Look upon California and despair.
Last weekend, Gov. Jerry Brown delivered the latest in a long line of bad news. Turns out the budget deficit is far worse than he claimed in January: What then looked like “just” $9 billion worth of red ink is now $16 billion.
And tax revenues in April came $2 billion short of state projections.
The Golden State boasts the world’s ninth-largest economy — and an 11 percent unemployment rate. For all its natural beauty and vast resources, it now has the worst business climate in America.
And now California has been driven to the brink of insolvency and ruin by a progressive political culture that doesn’t know when to say when.
Hardline Democrats call most of the shots in the Legislature, as clueless Republicans struggle to hold enough seats to stop the supermajority vote needed to raise already sky-high taxes into the stratosphere.
Since tax increases can’t pass the Legislature (for now), Brown wants voters to approve the highest sales and income tax rates in the nation.
Sure, he’s promising spending cuts, too — $8.5 billion and counting. “We will have to go much farther and make cuts far greater than I asked for at the beginning of the year,” Brown said.
Actually, his proposed budget hiked outlays $5 billion over last year: The “cuts” were from reductions in planned spending increases.
But such facts aren’t convenient for the governor’s tax-hike plea. “We can’t fill this hole with cuts alone without doing severe damage to our schools,” he said. “That’s why I’m bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety.”
If voters approve Brown’s plan, the state’s top tax rate would leap from 10.3 percent to 13.3 percent for seven years. Sales taxes would jump a quarter of a penny, to 7.75 percent on average, and expire after five years.
Brown claims the tax hike would rake in another $9 billion a year, with most of the money supposedly going to schools.
It’s all baloney — and Brown knows it.
Most of the money, in fact, would go to teacher pensions. The California State Teachers’ Retirement System has a yawning unfunded liability of more than $60 billion.
That $9 billion figure assumes the rich are dumb. In 2008, 43,000 Californians reported adjusted gross incomes of $1 million or more. In 2009, just 34,000 did — a 20 percent drop. Those are the people Brown’s tax hikes would hit hardest. How many will pull up stakes and head for friendlier climes?
Brown returned to the governor’s office last year after a 30-year hiatus on a promise of signing “honest” budgets. That promise lasted about six months.
Within six weeks of Brown signing an $86.5 billion budget last June, state Controller John Chiang was telling anyone who’d listen that revenues in July — the first month of the new fiscal year — were running 9 percent below the budget’s magical assumptions.
Fast forward to January of this year, when Brown released the first draft of his 2012-13 spending plan. This time, he hedged a little, calling it “an honest budget . . . but it’s not a fortune-telling budget. We don’t have clairvoyance at the Department of Finance.”
A few weeks later, Chiang was back. This time, he warned that the state would run out of money by March: Tax revenues were $2.6 billion below the state’s projections, and spending was running $2.6 billion over them.
The Legislature averted a cash crisis by borrowing $3.3 billion — but the Democratic majority refuses to cut spending, and the Republicans can still stop tax hikes, so the state’s still headed for ruin.
And here we are.
Not so long ago, Jerry Brown was promising Californians “wine and roses, but not in 2012.” At the rate the state is going, come 2013 we’ll be lucky to afford beer and pretzels.
Southern Californian Ben Boychuk is an associate editor of the Manhattan Institute’s City Journal and contributor to PublicSectorInc.org.