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From Jim Gilliam's blog archives
Keeping it Legal in Cali

July 24, 2003 5:27 PM

Well, the recall election was set today for October 7th. Not coincidentally, the budget compromise was also announced. As seems to be happening more frequently in California politics, Daniel Weintraub asks the question: Is the $11 billion bond to finance the deficit legal?


The state constitution prohibits borrowing more than $300,000 without a vote of the people. While court decisions have permitted short-term "revenue anticipation" bonds for cash flow or to tide the state over in tough times, the breadth and scope of this bond would be unprecedented. Now the Pacific Legal Foundation has threatened to sue if the bonds go forward without a public vote.

Such a suit would place into doubt the two biggest pieces of the budget deal: the $4.2 billion tripling of the car tax engineered by Davis earlier this month, and the $10.7 billion deficit bond. Court decisions nullifying either one of them would be a devastating blow to the state’s fiscal condition, perhaps even enough to send California into insolvency.


We must look like complete idiots to the rest of the country.

More from the archive in California, Incompetence.

Keeping it Legal in Cali (07.24.2003)

Next Entry: Dear Mr. Cheney (07.25.2003)
Previous Entry: Desperately Seeking: 1 Smoking Gun (07.23.2003)

Read the 9 comments.

dhermesc:

Agreed, California does look like the land of Fruits, Flakes and Nuts.

IF Davis is recalled, I really don't see any way for California to get out of the mess its in without biting the bullet and cutting programs. No person who takes over the governorship is going to be popular unless they can balance the budget without making cuts or raising taxes, provide cheap power without building power plants and enforce laws without making arrests. If Davis is recalled I see the next governor (dem or rep) facing the same fate. Frankly I am surprised anybody even wants to run for a job you are doomed to fail at.

The rest of America better hold on to their wallets because in the next couple of years California is looking to them to solve their problems, mainly by ponying up BILLIONS of dollars. I just hope that who ever is president has the backbone to tell them to solve their own problems, much the way Ford(?) told New York back in the 70s.

Fri Jul 25 2003 8:55 AM


Jim Gilliam:

So true. Davis actually tried to make the tough service cuts and tax increases necessary to balance the budget with his first budget proposal back in January. The legislature would have nothing to do with it. Republicans refused to raise taxes, Democrats refused to cut services. Stalemate, Davis is caught in the middle. I don't see how that changes with a new governor.

The big problem is that California requires 2/3 majority to pass a budget, meaning even though the legislature is overwhelmingly Democratic, they still need 2 Republican senators and a half dozen assemblymembers to pass it. Instant gridlock.

There is a movement (yet another petition!) to reduce that requirement to 55%. I believe that's the only real solution at this point.

Fri Jul 25 2003 10:05 AM


Paul in OC:

I'm appalled (once again) at the lack of thoughtful analysis in the media. Has anyone done an in-depth investigation to show how we got to where we are? I have a strong suspicion that Pete Wilson's foolish energy privatization scheme, and the rampant fraud and energy crisis which followed, are responsible for a good portion of the budget shortfall.

Now that I think about it, I remember hearing UCI's Peter Navarro comment on KPCC 89.3 that his analysis showed California may be out upwards of $20 billion due to fraud which took place in the energy markets. How have Republicans avoided responsibility for the deregulation disaster which was enacted by a Republican governor? The whole thing was Wilson's pet project. He's 100% responsible for the fiasco it turned into.

Fri Jul 25 2003 2:11 PM


dhermesc:

I am not as well informed about WHO started the energy crisis as I am about WHY the energy crisis started.

California moved to a privatized energy sources in hopes of competitive bidding to keep costs low. During that move a blunder of epic proportions was committed, and continued until 2002. State regulations prohibited LONG TERM CONTRACTS! Energy was bought DAILY on the spot market. With no long term contracts any near term shortages resulted in tremendous price fluctations. California envisioned there always being plentiful amounts of power and companies competing to sell. It never occured to them what might happen if California had to compete for a limited supply.

The best analogy I have heard would be if the government made canned goods and refridgerators illegal, your food needs would have to be purchased daily at the local market. Imagine the panic buying and price fluctuations the one day the market runs out of food and what little there is left is auctioned to the highest bidder. You will pay whatever price is demanded so that your family won't go without.

