California Does NOT Need A Tax Increase

Governor Brown has a budget shortfall of $28 billion. He seeks to get $12.5 billion from spending cuts. That is 44.6% of what needs to be done.

Please consider California’s Brown Unveils $12.5 Billion in Spending Reductions

California Governor Jerry Brown’s budget will cut spending by $12.5 billion, including as much as a 10 percent pay reduction for most state employees, aides said.

The largest U.S. state by population faces a $25.4 billion budget gap over the next 18 months, Brown said in a statement. The 72-year-old Democrat, who took the oath of office last week, has vowed to reach a budget agreement with state Legislators over the next 60 days.

“These cuts will be painful, requiring sacrifice from every sector of the state, but we have no choice,” Brown said in the statement.

His plan will chop an amount equal to 10 percent of the current year’s $125.3 billion in spending. Cuts include $1.7 billion from Medi-Cal, the state’s version of the Medicaid program for the poor; $1.5 billion from CalWorks, a welfare-to- work program; and a combined $1 billion from the University of California and the California State University systems, which together serve 663,000 students.

Additional cuts will be made to prisons and the courts. Spending on kindergarten through 12th-grade education will be spared, Brown said.

Voters will be asked to extend increases in sales and income taxes as well as vehicle license fees in a special election in June, Brown said.

Eliminate Waste Not Just Reduce It

The Governor should plan on 100% of what’s needed to come from cuts, better yet 150%. I have not seen any proposals to eliminate unneeded departments.

I talked about that in California Budget Balancer Interactive Map from LA Times Misses the Mark. Here is a repeat of that post for convenience.

I just took the interactive LA Times California Budget Balancer exercise.

I vehemently protest.

This was a blatant effort to force people into accepting a need to raise taxes. To balance the budget I made every possible program cut offered. It was not enough. To balance the budget I had to raise sin taxes and gas taxes.

There are worse solutions of course, like hiking income taxes or corporate income taxes.

Exercise Misses the Mark

• Where was a proposal to privatize the prison system using non-union labor?
• Where was the proposal to eliminate prevailing wage laws?
• Where was the proposal to eliminate defined benefit plans for all government workers?
• Where was the proposal to virtually privatize every conceivable government job to the private sector?
• What about programs that could be eliminated entirely?

California Agencies

Look at this disgusting list of California Agencies.

I sorted out some but not all of the more ridiculous ones.

Does the state need a ….

• Acupuncture Department
• Office of AIDs
• Air Research Board
• 3 different agencies for alcohol and beverages
• 2 Apprenticeship Councils
• Art Council
• Asian Pacific Islander Legislative Caucus
• Bureau of Automotive repair
• Barbering board
• Biodiversity council
• Calvet Loan program
• Climate Change Portal
• Coastal Commission
• Cool California
• 4 Delta agencies
• Digital Library
• Bureau of Electronic and Appliance Repair
• Employment Training Panel
• Energy Commission
• Equalization Board
• 2 Fair Employment agencies
• Film Commission
• Flex Your Power
• Healthy Family Program
• Hearing Aid Dispensers Bureau
• Home Furnishings Bureau
• Humanities Council
• Independent Living Council
• Indoor Air Quality Program
• Economic Development Bank
• Interagency Ecological Program
• Labor and Workforce Development
• Latino Legislative Caucus
• Learn California
• Little Hoover Commission
• Maritime Academy
• Managed Risk Board
• Museum for History
• MyCali Youth Portal
• Native Heritage Association
• Natural Community Planning Program
• Naturopathic Medicine Community
• Outreach
• Peace Officer Standards Board
• Postsecondary Education Commission
• Prison Industry Authority
• Privacy Protection Office
• Psychology Board
• Railroad Museum
• Recovery Task Force
• Refugee Branch
• Regents of the U of C
• Save Our Water commission
• Smart Growth Caucus
• Status of Women Commission
• Take Charge California
• We Connect
• Wetlands Information System
• Workforce Investment Board

California does not need ANY of those. Moreover I assure you I missed dozens more that could be cut back if not eliminated entirely. What the heck do those cost? And how much can be saved by my suggestions above.

I propose the LA Times re-do their preposterous exercise meant to convey the idea that taxes have to be raised. They don’t. In fact, I bet they could be lowered.

Here is the LA Times Discussion Thread on California Budget Balancer

For more ideas on how to Fight California Tax Hikes please visit the Howard Jarvis Taxpayers Association

Screw The Tax Hikes

Until the governor gets serious about eliminating waste, not just cutting it, there should not be any discussion of tax hikes.

California voters should tell Governor Brown to “go to hell” on those tax hikes. In the meantime, I would like to see the legislature agree to those $12.5 billion in spending cuts. Then after voter rightfully reject his proposals to hike taxes, Brown can try again to find the remaining $15.5 billion.

Here are some suggestions

• Eliminate defined benefit plans for all newly hired state workers
• Increase the required contribution rates for existing members of defined benefit plans
• End collective bargaining of public unions
• Eliminate prevailing wage laws
• Privatize the state prison system
• Eliminate dozens of useless California Agencies in the list above

If the governor does all that, he can cut taxes not hike them.

About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.