More Budget Cuts in California, New Jersey, and Florida

The "People's Governor" has just announced Actions to Jump Start California’s Economy by creating jobs to offset the housing slump.

Governor Arnold Schwarzenegger today awarded $73 million for 40 housing projects in 26 cities across the state, helping 1,611 California families rent or purchase affordable housing.

The awards, coupled with the $69.5 million in permanent low-interest loans from the Proposition 1C housing bonds Governor Schwarzenegger announced earlier this month, will create more than 5,300 jobs and more than $244 million in wages. The funding for these projects is from Proposition 1C and Proposition 46. Proposition 1C, which provides $2.85 billion to finance affordable housing and infrastructure across California, is part of the historic $42 billion package of infrastructure bonds championed by the Governor and approved by voters in November 2006.

"This will put people back to work and it will also create hope for some of the people in our state who need it most. Building a better life and pursuing opportunity begins with having a place to live," said Governor Schwarzenegger.

Let's see if I have this straight: California needs a budget reduction of $16 billion and counting, but Schwarzenegger promises to "jump start" the economy by providing $73 million in affordable housing.

Steep Cuts At California Schools

While Schwarzenegger (by proposition from California voters) is wasting taxpayer dollars in a foolish attempt to help people buy houses when home prices are declining, inventories are at record highs, and people are walking away from their homes, California's schools are preparing for steep cuts.

The Long Beach school board voted to close an elementary school this week. The Rialto Unified School District, in what is believed to be the first such action in the state this year, sent notices to 305 employees including teachers, informing them that they may not have a job next fall. The San Francisco school district may take city "rainy day" money to help balance its budget.

School districts across California have begun trimming services and preparing to lay off teachers in response to Gov. Arnold Schwarzenegger's proposed budget, which could cut about $4.8 billion in education funding this year and next year. Educators say it's the worst financial crisis they can remember.

The Los Angeles Unified School District, the state's largest, could have a $560-million deficit next year, an amount that would affect classroom programs. The district already had agreed to trim almost $100 million from next year's budget to comply with county guidelines before Schwarzenegger's announcement in January of his fiscal plan, which includes $460 million more in potential reductions.

The combined sums would be the district's biggest shortfall ever.

"When I first saw the governor's proposed budget, quite frankly, I was in a state of shock," Supt. David L. Brewer said at a recent board meeting.

District officials have begun raising some scary scenarios to illustrate the depth of the potential problem. Chief Financial Officer Megan K. Reilly said the $460-million cut would be the equivalent of closing 22 high schools, firing 5,750 employees or instituting an 8% pay cut for all employees.

Budget Problems Far Worse Than Forecast

As the number of foreclosures increase, so does the deficit. California's deficit is now $16 billion and growing.

California's non-partisan fiscal watchdog blames the slumping housing market for creating a rippling effect throughout the economy.

The result? Sharp drops in tax revenue from three major sources.

"The personal income tax, the sales and use tax and the corporate tax. That decline in revenues means we have a larger budget problem than what was estimated," said legislative analyst Elizabeth Hill.

Hill thinks Governor Schwarzenegger's plan of 10-percent across-the-board cuts is so flawed, she offered for the first time ever, her own plan to fix the state's budget problems.

It calls for a combination of cuts and $2.7-billion in new taxes, including reducing tax credits for dependents, adding a dime to every gallon of gasoline bought in the state, increasing tuition by 10-percent at all Cal State and U.C. campuses and closing the yacht tax loophole.

Talk of more budget cuts are sparking protests every day.

The disabled oppose the proposal to reduce hours their home care workers can provide. And some parents, kids and their teachers won't stand for less funding for their classrooms.

"Cutting from schools, from our children, from education from our future it's just so wrong," said Marin County parent Cindy Ross.

They won't stand for it?

That means they will be standing for higher taxes because something has to give. It's high time someone (Schwarzenegger in this case) goes before the public and says something like this:

California is living beyond its means. We cannot afford to give away free health care and free schooling to illegal aliens. In fact, we really can't afford to give away free health care to anyone at all. Furthermore, many of the propositions that have been voted on are fiscally irresponsible. For example ... proposition (names here) ...

We are going to have to start living within our means, and that means government salaries have to drop, benefits have to drop, jobs have to be cut, or taxes have to be raised. We cannot keep putting this problem off by floating more bonds.

