The Fiscal Collapse and Political Farce That Is California

May 19, 2009 may go down in California history as the date the most populous state in the Union became "obviously ungovernable." For on that date, the voters of California told their legislative representatives they had just elected to office that they - the voters - really did not want those representatives to attempt to operate and maintain government within the state.

And they repudiated the political compromise worked out by Governor Arnold Schwarzenegger who they elected when they recalled Governor Gray Davis, the second governor to be recalled in American history.

There aren't many Americans old enough to remember when during the depression, along with banks going under, state and local governments including schools started paying vendors and employees with "warrants" which were IOU's based on the hope that someday enough cash would come into the treasuries to cover them. Californians will get there.

The State of California is about to start massive layoffs beginning with about 6,000 employees in the next month with the initial largest layoffs in the Department of Corrections (yes, prison guards).

While most Californian's don't see the magnitude of the problem, the State and local governments of the world's 8th largest economy will suffer a financial shock over the next 6 months. I mention local governments, because the State is considering "borrowing" property tax revenues and will be unable to remit sales tax revenues to local governments because the State is again getting low on cash. The State's deficit is now 25% of the State General Fund and rising.

State spending on everything from cars and computers to food and toilet paper is going to have to be cut by a minimum of 15%. This is a surprisingly large amount of money that is going to cease to enter the private sector. The ripple effect in the national and world economy will be noticed by the economy's statistics keepers.

It's just the way it is unless Congress decides to intervene to bail out another poorly managed "too-large" economic entity within the American economy in order to reduce the impact on the world's economy. The Los Angeles Times, in discussing the likelihood that private investment in California's economy will dry up, noted today:

"We lose competitive advantage by being the state that can't solve its problems," economist Stephen Levy said. "Regardless of what we think the solution is, the fact is we can't find a solution."

The budget crisis threatens to further weaken the state's job market, which lost 63,700 more jobs last month, according to figures released Friday. The state's overall unemployment rate actually fell slightly, to 11% from 11.2%. But new job losses could prolong the vicious cycle in which the California economy is now trapped, with rising joblessness reducing consumer spending and delaying a housing rebound, thus leading to more layoffs.

Business Week yesterday called California a "basket case" in an article noting that 47 states face budget gaps explained:

The California state legislature will now have to consider many more cuts. They'll range from relatively smaller items—a $4 million-a-year poison-control hotline that gets 900 calls a day—to sweeping cuts in health-care spending that will reduce coverage for 2 million poor state residents. "These are folks who may go to the emergency room, but they'll face the bills afterward," says Anthony Wright, executive director of advocacy group Health Access California. "If you're trying to lift yourself out of poverty, that won't help you."

California legislators had already passed $16 billion in spending cuts and $12 billion in fee hikes to tackle the current fiscal year's budget. Schwarzenegger says his own office has been reduced by 27 positions, to 147 people, and remaining staffers are taking a 9% pay cut. State legislators, though, say the governor's decision this week to stop pursuing short-term borrowings came as a surprise to them. Noreen Evans, a Democrat who chairs the budget committee in the State Assembly, says she was against borrowing more money to begin with. She thinks the fix lies in a number of spending cuts and tax increases—everything from putting a sales tax on tickets to sporting events to the $750 million a year that could be gained from taxing oil production in the state. "We should think about taxing oil producers before we cut health care coverage to 200,000 children," she says.

Some see California's fiscal crisis as an opportunity to address structural problems with the state's government....

Indeed, some of us do see it that way. As we proposed in our Three Californias web site several years ago, California is too large to be effectively governed unless it becomes a separate country. Since that is unlikely, it is time to split the state into Northern California, Coastal California, and Southern California, as we have proposed.

The Economic Panic and The 3 California's Proposal

The recent economic panic (a term preferred to trying to distinguish between a recession and a depression) appears not to have created significant differences in the relative economies between the three proposed states. Using employment data, for instance, Northern California generally has a higher unemployment rate than the other two.

Prop 8's win confirm the existence of Three California's

Based on the 2008 election results in California, it's clear that there are three Californias. Two social policy issues that were on the California ballot were social policy issues:

• Proposition 4 which would have required parental notification before a teen could get an abortion and which was defeated by the voters;
• Proposition 8 which placed in the state constitution a provision effectively banning gay marriage.

In nine counties casting a majority for Obama, voters also approved requiring notification of parents in advance of any teen abortion. In six counties casting a majority for McCain, voters were against the notification measure. These 15 counties seem to indicate a discrepancy between attitudes on social policy and reasons for voting for a presidential candidate. In itself, this would not be surprising. After all, the issues most affecting how people voted for President - the economy and national security - do not indicate attitudes on any single social policy issue.



So how does one explain the differences between the two maps on social issues, Prop 4 Abortion Notification (top right) and Prop 8 Gay Marriage Ban (bottom right)?

