This op-ed originally appeared in the Dana Point Times
We greet the New Year with anticipation and hope, setting goals in spite of the unknowns beyond our control. With almost complete one-party Democrat control of the levels of power in Sacramento, there should be fewer unknowns; setting goals and moving forward should be easy. But voter sentiment, open primaries, new districts and election year polling has made a huge impact on what would normally be lock-step voting by the majority party.
Looking forward to 2012, I predict gridlock—which is not necessarily bad. Due to our sheer size and population, California has been at the epicenter of the financial storm that crashed in 2008. Our first quake, created by the Environmental Protection Agency shutting off water, caused debilitating unemployment in Central Valley farming communities. The ensuing housing market and financial quake scored even higher on the Richter scale spreading devastation statewide. We are recovering in water, thanks to nature, and in housing, thanks to time. Therefore, gridlock is good; less government meddling is positive. Our situation should not worsen, and actually improve, with a bit more certainty for business and planning purposes.
Major political issues remain unresolved. Does California spend too much? Certainly, but the people, and hence their 120 representatives in Sacramento, dispute where to cut. Is our tax structure unfair? Certainly, but we dispute how to reform, as tax reform has become code for taking more out of taxpayers’ pockets. Is our state business un-friendly? Certainly, if one reviews business rankings or asks companies struggling or fleeing the state, but the Senate and Assembly leadership and Governor think differently reviewing the legislation that they pass. Can government stimulate the economy? Again, the Governor and most of his party believe so, but increasingly many of our representatives, on both sides of the aisle, hear about excessive regulation, taxation and punitive legislation forcing businesses out of state. Pension reform? Don’t hold your breath.
Quick ballot fixes in 2010 left our financial situation unchanged. Granting a “majority vote” budget allowed for an on-time but unbalanced budget. So, while tax revenues are $1.8 billion over projections, we still have a $10-12 billion hole to patch (improvement over years past.) The Governor will release his updated spending plan on January 10, 2012, asking for $35 billion in higher taxes. Anticipate tying proposed tax increases to education and public safety, concerns we all share, and where $981 million in “trigger cuts” are slated to occur. However, expect the real problem of double digit percentage increases in welfare and federal healthcare reform costs to be omitted from the debate.
State debt will continue to rise. Lender constraints rather than internal discipline will ensure modest increases. California will continue to borrow in $1-2 billion increments for supposed long-term projects. Our credit rating should remain “stable” rather than “negative” due to the Governor actually providing a choice of “trigger cuts” and/or improving tax revenues, aiding our state’s cash flow. Debt service, directly impacting general fund expenses, is projected to increase from 7.7 percent of revenues in 2011-12 to 9.3 percent in 2012-13. The more we borrow, the more we pay, and the less we have for priorities such as education, public safety and providing for the truly needy.
Unemployment will hover at 11-12 percent. While subsidizing a few industries through tax credits and coddling anything termed “green” is no substitute for a robust and friendly business climate, it acknowledges a problem: California needs private sector jobs. To date, the governor and his crew have focused on government-funded high speed rail as the job creator for the next decade. However, lack of funding and decreasing popular support statewide could free up billions for local transportation “shovel ready” jobs, in lieu of carving through existing businesses and productive farmland in the Central Valley. If permanently “de-railed,” we would be on track to improving our state’s financial outlook with regard to debt, future expenses, credit rating and employment.
Sharpen your pencils. When you can’t win in the legislature or are afraid to lead, fall back to the initiative process. Asking voters to decide or override policy decisions that should be resolved by elected representatives in the Legislature defeats the purpose of representative democracy. How can voters hold leaders responsible if they won’t make decisions? Envisioned for rare, grass-roots, voter driven solutions, “Let the Voters Decide” has become a Sacramento tool, with over 30 approved for the November ballot.
To summarize, looking forward expect incremental improvements and a highly-charged, emotional political debate and environment. In situations such as these, gridlock is good!