California budget deal punishes the poor

July 28, 2009

Jerald Reodica examines the injustices of the California budget agreement worked out between Arnold Schwarzenegger and Democratic lawmakers.

"PEOPLE ARE going to die." Those were the words of Michelle Rousey, chair of the Public Authority Advisory Board for In-Home Support Services (IHSS) in California--as the cruel details of a budget deal worked out between Republican Gov. Arnold Schwarzenegger and the Democratic-dominated State Assembly emerged.

California's state political leaders approved cuts totaling a staggering $15.5 billion. From conservatives to liberals, lawmakers chose to steal resources from programs meant to help students, infants and children, the elderly, the disabled, the poor and the working poor--instead of raising taxes on the state's rich and California corporations to cover the budget shortfall.

The politicians ignored those who will bear the terrible brunt of these cuts. For her part, Rousey was speaking for those who can't get out of their homes and beds. With the aid of her electric wheelchair, she attended a recent protest against budget cuts in San Francisco, where she described for the crowd the real effects of the budget deal: Poor and working people's futures are literally on the line.

Marching against the California budget cuts in San Francisco
Marching against the California budget cuts in San Francisco (Steve Rhodes)

But it was a different story in the California capitol building in Sacramento, where there were bipartisan hugs and handshakes all around after lawmakers gave their approval to the deal after a "grueling" 20-hour session.

"We don't know whether or not we will be back at this," said Democratic state Senate President Pro Tem Darrell Steinberg. "We probably will, but I must tell you, we can...find common ground more often than not."

But finding "common ground" has meant caving into Schwarzenegger's demands for deeper spending cuts, while not raising corporate taxes and taxes on the wealthy.

The scale of the reductions in state programs is stunning. Major cuts include: $6.1 billion in K-14 education funds (including $700 million from community colleges); $2.8 billion in higher education funding from the University of California and California State University systems; $1.3 billion taken from workers' paychecks through a forced furlough program for the next year; $1.2 billion from the corrections system; a $1.3 billion cut in Medi-Cal, the state's version of Medicaid; $528 million from the state's welfare program CalWORKS; $226 million from the In-Home Supportive Services Program; and $124 million from the Healthy Families Program.

Besides cutting budgets for critical programs, the state also will grab tax money previously slated to go to local authorities, which will lead to further painful reductions. "If Sacramento goes forward with a proposal to nab $1.7 billion in community redevelopment funds, Los Angeles would lose an additional $70 million to develop projects in blighted neighborhoods," a Los Angeles Times blog noted.

And there's worse to come. About one-third of budget gap is being covered with accounting tricks and dubious revenue-raising schemes--for example, saving $1.2 billion in a one-time deferment of state workers' paychecks to the next fiscal year. The effect of these schemes will be to kick the problem down the road--and set the stage for more cuts in the future.

Plus, Schwarzenegger said he would pull out his "blue pencil" and enact additional line-item spending cuts before signing the final legislation.

MISSING FROM the mainstream discussion of the budget crisis is the fact that some of the world's most profitable corporations--including Apple, Genentech, Intel, Paramount Pictures, Walt Disney and Warner Brothers Entertainment--are getting away scot-free. They'll be able to continue avoiding their full share of corporate taxes by using deductions, credits and other preferential tax treatment.

According to a California Budget Project report titled "To Have and Have Not," both the September 2008 and February 2009 California budget agreements created tens of millions of dollars worth of tax breaks for state corporations. In addition, corporations can choose to be taxed solely on the share of their sales that occur in California--some forecasts suggest this will cost the state up to $1.5 billion a year in lost revenues.

Beyond the recent budget agreements, the crisis in California is in large part a product of the passage of Proposition 13 in 1978, which put a cap on property tax rates. The cap primarily benefited corporations and the rich, because property taxes on their mansions and office parks are locked in at the rate of 30 years ago.

In addition to lowering property taxes, the initiative requires a two-thirds majority in both houses of the state assembly for future increases in all state tax rates, including income tax rates. This requirement has allowed a Republican minority in the legislature to hold the budget process hostage--and the people of California with it.

So when it came to closing the deficit, the discussion in Sacramento was limited to how deep to cut spending. As left-wing author Mike Davis put it in a speech at Socialism 2009 in San Francisco:

Here you have the governor and his gang of Republicans, and they're holding the people captive and threatening to shoot them one by one unless their demands for budget cuts and a new stage of Republican fiscal revolution occurs. And on the other hand, you have the leadership of the Democratic Party in Sacramento, [Assembly Speaker] Karen Bass and Darrell Steinberg, saying, "Oh no, don't shoot all the passengers, just shoot half the passengers."

Thus, in the name of bipartisanship--and saving California's credit rating from junk bond status--legislators passed a package of laws that leave the passengers behind.

Controller John Chiang will now be able approach Wall Street to obtain the state's annual short-term loans with the promise that the state will stop paying creditors with the IOUs they have been issuing since July 2. One factor driving the budget negotiations was the ultimatum from a group of the country's largest banks--including Bank of America, Citigroup, Wells Fargo and JPMorgan Chase--that they would stop accepting state IOUs.

But despite the budget's passage, the state's financial woes aren't over. According to the Wall Street Journal, some economists predict the budget shortfall will swell by an additional $5 billion to $10 billion during the fiscal year.

Now is the time to organize an opposition that not only challenges the politicians and bureaucrats implementing these cuts, but encourages more people to mobilize against the skewed priorities in Sacramento. A long-term struggle can begin with organizing the newly unemployed to demand job creation and job training programs from the state government.

A resistance that unites workers, students, seniors, the disabled and all the victims of the budget ax can begin to put forward an alternative to the lawmakers' negotiations over how much to cut--beginning with a very simple demand: Tax the rich.

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