Is California the next Greece?
It’s a legitimate question given the attacks on the California commons that began with Proposition 13 and continue with the ongoing ravaging of the institutions built up over the generations.
Starved of cash by a powerful set of interests organized by the California Chamber of Commerce, the California Taxpayers Association, and other industry-backed lobbies, the state is looking very Grecian these days.
Jerry Brown, the Swidden governor
Back in the days we were studying anthropology in the Groves of Academe, slash and burn was the name given to the practice of primitive forest agriculture where farmers burned the existing vegetation, then planted their crops in the ash-enriched soil. Once the soil is depleted, the farmers move on to slash and burn again.
Today the practice is called Swidden,
But unlike the practitioners of old, California’s slash-and-burn governor will have no new forests to burn once this one’s consumed.
From Guy Adams of The Independent:
Taking a deep breath, California’s most powerful man strode to a lectern and unveiled the fiscal policy that he hopes will keep America’s most populous state from falling into bankruptcy.
“You name it,” he declared, “and we’ve got to cut it!”
It wasn’t the most nuanced announcement. But this is no time for subtlety. After years watching his state fall deeper and deeper into the red, Governor Jerry Brown used a gloomy Monday night press conference to unveil what aides described as the ultimate in austerity budgets.
Welfare payments, healthcare for the poor, and benefits for elderly and disabled Californians will be immediately slashed by around $8.3bn (£5.2bn), which equates to roughly 17 per cent of Mr Brown’s entire discretionary budget. And state offices, which employ roughly 200,000 people, will switch to a four-day, 38-hour work week.
The radical proposals came days after it emerged that the Golden State, which is currently suffering 11 per cent unemployment, has a projected annual deficit of $16bn, far higher than the $9bn predicted in January. Its total debt is now around $40bn, giving it the lowest credit rating of any US state in recent history and prompting fears of a Greek-style default crisis.
As with most government cuts under the austerian regime, the poor and the young will be those most hurt.
More details from Steven Harmon, Josh Richman, Sharon Noguchi, and Karen de Sá of the Oakland Tribune:
In his revised budget, Brown also proposed cuts to hospitals and nursing homes to reduce Medi-Cal costs; barring colleges and universities that can’t meet minimum performance standards from taking part in the Cal Grant program; reducing state workers’ pay by 5 percent through contract renegotiations; and using assets that used to belong to local redevelopment agencies.
K-12 schools and community colleges would be hit hardest if the tax proposal fails at the ballot, a $5.5 billion plunge that would drop their funding to $48.2 billion. In the current fiscal year, schools, which get about 40 percent of the state’s general-fund revenues, received $47 billion.
And the downgrade warning follows
Note the perversity of the modern financial game: If you don’t impose austerity, you get downgraded. In other words, you’re only rewarded for inflicting misery. And unlike S&M games, there’s no “safe” word to temper the violence of the market.
One bond rating agency was quick to respond to Brown’s apocryphal pronouncement, reports Chris Megerian of the Los Angeles Times:
The ratings agency Standard & Poor’s warned on Tuesday that it could downgrade California’s financial outlook if lawmakers don’t pass a credible budget plan this year.
A final budget is due June 15, and lawmakers’ task has become increasingly difficult as the state’s deficit has swelled to nearly $16 billion.
“We could change the outlook to negative or lower the rating if we believe the state’s credit quality weakens through the budget process,” said a report from Standard & Poor’s.
The ratings agency had upgraded California’s financial outlook from “stable” to “positive” in February. That means California’s credit rating of A-, the lowest of any state, is poised for improvement.
Gov. Jerry Brown’s budget proposal is a solid starting point, said Standard & Poor’s, but there are many political and policy hurdles left to go.
Hitting hard at California’s college students
Naheed Rajwani of UCLA’s Daily Bruin reports on the impacts of Brown’s proposal of concern to students in the state’s higher education system:
Under the revised budget proposal, both the University of California and the California State University systems would each need to absorb $250 million, which is $50 million more than what was proposed earlier this year.
