Archive for July 21, 2009

California State Union Workers in Denial

Looks like California is busily robbing Peter to pay Paul:

SACRAMENTO, Calif. — California may soon be able to stop printing IOUs now that Gov. Arnold Schwarzenegger and legislative leaders have agreed on a compromise plan to close the state’s $26 billion shortfall without tax increases.

The governor and lawmakers announced the compromise late Monday, nearly three weeks after the state began issuing pay-you-later warrants to thousands of state contractors and vendors. Many recipients had trouble finding someone to take them after several major banks stopped accepting IOUs.

The four legislative leaders will begin selling the plan to other lawmakers Tuesday as the best way to get the state back on firm financial ground and prevent further sinking of the state’s credit rating, already the lowest in the nation. A contentious vote is expected Thursday.

The agreement composed of cuts, borrowing and fund shifts was not expected to resolve California’s financial problems as the economy continues to struggle and tax revenue lags far behind the level of the boom years.

“This is, of course, one of the most difficult economic times to face our state since the Great Depression, so none of these were easy choices,” said Assembly Minority Leader Sam Blakeslee, R-San Luis Obispo. “I think we selected a path which will lead the state back to the point where we will be strong.”

Personal income fell this year in California for the first time in 70 years, leading to a 34 percent plunge in income tax revenue during the first half of the year. Source:

So if the budget doesn’t address the problem with the budget (spending way more than revenues) and instead borrows and steals money from local governments, what was the point again?

Monday’s agreement reduced general fund spending from $92 billion to $88 billion, taking California back to 2005 levels.

I think they’re going to have to sharpen those pencils.

Predictably, SEIU bitches loudly:

Some 200,000 state government employees already have been ordered to take three days off a month without pay, the equivalent of a 14 percent pay cut. Those furloughs will continue through next June, shutting many government offices for three Fridays a month.

The leader of the largest state employees union declared the furloughs “just plain wrong,” and criticized Schwarzenegger and lawmakers for refusing to include tobacco and oil taxes in the plan.

“We’re furious about the failed leadership in Sacramento,” said Yvonne Walker, president of the Service Employees International Union Local 1000. “Their decision shows a lack of political courage to stand up to corporate giants and wealthy special interests.”

Hello. Californians are the ones that pay for those taxes through higher prices. MUCH higher prices. You can’t continue to balance your budget on the backs of legitimate business. Besides, when taxes go up, collections go down.

Update:

LOS ANGELES, July 21 (Reuters) – The day-old pact among California leaders to close the state’s $26.3 billion budget gap came under fire on Tuesday as county and city governments threatened to sue to block a plan to seize local tax revenues as part of the deal.

City and council officials vowed to seek a court order barring the proposed diversion of $2 billion from local redevelopment agencies and $1.7 billion in highway tax revenues into state coffers to help close the budget deficit.

Opponents argue that such moves are illegal because the state is prohibited under its constitution from grabbing revenues raised at the local level or earmarked specifically for county and municipal purposes.

They cited a recent state appeals court ruling that a similar diversion of $740 million in local public transit funds last year was unconstitutional.

A spokesman for Governor Arnold Schwarzenegger insisted the budget plan, which also includes $15.5 billion in spending cuts and no tax increase, would withstand court scrutiny.

Guess those local governments aren’t all that appreciative of being robbed.

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