Problems in California are going to keep getting worse. In the last two months the deficit went from $14.5 billion to $16 billion. In several more months it is likely to be $20 billion. Raising taxes is not the answer, nor is floating bonds. That means people will have to be fired or salaries and benefits cut. It's time for choices California, but more importantly it's time for some honesty about the problems.

For the record, Obama (once elected) should be giving a similar speech at the national level along with announcing a proposal to cut the military budget by a cool 50% to strengthen the dollar. Don't get your hopes up on this.

Circuit Court Cutbacks In Florida

In Florida, the Chief Circuit Judge Proposes Unpaid Furloughs.

Miami-Dade court employees got chilling news this week when they discovered they may be forced to take as many as 11 weeks off without pay by July. State-funded county court employees could expect to take a 58-day furlough, and circuit court employees could be left without 22 days of work and pay. For county court workers, that would mean taking off 11 of the next 19 weeks. At the circuit court level, four weeks of work would disappear.

“This is not the type of news we were anticipating,” the e-mail reads. “We are hoping that this will not be the ultimate solution to meet this major additional setback in our financial picture.”

Farina’s office issued a statement Wednesday saying the furloughs would cause child-custody and child-abuse cases to be postponed, delay banks getting foreclosed homes back on the market, and effectively stop traffic court, divorce court and commercial litigation. It would also put criminal courts in danger of running afoul of speedy trial requirements.

Reached late Wednesday, Chief Broward Circuit Judge Victor Tobin said the same furlough scenario could play out in all circuits across the state, and it would take years to recover from the “catastrophic” consequences.

“There would be no evictions, no child support hearings, no civil cases, no foreclosures. It would ripple through the entire economy with a devastating effect,” Tobin said. “What we do for the public and the service we perform far outweighs the cut that we're going to take.”

Judges are bristling at the impact of the funding shortfalls.

In Palm Beach County, a newsletter issued Tuesday by Clerk and Comptroller Sharon Bock outlined employee suggestions for dealing with lower property tax and other revenue collections. One idea was to cut the work week from 40 to 37.5 hours with a corresponding reduction in pay.

The Miami-Dade e-mail was sent the same day judges from across the state went before the Legislature in Tallahassee to warn lawmakers about the effects the expected cuts would have on the court system.

The only court employees immune from furloughs would be judges. But their judicial assistants and other courthouse employees who draw their checks from the state would lose pay.

Alarms Sound In New Jersey

In New Jersey, Alarm bells are ringing over Governor Corzine's Budget.

Gov. Jon S. Corzine is mulling cuts to the state work force as he readies a budget plan replete with spending cuts, but two leading lawmakers on Tuesday were hesitant about offering early retirement packages to state workers.

But Assembly Budget Chairman Lou Greenwald and Senate Budget Chairwoman Barbara Buono worried an early retirement package could increase state retirement benefits costs. Buono and Greenwald both recalled a 2002 early retirement package that was taken by about 4,000 workers, bringing an immediate salary savings but increasing state pension liabilities by $645.4 million.

As part of his plan to revamp troubled state finances, Corzine plans to freeze state spending in the budget he's set to introduce on Feb. 26. The plan would be for the fiscal year that starts July 1. Corzine said the spending freeze will mean about $2.5 billion in budget cuts.

Akron Ohio Mayor Wants To Sell Sewer System

In Ohio, Akron mayor wants to sell sewers, use cash to give free tuition.

Mayor Don Plusquellic wants to sell the city's sewer system and use the money to send residents to the University of Akron for free.

Plusquellic said Thursday that his plan is to create a scholarship fund by selling the sewer system, which the city values at $100 million to $400 million. That would give the city enough money to cover tuition and fees for the university or a trade school in the city.

"This would be the kind of transformation that can reshape Akron for the rest of this century," Plusquellic said in his State of the City address Thursday. "We've invested in our school buildings. I say, 'Let's invest in our students.' "

Educators in the city applauded the plan.

"I think it is exceptionally bold," said UA President Luis Proenza. "It's the sort of thing that can transform the community."

Everyone wants something for free. Free tuition won't solve a thing for the simple reason it won't be free. Perhaps taxpayers would rather have something else for free, like keeping more of their paychecks instead of giving services away for "free". Why is this simple construct so hard for everyone to see?

California, New Jersey, and Florida are in for some rough times. Taxes are going to be raised, jobs are going to be cut, or salaries are going to be reduced. Expect other states to quickly follow suit.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List