California kicks the can (again)

You have to love the politicians in Sacramento -- maybe not as embarrassing as those in Congress but pretty darn close! As I've written previously, the state has been in a fiscal mess of its own making, issuing high-interest IOUs in lieu of cash. Its just the latest annual budget fiasco in a state that spends more than it takes in -- in part because it gets over half its tax base from a tiny percentage of its richest residents whose incomes don't stay steady. Add to that an annual "cost of living increase" baked into the state's huge employee and pension contracts (regardless of annual revenue) and you have the kind of deficit spending that government is so good at. Now news comes tonight that the state has -- at least according to the questionable standards of the  San Jose Mercury News -- made a Budget Breakthrough solves California's long fiscal nightmare. Only it hasn't "solved" anything -- other than the current fiscal problems. What it didn't do is come to any kind of structural or long-term solution:

The deal would include Democratic concessions of more than $14 billion in program cuts — hitting the poor, children, the elderly and disabled while avoiding outright elimination of the state's welfare-to-work CalWORKS program and the Healthy Families health insurance program for children.Though they failed to get permanent reductions in welfare programs, Schwarzenegger and Republican legislators were able to uphold their vow of no new taxes with a series of accounting shifts and an enforced "loan" of nearly $4 billion from local governments.

Those accounting tricks include accelerating income tax withholdings from residents' paychecks by 10 percent,effectively shifting millions of next year's revenues into this year's budget, and delaying state workers' June 30, 2010 paychecks by one day — and thus, into next fiscal year.

From the beginning, Democrats had little hope that they could win approval of tax increases, though they proposed popular measures such as $2 billion in taxes on oil companies, alcohol and tobacco sales and the closing of numerous corporate loopholes.

Although they represent barely more than one-third of either the Senate or the Assembly, Republicans have near-veto power over the proceedings, thanks to the constitutional requirement of a two-thirds vote for budgets and taxes.

Despite an ardent lobbying effort, cities and counties likely will take a major hit, with the state poised to borrow nearly $4 billion in revenues from property taxes and gas taxes. Critics say that will result in a devastating impact on local services.

Only in California, then, can you fail to make any headway on the longer-term issue of out-of-control spending and a shrinking revenue base while solving the problem with accounting gimmicks -- and call it a "success".  What the state has done is simply to kick the can down the road yet again, so that next year it will have to go through this all over again. Now that's what I call inspired political leadership!

What do you expect from a legislature that is bought and paid for by the unions and special interests, and a governor who talks tough but doesn't really have the stomach (or principle) for the kind of show down that might have really fixed this problem once and for all?  Creative accounting followed by a huge passing of the buck to local governments, which will now have to make the tough choices that Sacramento didn't have the courage to make.

And we now are going to give health care to Washington? Are we completely nuts?

Ritter learning too slowly on budget

Grappling with declining state revenues makes for some very unpleasant budget choices, as Gov. Bill Ritter and the Democrat majorities in the state legislature learned over the past 12 months. It's fair to criticize those choices, including the governor last year denying for several months that a problem existed. Yet anyone who has shouldered the responsibility of balancing a budget during a recession understands that learning from your own mistakes is inevitable.

Learning, however, is essential - both to sound fiscal policy and to political credibility. That's why it was astonishing to hear Ritter and leading Democrats dismiss the need for a special session of the legislature on the very day they acknowledged that the state will start the new fiscal year nearly $400 million in the hole.

Anticipating further economic deterioration, legislators gave Ritter the authority to "borrow" up to $500 million from next year's budget to pay this year's bills. Based on new projections by Legislative Council economists, about half that amount will be needed.

Moreover, legislative economists forecast tax revenues for the new budget year, beginning July 1, to be $135 million less than budgeted and $874 million short over three years. Those economists prudently expect the recession to continue into 2010 in Colorado and foresee possible recovery "at least a year after that."

That's the point at which this scenario takes on an incredible aura of déjà vu.

Economists in the Governor's Office of State Planning and Budgeting (OSPB) paint a much brighter picture, forecasting a recovery later this year. That outlook enables OSPB to expect an additional $1.3 billion to spend over the same three-year period.

Last September, Legislative Council sounded the alarm early enough for the governor and legislature to call a special session just three months into the fiscal year - ample time to revise the budget and mitigate the shockwaves to affected programs and participants.

Instead, the governor boldly proclaimed, "One of (the forecasts) is pretty significantly wrong," and according to the Denver Post, he "made it clear" that the error wasn't in the projections from his office. Days later when the Wall Street financial crisis struck, Ritter ordered a "hiring freeze" which, it turns out, wasn't nearly as frigid as advertised.

