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UQ: CALI ECONOMY ON THE BRINK
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- A2: CALIFORNIA ECONOMY WILL INEVITABLE DECLINE
UQ: CALI ECONOMY ON THE BRINKCalifornia’s economy is on the brink Ladaga 7/1/09 (Lili, Editor, http://news.yahoo.com/s/ynews/ynews_ts418) Armageddon. Apocalypse. Disaster: These are the words being used to describe California's staggering $24 billion budget deficit. Last night, lawmakers failed to pass a budget by the midnight deadline and the state may now have to issue billions in IOUs to cover the bills. Almost every state is suffering from the effects of the recession, but not every state accounts for 12 percent of the national gross domestic product. According to AP, if California goes down, so goes the nation: California's annual $1.7 trillion economy is the world's eighth-largest economy and provides a significant chunk of tax revenue for the government; California alone funds many social programs for the entire nation. Like the Big Three automakers, California may be "too big to fail." If the state implodes, the ripple effect could slow the entire nation's recovery from the recession. Burt P. Flickinger, a retail consultant, tells AP: "California is the key catalyst for U.S. retail sales, and if California falls further you will see the U.S. economy suffer significantly." How did California dig itself such a huge hole? The recession certainly didn't help, but Time's Kevin O'Leary writes that California's financial troubles can be traced back to the passage of Proposition 13 in 1978. An antitax measure, Prop 13 makes it extremely difficult to raise taxes or pass a budget unless a 2/3 majority in both state houses agree — a virtually impossible task. California Rep. Zoe Lofgren tells Politico: "If we [in Congress] had to do what the California legislature does, we would never send a bill to the president of the United States,” she said. If the political wrangling over the budget isn't resolved soon, Californians will be feeling the pain on every level, big and small. Just a few of the proposed spending cuts: — State employees will be forced to take another day of unpaid leave a month, in addition to the two days leave they were forced to take starting in December. (NYT) — Funding for the Bureau of Narcotics Enforcement will be slashed by $20 million. The "little-known unit" has played a key role in several of the state's high-profile cases: The bureau's agents helped arrest Scott Petersen for the murder of his wife and unborn child, and their investigation led to charges in Anna Nicole Smith's overdose death. (AP) — 80 percent of state parks would be closed, 25 in the Bay Area alone, including several beaches along the peninsula. Park visitors spend an estimated $2.6 billion a year in and near state parks, but closing the parks would save only .26 percent of the $24 billion deficit. (SF Chronicle) — Education funding would be reduced by $5.3 billion. School districts have already laid off 30,000 employees. Class sizes are expected to surge from 20 to 30 students and many after school programs, arts and music classes will be cut. A national education survey conducted this year ranked California 47th in per-student spending. (AP) — Gov. Schwarzenegger is proposing to eliminate the state's $1.3 billion welfare program. Frank Mecca, the head of the County Welfare Directors Association of California, tells Time, "California could become the only state in the First World without subsistence benefits for poor children." So far, the government is using a "wait and see" approach to California, or as a recent Politico headline stated more bluntly — "Washington to California: Drop dead." Earlier this month, White House spokesman Robert Gibbs said that the administration would "monitor" the situation, but that California's "budgetary problem unfortunately is one that they're going to have to solve." (Think you can do a better job at balancing the state budget than the governor or state lawmakers? The Los Angeles Times is letting the common folk try their hand with a "You balance the budget" interactive.) A2: CALIFORNIA ECONOMY WILL INEVITABLE DECLINEEven if they win that California’s economy will decline in the future – they make it worse – because the plan wrecks the small window legislators have to agree on a budget before the entire state economy shuts down. Lin 7/2/09 (Judy, AP writer, “Some states without budgets as key deadline comes and goes; Begin fiscal year as recession takes a devastating toll,” The Boston Globe, Associated Press) SACRAMENTO - States from coast to coast began a new fiscal year yesterday with no budget plans and with cash quickly running out, sending some to the brink of shutdown and forcing others to furlough workers and cut services. In California, Governor Arnold Schwarzenegger declared a fiscal emergency and ordered state offices closed three days a month to save money as the state sank deeper into dysfunction. State officials plan to pay bills with IOUs starting today. But the pain extends far beyond the West Coast. The governor of Pennsylvania is proposing a 16 percent tax increase. A budget veto by the Illinois governor left the state with no spending plan at all. Indiana barely avoided a shutdown. In most states, the debate centers on whether states should be raising taxes to bridge the budget gaps. Schwarzenegger said he wouldn't sign anything that raised taxes or fees beyond what he has already proposed. ``I'm proud of California, even though we have our crisis,'' he said. The recession has taken a big toll on tax revenues and state finances. States had a cumulative $121 billion budget gap in crafting this year's budgets - and the gap would be even bigger without federal stimulus money, said Todd Haggerty, a research analyst at the National Conference of State Legislatures, or NCSL. ``You can't look to any one region that's performing better than the others,'' Haggerty said. ``You can see Arizona and California in the West, Ohio and Illinois in the middle and Pennsylvania and North Carolina in the East.' The NCSL says seven states - Arizona, Connecticut, Kentucky, Mississippi, North Carolina, Ohio, and Pennsylvania - have experienced delays or had to extend their sessions to deliberate on the budget. In California, which has a budget but one that is out of balance, the Legislature will have 45 days to send Schwarzenegger a plan to close a gap now pegged by the governor at $26.3 billion. After that, they cannot adjourn or act on other bills until they solve the crisis. 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