California Budget Crisis: Can We Close The Budget Gap?

by Silicon Valley Blogger on 2009-06-2625

As one of California’s denizens who also has school-aged children, I was quite interested to learn about a site called Next10, through Lazy Man’s post called “Can You Fix California’s Budget”? Next10 asks you questions about how you stand on certain issues that have an impact on the California budget, and based on your responses, comes up with a new, proposed budget. Their questionnaire is aimed to determine how you’d prioritize issues for the sake of resolving the budget crisis.

The California Budget Crisis: How Do We Close The Budget Gap?

Here’s a sampling of the issues which received the most responses:

  • 40.7% of respondents want to reduce spending for K-12 pupils in California. The consequence here is that spending will fall below 28% the national average. Unfortunately, schools are already hurting with many resources and programs being cut each year, and are relying more and more on volunteers and fundraising to cover gaps in services.
  • 52.5% want to reduce Medi-Cal eligibility for undocumented and new immigrants and are open to eliminating some health care programs for low income people.
  • 40.8% want big reductions in human services programs (is this what is called welfare?). This will of course, affect the aged, disabled and poor children and families.
  • 50% (including Lazy Man, by his own admission) are willing to release less dangerous inmates and those who end up violating parole.
  • 55.4% want to keep unemployment and training benefits as they are.
  • 48.3% want income taxes to be raised for the wealthy. There’s a recommendation here for reinstating higher tax brackets for those earning $300,000 a year and above.
  • 53.3% want to increase the corporation tax rate. With taxes growing more slowly than corporate profits, increasing taxes in this case makes sense to me.
  • 42.8% are for limiting tax breaks.

Let’s cap this with an image of the California Budget projections over the coming years (numbers are in billions). Click the image for a larger picture:

It’s going to be interesting to see how this budget situation will be addressed. Our family will be feeling the effects of this crisis for years to come, with fewer services in our schools. We’ve already experienced some of the fallout firsthand; for instance, just this past school year, our public school lost its principal when she unexpectedly retired (rumored to be because of financial reasons). On top of this, my child’s class ended up with a substitute teacher for most of the year. To add insult to injury, how about this: our school district happened to be invested in Lehman stock, and was part of an investment pool that lost a reported $150 million after the Lehman bankruptcy!

Coping With A Local Economic Crisis

So what’s it like living in a state that has its own financial crisis brewing? How are we coping with things right now?

Over at the US News Alpha Consumer blog, Kim Palmer has begun a new series called “Recession 2.0, Do You Feel It?”, where she’s asked a few bloggers to share their latest thoughts on how bloggers deal with a slowdown in the economy. In general, we’re doing fine, given the economic setting we have right now, but is what we’re doing enough to keep us afloat in Silicon Valley, where the cost of living is ridiculously stratospheric? That’s the million dollar question.

Cutting Costs….Hard: There Go The School Funds

Across California, there are many families that are handling their own budget crisis too. In our case, there are some major changes in our attitude towards our finances. If you’re a parent (or maybe even if you’re not), you can empathize with this story: there’s a little kid, one of our sweet neighbors, who regularly comes by to sell stuff to raise funds for his school. I’m normally pretty generous and buy items from him every time he drops by. I do the same and order a load of items from my own kids’ schools to support our school district. Unfortunately these days, we’re now watching our money like hawks and account for everything that leaves our pockets. This means that $25 scented gift candles and various overpriced assorted bric-a-bracs, chocolates and what not are no longer part of our discretionary budget. So for the first time ever, I had to leave our little neighbor boy empty-handed. The sad part of the story is, the rest of the neighborhood had the same idea (I took a peek at his order list, and it was pretty much empty).

When times get tough, priorities rule even harder.

Copyright © 2009 The Digerati Life. All Rights Reserved.

{ 25 comments… read them below or add one }

Mr Credit Card June 27, 2009 at 7:07 am


Guess when you have to “spend less than you earn” when you are earning less, it becomes really tough. It’s easy to figure it out between a couple than with the number of legislators you folks have on the west coast. And your kids are not unionized, which makes things easier when you have to cut on their say “piano lessons”. Try that with the LAPD or fire department!

