California braces for new round of budget cuts

[Hannah Bell]

The 2009-2010 California budget appears to have been based on unwarranted optimism over the prospects of an early economic recovery, according to several state officials now pressing for additional cuts in social spending. Even as the devastating effects of the first round of budget slashing is being felt around the state, there are growing political chorus suggesting a second bout of cuts will be necessary, as economic data indicate there is no recovery in California’s foreseeable future.

Schwarzenegger cut $8.1 billion in public funds for education, including $6 billion from K-12 and the rest from the state’s community colleges and public universities...

The UC system raised fees for the coming academic year by 9 percent over the previous year, and decreased incoming freshman enrollment by 6 percent.

The CSU system raised fees by 32 percent, and announced plans to cut enrollment by 40,000 students over the next two years.

Officials from both the UC and CSU systems have recently indicated that the cuts and fee hikes enacted thus far offer, at best, a transitory solution to their respective budgetary crises...

The California Public Employees’ Retirement System (CalPERS), the nation’s largest pension fund, reported a 23.4 percent drop in asset value last year. Under-funded pensions threaten to bankrupt many municipalities, eliciting a threat from Governor Schwarzenegger that he will pursue “pension reform.”

Once again the word “reform” is being used as a euphemism for cutting benefits and, in this case, stripping retirees of their hard won pensions. One plan being proposed by the California Foundation for Fiscal Responsibility would require state workers to work, on average, six additional years in order to qualify for benefits.

The Schwarzenegger administration announced last Tuesday its intention to lay off 5,000 state employees in the coming weeks. The bulk of the layoffs will come from the Department of Corrections..

The unemployment rate in California climbed from 11.6 in June to 11.9 percent in July, the highest level for California since before World War Two. The state has lost 760,000 jobs so far this year.

The Mortgage Bankers’ Association (MBA) reported Thursday that 15 percent of California mortgages are either delinquent or in foreclosure. This is the highest such total since the MBA began keeping records...

Fully one third of new mortgage delinquencies in California in the second quarter came from low-risk homeowners with prime mortgages, a clear indication that the high levels of unemployment are contributing to the rise in mortgage defaults...

While President Barack Obama handed trillions of dollars in public funds to Wall Street, his administration has rejected any bailout of California and other states bankruptcy by the economic crisis. On the contrary, the administration has used the fiscal crisis to push through a right-wing agenda of fiscal austerity long desired by the very same financial aristocracy that received the funds, and whose reckless racketeering led to the financial collapse.

The “California model” is being used as a precedent to prop up the capitalist economy on the backs of the working class through decreased wages and a no-holds-barred attack on long standing social benefits, such as education, health care and housing.

http://www.wsws.org/articles/2009/aug2009/cali-a25.shtml