On the CA budget crisis and my lack of expertise

A few weeks ago at lunch one of my co-workers asked why the California budget is in such terrible shape.  Her sister-in-law was claiming outrageous things about excess spending.  I argued, pretty forcefully, that the current budget crisis (and the failure to find a timely solution to it) is caused by three things:

1. The proposition system, which ties up much of the state’s budget, leaving the legislature no room to maneuver;
2. Proposition 13, passed in 1978, which limited state tax revenues (specifically property tax revenues); and
3. The two-thirds rule, which states that all new taxes have to be approved by two-thirds of the legislature.

The people I was eating lunch with all seemed to believe my assessment.  After lunch, the co-worker who had started the conversation asked me for an article or two that she could send to her sister-in-law to straighten her out.  I went looking and realized that the reason I believed the argument made above was that I had read it in a couple different blogs.  Writers I trust had made these claims, and I believed them; but that hardly seemed like sufficient evidence to convince someone who did not want to hear it.

After sending on the information I had, I started digging around.  This report (http://www.ppic.org/content/pubs/report/R_1208BCR.pdf) from the Public Policy Institute of California (PPIC) examines the institutional constraints on the budget.  Comparing California tax and spending levels to pre-Prop 13 levels, as well as to the levels in other states, PPIC finds that California tax revenues are about the same as a percent of GDP as they were before Prop 13 (though they did plunge in 1979).  That is, we have managed to raise other kinds of taxes to make up for the loss of property tax revenue.  As PPIC also points out, the California state government has largely been divided for the last thirty years, with Republican governors serving as a check on tax increases just as surely as the two-thirds rule.   We also spend about the same amount on about the same priorities, and only ten percent (cite) of the budget is actually tied up in mandatory funding from propositions.

In short, it turns out that none of the three things I listed really caused the problem.

So what did?  My modified answer is: a highly unstable tax base.  Income taxes – particularly on high marginal incomes – service fees and bonds now make up a much larger part of our revenue stream.  When capital gains plunge, as they did last year, the state budget takes a major hit.  Similarly, in a recession that has everyone scrambling to be thrifty and save up, people are less likely to approve temporary bond measures.  You can blame this on Prop 13 (we would not have to turn to such unstable revenue streams if property tax revenue had not become largely off limits) but then again, what is more unstable than property right now?

I still think the two-thirds rule (which applied to both tax increases and the whole budget, as it turns out) is trouble.  We would still be in a fiscal crisis, but we could probably have passed a budget a lot faster than we did last year if we did not have to beg for minority support.

My larger point is one of expertise.   I consider myself a well-informed person, and I’m known among certain groups of friends as a political/policy wonk.  But this incident made me realize how little I really know about some of the things I happily pontificate on.  More reason to be excited to engage with GSPP, where I hope to complicate a lot of things I think I already know.

(Hopefully to be cross-posted here once I get my login credentials.)

if only I could see the future

So the reason I am in New Jersey at the moment, instead of, say, on Monday, is that I was trying to go to a Camp Obama training session, which I was told would put me on track for a campaign job. The training was Friday and Saturday, and I signed up too late – but wasn’t sure that I was too late until after I had booked my ticket. Now I am here, untrained.

Tonight, just when I was about to go to bed, I received an email from the Obama campaign inviting me to Camp Obama… in California. They are now holding fifteen or so of these trainings, on the West Coast. Argh. If you go to a training, they then send you to a swing state. So I applied, anyway – I guess nowadays flying across the country is no big deal – but I feel very silly. Every step I take seems to be in the wrong direction these days.

In other encouraging news, a friend of a friend sent me a long email about where I should apply for campaign jobs, including possibly Florida (their offices opened late because of the primary issues). I submitted a resume to the national campaign also, just in case they are randomly hiring (which apparently does happen). Fingers crossed something works out.

EDIT: I almost forgot – Biden looks like the VP (still no text message though! boo Obama campaign!) I am OK with this choice though not super excited. I think Biden balances out Obama’s inexperience with foreign policy/McCain’s experience. I also think that Biden is good at attacking Republicans (remember how he dismantled Giuliani with the “noun, verb, and 9/11″ thing?) Both of those are good things. But he is a little conservative in other ways for my tastes, and he has a tendency to say really stupid things. So I am OK but not ecstatic. That’s fine – I was ecstatic when Barack won the nomination, and one super exciting person on the ticket is enough.