NORTH BAY BUSINESS JOURNAL EVENT

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Tuesday, August 26, 2008, 8-10:45 a.m., Napa Valley Marriott, Napa

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September 25, 2008, 5:30-7:30 p.m., Doubletree Hotel, Rohnert Park

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Taxpayers’ generosity returned with slap in the face

By almost any measure, California taxpayers have been extremely generous with Sacramento.

In just the last seven years, the citizens have sent more than $40 billion in additional taxes into the state general fund and agreed to finance tens of billions of dollars for aging highways and other public infrastructure.

Last Thursday, the favor was returned with proposals to release 22,000 prisoners back onto the streets; cut aid to the poor, schools and universities; close 48 state parks; and, you guessed it, go into debt to the tune of another $38 billion.

The trigger for all of this is a $14 billion deficit. And just like the $20 billion deficit that Gov. Schwarzenegger rode to the governor’s office in 2003, this one was predictable.

In fact, Sacramento can talk budget cuts all it wants. But until it deals with the underlying causes of the state’s boom and bust budget cycle, it will find itself right back in the same place sometime in the near future.

The cause of the 2003 crisis was the end of the telecom boom that swelled Sacramento’s spending. The cause of this 2008 crisis is the end of the state’s great housing run-up. During both, Sacramento spent the windfall without setting aside for a rainy day.

Well, the rainy day is here. And perhaps this crisis will spur some long-term reform.

To that end, Gov. Schwarzenegger’s call for spending caps and no new taxes are a start. And while legislators are at it, they should also deal with the state’s bloated pension and retiree health care commitments.

Most importantly, the state must find a more balanced method of financing its spending. By some estimates, the top 10 percent of California taxpayers pay up to 80 percent of the state’s income tax, which is the highest for any state in the country.

In short, when the fortunes of the state’s most productive residents are rising, the state’s coffers overflow. And when those fortunes turn down, the state suffers. The system is a recipe for constant booms and busts.

California deserves better.

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