Not So Golden

Not too long ago I was watching TV and saw an ad with Arnold Schwarzenegger and Maria Shriver sitting at some sun-dappled outdoor cafe, urging viewers to come to California because it was better there. That ad now seems like a kind of cruel joke. With the defeat of a number of ballot initiatives yesterday, California is facing a projected $21 billion budget deficit — and with the way the state’s tax revenues have been falling, that deficit number will probably be even larger than the current projection.

California’s finances are something of a train wreck. According to this article, the Golden State’s credit rating is the lowest of any of the 50 states! Homes located in the state have lost a significant part of their value during this recession, and indications are that many people who moved to the state are leaving. Although some people blame the voters and California’s broad allowance of referendums, I can’t blame the voters for rejecting the ballot initatives, which included a massive tax increase and such dubious schemes as borrowing against future lottery proceeds and taking money from dedicated programs to fund general revenues. So, the Governor and the Legislature will have to go back to the drawing board and come up with new ways to deal with the budget shortfall.

California may simply be leading the way for other states, as it often has in the recent past. The main difference between California and the federal government is that California has to balance its budget, whereas the federal government does not. California can’t print money, but the federal government can. The message that California voters are sending, however, seems unmistakable and should apply equally to any level of government — whether federal, state, or local. Voters simply don’t want to be taxed more, and governments which expect voters to approve taxes to solve budget problems are just fooling themselves.

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