These cuts will not materialize if Brown’s proposed tax measure passes in November. The measure would raise the sales tax by a quarter percent and increase income taxes on the wealthy, raising an estimated $8.5 billion in extra revenue for the state.
In his proposal, Brown also revised the amount of money that can be allocated to the UC Retirement Plan, from $90 million to $52 million. That number will not be affected by the passage of the tax measure.
The California Legislature will now review the proposal and is expected to pass a final budget in mid-June.
Canadian students would be up in arms
That’s because yet another tuition hike is certain, following on a wave of increases that have sent the costs of attending UC campuses soaring to levels that ensure many enrollees will be forced to take out those odious student loans to cover the costs.
As the San Francisco Chronicle’s Nanette Asimov reported a week ago:
The University of California will need to charge students at least 6 percent more for tuition next fall – an extra $732 – to stave off more layoffs and program closures, say UC leaders who will ask the regents next week to consider raising the price in July.
“At minimum we’ll need 6 percent,” said UC’s budget czar, Patrick Lenz, noting that an increase of that size would take care of most of the $139 million shortfall expected for next year.
The problem, Lenz said, is that all of those numbers could get worse.
When the Regents met in Sacramento to discuss the tuition hike yesterday the discussion was derailed, at least for a time, when students rose to protest.
Here’s a clip of their action va the UCLA Daily Bruin:
Pat Flynn of San Diego’s U-T [formerly the Union-Tribune] reports on the outcome of the delayed discussion:
The UC regents will consider boosting tuition again, by 6 percent, at a meeting in July. If approved, it would raise the cost to $12,923 a year, nearly double what it was five years ago. That does not include the cost of room and board, or campus-based fees, which average about $1,000.
UC and community college officials said it is too early to offer too many specifics on what would be cut if the tax measure fails. In general, UC officials said, there would be layoffs, delays in hiring faculty and consolidation, cutbacks and elimination of programs.
Tiering off UC’s laboring class
Before the disruption, the regents approved a new two-tier pension system that will reduce pensions not only for new hires but for those who are rehired after leaving their jobs. Here’s a description of the new policy from the university’s website:
The UC Board of Regents today (May 16) approved several provisions related to the new tier of the UC Retirement Plan that was originally approved in December 2010.
These provisions clarify:
- That membership in the new pension tier is determined by the date the employee becomes eligible for UCRP benefits; this clarifies that the new tier applies to career employees and means an employee hired prior to July 1, 2013 who becomes eligible for UCRP after July 1, 2013 will be in the new tier.
- That the new tier applies to all career hires after the effective date – both new hires and re-hires (former UC faculty and staff who return to UC employment after a break in service), and
- How the current tier and the new tier will work together for future retirees who have earned service in both tiers.
The UCRP 2013 tier is a pension plan for all eligible faculty and staff hired or rehired in an eligible appointment on or after July 1, 2013. The new tier raises the minimum retirement age from 50 to 55 and the retirement age for maximum pension benefits from 60 to 65 and eliminates the lump sum cashout and subsidized survivor benefits.
In other words, there’ll be a class system even among the most poorly paid of University of California workers, a move certain to provoke more bitterness and divisiveness. But maybe that’s the intent, so keep people divided?
But the regents did approve a pay hike
The board of mostly plutocratic gubernatorial appointees did approve one major expenditure because the person affected is one of their own, a true one percenter.
Michael Gardner of the U-T reports:
University of California Regents Wednesday confirmed the appointment of new UC San Diego Chancellor Pradeep Khosla and approved a base salary of $411,000 annually.
His pay represents a 4.8 percent increase over the salary of the current chancellor, Marye Anne Fox, and is already drawing fire from critics who say UC executive salaries are inflated in an era of tight budgets and tuition hikes.
