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04.30.2009 0

Editorial: California Must Avoid Compromising Budget Cuts for Stimulus Funds

  • On: 05/11/2009 10:57:05
  • In: Fiscal Responsibility
  • California Governor Arnold Schwarzenegger (R) has found himself in a tight spot financially. With the state facing a potential $23 billion shortfall, there is immense pressure to do whatever necessary to terminate the deficit. And the federal stimulus dollars being offered to the state are looking as appealing as ever.

    But California would have to un-tighten its belt and sacrifice some of its own efforts at cost-cutting to receive those monies, according to the Obama Administration. In an attempt earlier this year to cover the state’s staggering $42 billion deficit, the Governor negotiated with the Democrat-controlled Legislature to find ways to patch up the state’s finances. One of the solutions was the implementation of pay cuts to unionized home healthcare workers, estimated to save the state $74 million.

    And now, the state has been informed by federal officials that it will have to rescind those pay cuts if it wants to receive the nearly $6.8 billion in stimulus dollars set aside for the states. Doing this will be difficult—the legislature will need a 2/3 majority to approve it, meaning some Republicans will have to agree—and dangerous to the overall welfare of the state, making it dependent upon federal funding for survival.

    If Governor Schwarzenegger gives in and rescinds the proposed pay cuts, he will have passed up an opportunity to bring the state into solvency. And while $6.8 billion may sound tempting, there is no guarantee the money will be there next year. Moreover, by giving in to the federal demands, California will lose that much of its ability to balance its budget on its own—an ability that it will desperately need once the federal funds inevitably dry up. Any remaining cost-cutting strength will undoubtedly atrophy.

    And while the stimulus money represents a sizable chunk of change, it still comes nowhere near to solving the budget problems facing the Golden State. Presently, California is relying upon voter approval of propositions to borrow additional monies—likely at high interest rates—or else the state will see its 2010 deficit balloon to $23 billion. And the propositions are not doing well in the polls.

    Unfortunately for Governor Schwarzenegger, this isn’t the first time he has been left stranded after banking on Democratic principles.

    In the wake of the 2005 election, when the California Governor’s budget reform propositions failed, he embraced the Green Energy envirolobby and began enacting state-wide carbon caps. Voters were promised that the Green Energy economy would flourish, creating more jobs than would be lost.

    Sadly for the state, the opposite was true—businesses fled the state in droves, opting for more business-friendly states such as Texas. And the Green jobs that were supposed to appear and save the economy never materialized.

    At present, California serves as a model to the nation—but not a model to emulate. Rather, it serves as a vision into the future of “what might be” if the rest of the nation continues down the path of unrestrained spending, massive social programs, reckless green energy pursuit, and tax hikes. And if that happens, there will be no one left to bail out the rest of us.

    If Governor Schwarzenegger continues to trade his principles for the fleeting promises of liberalism, his only legacy will be that of the governor who did nothing while his state bankrupted itself. The compromises he has made in the past have not helped him—or his state—at all. He should not expect the future to be any different.

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