Suspension of Prop 98 May Be Last Sticking Point –
Late last night it was announced that talks had stalled and word leaked out that the point of difference was what to do about education, specifically Proposition 98. Education has already suffered cuts of well over $10 billion and that number could increase even more if the legislature agrees with the Governor to suspend it.
Right now, according to the Legislative Analyst’s Office (LAO), Prop 98 spending represents around 45 percent of General Fund revenues. The legislature has the power to suspend Prop 98 with a two-third vote and can then provide any level of K-14 funding. Obviously a vote to suspend Prop 98 would be a prelude to far greater cuts to education.
Advocates for education argue that education is an investment in this state’s future and further efforts to cut from educational spending is tantamount to robbing from our future to finance our current budget shortfall. There is a real danger here if we look at proposed cuts to education on top of the $10 billion plus already cut, tuition increases at UC and CSU, furloughs and programmatic cutbacks at UC and CSU, cuts to Cal Grants which help fund low income students tuition, etc.
Marty Hittelman who is President of the California Federation of Teachers, the smaller of the two teacher’s unions in the state argued in an Op-ed recently that we have already cut education to the bone.
“California schools have been cut $11 billion in the past year. Suspending Prop. 98 would further drain basic resources from schools that have already been forced to increase class sizes, cut programs critical to student learning, cancel bus routes and eliminate summer school programs, as well as librarians, counselors and arts and music classes.
Educating our kids is investing in our future. Closing corporate tax loopholes that benefit only a handful of the largest corporations is a common-sense step to take. California can’t afford tax breaks for big corporations while our kids are neglected.”
Instead he proposes increased taxes to the wealthiest people in California and repealing corporate tax breaks.
“The wealthiest people in California and large corporations, after years of tax reductions, could afford more taxes to support the well being of the entire population. CFT proposes to increase state revenues with fair tax policies for individuals and businesses that can afford it.”
Critics will argue that this will continue the trend of forcing the wealthy and business out of California. However a recent study by the Public Policy Institute of California (PPIC) found that contrary to that argument, wealthy individuals have not been leaving California in large numbers. They found that the proportion of wealthy people leaving to those arriving from other states is only 1.09, which suggests for every 1000 people who come to California, 1090 people leave.
So far as we have suggested, those who can least afford to take the hit have done so whether it be cuts to programs helping the elderly, disabled, the poor, or education or the increase in regressive taxation such as the sales tax.
As Mr. Hittelman writes:
“California is the richest state in the richest country on earth. The problem is not that we don’t have the money. The problem is one of priorities, and that the money is in the wrong pockets. The top 1% of wealth holders owns 34% of the wealth. Their tax rates today are lower than they used to be. In 1993 the highest tax bracket in the California was 11% of income; today it is 9.3%. The same is true for corporations. In 1980 California corporations contributed nearly 15% of the state budget; today they pay 11%. The Legislature has enacted more than $12 billion in tax cuts for individuals, families and businesses over the past 15 years. It is time to reverse this trend so we can continue to provide necessary services to Californians. We need to address the state’s structural budget problem, with progressive tax policies that largely do not adversely affect the average Californian.
Repeal corporate tax loopholes put in place during last year’s state budget deal would save more than $2.5 billion a year. That’s preferable to suspending Prop. 98 and cutting billions from public education. Our kids get only one chance at their youth and their education.”
Unfortunately Governor Schwarzenegger has demonstrated that he really does not understand the budget process. He showed that on July 3, in an Op-ed in the Los Angeles Times, “Waste is Killing California.”
“Legislators want to save programs. Well, let’s save them, but let’s do it by getting rid of the fraud and waste, with common-sense reforms that will make government more efficient and reduce costs. Put together, the ideas I’ve laid out will save approximately $2 billion in this current year — toward our $26.3-billion problem — and phenomenally more in coming years.”
First, I will dispel the myth–yes there is waste in government spending. Any large bureaucracy is going to have inefficiency and waste. But at the end of the day, we are not going to save programs by finding waste along the margins. If we can find $2 billion as he suggests, great, but the Governor went on to make more dubious claims such as a 25% fraud rate in IN-HOme Support Services program (IHSS).
As the Sacramento Bee wrote yesterday,
“While IHSS certainly has problems with fraud, it is nowhere near the level suggested by Schwarzenegger, who was forced to backpedal from that claim.”
As the San Francisco Chronicle wrote on July 11, 2009:
“Schwarzenegger said he believes that from 5 to 25 percent of the claims made to the $5 billion program that provides home-based care for about 440,000 low-income and elderly Californians are fraudulent. If the fraud is just 10 percent, he said, the state could recoup as much as $500 million – enough to save a popular health program for low-income children, which is on the chopping block due to the state’s budget crisis.
But fraud estimates involving In-Home Supportive Services are tough to substantiate.
Likewise, the Sacramento Bee on July 10, 2009:
“The governor is unable to substantiate a centerpiece claim that fraud wastes as much as a quarter of the In-Home Supportive Services program, which provides home health care workers for low-income elderly and disabled.
“I’ve never had anyone tell me where that number comes from,” said Virginia Bella, who specializes in studying the IHSS program for the nonpartisan Legislative Analyst’s Office.”
This controversy illustrates the disconnect between the Governor and reality. It was reminiscent of President Ronald Reagan’s claims about welfare cheats. One of the more famous ones was the a food stamp recipient purchased an orange with food stamps and then with the change a bottle of vodka. It made for good show, but the problem was that even at that time, one could not receive more than change with food stamps, not nearly enough to purchase even a cheap bottle of vodka. But it sounded good.
And it sounds good to say there is waste and fraud–and there is some, but not enough to make a serious bite in the budget. The serious bite right now is going to come from programs that people count on to literally survive. Education has been cut to the bone, no further cuts are going to cut out fat, they are coming exclusively from teachers. We are putting our children’s education at peril with these policies and we will pay for them in the long run.
–David M. Greenwald reporting