In December, with half of the fiscal year passed, Legislative Council pegged the budget shortfall at $631 million. Ritter's OSPB forecast a mere $70 million deficit. Two weeks later, OSPB admitted it had used "outdated information" and issued a new estimate of $230 million in red ink.

By the time the legislature convened in January, the remaining choices were severe cuts, exacerbated by months of inaction, or accounting gimmicks that postponed the day of reckoning and made balancing the 2009-10 budget even more difficult.

Choosing to procrastinate, legislators tried yet another dodge by attempting to extort $500 million which employers had paid into the state's fund for injured workers. Then they wiped away budget caps that restrain spending in good years - as if that would somehow create more money amid a withering economy.

Finally, after raiding trust funds, re-imposing a property tax on senior citizens, and accepting a federal bailout, they proclaimed the budget balanced.

With prescience, Republican leader Sen. Josh Penry observed, "This budget will be out of balance on June 20."

And so it is.

Incredibly, Governor Ritter and Democrat legislators seem headed for another year of budgetary brinksmanship, placing all their bets on a quick economic recovery.

For five years, Democrats have controlled the legislature and for three years the governor's mansion. Colorado taxpayers are right to expect that, after blundering through a year of budgetary mayhem, Ritter and Company will learn from the past and make prudent choices this time.

Dems' arrogant money grab worsens

If legislative Democrats in 2007 were devious for passing Gov. Ritter's infamous property tax hike without voter approval, the 2009 crop plunges to new depths. In an act of sheer arrogance, this year's Democrat majority poked taxpayers in the eye just for spite.

Recall that the aforementioned property tax hike increases the burden on local property owners while reducing the state's obligation to fund K-12 education.

Recall also that Colorado's constitution says that no "tax policy change directly causing a net revenue gain" can be enacted without a vote of the people and that this policy change increased property tax revenues by $117 million in the first year alone.

Finally, recall that crafty Democrats hinged permission for their tax hike on 174 separate, previous votes by taxpayers in all but four of the state's 178 school districts. Never mind that those voters were repeatedly assured by school and state officials that their taxes would not increase as a result.

Not satisfied that the Colorado Supreme Court slipped this nonsense through a previously undiscovered loophole in the state constitution, Democrats added arrogance to insult by swiftly passing bill to now prevent any of those 174 school districts from reconsidering.

That's arrogance, plain and simple.

For 13 years after voters adopted the Taxpayers Bill of Rights (TABOR), the Department of Education and local school districts reassured property owners that they could loosen revenue limits on their local schools without making themselves vulnerable to a tax increase by the legislature.

They took this position not because CDE or local school boards are staunch defenders of TABOR but because they were following state law.

Then in 2007, the legislature unilaterally decided to change the law, to impose an immediate tax increase on property owners - and to retroactively change the result of those 174 local elections, all the while arguing that it was precisely those elections that permitted the tax hike in the first place.

As a result, property owners in those districts are now paying higher taxes - not so their schools can receive more money, but so the state can take the money it previously spent on K-12 education and spend it on social welfare programs instead.

However, the four districts that never waived their school's revenue limits remain exempt from the legislature's shenanigans. In those districts, the growth of local property tax revenues is limited and the state must provide any additional money necessary to fully fund those schools.

A reasonable taxpayer - or school board member - in one of the school districts now being soaked by the state might see this disparity and decide that the local school district should reconsider its decision to waive all revenue limits. After all, it's one thing for property owners to permit local school to "keep the change" and quite another to permit the state to raise taxes, too.

Now thanks to Senate Bill 291, which was opposed by every Republican at the state capitol, districts that loosened the tax limits under the old law are forbidden from reinstituting those limits now that the law has changed. If they do, the state will punish their children by withholding funds from their school.

This from the party that claims to do everything "for the children." In reality, the Democrats do everything "for the government" and aren't above using your children as hostages in their extortion racket.

It's hard to imagine how the state's constitutional mandate to provide a "thorough and uniform system of free public schools" could be interpreted to allow one school to be penalized solely because of the way its residents vote.

However, Colorado Democrats have already proven that they will ignore the constitution when it's inconvenient and that the state supreme court can be counted on to back them up.

