Budget Deficit:California
Introduction
In all the states of American nation, it is the responsibility of the state’s governor to submit the proposed budget of the financial state for the next government year. The preparation, explanation, and the administration of the budget is the work of the financial department after which the governor submits the budget to the Legislature in January, and later revised in the month of May in preparation for the fiscal year which starts in first of July every year. The visible deficit in the budget approximately $25.4 which arises from the variation in the commitments put on spending as compared to that of the revenue earned and is approximated to be equivalent to 29% of the general budget fund to the whole year. This is as provided by the legislature’s budget analysts. This year, there is a notable deficit in the budget of the state of California and for these reason the residents of the state has called in the governor to fix the budget deficit.
The budget deficit
These crises arise as the former governor Arnold Schwarzenegger left office for the current governor by the name Jerry Brown. To most of the officials the budget deficit appears exaggerated a situation that raises questions (ebudget.ca 2011). These figures are viewed as the outcome from the passage by Arnold and some legislatures as savings, and the more budget restrictions arising from voters and the prospected slow rate of economic recovery as stated by some non patristic governmental analysts. In addition, at least $8 billion set as short-term sales, car and income taxes are set to terminate in the near future and the federal stimulus that has played a role in sustaining health care and school for the underprivileged are set to disappear in the near future. This deficit is a prediction of future deficits and as some legislatures put it, there is no good news awaiting the state dwellers even in the future.
According to Goldmacher (2010), the deficit is set to elevate considering the implementation of the K-12 schools where billions of dollars are expected to be fuelled to facilitate their upkeep. To answer such questions, the incumbent governor, Brown, has been unavailable and with no comments to make at all. To prevent such occurrence, Brown and other officials in control of the legislature propose a reduction as one way to win the republicans vote for the extension of taxes (Goldmacher 2010).
The main cause of alarm for the state dwellers is the fact that, to cover the deficit, it is proposed that there be a rise in taxes a move that has caused the citizens, on the republican side, to vow to block and reject any tax pay rise as they feel that the deficit is political and not economical as it is made to appear, while those on the democratic side vowed to protect employment opportunities and programs and take advantage of the shortfall to streamline government. In addition, there is a proposed cut in the state’s spending which to most analysts like Walters (2010) is a drop in the ocean of politics and this will not have any far-reaching contribution in minimizing or eliminating the deficit. According to Walters (2010), the deficit on one side displays the financial negligence of the citizen’s of CaliforniaState as well as the effect of politics in the states affairs. It is clear that, compared to the state’s income for the year ended 2009 of $1.9 trillion, the deficit is minute.
California state being one of the richest followed closely by Texas and New York, simply implies that the deficit is just one percent of its output economically and so, to close such a gap would mean that the cut in expenses or the increment in tax by about $20 billion has just virtual impact on its economy as they have little or no effect on the lives of the citizens. Though the slow rate of economic recovery is also a contributing factor to the budget deficit, ebudget.ca (2010) clearly demonstrates that the deficit existed even before the economic downturn hence, an implication that the incomes had been less than the expenses by far. With these reflections, it is clear that the governor has a difficult task ahead in attempting to balance the budget this year and in coming years.
The definition of the Gap
The contribution to the gap is from a shortfall of $15.2 billion from the present year and a deficit of $8.2 billion budget year which resulted to total deficit of $25.4 billion deficit. On the contrast is a reserve of $1 billion and a $26.4 billion slash, taxes as well as other budget solutions necessary to cut down the deficit which is projected to increase as time goes by. As stated in the ebudget.ca.gov (2010) some factors contributing to the exaggerated deficit include: first, the unrealistic suppositions like the receipt of federal funds in terms of billions of dollars, and the predicted reductions in expenses that were not attained which led to a resultant $5.3 problem in the 2010-2011 budget (ebudget.ca.gov 2010).
In addition, the revenue for this year are $3.1 less than those anticipated the 2010 budget Act as well as the unemployment insurance reauthorization and job creation Act of 2010 (ebudget.ca.gov 2010). Supplementary budget shortfall, $1.6 resulted from the signing into law Proposition 22 of November which banned not only on the supplemental funding of the budget by some particular transportation reimbursements but also from general fund as loans. Miscellaneous shortfalls in general accounted for about $2.1 billion. The provisional elevations in the rates of taxation on the citizens are prospected to reduce revenue by an amount of slightly above $ 7 billion for the 2010-11 to 2011-12 budget proposal while increasing the cost funds by approximately $4bilion. A final contribution to the budget gap is additional $3.4 billions with an expiry date at the end of the 2010-11 budget years.
