Fallout: The Financial Crisis

Budget impasse tarnishes Golden State

Sarah Gardner Feb 17, 2009
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Fallout: The Financial Crisis

Budget impasse tarnishes Golden State

Sarah Gardner Feb 17, 2009
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TEXT OF STORY

Kai Ryssdal: Whatever benefit California stands to get from the stimulus package is probably already spent. Gov. Arnold Schwarzenegger is set to lay off 10,000 state workers today. He’s also going to bring all public works projects to a halt. California will also delay billions of dollars in payments to contractors, counties and social service agencies. You’d think a $42 billion deficit would get the legislature to do something, too. But no.

Marketplace’s Sarah Gardner reports that California may be the best example so far of how not to guide a state through a financial crisis.


SARAH GARDNER: Iris Lav doesn’t have much sympathy for the so-called Golden State. The Deputy director of the Center on Budget and Policy Priorities, says yes, 46 of the 50 states are running deficits. But California voters, she says, brought some of this mess upon themselves. First, she says, they required a two-thirds legislative majority — one of the largest in the country — to pass a state budget.

IRIS LAV: That is something that just begs for what’s often called the tyranny of the minority.
A very small number of legislators can hold up the budget.

And despite California’s go-with-the-flow reputation, when it comes to state government, rigidity is more like it. Scott Pattison, executive director at the National Association of State Budget Officers, say years of voter ballot initiatives have ended up tying the state’s hands in times of crisis.

SCOTT PATTISON: Very little of the budget is actually flexible, discretionary funds. And as a result, when you have an economic downturn and you have shortfalls, it really becomes difficult to make the political decisions of where to cut or where to increase taxation, if you have to or want to.

One of those ballot initiatives, Prop 98, may inadvertently prevent California from using federal stimulus money for the public schools. Prop 98 was passed to make sure the schools got enough state funding after the most famous initiative of them all — Prop 13 — limited property taxes, the main source of school funding.

I’m Sarah Gardner for Marketplace.

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