A California budget "solution"

http://www.sacbee.com/111/story/1239210.html

"I know that we're not sending [Governor Arnold Schwarzenegger] the budget that he wanted," [Assembly Speaker Karen] Bass said. "But this isn't the budget that any of us wants."

Yet this is what we're getting!

The Dems and GOP can't agree on whether to raise taxes (in a state with some of the highest taxes in the US) and/or cut critical spending to public services to balance the $15B budget deficit, which caused the budget to be about 80 days late this year (a new record in tardiness for a state that has only passed 4 budgets on time). So what do they do instead? Borrow against future budgets of course! Arnold's billions of dollars of bonds did not sustainably fix CA's budget woes, as he promised when running to oust Gray Davis. Regardless, there have been some painful cuts, such as smaller doctor reimbursements for Medi-Cal, smaller or suspended cost-of-living increases for schools/seniors, cuts to disability/SSI, and many teachers/public workers laid off. Of course this mostly hurts the poorest and weakest of us, who don't really matter. At least they managed to close some tax loopholes on the rich and privileged (the famous yacht/RV deduction), or so they claim. But plenty of other holes remain.

So now the CA legislature (with a Congress-like 19% approval rating, compared to Bush and Arnold's 38%) has decided to play some accounting tricks to appear to balance the budget. I love the Sac Bee term for it: "employing accounting maneuvers". So basically CA will take 10% larger income tax witholdings in the first half of the calendar year, and then take less in the second half or give it back to us as reimbursement later (we can opt out of this though, but probably most people won't). By the way, tax reimbursements for archaic paper filers (such as idiots like myself) can take up to 6 months for delivery, according to the CA Franchise Tax Board. Well, I filed my 2007 return in February, and haven't got my meager reimbursement yet in September! I emailed, mailed, and called the FTB about it, and they said they didn't know why there was a delay, but would "flag" my file for fast action. That was 3 weeks ago, with no results. I can't stand how the state just decides to sit on your money (money that you could have invested to collect interest, or more like watch it evaoprate in the turbulent market!), and you just have to wait until they get around to returning the money you earned months ago back to you. So for them to seek to balance the budget by increasing income tax witholdings, I can just see our wages stagnating in Sacramento's coffers for months, if not years. And can you imagine the sea of confused filers and complaints that will flood the FTB, an agency that's not exactly known for outstanding customer service? Obviously Lehman and Fannie aren't the only financial institutions that are terribly mismanaged and make poor decisions that hurt themselves and their customers.

So the legislature will pick up the budget shortfall in year X by siphoning tax revenue from year X+1. But what happens when the budget for year X+2 comes around? Now you have to take even more money from the future pot to compensate for the money you withdrew last year. Pretty soon we'll be paying for the 2015 budget with 2030 money, which is like a no-interest bond for them! The state doesn't have to pay interest to the taxpayers that it borrows from without our consent. Of course this is just a stopgap measure to buy them some time in order to draft a "real" budget that could persist. Well considering their track record for cooperation and punctuality, I think it's more likely that we'll win the lottery!

Well speaking of that, come November the voters will get to decide whether we want to borrow from future lottery revenues to help balance the budget too. So buy more scratchers! But the lottery is just a sick social experiment. Critics say the CA lottery is terribly underperforming versus other states, needs to vastly improve marketing, and should be privatized. Well maybe so, but as we know, most gambling/lottery operations prey on and hurt lower income individuals the most. And those are the vulnerable people who depend on state services to literally stay alive. So they're getting the double-whammy in CA: cuts to their services, as well as greedy Wall Street involvement in the lottery. So for the few lucky winners, they'll get less money because some will be shipped off to investors. And of course the lottery causes many social problems that push more people into financial ruin, force more desperate families to file for state support, and have less spending money to infuse into the state's economy. Is it any sort of budget solution to promote the lottery - where sales tax dollars just become lottery revenues instead? That's like Enron accounting.

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why not just sue the estate of ken lay for the money enron stole from the state? i think it's around 16 billion? oh, that's right, arnie dropped any charges or possible lawsuits against him or enron. that's how he funded his recall.

Wow, he really gave them immunity?

Yep, it appears so! Davis-Bustamante were preparing a $9B suit/refund against Enron for the CA energy scam, but Arnold dropped it. Well $9B would have gone a long way to balancing our current budget.

http://baltimorechronicle.com/oct03_Palast.shtml

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I guess the last budget proposal was "j/k", and this is the real one:

http://www.sacbee.com/111/story/1249171.html

It's sad that it took 81 late days and state childcare/medical facilities scrambling for stopgap funding in the meantime (or just flat out closing their doors to the needy public) for the CA legislature to realize that they can increase revenues by actually getting corporations to pay their taxes! So instead of using private citizen taxpayers as "ATM machines" as Arnold said, they will scrap those short-sighted, disrespectful accounting gimmicks and instead collect more revenue by actually enforcing the corporate tax code. They will make late payment penalties larger, which will either net them more money in penalties or increase on-time payments. Wealthy persons and companies that owe more than $1M in back taxes will be penalized 20% instread of 10%, and some tax amnesties will be cancelled. Small companies are supposedly exempt.

Actually I have to give credit to Arnold for standing firm on this and not just signing the previous stupid budget to get it over with. It's more than I can say of the spineless Democrats and ideologue Republicans in the legislature. What if their salaries and benefits froze up for 81 fretful days, so they could see what it's like for lowly state workers and the clients who depend on them?

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Also... what do you think about the huge infusion of public cash into the money markets by the Feds? So much for small government and laissez-faire. Maybe such a drastic move is unavoidable at this point, to restore some lost confidence and rescue the financial sector. But it sends a dangerous message of course, like the market is the misbehaving spoiled teen, and the government is the rich father who will always pull major strings to bail the kid out of trouble. Maybe instead of rescuing greedy idiots every time they shoot themselves in the foot, we can overhaul the entire system so that our economy is not so dependent on overborrowing, overspending, and lusting for larger and larger profits? I must be smoking. Well, at least some people got their money back in the market with this "good news". The Dow swung from 11,300 to 10,600 to 11,400 in half a week, sheesh.

http://biz.yahoo.com/ap/080919/financial_meltdown.html