Khosla’s current job is engineering dean at Carnegie Mellon University.
And the university prepares for more layoffs
Under the heading of Project UCPath on the University of California’s website, we discovered this announcement:
UC Riverside to host systemwide shared service center
UC Riverside has been selected as the location for shared service center that will process all routine transactions related to payroll, benefits, leave management and workforce administration for UC’s ten campuses and five medical centers.
The UCPath Center is expected to be operational by July 2013, initially serving five locations: UCLA, UCLA Medical Center, UC Santa Cruz, UC Merced and UC Office of the President. All other campuses and medical centers will make the transition in two subsequent waves, with the transition completed by October 2014.
UC selected UC Riverside for the center after evaluating a variety of factors, including: the proximity of a strong pool of UC talent to staff the center; local housing and cost of living considerations; the availability and condition of scalable office space; and the support of local leadership.
The facility is part of the UCPath initiative now under way to deploy a single HR and payroll system at all UC locations. The decision to create a single systemwide shared service center came after months of thoughtful discussion and consideration with numerous stakeholders systemwide, and is intended to maximize cost efficiencies by fully leveraging economies of scale; improve service to UC employees; and ensure consistency in business processes UC-wide.
And then there’s this telling paragraph from the university of California’s FAQ [PDF] accompanying the announcement:
HOW WILL EMPLOYEES WHO WORK IN PAYROLL, HR AND ACADEMIC PERSONNEL BE AFFECTED BY THE UCPATH CENTER?
Over time, payroll, HR and academic personnel operations are expected to require fewer positions for transactional processing and customer support, but the impact on employees will vary by function, department and location. If positions eventually are reduced, UC plans to minimize involuntary layoffs through attrition, re-training and realignment of responsibilities.
South Los Angeles, mired in poverty
To conclude, we offer the first two stories from the Los Angeles Times reporting on development cities before the latest budgetary announcement.
First, from Ricardo Lopez, a 22 April story on the plight of the LA’s poorest region two decades after the Rfodney Kind vedict riots:
Two decades after the L.A. riots brought pledges of help to rebuild South Los Angeles, the area is worse off in many ways than it was in 1992.
Median income, when adjusted for inflation, is lower. Many middle-class blacks have fled in search of safer neighborhoods and better schools.
And the unemployment rate, which was bad at the time of the riots, has reached even more dire levels. In two areas of South Los Angeles — Florence Graham and Westmont — unemployment is almost 24%. Back in 1992, it was 21% in Florence Graham and 17% in Westmont.
During the 1970s and ’80s, many South Los Angeles residents were able to make a middle-class living working in manufacturing and aerospace. But those jobs disappeared when those employers closed up shop, resulting in mass layoffs.
Labor activists and residents said that when jobs now become available in the area, they often don’t pay living wages.
Los Angeles courts, where delay presides
The plight of L.A. courts is certain to get even worse than when Ashley Powers and Alexandra Zavis wrote this, also in April:
The sprawling Los Angeles County court system, which already lopped $70 million from its budget this fiscal year, will slash an additional $30 million in the coming months by laying off workers, closing courtrooms and axing a Juvenile Court program, court officials said [17 April].
The perpetual state budget shortfalls have forced numerous courts to slash hours and staffing, delaying divorces and stretching out custody battles throughout California. But Los Angeles’ trial court system is the nation’s largest, making the effect of budget cuts particularly dramatic.
This fiscal year, the system shaved $70 million from its budget in part by freezing wages and forcing staff members to take furlough days. But it still needs to cut $48 million more. The measures announced Tuesday will save the court system $30 million, meaning that it will begin the next fiscal year with a deficit regardless of how much money state lawmakers dole out to the judicial system, spokeswoman Mary Hearn said.
By the end of June, the courts will have 350 fewer employees and 56 fewer courtrooms, which officials said will slow down the resolution of criminal, civil, family court and juvenile delinquency cases.