Closing the budget gap
In his proposed budget, the governor Jerry Brown proposed that the some reductions be made while the enhancing a balanced approach. He proposed that the restoration of decision making be taken back to the local authorities and ensuring that such decision are made subject to the people make the local government more effective and protect principle services.
Some of the proposed adaptations include $26.4 billion cuts in expenditure, income and other solutions to balance the budget currently and in the future, as well as provision of surplus to hold back. The budget curbs expenditure by $12.5 billion with the inclusion of substantial reductions in principle programs liked the Medi-Cal by about $7 billion, the wellbeing to work of California by about $1.5, and compensation of workers and operation of the state reductions by about $580. One of the controversial adaptations in the proposed budget is the maintenance of the K-12 school funding which will maintain continued high tax rates for additional five years. There are also plans to use the single sales factor on the allotment of income rules on particular corporate taxpayers and the elimination of unproductive curriculum on tax payment. The successful implementation of such postulations will result to an added income of about $12 billion as reserve.
Budget summary
Other solutions to the budget apart from increased tax and reduced expenditures are the one time savings and borrowing from sources like the exceptional funds an amount of $1.8 billion, property tax adjustments amounting to $1.7 billion, the funding of programs for children using $1.0 billion from the Proposition 10 surplus and the community mental health funding from the proposition 63 funds. The governor points out the need to embrace the permanent solution in order to do away with the imbalance in the proposed budget today and in the future. This is with an expected reserve of about $7 million to $ 2.4 billion in every year a thing that will accelerate the restoration of the equilibrium in the finances of the state.
It is proposed that the relationship between the state and the local government relationship be maintained through the reversal of budget authority and control in Sacramento, the full implementation of which will restructure the delivery of $10 billion services. This move will enable the government remain more focused on principal issues making it more effective, efficient and more cost effective since there will be a clear definition of responsibilities which will also reduce redundancy in services and administrative costs. The first $5.9 will concentrate on the transfer to county level of programs from the state level.
Reduction of spending and promotion of efficiency
According to the proposed budget, the governor recounts that the state can only gain substantial reserves, improve operations and regain its lost confidence in the citizens through cubing wastes and duplications in work. This budget is seen as the commencement of an effort to improve the efficiency of the state and it effectiveness. It is also a way of enhancing responsibilities among the administration members by providing them autonomous obligations that eliminate common characteristics in responsibilities which will minimize expenses and recover appropriateness. To achieve such moves, some of Brown’s steps include: the elimination of the office of the Education’s Secretary, the reduction in the budget of the office of the governor by about 25 percent, and the elimination of the office of the investigator of the recovery act of America.
There is also a plan to reduce the number of state cell phones by over 40 percent of all state employees as well as a reduction in the number of vehicles for state use both for public safety use and for the fleet by the state. This will follow the report on the purpose of each vehicle and the adjustment of its necessity with the exception of vehicles for the most crucial functions in the state and whose retention is cost effective.
Politics in the Attempts to return to solvency
With these attempts to return to solvency, the deficit problem in the CaliforniaState budget is surrounded by political forces which attempt to divert the minds of the state dwellers not to just look at things on face value and judge them. Walters (2010) is for instance for the opinion that the move is political since the new governor, Jerry Brown, is a democrat and of course on the presidents side. In the political air surrounding the air therefore it is also obvious that the democrats will have their way in their assertion that having to raise the tax to cover up the deficit, as proposed by the minority-republicans, will direct the state’s economy to irrecoverable recession, while the republicans argue that the reduction of the states spending would similarly devastated the states economy.
This is the resultant tag of war. Walters describes the situation as one where none of the side has a meaningful decision as the closure of the gap by reduction of expenses or the annual increment of tax by $20 billion would have insignificant changes on the money circulation in the economy but significantly affecting the lives of individual taxpayers or the recipients of tax services and funds (Walters 2010). To this effect, to cover the budget deficit is not an economic issue but rather propaganda between the democrats and the republicans. It is a reflection of the ideological polarization on the capitol and the ordinary Californians comprehension of the states financial inefficiency and non-productivity as compared to the private sector.
In a poll conducted by the university of California and the Los Angeles Times, the results showed an inclination towards the fact that most of the Californians preference to close the gap in cutting the expenses rather than increasing taxes but at the same time were against the particular reductions that would have to be implemented to effect the solvency of the state. This pole, like all others of similar results heightened the debate as most of the democrats seized it as an opportunity to support the intentions of the governor to continued spending while promoting new taxation rates (Walters 2010). On the other hand, the republicans viewed it as a way to show that the opinion of most voters was in effecting the governors’ proposal on reduction in expenditure while rejecting the move to implement new taxation rates.