I’m more intrigued by the loss and investment of your kids “school trust” in Lehman! Our church went through a similar thing with another mini Madoff like “ponzi scheme”! Unlike a church where you can ask the congregation to “step up”, it is a shame that this whole mess has affected our education system and your child. Maybe a better way is not to have a totally free education system, but a heavily subsidized one where you have to pay say $15 a month for each kid you have in school. This way, when the world falls apart, at least there is still some steady revenue. Food for thought?

Data Entry Services June 27, 2009 at 11:38 am

Oh if we ran our homes like this! If we spend more than we make someone will come and start taking things away.

Kosmo @ The Casual Observer June 27, 2009 at 1:57 pm

My suggestion would be to have California start printing counterfeit US money. With all the tech companies out there, they could easily find the expertise to do it. Run the Cali-Mint for a few months, and they’d have enough money to pay off the debt.

I’m surprised that folks have overlooked this solution.

Foobarista June 27, 2009 at 4:27 pm

There are a bunch of draconian “options” not considered by that budget widget. One would be to do a hard reset of state pensions, particularly for lavishly paid local officials (who are part of state expenses due to the odd arrangement of state and local finances in CA). There are large numbers of people on local pension rolls making over $200K/year, starting in their 50s, with full medical. (The top paid guy is a local official in a small CA town who pumped his pension close to $500K/year!)

The net-present-value of these pension plans, when reckoned as annuities, are worth many millions each.

I’ll believe in “sacrifice” when I see it from the State’s political class. Until then, I’ll vote against every tax increase and encourage everyone to do the same.

Glenn Torres June 28, 2009 at 5:53 am

If balancing the budget means cutting on education costs and laying off teachers, then I would rather gladly pay just slightly more. This is a very touchy subject. I would opt for more efficient government spending, a more efficient bureaucracy, less luxuries for our politicians, but that’s not really going to happen. 🙁

Bret June 29, 2009 at 10:04 am

I agree completely with Foobarista.

We should stop government pensions, especially for elected officials.

Taxpayers no longer get pensions and neither should government officials.

They should be given a 401k plan with contribution matching.

Jim June 29, 2009 at 4:41 pm

Why was a public school investing in stock? Was that a pension plan or something?

Ann June 30, 2009 at 10:06 am

Due to the recent economic crisis people have realized the importance of budgeting. The crisis stemmed from the fact that people where borrowing too much, spending too much, and not saving enough.

Goran Web Design July 1, 2009 at 5:40 am

Quoting The Governator

“Our wallet is empty. Our bank is closed. And our credit is dried up.”

California’s 38 million people and GDP of $1.8 trillion is the largest in the US. Its economy is bigger than those of Russia, Brazil, Canada, or India.

How could it be allowed to slip so far and so fast?

Daphne Rooney July 4, 2009 at 2:41 am

Why doesn’t the state cut state legislature salaries, they get paid ridiculous amounts already and look how they have gone and screwed up our state economy. That would save so much money right there. It really makes me angry that they won’t take any responsibility and instead want to tax the general public more for the mistakes they have made. What is your opinion of the California deficit. What do you think should be done?

rb July 28, 2009 at 9:44 pm

One of the biggest problems with the over spending in CA is with the illegal immigrants. It affects the hospitals, education, welfare, and prisons. Women labor in the parking lots of the hospitals and come in at the last minute to deliver and have a US citizen. Write that bill off to the taxpayers. The kids go to public schools with the class sizes getting huge. Classes are taught in both English and Spanish, taking twice as long to get 1/2 of the material. No wonder CA in the botton 4 of the states. These people are signed up under welfare further soaking the taxpayers. Look at the 10 most wanted in the large cities in CA and you will see at least 9/10 of them are immigrants. Good for them escaping the law, but their friends/gangs are mostly in the prisons.
Let INS do their job (they are not allowed to) and CA might be in the black again.
The politicians don’t have a backbone to gather them up and throw them out.

