On February 20th, the San Jose Mercury News published a column by David Crane offering advice to California’s elected officials on fiscal issues. This is the same David Crane who provided fiscal counsel to former Governor Arnold Schwarzenegger. Those who remember the fiscal brilliance of the Schwarzenegger administration might expect the whoppers to be coming fast and furious. Relax; you aren’t going to be disappointed.
Crane’s major thesis is that there are two other categories of expenditures in addition to corporate subsidies and pension costs that are “crowding out” government spending for public services. The infamous two are the salaries of government employees and debt service to Wall Street. Because of them, there isn’t enough money available for UC, CSU, parks, etc.
With this argument we’ve entered mega-whopper land.
Let’s start with salaries. The most obvious point is that the services Crane allegedly wants to protect are provided by public employees who work in exchange for…well… salaries. For example, about 54% of the UC core operating budget is for salaries (and that’s without benefits).
Secondly, Crane specifically cites California cities such as San Jose as places where the infamous two are causing cut backs in libraries, community centers and so forth. But San Jose has become a poster child for demolishing the argument that you can merely slash public employee compensation and then staff up with qualified cheap replacements. San Jose has had to pay a temporary employment agency $270,000 a year for a single FTE (full time equivalent) at the sewage treatment plant because skilled personnel left for better jobs elsewhere. While crime skyrockets, San Jose’s combination of pay cuts, pension “reform,” and contempt for disabled public safety personnel has made it impossible to hire more police (there are 70 budgeted vacancies as I write).
Moreover, just last week the city’s senior management team presented an analysis of San Jose’s fiscal plight to the City Council. This is the same crew that implemented one of the most anti-public employee onslaughts in the state. Yet they emphasized that the city’s fiscal woes were significantly the result of a weak tax base, that employee compensation would likely need to be increased, and that a tax increase was overdue.
Finally, Crane alerts readers to the fact that payments for Wall Street and retirement costs are responsible for those pesky fee hikes residents are experiencing. However, fee hikes began decades ago when pension costs were low but the combination of Proposition 13 and Proposition 218 made it impossible for local governments to legislatively increase revenues by any strategy other than fees.
And now on to Wall Street.
First, much of local government’s debt doesn’t crowd out any city services. The debt is the result of voter approved general obligation bonds, and they’re paid for out of property tax levies, not local government general funds.
Second, in the vast majority of cases at the local level, residents get something for the debt service – capital projects like libraries, fire stations, or transportation improvements.
Third, it is true that the State of California has issued large amounts of debt – not to pay for capital projects but to pay for its operating budget. But that less than responsible behavior is not the fault of Wall Street but of the Governor who proposed such policies. Let me recall…there was a humongous $15 billion dollar bond brought forward to pay for the state’s basic expenses shortly after the Gray Davis recall. I believe the Governor who supported it was named Schwarzenegger.
Last, but certainly not least, Crane somehow omits another fiscal practice that has left California without resources to pay for critical services. That practice is blowing gigantic holes in the budget for pure political gain. A case in point – immediately upon taking office, Governor Schwarzenegger demanded a $4 billion cut in vehicle license fees with no prospect of replacing the lost revenues.
What can I say? For a man seeking whoppers, a column by David Crane can be like a school of silver salmon entering the mouth of an Alaskan river.
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