California thinks it leads the nation

By Steven Greenhut

SACRAMENTO — Everything is rosy in California, according to Gov. Jerry Brown and state legislators. In fact, California’s comeback is so seemingly spectacular that some observers are half-seriously arguing that the 75-year-old Brown should gear up a presidential run in 2016. California, say some of the nation’s elite media, is the model for the nation.

Those of us who live here are scratching our heads. California’s state government is awash in debt, with hundreds of millions of dollars in unfunded liabilities to pay for its most-generous-in-the-nation pension and medical system for government employees. The state’s brutal prison system is under the control of federal judges because of repeated civil-rights violations.

In most areas, the state’s taxpayers pay the most in the nation for public services and get the least amount in return. The Census Bureau and other studies show the state with the highest poverty rate in the nation by far when cost-of-living factors are taken into consideration. By almost any measure, California is one of the most regulated, highly taxed states — and business owners continue to flee for friendlier climes.

Yet in his recent State of the State address, Brown — to thunderous applause from Democratic leaders in the Assembly chambers — mocked the folks he routinely refers to as “declinists” who refuse to recognize the amazing feats that have been accomplished under his watch.

Brown and his allies are happy for one reason. The state, which had been struggling with billions of dollars in predicted budget deficits, has managed to close the budget hole and even show a few billion dollars in likely “surpluses” in the coming years. The budget has always been an annual stumbling block, and now that problem is “fixed.”

Brown accomplished this feat by convincing voters to support a massive sales- and income-tax hike, and the result has been an influx of new revenues. It looks increasingly unlikely that the tax hike was even needed given the growing revenues from a somewhat rebounding economy. Brown, at a recent press conference, wouldn’t say if the taxes were needed, but said that he certainly plans to use them.

So there’s more money to spend, and the governor’s budget — by California standards, any way — was reasonably responsible. His Democratic allies in the Legislature can’t wait to spend billions of additional dollars on new programs — such as a free universal preschool plan — but Brown is hiking spending on existing programs only and diverting a lot to pay back money the state borrowed to meet its bills during tough times.

But while the proposed budget doesn’t go wild — and that’s been a big concern now that Democrats have super-majorities in both houses of the Legislature, and control every state constitutional office — it isn’t anywhere close to being balanced if one takes the state’s debts seriously.

For instance, the governor punts on the massive liabilities facing the state teachers’ retirement system, which needs an additional $4.5 billion a year from the general fund to stay afloat. He punts on retiree medical benefits that should claim another $3 billion each year. It doesn’t address other major unfunded liabilities, for the California Public Employees’ Retirement System or for the state’s unemployment insurance system. Note that any supposed surplus has been long gone when these items are considered.

So the state’s budget is balanced in the same way that one’s personal budget is balanced if one can barely make the minimum payments and simply ignores a crushing level of debt and serious maintenance issues all around the house. The governor’s main goal has been consistent — to protect the public sector unions, which have been the key to his winning elections, from any serious reforms in benefit levels. And nothing will improve in California until these muscular special-interest groups are tamed.

Nothing is being reformed. The state’s unions are looking for even higher salaries and the pension systems are in trouble. Attorney General Kamala Harris, another tool of the public-employee unions, recently besmirched her office by issuing a misleading summary to a statewide ballot initiative that would allow localities to rein in their pension costs. That summary — the main thing voters read before voting on these ballot measures — suggested that the measure would eliminate pension benefits rather than limiting them going forward. But supporters are now taking the matter to court — something that will probably delay the campaign until 2016. That means two more years with no likely reform.

That’s because the state Legislature has made it clear that pension reform isn’t on its agenda. Officials passed a tiny measure last year that was good mainly for PR value, and now they say that the pension system is fixed — despite the growing debts.

Everything the state touches is a mess. A recent Capitol hearing spotlighted whistleblowers from the California Department of Transportation (Caltrans), who alleged that the state ignored warnings about highway employees who falsified test data on the new eastern span of the San Francisco-Oakland Bay Bridge and ignored other safety warnings. State auditors have released multiple reports about Caltrans’ incompetence, but nothing changes. Some officials blamed the problems for the fast-tracking of the bridge project — a plausible argument until one realizes that the state has been working on replacing the bridge for the past 24 years.

California is facing one of its worst-ever droughts. Brown and other officials are blaming global warming and climate issues, but the real problem is the state has been opposed to building more water storage facilities. In fact, the state and feds have been trying to demolish dams to restore natural habitats.

Despite a lack of money, Brown is pitching a plan to build a high-speed rail system which in its current form is not particularly fast and it violates the terms of the ballot initiative approved by voters in 2008. That will cost at least $68 billion.

Yet California officials believe that all is well, that the main problems in California stem from the private sector, and that there’s virtually nothing that more regulation and higher taxes won’t fix. Eastern pundits have picked up the theme of the California Miracle and Brown the Fixer, but that narrative only works if readers ignore most of the readily available facts. But I suppose pointing this out only makes this columnist a declinist, even though I love my home state and want to see it boom once again.

Write to Greenhut at steven.greenhut@franklincenterhq.org.

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