California’s fiscal deck of cards has been destined for collapse for a long time now. No amount of fiscal trickery, glue sticks or tape can stop it. Sadly, the individual cards are the cities and counties, and they’re beginning to fall under a severe financial burden.
Two major cities — Stockton and San Bernardino — have garnered attention in recent weeks because of their fiscal insolvency. The Town of Mammoth Lakes also made the news in as many weeks as the third of four municipalities to seek bankruptcy protection. The City of Vallejo started its bankruptcy process several years ago as it too could not keep up with rising costs.
For several years now California’s golden luster has tarnished as the state’s financial position in the world sunk from what was once the worlds 6th largest economy to the 9th or 10th largest now. This mess has been years in the making. It wasn’t that long ago that California was basking in the glory of a state budget windfall and budget surplus under a governor who was ultimately fired by state voters in a recall election that elevated a “B” movie actor to the top state-house position.
Say what you will about Stockton’s mess, which is a shining example of how greedy public unions are, and the false premise that private sector taxpayers will always have the money to pay public employees an opulent wage while employed and lavish salaries to live out their decades-long retirement in blissful luxury. Even San Bernardino’s published problems related to the housing crash and the loss of property tax revenue fails, while egregious in terms of the city’s ability to conservatively manage its revenues, to point a responsible finger at the true culprit of local government woes in California.
The blame rests with Sacramento
For the most part, the problems with shrinking local revenues in California cities and counties is due wholly to Sacramento’s inability to live within its means and the legal ability it has to blackmail cities and counties into picking up the tab for its spending orgies.
While some continue to claim that Proposition 13, passed by voters in the 1970’s to slow property tax rate hikes, forever killed the golden goose, the fact remains that the State of California has developed a fetish for spending money at rates faster than it can be created, earned and taxed. Additionally, California’s fulltime legislature and bureaucratic machine had developed a keen ability to pass the buck, quite literally, down to the cities and counties by forcing local governments to pick up the tab for things that were formerly paid for through state taxes.
In the early 1990’s, California legislators discovered that they could force cities and counties to give up their local sources of revenue under the notion that they ought to pay for the public education from which they more closely benefit. Never mind that the state up until then had always paid for public education through its own tax stream.
Just 10 years earlier California voters were asked to approve a state lottery, from which oodles and gobs of money would be added to public education. As it turned out, that became just another example in a long list of schemes borne in Sacramento to extract money from gullible Californians. Here’s how that scheme worked: As the mandated amount of money from lottery revenues was given to public education, a like amount of money was withheld from public education, to be spent elsewhere. In short, for every dollar the schools got from the lottery, at least a dollar was withheld from traditional general fund expenditures to public education. To California legislators, the lottery simply became a new source of money to be dolled out in any way they saw fit.
Under California’s 1990’s scheme to defraud local governments and voters, local governments would give up their sole source of funding for public safety and services. That started a landslide of local, targeted tax measures aimed at filling local budget deficits by jacking up local property tax and sales tax rates.
The selling point for these tax hikes was simple: do you want police and fire? Then agree to raise your local sales and property tax rates? What were local voters to do?
Shortly after this mess was created by Sacramento politicians, a local county supervisor in one of California’s more sparsely populated counties, announced out of frustration during budget hearings that he might as well resign as more than 95% of that county’s revenue was mandated by state and federal bureaucracies to be spent on specific programs. So much for local control!
Trying to be a responsible and inquisitive newspaper reporter at the time, I asked a county executive officer why cities and counties didn’t merely keep the taxes they collected and use them locally, rather than sending 100% of it to the state, only to get less than that back. His short and politically correct answer was that this is not how it works in California.
It still puzzles me, what with 58 individual counties, hundreds of cities and their thousands of elected representatives, Sacramento’s 120 legislators can’t be bullied into doing the right thing for the millions of people who live in California’s cities and counties and rely upon the services they provide.
While this doesn’t immediately address local cities like Stockton and others, who are drowning in a sea of debt created in large part by selfish public employees unions, the fact remains that had Sacramento not stolen local tax revenues from the cities and counties, then maybe local governments would be in a better position to afford the excessive salaries that only public employees enjoy.