First, consider the voting pattern on Proposition 22 passed in 2000 which created a statute defining marriage as between a man and a woman and which the State Supreme Court overturned as violating the state constitution. As you can see from the map below left, Prop 22 was defeated in only a few of the most liberal California counties. It was clear from that vote that even in the generally liberal counties the electorate was probably two decades away from supporting gay marriage.

Now, consider the voting pattern on the 2008 measure, Proposition 8. While the measure was defeated in many of the traditionally liberal counties representing a gain for the gay community, in fact Prop 8 passed in Los Angeles County, Imperial County, Solano County, and Sacramento County.

Why did that happen? We have no polling data on these ballot issues at this time. So all one can do is speculate based upon other considerations. Generally the Hispanic and Black communities are thought to be more conservative on the issue of gay marriage due to cultural and religious background. And while the same cultural and religious background might favor anti-abortion laws such as Pro 4, the abortion notification issue is decidedly a women's issue that would tend to cause many somewhat socially conservative women to vote against it while still voting for Prop 8.

These results clearly support the concept that there are the Three California's advocated here and as outlined on our map:

California Primary Held Too Early

I have been waiting for someone else to note this fact. California held its Democratic Primary too early to be relevant.

It is more than ironic that the Texas and Ohio primaries are considered crucial for Clinton and, depending upon the results from next week, Pennsyvania could be "the decider" in April.

The problem for California's Democratic voters is that many cast their ballots by mail in advance of developing stories - particularly the story of Barack Obama. The rest of us who voted at the polls were just beginning to get the message that there was a viable alternative to Clinton.

So here we are. We used to have an election date in March - generally reserved for local elections - it would have been a good date. Imagine if Clinton and Obama on March 4 were competing for California as well as Texas and Ohio.

Also imagine if so many of our Superdelegates hadn't committed before March. My own Congressman - Mike Thompson - committed to Clinton. Obama won in his District even though Obamamania had yet to take hold in most of the state. Nearly 55% of the voters in Thompson's District voted for someone other than Hillary Clinton.

Now if we Californian's could just approve an initiative to allocate our Electoral College votes proportionately we could become completely irrelevant....

California the Ungovernable

Dan Walters, long time Sacramento Bee reporter and columnist on Sunday began a series of columns on Arnold Schwarzenegger's problems and mistakes in attempting to get control of the helm of our floundering state as follows:

California is an extraordinarily difficult state to govern. Its immensely complex social and economic mélange generates unique issues and unique political conflicts that make consensus on any of those issues virtually impossible.

Indeed, a perfectly logical argument can be made that California is fundamentally ungovernable, at least with a political structure that gives almost every faction a veto power. And the recent political history of the state - wheel-spinning on virtually every front - provides strong prima facie evidence of the theory's validity. More

How to Proceed

Separatism is not the proposal of this web site. But many of the same arguments that lead to proposals for California being separated from the rest of the Union contribute to the case for dividing the state. (Of course, the one exception is that a new republic could allow immigrants like Arnold to become President without the problem of a Constitutional Amendment. For more on having California "released" from the Union, see my alternative analysis at A New California Republic.)

So how do we proceed to divide the state into three states?

The Legislature needs to place a three state proposal referendum on the statewide ballot. It should provide for the creation of a Commission to prepare on behalf of the Legislature a detailed proposal to divide the State approximately as indicated in the maps here (while we recognize that the boundaries proposed here may need some adjustment, we would hate to see either an effort to divide the state in two nor in three ways horizontally as has been suggested in the past, nor would we want to see peculiar gerrymandering).

The referendum should provide that the Commission's proposal be placed on the ballot by the Secretary State as a proposed amendment to the State Constitution. Finally, it should provide that if the Commission's proposal be approved by a majority of the voters of the State that the State's Congressional Delegation including all members of the U.S. House of Representatives elected from the State and the State's two U. S. Senators sponsor and introduce a bills in each house to implement the division of the State.

That's how it could be done. Now, we need only persuade the Legislature, the voters, then Congress.

How Would Three States Stack Up?

California is the most populous state in the Union with about 10% of the nations population. As of the 2000 census, based on population California was 65% larger then number 2 Texas and 78% larger than number 3 New York. California is the third largest state in area, behind Alaska and Texas both of which are substantially larger.

So how would the three proposed Californias (see map) stack up in the ranking with a total of 52 states?

Southern California would be the 2nd most populous state, slightly behind Texas, and 21st in area, ranked between Washington and Georgia.

Northern California would be a bit larger in area, ranking 19th between Oklahoma and Washington, but would be 21st in population between Maryland and Arizona.

Coastal California would be 9th in population, between Michigan and New Jersey, and 42nd in area between South Carolina and West Virginia.

With the division of the state, Californians would find themselves in states more comparable to others in the Union. Each of the new states would have political influence similar to most other states. Each would have a clearer image of what the state was about.