News this week that California tax receipts are down is not surprising.
In a report State Treasurer Jon Chiang said revenues from corporations were down a whopping 213 percent and revenue from personal income was down by 19 percent. This tells me the two groups that earn income to pay taxes are earning less or leaving the state. If true, it’s a bad omen.
According to Chiang’s report the state began the year with a $9.6 billion deficit and as of Nov. 30 the deficit had swelled to $24.9 billion and was being covered by internal borrowing (borrowing money from other funds) and $10 billion in external borrowing. If this sounds bad it’s because it is.
Sadly while the state’s debt is increasing services appear to be decreasing. According to the organization Calwatch, California now ranks 30th in the nation for K-12 school performance and the state ranks 43rd in spending per student. In the 2011-12 budget the state proposed cutting funding for parks by 50 percent. Where is the tax money going?
An area where California seems to be doing well is increasing pay and pensions for public employees. According to a report published by the Congressional Budget Office public sector workers are now earning 16 percent more than private sector employees and a report published Dec. 7 by the Pacific Research group, a division of the California Watchdog Organization, stated that, “a key driver of the budget crisis is overly generous government compensation packages” and that “accounting for retiree health benefits and defined pension plans generates a public compensation premium of 15 percent.”
For many California cities the cost of these generous pensions means reduced services for residents. The city attorney of San Bernadino recently told residents that they should, “lock your doors and load your guns,” in response to the city’s inability to protect residents. This sounds like Greece, not California.
I think the residents of North County need to begin discussing the state’s financial woes and the impact on our local economies and families. Just how did we get here?
In Encinitas the councils of the past 10 years approved pay and pension increases of more than 35 percent. Encinitas has a city manager earning near $225,000, who just hired a financial analyst getting $160,000; they also get pension packages. Add to this that Encinitas has five retired employees who get combined pension payouts that total close to $1 million and it becomes apparent this is unsustainable. Tax money that should be going to serve residents is instead serving high priced pensions.
We could choose to ignore these warnings, but do so at our own peril. Turning a blind eye to the reasons why the state has the fiscal problems it does make the problem worse. Let’s begin the discussion of how to make it better. You can’t spend money you don’t have and you can’t borrow money you can’t pay back.