Dear Legislator:
In his final State of the State address, Governor Schwarzenegger offered a number of solutions to California’s short-term budget crisis, along with a few long-term strategies to put the state on a sustainable path to fiscal stability. Many of the most beneficial policy prescriptions will be difficult to implement, while some easy “quick fixes” will only prolong California’s economic stagnation. On behalf of the National Taxpayers Union’s (NTU) more than 52,300 members in California, I urge you to implement Gov. Schwarzenegger’s proposed $8.5 billion in spending cuts while rejecting his call for $6.9 billion in federal bailout money.
California’s problems are numerous and well-documented: The state vastly overspent tax dollars when receipts were high, the tax system is unstable and vulnerable to economic downturn, and the state government is neither transparent nor accountable to taxpayers. The budget deficit currently stands at $19.9 billion and threatens to swell by an additional $2.4 billion in the near future. Families and small businesses are leaving in droves as oppressive taxation chases them away. Even as states across the country are suffering, California has become a national punch line.
Gov. Schwarzenegger is right to suggest bold spending cuts. The difficulty involved in downsizing state programs underscores the danger of boom-and-bust budgeting: A state that spends frivolously in periods of economic growth must cut drastically in times of recession. The Governor mentioned the importance of priorities in his speech. When Californians are making choices about which monthly expenses they can afford, their government should be obligated to do the same. Thankfully, they will have a little more to spend next year, as the Governor’s budget proposal allows last year’s temporary income and sales tax hikes to expire. It’s a start.
What Sacramento seems not to understand is the peril of one-time revenue dedicated to ongoing expenditures. Gov. Schwarzenegger seeks to continue the failed policies of the Obama stimulus by asking for almost $7 billion in federal bailout money to balance the budget. This should be a non-starter in the Legislature. Strings tied to these federal funds will strangle California’s sovereignty over its budget in years to come. And when the federal money runs out, the state will be in the same position as it is in today.
There are responsible ways for the state to raise money. Every capital gains tax cut in the 21st century at the federal level resulted in a revenue boon. California’s shoreline is ripe for environmentally responsible oil drilling that would net the state billions. By privatizing non-essential state assets, California could experience a large one-time windfall as well as serious cost savings in perpetuity.
The Governor should be commended for his leadership in proposing serious restraint on the Health and Human Services, public employee compensation, and the state prison system budgets. Allowing the 2009 tax hikes to expire is a significant, albeit small, first step toward a competitive tax code. But the overreliance on federal money is troubling. For every statement Gov. Schwarzenegger makes about federal government “fairness,” he forgets that the other 49 states will foot the bill for a bailout of California. On behalf of NTU’s 52,300 members in California, I urge you to implement the Governor’s spending cuts and continue to look for more cuts, particularly in education. Tax hikes are certainly not an option in this terrible economic climate.
Sincerely,
Joshua Culling
State Government Affairs Manager
CC: Gov. Arnold Schwarzenegger