California Budget Passes, to Popular Dismay

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A new California budget plan has been approved this morning, after 15 weeks of indecision. The Wall Street Journal reports:

California’s legislature approved a plan Thursday morning to close the state’s $42 billion budget deficit through steep cuts and new taxes, after state leaders corralled the last Republican vote needed to end a 15-week partisan impasse that has battered an already-crippled state economy.

The budget calls for California to generate up to $13 billion in revenue by raising sales taxes one percentage point and adding a surcharge on state income taxes, among other steps. One feature represents a remarkable capitulation for Mr. Schwarzenegger: an increase in the vehicle-license fee from 0.65% to 1.15%. The governor won his post in 2003 after campaigning to cut back the so-called car tax, which he did soon after taking office.

The proposal calls for the state to slash $15 billion in spending, including $8.6 billion from education. To save $1.4 billion from payroll costs, the government will eliminate two state holidays, change overtime rules and furlough workers at least one day a month. The remaining deficit was to be closed mostly through borrowing or with money from a federal-stimulus package.

The spending plan also includes $700 million in tax breaks for large corporations. Voters later this year will have to approve some aspects of the plan, such as a spending cap. The proposed budget outlines spending for the next 17 months. Some of the taxes and cuts will go into effect almost immediately, while others will begin July 1.

The Sacramento Bee reports on how people feel about the budget:

Even before it passed, the budget drew almost universal criticism in California, which, with 37 million residents and a gross state product of $1.6 trillion, is the nation’s most-populous state and is the equivalent of the world’s eighth-largest economy by some measures. “Certain elements of this [budget] will exacerbate future challenges, rather than minimize them, and will make it harder for California to have a healthy economy,” said Jean Ross, executive director of the nonpartisan California Budget Project. “Individuals, particularly those teachers who lose their jobs, people who depend on certain public-assistance problems, will experience a very major impact.”

Labor unions blasted the compensation cutbacks. Taxpayers associations decried new levies in one of the country’s highest-taxed states. And economists said the cuts and taxes will exacerbate the woes of a state facing rising unemployment and foreclosure rates.

So people are dissatisfied, but the government said it had to take immediate action. Sounds like the national crisis.

Why doesn’t anyone in California address the bloated state workforce and inefficient budgeting system?

  • While I’m relieved that my state won’t be going bankrupt (at least today), I am not pleased about some of the ways they went about ensuring this budget was handled to begin with. As a the owner of a website development company, I am aware of what it takes to run a successful business, but I don’t do that by inflicting unnecessary costs onto my clients. I feel this budget hurts those of us that it is intended to help. But, that being said, I’m not sure there was any better alternative.

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  • I am a business owner in California, and have been extremely worried about the way our local government has handled our economic crisis. While I am not pleased with a lot of what it is in this plan, I also would not have been pleased to lose clients because they no longer had a job. Now that it’s done, I can only hope it works.