Mark Hillman served as senate majority leader and state treasurer. To read more or comment, go to www.MarkHillman.com

California needs leadership, not evasions

Typically in the wake of disasters there is a mess to clean up. California’s interminable budget crisis qualifies as an ongoing disaster. On the maxim that those who make messes should clean them up, the politicians in Sacramento have no business following up their failure to exercise budgetary discipline by throwing the alleged solution into the laps of voters in the May 19 special election. The package of propositions 1A through 1F imposes budgetary gimmicks, raises taxes, puts more money into education, borrows money from the lottery, transfers funds from some programs to fund others, and delays officials’ pay increases in order somehow to end the annual gap between expenditures and revenues. But it suffers from two major defects: it derives from the same politicians who largely got the State into its current fiscal mess and it attempts to make up for their lack of prudence with constitutional and statutory tinkering.

When public policy is bad, surely it should change. But the best way to ensure change is to change those who made the bad policy. What the Democrat-dominated State Legislature needs is tough love, not enabling. Therefore, voters should turn down all six propositions, whatever the specific merits of any of them.

The strongest proof of the questionable paternity of these "save the day" measures is the deception in the first and most critical of them: Proposition 1A. Its aims, as summarized by the Legislative analyst in the Voter Guide (pp. 10-15) are to

* increase the State’s "rainy day" fund from five to 12.5 percent of the General Fund;

* dedicate some annual deposits into that fund for future economic downturns and the rest to fund education, infrastructure and debt repayment, or for use in emergencies; and

* require additional revenues above historic trends to be deposited in the "rainy day" fund.

A careful reader might wonder just where the "additional revenues" will come from. No answer to this question can be found in the summary (or in that provided on the sample ballot, either), but near the bottom of page 10 we read: "If this measure is approved, several tax increases passed as part of the February 2009 budget package would be extended by one to two years. State revenues would increase by about $16 billion from 2010-11 to 2012-13."

At the bottom of the next page and following, voters are reminded that the sales tax was increased from eight to nine percent, the vehicle tax rate was raised from .65 percent to 1.15 percent of a vehicle’s value, and the personal income tax rate was raised by .25, ranging from increases of one to 10.3 percent, depending on income.

The political advertisements I have seen on television stations mention nothing whatever about this "additional revenue," speaking only in glittering generalities about how great it is that finally something is going to be done to restrain the politicians in Sacramento who got us into this mess.

Propositions 1A through 1C and IF are constitutional amendments and 1D and 1E are revised statutes. Once again, California’s already incredibly long Constitution is being burdened with still more specific provisions which are designed to particularize the judgments our elected officials make rather than holding them accountable to the voters for their decisions.

The massive defect of such a constitution is that it defies the efforts of all but the most sagacious and interested parties from understanding it and blurs the distinction between the supreme law, which establishes the government, and the statutes which are intended to be consistent with its limitations.

Thus, constitutionally, as well as fiscally, California's political leaders are attempting to fix bad or inadequate decisions of the past with decisions cut from the same cloth. Rather than exercising fiscal and budgetary prudence as a constitutional duty, they are lurching from one crisis to the next without owning up to the primary cause of the problem, which is themselves.

Denying the Legislature and the Governor the power once again to cobble together a Rube Goldberg contraption designed to put a brake on their own insatiable desires to tax, spend and elect will do far more to promote fiscal discipline than this clever package, which conceals the source of the problem.

Instead, we should look forward to the implementation of the redistricting plan Californians passed last November that will, for the first time in years, permit the design of state legislative districts with greater attention to geographic and demographic realities and less to assuring safe seats that keep incumbents in office. The real need is for open and competitive elections, not more evasions.

Deficit clouds mayoral race

Editor: Randy Pye, the only mayor the young city of Centennial has ever had, can't run again. Two hopefuls are already in the field to succeed him, Councilman Todd Miller and former Charter Commission Chair Cathy Noon. The election is this November, and others may jump in. Local taxpayer advocate Ron Phelps offers these thoughts: =====================

Like other municipalities, the city of Centennial faces tough financial decisions in the coming months. The City recently held a special meeting to ponder how to deal with the tough times ahead.

The City Council’s initial steps include cutting approximately $3M from public works from the 2009 adopted budget. Some public works will go forward, and no services or staff will be reduced. With anywhere from $200K to $1.7M more to resolve for 2009, they will meet again in July to make additional decisions.

For 2010, the City also needs to resolve the projected deficit of approximately $3M. This will also be discussed in July.

All of this falls right smack into the upcoming City elections. With two announced candidates for Mayor, I think it’s essential that all of Centennial’s citizens learn how the candidates propose to solve the City’s financial challenges.