California’s Fiscal Collapse at Center Stage in U.S. Senate Contest by Gregory Hilton

The fiscal outlook in California continues to be dire and economic issues will dominate the 2010 race for U.S. Senate race. The outlook in the Golden State is decidedly different from when Senator Barbara Boxer (D) last sought re-election in 2004. Boxer, 69, served a decade in the House before moving to the Senate in 1992, and is promising to raise $20 million for this year’s campaign. She has already raised $11 million and is going to need all of it in order to cope with considerable voter anger.
California’s sales, income and gasoline taxes are among the highest in the nation. Its corporate taxes are the highest in the West, and despite 1978’s Proposition 13, its property taxes are at about the national average.
The state has a 12.1% unemployment rate, housing prices have plunged, home foreclosures have skyrocketed and a drought is threatening the state’s dwindling water supply. The Senator’s massive support from public employee unions is becoming an issue.
The number of state employees grew 24% over the past decade, and they are now the nation’s most highly compensated. Survey research indicates voters are drawing a connection between generous compensation packages for public employees and the state’s huge budget deficit. The result is declining approval ratings for the Senator, and she is now being blamed for deficit spending on Capitol Hill and in Sacramento.
California is already technically bankrupt, and it’s collective deficit from all cities and towns is double the state government’s $20 billion budget gap. Many municipalities have been closing parks, firing teachers and police officers, and the tuition at state universities has gone up 30%. Of course, states can’t technically go bankrupt, but they can end up in federal receivership.
The primary is on June 5th and both parties have interesting contests. Boxer is expected to easily defeat journalist Mickey Kaus of Slate magazine for the Democratic nomination, but it will be difficult for the incumbent to answer the questions posed by the challenger. He points to the unified public school district in Los Angeles as an example of the state’s problems.
In the past decade, the school district has spent $3.5 million trying to fire just seven of their 33,000 teachers for poor classroom performance. Only four of the seven were eventually fired, and each case lasted an average of five years. Kaus is saying Democrats should not be reluctant to take on teachers and other union. He says, “You can’t find a Democrat politician criticizing the teachers unions,” and Boxer has traditionally relied on organized labor for the bulk of her campaign cash.
A major problem is the revenue decline because of the recession, but the state is spending more than enough money to deliver services. It just spends the money poorly. For example, California is spending $11,600/pupil per year for K-12 education, or $371,000 for a classroom with 32 children.
Gov. Arnold Schwarzenegger (R) has been trying to change the state’s priorities, but is often thwarted by the overwhelming Democratic control of the state legislature. Schwarzenegger came to office because of a 2003 recall election and then received a full term in 2006 with a landslide victory margin of 56% to 39%.
The Governor attempted to reduce the power of public employee unions and proposed a 2005 constitutional amendment to fix the budget permanently. It eventually became Prop. 76, but it was defeated when unions poured $100 million into effective TV ads. The Governor has also repeatedly requested across-the-board spending cuts, but this has also been denied by the state legislature. He is leaving office because of term limits.
The GOP primary includes former Rep. Tom Campbell, former Hewlett-Packard CEO Carly Fiorina and Assemblyman Chuck DeVore. It is expected to be a bitter battle for the next three months. Campbell appears to be the most electable candidate, but he may not survive the primary. Syndicated columnist George Will recently wrote “If Campbell is nominated, he can win, but if Californians were sufficiently rational to nominate him, their state would not be shambolic.”
All of the Republican candidates want to be portrayed as fiscal conservatives. Fiorina was the front runner until Campbell entered the face and her “Demon Sheep” video had attracted considerable attention. It is 3.5 minutes long and was designed for Youtube.
The ad accuses Campbell of backing increases in state taxes when he served as Finance Director for Gov. Schwarzenegger. The ad advertises a web site: FCINO.com – — fiscal conservative in name only. The bizarre ad may end up backfiring on Fiorina, who had a spotty voting record prior to this campaign.
Campbell represented Silicon Valley in Congress for nine years, and served in the California Senate. In addition to his post as state budget director, he headed UC Berkeley’s business school. Currently he’s a law professor at conservative Chapman University in Orange County.
His amazing resume also includes a Ph.D. in economics from the University of Chicago, where his faculty adviser was Milton Friedman. Campbell also graduated Magna Cum Laude from Harvard Law and was a Stanford University law professor.
Campbell’s biography states, “During Tom’s tenure as State Finance Director, California’s budget was balanced with no tax increases, no new borrowing, and no accounting gimmicks.” The problem is that when Campbell was running for governor last year, he endorsed several temporary tax hikes as part of a broader package of spending cuts to balance the state’s books.
Among the tax measures Campbell endorsed was Proposition 1A which was on the May 2009 special election ballot, and was rejected by nearly two-thirds of voters. It would have extended a series of temporary taxes for an additional year and created a new “rainy day” fund to hedge against future downturns. Campbell also proposed a one-year, 32-cents-per-gallon increase in the state gasoline tax to help bridge the deficit.
He defends himself by saying the tax increases he backed were coupled with proposals for even deeper spending cuts and budget reform, and that California, unlike the federal government, is barred by law from running a deficit. He says there is no way to “avoid unfathomable cuts to public education” without generating some new revenue. Polls indicate voters want to erase the $20 billion state budget deficit with reductions in programs and services rather than tax increases. Fiorina signed a petition not to raise taxes but she has not proposed any concrete way of tackling the deficit.
Campbell is responding to Fiorina by highlighting his Congressional record, and the ratings of the National Taxpayers’ Union (NTU). In the 102nd Congress, Campbell was number 1 out of all 435 Members of the House, as the single “most fiscally responsible” Member according to the NTU. Then Rep. Barbara Boxer was 412. In the 106th Congress, he was once again number 1. Then-Sen. Boxer was ranked 95 out of 100 Senators. She has amassed one of the biggest spending records of any Member of the House or Senate in history. Campbell describes his mission by saying:
“I object to spending our children’s money. I object to borrowing so much from overseas that we give power to other countries who can threaten to “call our loans.” I object to printing money at such a rate that a high level of inflation is threatening as soon as the economy recovers.
My proposal for dealing with the deficit is set out in an alternative to the President’s budget. It’s on my website, at campbell.org. I cut the President’s deficit more than half: by almost 700 billion dollars. And, to hit zero deficit eventually, we need to restore Gramm Rudman. Because of Gramm Rudman, we actually balanced the federal budget when I was last in Congress.”

Furthermore, Campbell was the lawmaker who took on the leadership of his own party when they broke the budget guidelines. He damaged his relationship with the Speaker Newt Gingrich (R-GA) when he went public to denounce the GOP leader for breaking the budget and setting a bad example.

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One response to “California’s Fiscal Collapse at Center Stage in U.S. Senate Contest by Gregory Hilton

  1. Nice Article very informative & usefull for me thanks…

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