This op-ed originally appeared in the San Clemente Times
Entering 2011 “another year older and deeper in debt,” quoting a Johnny Cash tune, I’m surprisingly optimistic. I predict that 2011 will be a new day as California climbs out of its gigantic financial hole. Estimates of how steep the mountain “range” from $30 billion-plus short-term to $500 billion-plus over the long term. As we all know, the first step to solving any crisis is defining the problem. Amazingly, I do believe the incoming Governor-elect Brown gets it.
Expect the “solutions” as battle ground for 2011. Just like a family when money is tight, splits between party lines, geographic regions, environmental groups, unions and private sector employers will be magnified. But more importantly, the great divide and debate over the next few years will be between those who pay for state government and those who receive the majority of the benefits. In other words, the proper role of government and who should pay will be the topic “du jour.”
The Governor-elect has implied that a broad-based 20 percent reduction in state spending might provide a partial solution. Having offered this idea in the past, I know that cutting 10 percent from each state department would save roughly $1.2 billion annually. I can also attest that automating some of the labor-intensive state positions, such as court reporting, could slice off another $1 billion-plus per year. In our cutting-edge high-tech, top-notch university state, I find it hard to believe we cannot computerize much of what occurs at the state level, and retrain our people for the jobs of tomorrow. If we are not willing to enter the 21st century, except for a few elite, we will spiral to developing nation status.
Defunding the High Speed Rail (HSR) boondoggle could also save us billions in future costs, as well as millions now in interest expense for the bonds (long-term debt) we are accumulating, for an HSR marketing machine on steroids. In a state where a court appointed receiver is dictating our prison system due to “overcrowding” wouldn’t our scarce borrowing capacity be better applied to building prisons, as intended in 2007, satisfying the courts and saving us another $1 billion annually in prison costs? Do we really need to allocate $4.3 billion in state debt and federal “free money” to cart people between Podunk and Bakersfield? And let’s not forget the future operating costs that will be heaped annually onto our already over-burdened state. Is another old-school, steel and wheels, state-run train the 21st century approach to your transportation needs?
Water “wars” will also seep to the surface as the new proposal for a tunnel system in lieu of a peripheral canal enters the debate. About 25 million Californians and 2 million acres of farmland depend on the Sacramento area Delta for at least some of their water supplies. Estimated to cost roughly $11.6 billion, the users or water agencies serving areas south of Sacramento such as the Central Valley, and our Metropolitan Water District of California (serving So Cal), would pass the higher rates onto us.
The “heavy smog” of Regulation strangling private-sector job creation will likely remain a focus. With the California Air Resources Board agreeing to delay some of the more stringent requirements for diesel fuel emission rules in light of our 12.4 percent unemployment, could it be acknowledgement that people are part of the environment too? Pray for an epiphany.
Pensions will consume more of our cash as unfunded liabilities increase, and high yields become “right-sized” to fit the real world investment outlook. Public employees in a variety of counties have already chosen a seat at the negotiating table, offering cost-cutting measures to ensure their employers and retirement system remains solvent. Teachers and all public sector union workers would help themselves as well as their state by stepping up and becoming part of the solution.
So, choices will need to be made and what a fabulous opportunity for all Californians! Our nation-state, divided into 58 counties, will remain the focus of the national debate for years to come. Our sheer vastness, geography, 38 million people and stunted economic engine, will dictate that as California goes, so goes the nation.
It’s a new day for California and we’ll soon know if our Governor will really attack some of the sacred cows. I think he will only because he must to right our ship of state. As Vice-Chair of Appropriations for the California State Assembly, as well as seated on all financial committees in the Legislature, I will have a bird’s-eye view of what’s really going on. I’ll keep you posted!