Austerity Measures for San Diego and California?
With Monday’s unveiling of Gov. Jerry Brown’s cost eliminating budget proposal, which he claims will effectively transfer numerous state services to local government control, nearly all San Diego County officials are unanimous in their response: that, while well-funded counties could run many state-mandated services cheaper and more effectively, they can only do so when they have available the money to fund such endeavors.
“My general concern, of course, is the money,” District Attorney Bonnie Dumanis said. “Where is it going to come from and is it going to pay for everything?”
Monday’s outlining of Brown’s 2011-2012 budget and initiatives will entail designs to pay-down a $28 billion deficit over the coming 18 months. An extraordinarily short period of time in which to undue an economic situation that took years to dig, such measures two years ago might have resulted in a quick, intense depression, out of which the state and its cities could have meaningfully emerged.
Today, such a course would likely tempt a deflationary spiral, and coupled with quantitative easing at the federal level, bring about prolonged depression. Currently, the state’s general fund is $86.5 billion.
Despite 2010 cutbacks, California has a $20+ billion budget gap, not including $200 billion in loans. It has the lowest S&P rating of any U.S. State, an A-. Seven of the U.S.’ most unemployed cities are in California. Nearly 70,000 homes in the state were foreclosed on in February—the nation’s highest. (1)
Of the coming budget proposal, The Sacramento Bee hinted at cuts to most everything: from the elimination of low-attended parks, the ceasing of funding for all local libraries, welfare—through harsher terms for eligibility—and the cutting of benefits for the elderly, blind, and so on.
“It’s time for truth. It’s time for working together,” said Brown before meeting with county leaders in Sacramento last week.“My principle is one of returning power to the people,” he announced.
Expect phrases like “we are all in this together” and “shared sacrifice” and words like “unity”to be used heavily in conjunction with the outlining of future austerity, not only in San Diego and California, but across the nation and world.
Similar to Brown’s call to return power to the people, in Britain Prime Minister Dave Cameron urges that his“big society” will usher in a dramatic redistribution of power from “the elite in Whitehall to the man and woman on the street.”
However, many have warned the term “big society” was created to obfuscate government’s movements to impose strict cuts in spending, similar to those imposed on countries like Greece. In the big society, the British people would be expected to volunteer in their communities in order to get things done.
Could a similar volunteerism come as part-and-parcel of the new governor’s structural readjustment?
What exactly Brown is going to propose remains unclear, although he has hinted that a number of programs, from welfare to jails to redevelopment, will be re-evaluated. Some of the ideas are sure to be put to voters.
“It will be controversial and it will be a struggle,” Brown ensures.
Having regularly drained local coffers of California cities, like San Diego, so as to balance its books, the state is likely to propose “unfunded mandates,”in which local governments are tasked with projects for which they receive no funding.
In fiscal year 2011-2012, Democrats offered $3.8 billion to local governments. To afford it, they attempted to levy an oil severance tax, transfer some sales tax and vehicle registration money to counties, and delay corporate tax breaks.
On Monday, Brown will present his budget, including the restructuring of state and local services. By June, a special election very well might ask voters to extend temporary sales, vehicle and income taxes, making them less-and-less “temporary.” To ensure the approval of such measures, tax extensions, in particular the sales tax, will be tied to education funding and other necessary services. If they aren’t approved, then money for schools will vanish.
Brown is no beginner at remaking the relationships between state and local governments, for, in 1978, he oversaw the passing of Proposition 13, in response to voters revolting against increasing property taxes.
At that time, Brown and lawmakers invested nearly $6 billion back into schools, cities and counties to keep local services. This marked the onset of a major centralization towards Sacramento, as lawmakers began imposing rules alongside revenues.
It’s expected that Brown and Democratic allies will propose transferring low-level prisoners to county jails, along with an amount of revenue for care-taking. In addition, likely transfers are health care, welfare and foster care programs, continuing the limited shifts already embarked upon under Schwarzenegger.
“Realignment has served us relatively well, except when the economy goes bad,” said Mike Van Mouwerik, finance director for San Diego County health and human services. “The problem is that during recessions demand for services goes up while at the same tie the dedicated revenue source for those services is in decline.”
Ed Martinez, head of the San Ysidro Health Center, expressed the concern of local centers in the face of looming cuts under any restructuring. Former Gov. Arnold Schwarzenegger tried to cut a number of programs and services for the poor. (2)
It ought to come as no surprise that Brown will be the champion of further statewide austerity measures, considering his connections to the international banking cartel through Goldman Sachs, which was charged with having played a large role in the unraveling of, among others, the Greece crisis. In a complicated financing deal made, before Brown was Mayor, by the city of Oakland—known as an “interest rate swap”—the city was to be guaranteed stability in its debts payments.
Now, the deal costs the cash-strapped city $5 million a year. Lasting until 2021, the agreement would cost the city $19 million to cancel. Union officials are calling on Goldman to let Oakland, as well as other municipalities, free from such arrangements.
The swap was agreed upon the year before Brown took office in 1998. Once in office, city officials renegotiated the deal in 2003, just as his sister, Kathleen Brown, California’s former state treasurer, began working for Goldman in the capacity of the West Coast head of municipal finance. In 2005, when the city paid off the debt Goldman had arranged under Brown’s watch, it left in place the interest rate swap. The deal increasingly benefits the company, whilst hurting the city’s economy. (3)
In the face of further austerity measures, a la the sort implemented by the IMF and World Bank in less-developed nation’s the world over, it is not unimaginable to think that San Diego will suffer the same fate as other California cities, such as Oakland, where in July of last year police chief Anthony Bates listed 44 situations to which his officers would no longer respond, such as grand theft, burglary, car wrecks, identity theft and vandalism. This after the city laid-off some 80 officers or ten percent of the work force. (4)
1. Gardner, Michael. Plan to increase local control raises questions, San Diego Union Tribune, 1.9.11
2. O’Connell, Justin. Truth About California Gubernatorial 2010, InttelDaily, 5.20.10
Accessible at: http://inteldaily.com/2010/05/truth-about-california%E2%80%99s-gubernato…
3. BusinessInsider. 16 Reasons Why California is the Next Greece.
Accessible at: http://www.businessinsider.com/why-california-is-the-next-greece-2010-05#read-more-17
4.Preuitt, Lori and Sanchez Kris. Suffer These Crimes in Oakland? Don’t Call the Cops, NBC Bay Area, 7.1310
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