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.
Read the rest.
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.
Read the rest.
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.
Read the rest.
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.
Read the rest.
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.
Read the rest.
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 Continue reading