Could anybody educate me about the situation in California?

[choie]

What are the specific factors that have led to the state's economic ruin? The recession seems to have hit California harder than any other state - why?

[Kerrytravelers]

1. I don't know how big or little the role actually is, but the Ballot Initiative process rules.

We also have a 2/3 majority to pass a budget, so the Party of No took it upon themselves to block all progress of a budget.

We also have a musclehead as governor.

[aquamarina]

2. Short version based on what I know

1. Governor is a jackass.
2. Must get the approval of 2/3rds of the legistlature in order to pass any legislation that raises taxes. Dems are currently in the majority but not by 2/3rds.

[Greyhound]

3. How much detail do you want? Like so much of that is wrong in America, it started with Raygun. n/t

[elfin]

4. Started with Howard (can't remember his last name)

many years ago to screw up funding for the have nots via emotional tax protests, exploiting the state's initiative process and then other winger groups elaborating on it for all sorts of fringe issues.

Finally reality is hitting, the whole state is totally f&^%*()-- and still voters are in denial.

Not crazy about Ahnold -- but not his fault -- this time.

[Cleita]

5. Also, the Jarvis amendment, Prop. 13 hens are coming home to roost. n/t

[mike_c]

6. a perfect storm....

1) Proposition 13, especially as it applies to commercial property.

2) Our state's requirement for a super-majority (2/3) to approve a budget in the legislature gives conservative partisans an easy means to hamstring the budget process for partisan advantage.

3) The ballot initiative process, which is conceptually A Good Thing but which, in practice, gives conservative activists a massively powerful tool for influencing the legislative process, and even for amending the state constitution, in ways that SOUND great-- "Vote for reduced taxes!"-- but which are ultimately against the best interests of most Californians. This is especially dangerous when you consider the deep conservative center of the state. Remember, this is the state that spawned the political careers of Richard Nixon and Ronald Reagan. It isn't all-- or even nearly all-- Hollywood and San Francisco.

4) A host of budget measures undertaken in the years after Prop 13 began to chew up state revenue, meant to give Sacramento access to local tax money, largely in response to the loss of commercial property taxes statewide.

5) The same economic downturn that has reduced revenue way below expectations all over the country.

The confluence of these events has been disastrous for California.

[lapfog_1]

7. It's a long story...

The state is hamstrung by Prop 13 (no increase in property taxes unless the property changes hands), and by ballot initiative (which MANDATES that certain funds only go to certain things, which doesn't allow the elective representatives much leeway in tough times).

Add to that a criminal conspiracy to "take down" California after the dotcom boom make millionaires from mere nerds (the old money types and the Wall Street Frat Boys didn't like it). Hence the push to privatize the electricity provided in the state, followed by the Enron (they were only one of many in on the game) moves to withhold electricity from California (via plant closings, etc) which forced the state into a ruinous set of contracts after the spot market for electricity threatened to bankrupt the state.

Gray Davis (a good man, if not very charismatic) signed the long term contract to purchase energy at under the spot market price, but at 2 to 3 times as much as such long term contracts should have cost.

That led to the recall election and Arrrrrnold getting in... promising to "open the books".

Funny, the books aren't any more open than they were.

The prop initiatives are still there, meaning he can't do much about the funding anyway.

The tech companies never really recovered from the dotcom bust, and there has been a large influx of people over the last 25 years.

Which led to the housing bubble (everyone could "qualify" for $700K homes built 100 miles from the nearest big city, in tracts of similar McMansions, ticky-tacky crap that was never worth anywhere near the sale price... but hey, $0 down ARM at 4.5% and you lie on the forms to say you and your spouse make $150K... and you're in... what can possibly go wrong... after all, last year homes in this tract were selling for only $600K... everyone that bought just made $100K profit!!).


The budgetary process is waaaay too tied to having a robust economy. Any contraction (like a deep recession) is magnified in the state budget...

And, California is something like the 5th largest economy in the world.

Sigh.

[dgibby]

8. It's payback for Prop 8.

Gawd don't like ugly.:evilgrin:

[CreekDog]

9. CA's tax revenue is highly dependent upon the economy

because Proposition 13 basically almost froze property taxes for most people (and more importantly corporations), the state has relied increasingly on sales taxes and income taxes instead (and a very progressive income tax at that). the problem with those sources of tax revenue is that when you most need those revenues to be strong like during economic times when you have more poor, more unemployed people, more people without health insurance, more people without money for school lunches, etc., during a slow economy. it's those times when you most need revenue that you are getting far less of it. meanwhile property taxes, which are a more stable source of revenue are increasingly less able to fund the state's operations because property tax valuations in California are based on the price of the property when you bought it and are only allowed to increase 2% per year, even if real estate is appreciating at 20% per year. further, corporate property taxes are capped in the same way, but unlike residential housing which at least turns over, corporate property rarely does.

and if the legislature were willing to fix it, that would be one thing, but Proposition 13 requires 2/3 vote of the legislature to approve a budget (and any new taxes). so, with our approximately 63% Democratic majority in the legislature, we need 1-3 Republicans to vote for the budget, but they have basically en masse refused if there are ANY tax changes involved.

and so here the state is.

[anigbrowl]

10. Also, try the search function in the top right corner

That has been extensively discussed in recent weeks.

[Betsy Ross]

11. Reagan fucked California before

he fucked the country.

[bridgit]

13. Yep, Wilson was no day at the beach either

[truedelphi]

12. Also keep in mind -

California's current indebtedness, somewhere in the 15 billion dollar arena (though that can go up another 10 billion while I type this!) is a mere one fifth of ONE PERCENT of the eleven trillion dollars given to the Bailouts.

If Obama wanted to help people, IMHO, he should have simply figured out how many people are in each state, and given each state $ 25K per person.

Instead he has let Bernanke and Geithner push our economy over a cliff, and let the states that are in trouble flounder and then sink.

For each one dollar that California gives the Federal government, we get less than eighty cents in return.

[choie]

14. Thank you all for your replies.

The causes of California's demise are much clearer now.