Tuesday, June 16, 2009


Summary: http://www.californiareport.org/archive/R906160850/a

A $24 billion problem will add to the California economic problem. This number is exponentially rising and state cash is running out. The Governator says that the public sector jobs are part of the problem and to privatize the state's prisons will lower the costs substantially. So what is the real problem?

"They are smart individuals (legislators)", he says, "who know where all of the bloat, fat, fraud, and other misrepresentations are". He refers to various social services programs and the role the unions play in keeping the state budget inflated.

"The question is whether or not the Democrats are willing to have the guts to make the necessary cuts". Schwarzenegger says, "I'm not concerned about my legacy but I am quick to defend my record".

The California Report states that the budget went up 24% in the first year that Schwarzenegger was in office and has been steadily increasing. Schwarzenegger says that he defends the numbers because he has also been paying down the debt left by the previous administrations. Starting with Reagan, who increased the state budget by 13%, every other governor has increased the annual budget from 3% to 8.5% (each year). In his final days in office, many politicians on either side of the fence say that Schwarzenegger is calling their bluff and only grandstanding to keep the attention on him. The May 19th vote indicated that grassroots Democrats are against increased taxes. Because of cuts on the social services, conservationists http://www.ecovote.org/news/endorse040909.html , Libertarians http://ca.lp.org/pr20090407.shtm and Republicans http://www.electionforum.org/special-may-19th-election-alert.html , http://archive.constantcontact.com/fs012/1100358257512/archive/1102527559657.html all but seem ignored.

"Meantime, the legislature kept borrowing and borrowing from the future", Schwarzenegger said he is trying to stop this but insists that a budget must be reached so the next governor doesn't have to deal with this problem. He is requesting a complete solution on his desk. But is he making this goal to balance the budget so that it will be his legacy?

Apparently, anything smaller than the $24 Billion solution won't be enough. To date $7 billion worth of cuts have been proposed. The Governor's goal is to accomplish much more than this. "We are in an economic crisis, and a revenue crisis. We need to solve the problem and cut the size of our spending," he offered.

"Kicking the can down the alley is what they have been doing for years and years. I have held up the budget because of this. They would eventually have to make the cuts. They originally tried to solve the problem with money we don't have. The State Controller, John Chiang (pictured to the left) says we will run out of cash in July. Yes, we need a grant and they (legislators) know what needs to be done. http://www.sacbee.com/static/weblogs/capitolalertlatest/cat_controller_john_chiang.html

In the meantime, the credit rating of the state, the seventh largest economy in the world, has been deteriorating since February http://online.wsj.com/article/SB123370579471145581.html

"They are smart people. It has more to do with their will. They know exactly where the fat, fraud and abuse in government is, but they need to make the decision as to what is more important: to serve the people who need the services or to serve the needs of those people providing the services.

Schwarzenegger states that "February was a good middle ground solution", but to balance the budget and to find a combination of a solution to oil, tobacco, tax spending, revenues and credits, needs to be more wisely determined."

This isn't the first time that this question of taxes and cuts has come up. After 18 years of no tax increases, the problem has become one of revenue. So that now an increase in taxes needs to be made. All four legislative leaders realized and promised that the financial problem would get worse and bottom out if they didn't come up with solutions. So now they're going to work on obtaining short-term cash and revenue and make further cuts in the May.

As for the possibility of having extensions, Schwarzenegger said, "we didn't know the word 'extend' at that time, because everyone was clear, no more taxes or fees with cuts." He said all four legislators knew what California was up against. We can't go back."

The California Report agreed that during the Pete Wilson Administration, they didn't want more taxes but they kept spending and not living within their means. We need to be more responsible. People rearranged things in order to stay in business and provide the important services and then it is up to the legislators to trim the fat out of the bloated programs.

Trimming the fat entails looking at what you have available and seeing which parts you can do without. You might even have to come up with new legislation to reach those goals. But you also have to have a plan. Stick to those goals and execute them with determination. He gave an example of how they change the way the state pays brokers. Brokers' compensation was reduced and the savings ended up netting the state 60% to 70% more revenue. Schwarzenegger believes this type of action can occur across the board.

He said that cuts to the CALWorks and Healthy Families programs are not something that can be done easily. California Report asked him "why not more temporary solutions instead of wholesale cuts?" Schwarzenegger says that there are many additional monies that can be taken out of these two programs if we research how they are run. We could take $200 million from in-home health services and prisons, which are two big items where we are spending billions of dollars. Because of how prisons are run, they are very inefficient. We could make them more efficient by privatizing them. He insists that if we are willing to change the law regarding how these institutions are built and run, we could realize significant cost savings.

"The way the laws are written all I can do is straight cuts and they know this. They have to rattle the cages, take the options and change the way things are done," he added.
Spending limits and tax increases will eventually cause the bottom line to improve. He makes the correlation that "when you lose sometimes, you may had to review what you did, take the hit but you never give up. No one will fault you for trying." He believes he is doing this by requiring the legislators to come up with a "solution" and not another Band-Aid response that will require them to have to return to the table again in another three to six months. He believes California residents deserve no less. He implies that we also need to re-examine capital gains tax.

"We don't have much of a rainy day fund and we need to remedy this. We need to redo our taxes", he offers.

When questioned regarding his legacy, he says that he is not concerned about his legacy. He believes his mission to reform the budget is more important. He had hoped to fix the budget so we don't have these drastic fluctuations. "Even when I am gone, I will continue to fight for the stability in the budget."

"It is unfair to say that I have made the problem worse. I have increased the budget less than any previous governor. They have been picking the numbers that they want to include in the budget. When we came into this office there was a huge debt."

The state had been borrowing from pension funds, local government funds, and transportation funds. All these acts needed to be rectified because they were illegal. The State had to repay these other entities. To have pay them back is now considered spending, but it is not."
Schwarzenegger insists that these numbers are distorted. "The current budget is low revenue income with 3.5 -3.7% spending," he said. Davis couldn't get spending cuts, raise taxes and balance the budget at the same time, hence Schwarzenegger says he was voted out of office. "Both houses were fighting him", he said, ". . . the next governor, " he adds, "I don't care whether the next governor is Republican or Democrat, but the next governor will require the best person with the greater vision of California", and that is the person he says he will campaign for and support.

"I enjoy thoroughly the campaign, have a vision, goal and plan to get there. They can say whatever they want, if it helps them by criticizing me, if it helps them accelerate their future political careers, so let it be, but it will require working together to get there", and this is all he says he is working towards.

You be the judge and see how the budget is met, whether or not the two legislatures of the state compromise and how those compromises are accomplished. Action requires that the citizens of California pick up their phones and start calling their legislators. The cost of running the state is increasing, the deadline for solutions is almost up and the Governator doesn't want to be known as the California Terminator.

By Minerva and Todd Hoover, Freelance writers, Santa Clarita Valley

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