The Intelligence Pool
State of Dysfunction: California Lurches Closer to Fiscal Anarchy
by Robert Roy Pool
California’s state government is universally understood to be dysfunctional, and this condition has persisted for almost twenty years. The nation’s most populous state is the only state to require a two thirds supermajority to approve both budgets and taxes. Whenever the economy contracts and revenues decline, California cannot make ends meet, and the legislature cannot agree on how to cope.
Summary: As the summer of 2009 approaches California is threatened with fiscal anarchy. But the 2009 Budget Crisis has nothing to do with the specific individuals who hold office in the state. It has been caused by a general structural failure of the state government. This essay analyzes the complex factors responsible for California's failure and suggests six steps that can be taken to rectify these problems.
California has experienced one fiscal crisis after another since 1991. Each time the state was forced to furlough employees. Each time the state flirted with default on its debts. But each time the state managed to skate back from the edge of the precipice, only to see its problems grow worse the following time. Due to a unique form of fiscal insanity triggered by Proposition 13 in 1978, the problems in California’s state government also devastate its counties and school districts.
The state is in worse shape than General Motors or Chrysler. Had it not been for the Obama Stimulus Package passed by Congress in February, California might have defaulted on its obligations in March, and / or fired most of its state employees, and / or demolished its credit rating – already the lowest of any state in the Union.
On May 19th voters rejected all five ballot measures intended to raise state revenues. The result is likely to be fiscal anarchy, with a chaotic series of budget cuts targeting the most vulnerable and those with the least legal protection. California’s budgetary apocalypse has finally arrived.
The California State of Mind
Some believe anarchy is the direction California had been headed all along. According to this view, a rich nation-state filled with creative, free-spirited individualists was never likely to end up with a smoothly-functioning government. California should embrace chaos.
While it is true that independent-minded individualists thrive in California, I disagree with the implication that Californians ought to learn to love fiscal anarchy. California’s unique philosophical commitment to free-thinking is NOT the main reason for the failure of political accommodation in Sacramento. It rather has to do with six structural problems that have overwhelmed the state government. These structural problems have nothing to do with the specific individuals who currently hold office in California. Sorry, but it is totally misleading to blame the current mess on Arnold Schwarzenegger or any of the other major players in California’s state government. The system itself has failed. The failures of the system need to be analyzed correctly, and the system needs to be reformed. While this will be easier said that done, it is important that these structural failures be articulated clearly. That is my goal in this article.
Structural Problem # 1 – The Supermajority Requirement
California’s supermajority requirement – the constitutional provision that requires a two-thirds vote of both houses of the legislature to approve any budgetary or tax bill – dates back to 1933 when the California electorate approved a ballot initiative intended to make it more difficult to raise taxes. It did, but it also planted a time bomb. What is surprising is not that California’s state government eventually became dysfunctional under the supermajority requirement, but that 60 years elapsed before it did.
California had about 5.6 million people in 1930, and an overwhelmingly Anglo voting population. By 1990 the state had about 30 million people, and the most ethnically diverse population of any state in the Union, perhaps the world. Since fiscal dysfunction paralyzed the state government for the first time in 1991, it is tempting to conclude that the sheer size and diversity of the state, when combined with the supermajority requirement, eventually produced dysfunction.
Almost all commentators now agree that the supermajority requirement makes it impossible for the legislature to agree on priorities, even when one party controls both houses. There is a growing consensus that the supermajority requirement must be overturned, but this can only happen through a voter initiative. One of the safeguards built into California’s system of direct democracy is a provision that prevents the state legislature from overruling a citizen initiative, even one 76 years old.
California Governor Arnold Schwazenegger prepares to cut the budget
California State Assembly Speaker Karen Bass prepares to defend the budget