December 10, 2008

Assembly Report

Solutions to California’s economic crisis

By Assemblymember Jim Beall Jr.
Special to the Times

We face the worst economy since the Great Depression. California unemployment is 8.2 percent. The state recorded 59,000 foreclosures in October—1,900 a day—the highest rate in the country.

We face even tougher choices than we when we passed the last budget. The magnitude of the projected deficit during the next 20 months—$28 billion—is too great to be solved by cuts alone. Both the governor and the non-partisan Legislative Analyst’s Office acknowledge that stark and sobering fact.

We could eliminate every community college and four year university in the state, close every state prison and county jail, eliminate benefits for the aged, blind, and disabled, and still not save enough money to balance the budget.

We are resigned to the reality that after cutting taxes during prosperous times, nearly $22 billion since 1998, and nearly a decade of economic decline, we have to raise new revenue. How much? It will depend on the effectiveness of a second federal economic bail-out plan that is being drafted by Congress.

Even if California were to obtain a generous share from the feds, our state budget faces long-term structural problems that will plague the Legislature and Governor.

The prospect of asking Californians to dig even deeper into their pockets to balance the state budget is a troubling when so many families are struggling to get by as well as the businesses that employ them.

At the same time, we require, expect, and demand the necessary state services we are accustomed to. We require our children to be educated. We expect unemployment benefits to be paid when we are laid off. We demand that our roads be repaired.

The state uses your tax dollars to pay for all this while providing assistance to the elderly, the disabled, and the poor. And it is responsible for regulatory safeguards that we take for granted, such as inspections of nursing homes for safety and the accuracy of gas pumps to ensure they dispense a true gallon.

So, how do we pay for all of this during a deep recession? I think we should begin by looking at rolling back outmoded tax breaks while trimming unnecessary costs such as unnecessary contracts for private consultants.

I agreed with the Governor’s proposal last month to levy an oil-pumping tax on oil companies. Every oil-producing state has an oil severance tax except California and it costs us $1.2 billion a year. I strongly believe that money should help fund education. Meanwhile, Big Oil reaped record profits in the summer and Californians received nothing.

The Governor’s idea is not new. The Democratic majority in the Assembly proposed the same tax last year. But the tax was rejected by the Republican minority that continually exploits the two-thirds majority requirement to protect unfair tax breaks.

Whether California should adopt a simple majority-vote rule to pass a budget is being examined by a bipartisan commission created to update the state’s antiquated tax structure and stabilize state revenues. The commission is scheduled to present its finding to the Legislature and Governor on April 15.

Beyond whatever the commission does, I believe California can save tens of millions by carefully sifting through the estimated $2 billion the state spends annually for outside consultants, some whom duplicate work that can be accomplished by state workers.

For example, the Department of Health Care Services and the Department of Public Health had left some authorized information technology positions vacant but chose to hire contractors to do the same work at higher costs even when taking into account the positions’ salaries and benefits. If those positions were filled it would have saved an estimated $2.2 million in consultant costs.

More immediate help could come from Congress in the form of a second bail-out program from Congress. I have contacted our Congressional delegation, asking them to ensure that the next economic stimulus package focuses on our working families.

But, I’ve also raised several other key points with our delegation, including:

-California must get its fair share of federal funds. Right now, the state recovers only 80 cents for every dollar it sends to Washington, D.C. A decade ago, California received well over 90 cents

-Funding to fix our crumbling infrastructure. Not only would federal dollars help repair our roads and bridges, the money would create more jobs.

-Congress must adjust the Federal Poverty Level, the yardstick that triggers so many crucial assistance programs, to realistically reflect California’s higher cost of living.

-Medicaid must conform to the federal Wellstone-Domenici Parity Bill. The bill, enacted into law in October, requires health insurers that offer substance abuse and mental health treatment must provide coverage comparable to that provided for physical illnesses and injuries.

-Federal Food Stamp benefits eligibility requirements should be readjusted and benefits temporarily increased for people who are unemployed or self-employed with diminished work.  Our state’s children should not go hungry because this economy caused their parents to lose their jobs.

I cannot over-estimate the severity of this economic crisis. But neither can I over-estimate the resiliency and tenacity of Californians who have continually reinvented themselves and our state.

Jim Beall Jr. is a member of the California State Assembly, representing the 24th District, including Willow Glen, Campbell, South San Jose, West San Jose, Saratoga, and portions of Santa Clara, Los Gatos, and North San Jose.