Some citizens, though feeling the pinch, believe that it is them to blame for having voted for such leaders whose language is a political illusion in a bit to try and cover up the mess in taxes increment, without eliminating the breaks and loopholes associated with taxes and bailouts where only the wealthy are at an advantage as they can easily remain concealed in tea ceremonies and small businesses whose property tax is incremented.
In the opinion of most democrats like Joshua Holland as pointed out by Eran (2010), the government needs not implement further spending reduction as the state is already smaller in size compared to most countries in the development states and within the period of 2004 to 2007, among 26 countries with spending rates, the US ranked 26th in Organization for Economic Corporation and Development (OECD) and with the lowest burdens in taxes. A proposition to by the governor to reduce inconsequential figures of payments by the state to health workers for the poverty-stricken elderly and disabled is ironical since instead of saving the state some funds as is expected, the alternative form of managed care is thrice more costly while the resultant to be anticipated visits to the emergency rooms would mean even more expenses.
This is an indirect way to abandon the elderly and the disabled and an indication of the misplaced priorities in the government spending because affected families are faced with the dilemma of who is to remain at home and take care of their elderly and disabled. Some misplaced priorities in government priorities is indicated by Eran (2010) clearly show thrice the spending in the funding of military in the US, which has the leading military power, as compared to their closest rival, China. This is quiet a show of the government concern in security for its citizens. This amounts to $30 worth providing water to the entire population on the universe.
On one part, the move by the governor and the democrats to advocate for some reductions in minute spending by the government have little or no effect on the states economy compared to the consequential outcomes resulting from the same (Eran 2010). These proposals, to cut tax, by the government on one hand are in the favor of the rich and wealthy who on the taxes can afford more taxes as seen in the benefits associated with their payment of the now cut pre-Regan taxes. Conversely, the reduction of the State’s spending on domestic health care workers for the elderly and the disabled negatively affects the low income earners who have to now spend at least thrice more in the care of the elderly and the disabled.
California according to Goldmacher (2010) is a centre for mortgage explosion and bust whose tax collections can never be at their peak level till the year 2015-2016. as of May 9, 2011, the short fall in the budget had decreased to about $15 billion which Brown intends to fix by the implementation of a stronger prospectus in the collection of tax as compare to he proposed budget in January 2011. To attain such amidst the strong opposition by the republicans, Brown and other Democrats in the control of the legislature, who are for the increase in taxes as compared to reduced states expenses, plan to use the proposed reductions in spending especially in the K-12 schools and Higher education to win the vote of from the republicans to support the increase in taxes whose term of effect ends in June this year.
This is so because, Brown and his colleagues face the threat of opposition of the tax increase proposal since the majority in the state are the republicans who will easily have their way, in blocking the new tax extensions, with a majority of two-thirds. With the reduction most of the republicans are now for extensions in taxes on condition that most of the revenue will be focused towards schools and not in the government loopholes of trying take advantage of the revenue from tax for own gains and ignoring important priorities such as education and healthcare.
Finally, Brown has given in to the pressure to embrace reductions and not increase taxes. This move has been accompanied by the closure of 70 parks in the states which means the elimination of about 220 jobs which is a move seen to save the state at least $33 million which is a part of the larger plan to reduce the large deficit of about $15 billion which attract about 5.6 million visitors per year (Thomson 2011). To most environmentalists, this is a devastating move and the hardest hit on the states historical parks.
Reference
Ebudget.ca, (2011). Governors proposed budget. California. Retrieved from http://www.ebudget.ca.gov/pdf/BudgetSummary/Introduction.pdf last updated 2011.s
Eran, A., (2010). California budget Deficit. LA Progressive. Retrieved from http://www.laprogressive.com/economic-equality/california-budget-deficit-not-a-real-problem/ last updated 18-12-2010.
Goldmacher, S., (2010). Estimated state budget deficit. The Los Angeles Times. Los Angeles: LA.
Thomson, A., (2011). California to close 70 parks. Retrieved from http://www.care2.com/causes/environment/blog/california-will-close-up-to-70-state-parks-to-save-money/ last updated May 15, 2011.
Walters, D., (2010). California’s budget Gap. The Sacramento Bee. Retrieved from http://www.sacbee.com/2010/12/05/3233962/dan-walters-californias-budget.htmllast updated 05-12-2010.
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