Fri Jul 25 2003 2:42 PM


ms. haplopia:

I have an idea for fixing the problem. How about if we outlaw offshore incorporation
once and for all?Okay. It's not really my idea, but it sure does make gobs of sense to me. Here's
some thinking from Ms. Huffington on the topic."According to a new study released last week by the Multistate Tax
Commission, a nonpartisan coalition of state taxing authorities, corporate tax
shelters robbed states of $12.4 billion in desperately needed revenues in 2001
-- a figure that represents more than a third of the money corporations rightfully
owed."And according to Ms. Huffington California is not alone in its budget disaster."Meanwhile, all across the country, state governments, facing the
biggest budget crisis since the Great Depression, are being forced to slash
programs and cut services.
Companies sheltering their assets overseas are draining another $70 billion
a year from the federal Treasury -- funds that often make their way back to
states through programs such as Head Start and AmeriCorps."

Fri Jul 25 2003 10:11 PM


Paul in OC:

"Under Wilson's direct order, the utilities also were prohibited from contracting ahead with these firms for power, forcing them to buy power on the wild spot market, with no limit being placed on the price they would have to pay."

Source: Electricity: This is Wilson's Monster

Courtesy of The Likely Story

The electricity crisis was entirely Wilson's fault, but once again a Democrat takes the fall for an incompetent Republican.

Mon Jul 28 2003 10:23 AM


dhermesc:

Paul in OC:

Before you get to carried away in your excitment for finding a villian for the hapless Fog Davis, lets look at a few facts. First, if the energy policy was as obviously flawed as you state, why did Davis only extend contract terms one month instead of 6 months or even a year or more when he took office (info from your own referenced story)?

Second, California has a SPENDING PROBLEM, not a revenue problem. From 1998 to 2003 revenue has increased 26%, during the same period the population and inflation rates have increased by 21%, but spending has increased 45%. Had California stuck with the "Gann Limit" (spending increases only by the combined inflation population increases) it would currently enjoy a 5 BILLION dollar SURPLUS, and a 5 BILLION SURPLUS from the previous year also, instead of a 35 billion DEFICIT this year. As for the "Draconian" cuts Davis has implimented, what a joke. Since March 2002 California has had a hiring freeze, but by March 2003 37,000 new public employees have been added to the California's payroll.

Mon Jul 28 2003 2:47 PM


Paul in OC:

dhermesc,

It's not about finding a scapegoat for Davis - it's about knowing the truth.

Read the article again - "the PUC [not Davis] overrode the deregulation law and began allowing the utilities to purchase power in blocks of a month ahead".

Please try again to explain to me why Davis is responsible for a failed deregulation scheme he had no hand in crafting. I'm still trying to understand that part.

Ever wonder if the $20 billion+ which was fraudulently billed to California might have contributed to California's so-called spending problem?

I would like to know the true cause of the budget mess. I could buy that part of it is Davis' fault, and I could even buy that he could have managed the energy crisis better (I'm not sure what he could have done vs. out-of-state energy suppliers), but dropping responsibility for the whole thing in his lap is dishonest and (dare I say it?) revisionist history.

Mon Jul 28 2003 10:53 PM


dhermesc:

Paul in OC:

Couple of problems with your reasoning, first the current budget is the problem, not what was spent two years ago. Second, Davis himself is only claiming that California was overcharged 9 billion dollars, a long way from the current budget deficient of 30+ billion. Of that 9 billion, 3 billion has never been paid, and that is about the amount that FERC has said that would never have to be paid. Even had the energy shortage not occurred, the 6 billion it costed doesn't go very far in balancing California's budget. As for the PUC, if Wilson could bend them to his will, why couldn't the charismatic Davis?

As I stated in my first post California has neither the will or desire to solve its self inflicted problems. The additional spending and unrealist revenue expectations under a liberal governor and legislative branch for 4 years has devistated the financial landscape of California for years to come. Not to mention their "secret" plans of prolonging the budget crisis that they managed to announce through the capital a week ago. You can dare to say whatever you want, just try and keep it honest.

Tue Jul 29 2003 5:56 AM


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