The good news is Californians don’t have to fear any longer about falling into the ocean after some cataclysmic earthquake as we are already drowning in debt. See this in article in the recent print edition of The Economist, which suggest that the more states (and federal government) resembles California, the more they threaten economic recovery.
Mac Taylor, the state’s non-partisan legislative analyst, now expects to see a deficit of $6.3 billion for the current fiscal year, which ends next June, rising to $14.4 billion next year.
This means that California’s legislature, having already made cuts that exceed the entire budget of many smaller states, must deal with another gap of $21 billion in the coming months. This is larger than, for example, California’s entire spending on prisons and higher education combined. Lest legislators be tempted to resort to temporary accounting tricks, Mr Taylor also warns that revenues are likely to fall below expenditures by about $20 billion a year for the foreseeable future….
The answer, suggests Mr Taylor, must be a mix of additional cuts and extended temporary taxes, although Republicans, a minority in the legislature large enough to block any tax or budget deal if they wish, are already saying no to more taxes as they prepare for an election year. But whatever the mix, taxing more and spending less is “the opposite of what we should be doing” in a weak economy, says William Lockyer, California’s treasurer, who is a Democrat. State finances are thus imposing a “reverse Keynesianism” on policymakers, he says, which counteracts the federal stimulus and might even jeopardise the recovery.
California’s problems may be in a league of their own, as the Pew Centre on the States puts it, but about nine other states face similar difficulties relative to their size. They include California’s neighbours, Arizona, Nevada and Oregon; that other burst housing bubble, Florida; the rust belt of Michigan, Wisconsin and Illinois; and the eastern basket-cases of New Jersey and Rhode Island. Altogether the ten states represent more than a third of America’s economy and population.
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It’s been said many times that California doesn’t have a revenue problem; It has a spending problem. There is no single solution to the state’s complex problems, but change must start on a local level. We can help by encouraging our elected officials to spend our tax dollars wisely. I live in Los Angeles County, and we’re seeing some glimmers of hope with our Board of Supervisors. Recently, they reissued an RFP for vendor services to operate the county’s GAIN case management services (a welfare-to-work program). I expect the same two companies will submit proposals as last year – incumbent Maximus Inc. and newcomer Policy Studies Inc. (PSI).
Maximus has maintained its contract with the county for many years now, but its cost to the taxpayers keeps skyrocketing. If the new bids resemble those from last year, we can expect that the Maximus bid will cost taxpayers almost a million dollars more than PSI’s.
What’s more, Maximus has a track record of poor performance. Under its latest three year contract, Maximus has been cited repeatedly for failing to meet required goals in 5 of 8 categories (according to the LA Times). Last year, the Department of Public Social Services favored PSI based on scoring done on the two companies by a neutral third party. PSI scored 9,082 out of 9,616 possible points in the procurement process, whereas Maximus scored 7,824 of 9,616. PSI won by a 13% margin on technical score and also submitted the lowest bid, which was 6% cheaper.
Even worse, Maximus has spent hundreds of thousands of dollars trying to buy the support of the Board of Supervisors through lobbying and campaign donations.
I, for one, am grateful that the BOS reissued the RFP and am confident they will select the right choice for LA. In these tough economic times, we need our local elected officials to scrutinize how every tax dollar is being spent and eliminate waste wherever possible. I hope we see a changing of the guard here very soon.