financial reality

Separating fact from fiction in finance and economics

California Dreaming

August 30th, 2010 by reality

I heard on the radio today that the California legislature is currently spending most of its time debating whether or not to ban the use of plastic shopping bags and require every shopper to provide his or her own cloth bag. Apparently the lower house is in favor, while the state Senate is opposed. This while the state has no budget and is, once again, planning to start paying its bills with IOUs.

The Legislature and Gov. Arnold Schwarzenegger are facing increasing criticism from the public and each other that they lack a sense of urgency to pass a budget that solves the state’s $19 billion deficit.

In past years, the state’s top five political leaders would be negotiating behind closed doors, working nights and weekends to pass a late spending plan. Not this year.

The legislature doesn’t want to deal with the problem because the controlling Democrats now that they are the problem, that they have been bribed and browbeaten by the state employee unions into providing ludicrously excessive compensation and benefits to state employees. Governator Schwarzenegger is demanding at least baby steps towards solving the problem, but of course the unions will not tolerate them.

But here’s the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.

True enough, but the baby steps are not nearly enough. The whole problem can be solved by bringing state employee compensation back to private sector parity – that is, cut it in half. Not going to happen until the eventual collapse, of course. But not doing it guarantees the eventual collapse.

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