Seeing Double: The California dream wanes despite record spending.
Dear John,
The California legislature passed a $300 billion budget this week and buried in it is a gift to government unions. The easily overlooked section creates a new tax credit for government union members who pay union dues, euphemistically named the “Workers Tax Fairness Credit.” At present, union members can deduct union membership dues from their taxable income. The proposed switch would give union members a third of the dues paid off their final tax bill. The result is a huge boon for government unions who can now tell members they can basically receive a discount for the union dues they pay. The rest of us, of course, will pay for that discount.
One can only surmise that the reason for this sleight-of-hand is to make an end run around the Supreme Court’s decision in Janus v AFSCME. Janus allows government workers to opt out of their unions, relieving them from paying dues altogether. The unions’ response: Pay your dues and our political lackeys have arranged it so you’ll get a kickback!
It’s a pretty sweet deal for the state’s powerful government unions, especially since they brag about electing their bosses. However, California taxpayers will have to cover the cost of the union windfall in the form of lost tax revenue.
“There is a reason President Franklin D. Roosevelt was opposed to collective bargaining among public sector workers. As he articulated, ‘The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations,’” said Lance Christensen, Vice President of Education Policy and Government Affairs at California Policy Center.
“To have the State of California continue to ignore the United States Supreme Court and compel government workers to stay with unions, while fleecing both union members and the taxpayers, is the height of hubris,” added Christensen. “The taxpayers would be better off in the long run if the legislature gives government workers a tax credit for leaving a union.”
Inflation-adjusted per capita state spending doubles in one decade — for what?
Remember the old joke that a camel is a horse designed by a committee? That’s California’s budget. The full budget proposed by the legislature is the product of a confederacy of dunces. The just-released “Floor Report of the 2022-2023 Budget” represents an agreement between the budget committees of the Assembly and the Senate and, building on Governor Newsom’s budget proposal, this $300 billion monstrosity has moved one step closer to becoming final.
To fully appreciate how out of control California’s state government spending has become, compare the general fund spending growth over just the past ten years. Relying on official state budget reports going back to 2012-13, CPC's Edward Ring shows California’s general fund was $92.9 billion. Adjusting for inflation and expressing this amount in 2022 dollars, the 2012-13 general fund was $118.4 billion, barely half the swollen $235.5 billion that is projected for the upcoming budget year.
When you take into account the fact that California’s population has increased only 3.1 percent in the same period (it’s actually declined for the past two years), this profligacy becomes even more inexplicable. The inflation-adjusted (i.e., 2022 dollars) per capita general fund spending ten years ago was $3,124. It has now exploded to $6,023 per person.
What has the average Californian gotten for all that extra money, apart from debt and taxes that are higher than ever — and set to go higher still?
By almost every objective measure, Californians are worse off today than 10 years ago. Back in June 2012, the average cost of a home in California was an already outrageous $307,000 ($391,000 in 2022 dollars). As of June 2022, the average cost of a home in California is more than twice that — just over $800,000.
Every basic necessity in California costs more: gasoline, electricity, and water. What about crime? Homelessness? Wildfires? Overdoses?
What’s happened in California — and is being exported to the rest of the United States — is that an out-of-control public sector has imposed a regulatory burden on businesses that has driven up prices, destroying small businesses and enabling big corporations to consolidate markets.
Excessive building codes and permitting fees are a perfect example. Builders in California are required to comply with so many mandated construction codes, and obtain so many permits from so many agencies, that only the biggest and most politically connected development corporations can still make money. Smaller operators are driven out of the business, not only including the smaller construction companies, but also mom and pop landlords. Thanks to the crippling burden of regulations, the last avenue towards building generational wealth in California, real estate, has been taken away from all but the wealthiest families.
This is the story of California in the early 21st century. A voracious state government has created shortages and high prices through overregulation. Then, as people are impoverished by its actions, government officials have used their suffering to justify expensive new programs and expanded state bureaucracies. Failed policies constitute success for California's state government leaders, who raise taxes and enact even more regulations to cope with the problems they created.
Read the full article by CPC senior fellow Edward Ring.
What comes next
The legislature passed its budget to meet the June 15 deadline required for legislators to get paid. Now, legislative leaders and Gov. Newsom will continue negotiating on their budget “priorities” until they can come to an agreement before the start of the fiscal year on July 1, although the process ran through August last year. At the heart of Newsom and the legislature’s spending largesse is the myth that California is experiencing an unprecedented budget “surplus,” which, of course, does not exist. Newsom and the legislature continue to ignore the state’s massive long-term debt obligations for pensions and medical benefits for state employees.
But will they heed the warnings of the nation’s faltering economy and stock market — or keep spending like there’s no tomorrow? When it comes to California’s reckless and feckless leadership, it’s not much of a nail-biter.
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