Last week, in the wake of the passage of Prop 30 and Governor Jerry Brown’s proposed budget, the bond rating agency Standard and Poor’s upgraded the State of California’s credit rating from “A-“ to “A.” Yes, this is the same credit rating agency that is being sued by the federal government for its role in causing the Great Recession, but they’re still one of the only games in town, so we still pay attention. (And oh-by-the-way, California State Attorney General Kamala Harris is now suing S&P too.) Regardless, the upgrade moved California up a notch from the worst credit rating in the country to second worst, behind the new last place finisher, Illinois.
Yesterday, the perhaps more credible Moody’s announced that it was impressed with the steps that California has taken to right its financial ship in the wake of the Great Recession, but wasn’t quite ready to boost the state’s credit rating yet. The state’s “improving economy, combined with recent tax increases and spending controls, has put the state on a path to large surpluses, although one that is typical of the boom-and-bust revenue and economic cycles of California,” said Emily Raines, the ratings agency’s VP and Senior Credit Officer.
In other words, we’re on the right track, but the finish line is still quite a way off.
Personally, I can live with that…….for now.
This newfound budget security was made possible because last November, in what must have come as a complete shock to Republicans, California voters approved a plan—Prop 30—to raise taxes slightly on the wealthiest Californians in addition to temporarily raising the state sales tax, effectively spreading the pain to all Californians. This was a slap in the face to Republican orthodoxy, since the only acceptable thing to do with taxes is to cut them, if not eliminate them altogether.
When Gov. Brown released his budget proposal last month, the state’s legislative analyst concluded that California would still run a deficit of $1.9 billion for FY 2013 instead of the $25 billion of just a couple of years ago, but that if things continued on the same trajectory the state could be running significant budget surpluses in the following five years.
In fact, the LAO credited the governor and the Legislature for its “budgetary restraint,” but that without Props 30 and 39, the state would still be running significant structural deficits. And under the governor’s plan, the state’s current $28 billion debt will be whittled down to $5 billion by 2016-17 according to the California Budget Project. Even so, there are still significant problems ahead with regard to unfunded liabilities in the teachers and state employee retirement systems. But hell, Europe wasn’t rebuilt in a day, and the California economy won’t be either.
This has got to be absolutely killing Republicans, though. The use of a combination of spending cuts and tax increases to eliminate the budget deficit and pay down the debt? They should be ecstatic, but then again, Republican dogma was never about reducing deficits or debt, it was about drowning government in a bathtub.
The point is this: Austerity measures by themselves do more harm than help in the long run. Yes, the slash and burn approach served to stabilize the budget in the short term, but there comes a point where you cut so much out of a budget that you start to do real damage to real people’s lives. Not the uber wealthy, but real people. Middle class people. Kid people, since nowhere were the austerity measures instituted since 2008 felt more deeply than in California’s schools, which were in big trouble even before the Great Recession.
Why were the tax increases in Prop 30 necessary? Here’s why, specifically as it relates to our public education system that Prop 30 aims to heal:
- According to the California Budget Project, the state cut school funding 15.3% between 2007 and 2010 as a result of massive budget shortfalls.
- California currently ranks 46th in the U.S. in K-12 spending per student at $8,908 while the national average is $11,764
- California ranks 46th in the number of students per administrator.
- California ranks 47th in K-12 spending as a percentage of personal income at 3.27%, while the national average is 4.29%.
- California ranks dead last in the number of K-12 students per teacher at 20.5. It’s worse in the San Diego Unified School District.
- California ranks dead last in the number of K-12 students per librarian (s/o to Anna Daniels) with a whopping 5,489 compared to a national average of 830.
More austerity wasn’t going to fix that. It would only make it worse. Much worse. And while Prop 30 isn’t a panacea that’s going to magically fix everything, it’s a massive step in the right direction toward restoring what was once the most envied school system in the entire country, if not the world.
Blaming teachers wasn’t going to solve anything, either. Teachers aren’t the problem…..well, technically they are, as in there aren’t enough of them because school districts have been forced to lay off huge chunks of their staffs—teaching and otherwise—just to keep their schools open. The state had already deferred $7.4 billion in funding in 2011 in addition to the $7 billion in previous cuts, making a dire budgetary situation even worse.
In San Diego, teachers already agreed last year to a reduction in the number of instruction days from 179 to 175 in order to stave off the termination of 1,372 teachers, which would have increased the average class size in the San Diego Unified School District from 24 to 31. Fewer days worked also meant less pay for teachers, a sacrifice they made for the good of their students.
California schools are just the most prominent example of what happens when austerity is the sole focus of lawmakers in search of ways to close budget craters.
It’s very easy to say that “we have a spending problem,” and that massive spending cuts need to be made. The problem is in sticking to that meme after massive cuts have already been enacted. When challenged, austerity advocates are typically unable to define specific programs or expenditures that need to be eliminated. They just know that it has to be done as an abstract notion. Which is why I’m so proud of California voters—although voters should never have been required to do the Legislature’s job for them, but that’s another issue altogether….one that has been resolved—at least temporarily—with supermajorities of Democrats in both the Assembly and the State Senate.
Apparently Californians are a much more self aware lot than they’ve been given credit for. They recognized that while budget cuts were necessary, by themselves they would not solve our problems. They were also smart enough to recognize that massive cuts to our schools were among the biggest threats to our long term fiscal viability, and that any legitimate solution to the budget crisis would necessarily have to involve some form of revenue increases. It is usually assumed that when presented with the option to raise taxes, voters will summarily reject the idea. But not here. Not in this state, where education has once again been made a priority.
California is by no means out of the woods yet. There’s still a lot that could go wrong, particularly if Congress allows the sequestration cuts to happen as scheduled. But after years of belt tightening things are looking up in the Golden State, and they’ll stay that way as long as state lawmakers continue to act responsibly.
What will be interesting to see, in light of Texas Governor Rick Perry’s swipe at California, is how the California economy grows in the next few years, particularly in comparison to Perry’s Texas. I’m guessing that savvy business leaders will see the long term affects of Texas’ austerity-only methodology as detrimental to their business interests, particularly when it comes to their approach to schools and higher education.
Which state will truly prove to be a role model for growth? I’ll put my money on California coming out the victor.
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