The state budget isn't growing

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I heard a great show on NPR the other day about the new rules on compensation for executives whose banks got federal bailout money. The feds have cracked down (a bit), and some of those massive salaries have been cut and top bankers are now accepting much less pay, and stock that can't be sold for three years.

And guess what: More than 80 percent of these people are still hard at work at their desks, including almost all of the most senior folks. Very few have left. It puts the lie to this notion that extreme salaries are needed to attract and retail the top talent; even after those salaries have been cut by more than half, the "talent" doesn't flee.

There's a new study by the California Budget Project (PDF) that says makes the same kinds of points. Jean Ross, the director of the nonprofit, nonpartisan group, says that urban legends die hard, so she's chosen the top ten myths about the state budget and demonstrated how utterly inaccurate they are.

For example, the anti-tax folks love to crow about the massive growth in state spending and how the budget is "out of control." Truth:

Current year spending is $16.9 billion below 2007-2008 levels and proposed 2010-2011 spending is $20.1 billion below  2007-2008 levels.

2009-2010 spending is $21.5 billion below the baseline levels projected by the Legislative Analysts Office in 2004.

As a share of the state's economy, state spending is at its lowest levels since the early 1970s.

And it's not just the recession:

State spending as a share of personal income has declined significantly in recent years.

And guess what: taxes aren't driving businesses out of the state -- or hampering personal wealth creation.

The number of millionaire taxpayers has increased more rapidly than the number of taxpayers as a whole since the passage of Prop. 63, which imposed an additional tax on high-income individuals.

And guess what, you bureaucracy bashers:

California ranks 41s [among the 50 states] with respect to the number of state and local government employees per 10,000 population.

So no, California doesn't have a spending problem. The state has a revenue problem.

Comments

NO. The state has a spending problem.

California has a $20 billion deficit last year, this year, and for the next five years.

This is STRUCTURAL.

SF, by the way, had a $500 million deficit last year, this year, and will have next year and years in the future.

The problem is structrual. SF needs to cut half its discretionary spending..for the foreseeable future. We don't have the money and will NOT have the money for years.

The state has a 20% structural deficit for this year, and for the next five years at least.
The state needs to cut 20%, at least, from its budget for the next five years.

Look , I realize this is very painful for liberals to deal with. WE ARE BROKE. The state is broke. The feds are broke. There is NO WAY OUT except to cut spending by 20-25% for the next ten years...at least.

For the last 15-20 years, liberals have added millions to state and local budget for feel good shit that costs millions of dollars. We simply can't afford it anymore.

SF spends a quarter of a BILLION dollars a year on "homeless services". Know what? We can't afford it anymore.

The party is over. Deal with it or you will find every major "service" in this city shut down due to lack of funds.

Posted by GuestScott on Mar. 30, 2010 @ 4:25 pm

Well put, Scott.

Posted by GuestMik on Mar. 30, 2010 @ 11:13 pm

I agree with Scott, too. I don't buy that we have a revenue problem. We have some of the highest income taxes of any state. While we have Prop 13 (which sets a low tax rate), we also have high property values that mean the amount of taxes we pay are high.

Posted by Guest on Mar. 31, 2010 @ 6:52 am

The PDF is a Mish Mash of odd statistics, that don't say if they account for inflation or do sometimes?

Page 17 is a good one "as a share of the states economy it is a moderate tax state" totally meaningless statistic.

That's the kind of crap that comes the CATO institute or the Heritage Foundation.

The goofy left has met the goofy right again in PDF form

Posted by glen matlock on Mar. 31, 2010 @ 7:44 am

If you pay attention and read it, the report makes perfect sense. California is NOT a high-tax state overall, and certainly not for businesses. At lot of our tax revenue comes from income taxes, which are the most progressive way to collect money; it's a higher-tax state if you're richer, but as the report notes, that hasn't seemed to impact the growth of personal income and wealth.

This is a growing, complicated, diverse state. Education costs more in a state where a lot of people don't speak English as a primary language, and where a large percentage of public school kids come from low-income households. We still spend LESS on education than almost any other state -- but it looks like a big number because of our large and growing population. If our revenue had kept pace with our growth -- that is, if we'd raised taxes a little -- we wouldn't have this awful deficit. (BTW, at least a quarter of the annual deficit comes directly from the governor's insane decision to cut the motor vehicle license fee.)

 

Posted by tim on Mar. 31, 2010 @ 8:53 am

I know the SFBG is for a progressive tax system, and I won't argue with that because the system will likely always be progressive to some degree. When a tax gets too progressive, though, it can make the revenue cycle pretty volatile -- the state relies pretty heavily on high earners for revenue but if a downturn hits and those people have less money, the system takes a big hit.

See, e.g., http://articles.latimes.com/2009/apr/15/opinion/ed-tax15

Posted by Patrick on Mar. 31, 2010 @ 10:44 am

Tim Redmond supports just about every tax or fee in place or proposed. His economic analysis of any situation, state or local, is compromised by his fixed ideology that somebody somewhere owes more to whomever he's found less fortunate. Redmond is not a reporter. He is an editorial writer. Period. His editorials should no longer be taken seriously by anyone concerned with reforming government.

Posted by Guest icarus12 on Mar. 31, 2010 @ 10:20 am

There are only two states higher, you keep repeating that it is not a high income tax state and people keep providing you links.

There are only two states higher.

The top rate starts out at 47,000$, hardly high income, then at 1,000,000 there is another 1% bump.

at the 47000, hardly any other states comes close to the rate that CA charges.

http://www.taxfoundation.org/taxdata/show/228.html

Posted by glen matlock on Mar. 31, 2010 @ 10:49 am

I agree, Patrick: The income tax system we have does tend to be more volatile. I think we need to back it up with the restoration of the vehicle license fee, an oil-severance tax and some other measures that won't fluctuate as much with business cycles.

Oh, and Icarus: I am both a reporter and an editorial writer. I try to do my homework and get the facts right, but I've never made a secret of my opinions. And one of them is that wealthy people in this country are way, way undertaxed, and have been since Ronald Reagan took office.

Posted by tim on Mar. 31, 2010 @ 11:41 am

I'm generally not a proponent of high/increased taxes, but I'll concede I didn't have much of a problem with the vehicle license fee when it was in effect. I never did understand why that fee was such a hot button issue. However, I do think that if that fee gets restored some day, the revenue should be allocated to roads and transportation projects. I think that if a fee like that (really a tax) gets imposed and is specifically tied to a particular activity like vehicles/transportation, the money collected should then be allocated to transportation.

Posted by Patrick on Apr. 01, 2010 @ 9:26 pm

I'm generally not a proponent of high/increased taxes, but I'll concede I didn't have much of a problem with the vehicle license fee when it was in effect. I never did understand why that fee was such a hot button issue. However, I do think that if that fee gets restored some day, the revenue should be allocated to roads and transportation projects. I think that if a fee like that (really a tax) gets imposed and is specifically tied to a particular activity like vehicles/transportation, the money collected should then be allocated to transportation.

Posted by Patrick on Apr. 01, 2010 @ 9:26 pm