Sunday, May 24, 2009

California -- Talk About Greed & Corruption!

How did California get to the point where it must partially shut down its public schools and begin to release dangerous criminals back onto the streets because it has a $ 21 billion budget shortfall? The greatest source of misinformation on this topic is the NY Times. According to the NY Times, all you need to do is raise income taxes on the wealthy and the problem is solved. Perhaps, the Times should note the nearly 150,000 people per year that are now moving out of California for good, thanks to the extraordinarily high tax rate on everyone -- rich and poor.

There are two problems in California that determine their current budget woes. The first and most significant is a woe that afflicts every state in the union -- the federal government. Begun under Nixon, the federal matching programs for entitlements such as medicaid now occupy more than one-third of all state budgets in the US. Matching programs for federal aid to education are enormous and affect state as well as local budgets. Neither the governor nor the state legislature have a vote on any of this is all federally mandated or you lose the federal matching funds. Eventually, federally mandated matching funds will break every state in the union, regardless of who is governor or who is elected to the state legislature or how voters vote on any and all referendums.

This is why numerous state governors are rejecting parts of the Obama stimulus package. All of these money grants to states create new permanent perpetural new spending mandates on states that will persist long after Obama has left the White House and is making $ 500,000 speeches around the country and the world. There is a controversy here in the state of Virginia over the funds in the stimulus package for unemployment compensation for part time workers. If the state accepts the one year of funds for this program, it commits to a permanent and massive new spending program that continues long after the single year of federal largesse. Republican candidate, Bob McDonnell is right to reject the funds for this program. Democratic candidates don't dare tell the voters that truth -- that accepting these funds creates a new permanent spending program that the state cannot afford.

The second problem, peculiar to California, New York, and New Jersey (and some, but not all, other states) is the absurd financial package for state employees and teachers. Prison guards make over $ 100,000 per year in California and that is before pension fund contributions and health care coats which add another $ 20,000 to the annual cost per employee. The publc school teachers have an even better deal. Who can afford this? The only answer for taxpayers is to call your real estate agent and the movers and get out of town fast, before the tax man comes.

California created its own nightmare by paying state employees and teachers more than twice the competitive compensation -- talk about greed and corruption!! Why should taxpayers bail out this problem.

Note that there is no fix short of bankruptcy for California, NY State and New Jersey. So, guess where these states are headed. If the US Treasury bails them out, then the US will be headed down the same road for the same reason.