This op-ed originally appeared in the Dana Point Times
Never anticipating the enormity of financial hailstorm that hit last year, I ran for elected office hoping to use my former career corporate finance skills, and passion for economics to help our state secure a more solid financial footing. Hence, my focus in Sacramento, on all “boring” number crunching committee assignments including Budget, Appropriations, Revenue and Taxation and Federal Stimulus Budget Subcommittee, should come as no surprise.
Being a “newbie” legislator what is surprising to me, and should be to you, is the shock-wave that is hitting the “dome” as legislators begin to realize the long-term cash squeeze we face. While our financial woes should have been obvious based on the public financial reports as well as the warnings from the Legislative Analysts’ Office, many come to Sacramento to correct a wrong, fight for a cause, or promote a project that requires State intervention (i.e., more laws and/or dollars). Many are worthy goals but unlike years past, my “boring” pursuits will most likely be taking center stage for the next few years.
There are some bright spots beginning to glimmer on the economic horizon, and I do believe that we are seeing the bottom in many housing markets as well as the stock market, and I hear from people on the street that banks are lending again. However, just weeks after passing the supposed 18-month state budget fix, we heard in the Assembly Budget Committee (3-11-09) that the state will once again be short on cash by July.
The causes are numerous but simply stated, revenues (tax receipts) are continuing to decrease and unemployment is up. We are still unable to access the bond market to the degree necessary to fill the gap, begin new “stimulus” projects, or even repay the cash advances we issued on existing state bond projects. Due to the Fed’s borrowing we will also now be competing with the Federal Government for a decreasing investor demand for bond funds.
There will, however, be Federal dollars available to the state in the amount of $30+ Billion over the next 2 years to help fund select and shovel-ready transportation projects, social services, education and health programs. We are obviously going to try to use some of these funds to offset dollars that we cannot generate. My job and the legislature’s work will be to segment out those dollars that do not obligate us to future increases in our state spending once the “one-time pop” is gone.
Much of the Federal stimulus money is targeted to specific programs or uses, and as back-fill for our deficit. So, our committee work has begun and I do believe that both sides of the aisle are taking the issue with the gravity it deserves. I am beginning to see thoughtful legislation proposed from both sides of the aisle, and I do have a few ideas myself.
As it happens, much of our present dilemma is created by “Voter Approved Initiatives” or those propositions that appear on the ballot requiring you to exercise legislative decision-making choices for our state. Much of our spending has been locked in constitutionally by this method, and billions of dollars of future bond debt is also approved in this way. Bonds must be repaid with your tax dollars, and much of the money to do so is committed constitutionally. So, when it is time to cut spending, most of the “budget pie” is off the table, and constitutionally as well as legally certain payments such as education, bond debt repayment, state payroll, and other payments have priority over funding to our counties, vendors, social services and other expenses.
To help correct the situation, I am proposing a bill requiring more ballot disclosure of the consequences of the votes you cast. Voters are smart but they need more information to make informed legislative decisions. I will also be attempting to establish a maximum debt threshold for the state, similar to what most companies operate under in order to remain solvent and credit worthy. Another complimentary piece of legislation is being proposed by Democrat Senator Ducheny, which would require any future bonds to identify a specific source of repayment. I have agreed to co-author this reform.
We have all heard that there is opportunity in crisis and I am hopeful that this Legislature will seize the opportunity for true financial reform.