't have to end up in this situation. If the Legislature had constrained government growth over the past decade to the rate of inflation and population growth, we would have a balanced budget today.

There would be no deficit and we could have returned billions to taxpayers, paid off debt or invested in desperately needed roads and water infrastructure.

Instead, as the economy contracted, government expanded. From January 2001 to February of this year, California experienced a net loss of 235,000 private-sector jobs. Over the same time, the state added 163,700 government jobs. It gets worse. From the middle of last year through January – the peak of our fiscal crisis – 66 state agencies added employees. It's no wonder the public is angry and losing faith.

Facing such a deep crisis, we are left with few options. We have to make cuts to state government. But just as important, we must change the way our state does business by setting priorities and finding more effective and efficient ways to operate.

We have a responsibility to eliminate agencies, boards and commissions that are redundant or aren't critically important. In education, we should require that 70 percent of all funding go directly to local schools, reducing unnecessary bureaucracy. We also have an opportunity to save hundreds of millions of dollars each year by letting local school boards use competitive bidding for landscaping, maintenance and other services, and by beginning the transition to electronic textbooks. These types of reform need to take place across the board in state government.

However, these reforms alone won't be enough to solve the problem. Unfortunately, services that people rely on will be reduced. This is not a situation I wish on anyone, but it's the situation we are in. To mitigate the impact, we need to prioritize our programs and make tough decisions.

California can only spend the money it has, so the task now is to do the least harm in balancing our budget.

Attempting to deal with this budget crisis without addressing job creation is shortsighted. The best way to increase revenue is through job growth.

We have to put Californians back to work to generate economic recovery.
California is consistently ranked around the bottom of the 50 states in competitiveness. CEO magazine lists us 48th in job creation and Forbes magazine said we have the single-highest cost of doing business. Clyde Jennings showed me exactly what that means for California business owners. When he sells a $10,000 redwood deck, he makes just over $150 in profit. The government's share of the total: almost $1,000. This is wrong.

Despite these facts, some in Sacramento are proposing further tax increases. Raising taxes is the worst thing the Legislature can do – it will reduce consumer spending and cost us more jobs. We cannot tax our way out of this problem.

Other states recognize California's harmful policies and are attempting to capitalize on them. Colorado recently sent notices to thousands of California companies touting its low tax rates, low regulatory burden and helpful state government. Texas, Nevada, Florida and others have launched efforts to lure California employers and their jobs. All too often they are successful.

We can't afford to let them succeed anymore. It is time to take immediate action to keep and create jobs here. Let's bring back Gov. Pete Wilson's Council on California Competitiveness. Let's take a hard look at the regulations on California's books to see if they are necessary, and make sure they carry automatic sunset dates.

As we take action to protect the jobs we have, let's also find creative ways to encourage job growth. Right away, we can establish innovation zones that provide incentives for private-sector investment. These would help expand existing epicenters of innovation and commerce like the biotechnology cluster we cherish in San Diego. Bottom line – if you can generate jobs, California should welcome you.

From the Gold Rush gold rush to today – the hardest working, most innovative and most entrepreneurial have sought to make California their home, their place to start the American dream. One of them, Charley started a lumber business 50 years ago with $20, grew it into the company it is today and passed it on to his son Clyde.

We have some challenges, but if state government will learn a lesson from our hard working people, we can come out of this crisis stronger.

Fletcher, a Republican, represents the 75th Assembly District, which includes Poway, Rancho Santa Fe, part of Escondido and the San Diego communities of La Jolla, Rancho Bernardo, University City and others.

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