Lindsay November 7, 2009 at 6:01 pm

Recession is going on and things go downward but still not much effect.

jim November 7, 2009 at 6:03 pm

Batten down the hatches…

The Digerati Spouse November 18, 2009 at 5:30 pm

I feel sad for the little boy, perhaps he could wash my car to make some money? Or mow the lawn! There are always jobs to be done, and I suspect it’s more productive for the economy than making extra scented candles.

Silicon Valley Blogger November 19, 2009 at 5:32 pm

Great insight, Mr. Digerati! I don’t know if Sam would like to come over to do that though, since he’s rather tiny for a 10 year old. Somehow, it doesn’t seem “right” to make him commit to that kind of labor. But I may, of course, be terribly underestimating the abilities of this little boy.

Brentos November 20, 2009 at 5:33 pm

Wish we could give to every one solicitor that comes to the door, but alas — it’s just not possible. Even the visitors at the door selling something for free (Watchtower folks) are looking a little like they’re feeling the effects of the layoffs and our new economy.

FFB November 20, 2009 at 6:00 pm

We haven’t been hit as hard yet by the recession. I hope it stays that way. I can see how things could go bad quick.

DES November 21, 2009 at 6:01 pm

I think the same applies everywhere. I know it does in rural Georgia where I live. People are watching their pennies and we see stores going out of business.

aunt mommy November 22, 2009 at 6:03 pm

No need to kill off supporting the schools totally, however.

Flush or not – overpriced crap is still overpriced crap. I made my decision to buy the overpriced crap this year because I was going to buy it anyway, and I had the choice of buying it for 2x through the school or for x through someone whose … life choices I disagree with and don’t want to support.

Next year, however, I’ll probably opt for the “write a check for the profit”. No overpriced crap in my house or as gifts, and the school still gets the same donation amount. The man in the middle (crap wholesaler) hurts … but maybe there is room in the 2010 budget.

Schools are getting hit hard, darned hard by the flailing economy. My local public school’s budget has had the amount of money they get per child cut in half, resulting in PTA and the teachers doing some creative sacrificing and fund raising to make up the shortfall and prevent some harsh RIFs (we were not able to eliminate them completely).

More than ever, our schools need that fundraising money.

Curt November 22, 2009 at 6:04 pm

Last week, I had a neighbor kid come by and I bought one candy bar from him for this school fundraiser.

It was the only one he sold and was excited to run home and tell his parents that he made a sale.

Shadox November 23, 2009 at 6:04 pm

Recession in silicon valley hit late last year. Unfortunately. The way our economy is built, much of our industry is based on venture capital financing and that basically fell off a cliff starting last year. We will see many high tech companies go down and many thousands of employees getting laid-off. We are in for some tough times in the valley.

Patrick November 27, 2009 at 6:04 pm

I think a lot of people are cutting back right now. It will probably be a leaner Christmas for most people and retailers. I have a feeling the economy will be in a rut for a while as well. Hopefully by this time next year things will be looking up. On the plus side, this will force people to look at their finances a little more closely, which can be a good thing!

G1 November 28, 2009 at 6:05 pm

It’ll be good to see people not spending money like there is no tomorrow, I hope to see people appreciating goods again. Kids these days often have no concept of delayed gratification.

John Cummuta November 29, 2009 at 6:06 pm

I completely agree with the cutting costs section. Even when we have to make choices that makes us feel bad (in my case is cutting eating out with my coworkers), we should focus on the priorities. And this is what a lot of people fail to identify. The sacrifices that we make today to pay our credit card debt, build and emergency fund, or any other financial goal, will be highly rewarded tomorrow. So in this example, refusing to buy knick knacks from the boys catalog is a wise decision even if you think you make him feel bad.

Amit November 29, 2009 at 6:06 pm

Cutting costs and evaluating our priorities are crucial in a brutal recession. Even with running a small to medium sized business, cutting costs on office supplies and other things that might seem minuscule can make a huge difference!

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