Why is California having problems with money?

[BabyMine]

I just read today that Arnold Schwarzenegger ordered a state of emergency becasue of the $19 billion shortfall. How did it happen? I always think of California being wealthy becasue of the COL and the movie studios.

http://news.yahoo.com/s/nm/20100728/pl_nm/us_economy_california;_ylt=AqGJbJNEpPT7Wdwc5YuT73u s0NUE;_ylu=X3oDMTNwZjNiODVpBGFzc2V0A25tLzIwMTAwNzI 4L3VzX2Vjb25vbXlfY2FsaWZvcm5pYQRjY29kZQNtb3N0cG9wd WxhcgRjcG9zAzUEcG9zAzIEcHQDaG9tZV9jb2tlBHNlYwN5bl9 oZWFkbGluZV9s

[wendmatt]

I don't know much but I know that they do not increase property taxes, so if you have lived in your home for a long time you only pay what it was worth when you bought it. That would make a huge shortfall. Not sure a bout anything else, I'm sure someone from CA will know.

[codex57]

http://en.wikipedia.org/wiki/2008%E2%80%9310_California_budget_crisis

We also spend too much, but don't make enough (such as thru property taxes). Gov't worker benefits are a big part of the problem, but not the only one. Doesn't help that CA is known to not be business friendly. Not a huge deal for big corps cuz they can absorb the costs, but it kills the small-medium sized businesses. The budget not getting passed is more cuz of the 2/3rd vote requirement. Too hard to get that many politicians to agree to anything.

[Indianamom2]

I don't live there, but I have to believe that illegal aliens using the healthcare system and and other government assistance, without paying taxes (because they aren't citizens) is a HUGE problem.

[maestramommy]

I don't live there, but I have to believe that illegal aliens using the healthcare system and and other government assistance, without paying taxes (because they aren't citizens) is a HUGE problem.


I thought this was the case too, but years ago I was informed that they do indeed pay taxes. How, I don't know. They don't have a SS number, but maybe some other kind of ID number? Obviously they pay sales tax, but this was not what my informant was talking about.

One other huge burden is the cost of bilingual ed for ESL (that isn't what they call it now though) students. When I was getting my credential I was surprised to find that many districts offer classes to new immigrants in their native language for a number of years, esp. in the primary grades. The thinking is that if a young child doesn't first get the rudimentary skills in their native language, it will make acquiring those same and higher level skills in English even more difficult. I don't really have an opinion on that since early childhood development isn't my area. But I just know that providing bilingual ed of this kind is VERY expensive.

[Indianamom2]

Melinda,

You are correct that they would pay sales taxes and maybe some others, but definitely not all of them, like a legal citizen is required to do. It's just not enough, compared to the services they receive, such as the ESL classes that you mentioned.

[mom2binsd]

Is that why all the rest stops on Interstate 8 where closed??? We drove from AZ and they were all shut on the way to San Diego (I mean not closed for the night but completely boarded up!).

[amandabea]

I think one of the biggest problems is that California provides more services than it can afford to provide. And while many citizens and politicians don't want to cut or eliminate these services for a variety of reasons (social, public safety, etc.), those same individuals don't want to pay more taxes to help cover the costs. It's a vicious cycle and now the state is so far in debt, that it's nearly impossible to pass a plan that would help. Also, I think the state pension plan (CALPERS I think) is a huge financial burden and is federally protected under ERISA, so even if it is underfunded the money must be paid out. I honestly don't know that much about it, but I do know that it's a mess.

[ShanaMama]

I thought this was the case too, but years ago I was informed that they do indeed pay taxes. How, I don't know. They don't have a SS number, but maybe some other kind of ID number? Obviously they pay sales tax, but this was not what my informant was talking about.

.

I'm not from CA but I've heard the same thing around here. An illegal alien may use a social security number (not their own) to work & therefore pay income and or payroll taxes. They aren't paying into their own Medicare, disability, etc. This is how I understood it, although I could be wrong.

[BabyMine]

Ilegals are issued ITIN numbers that are used like SS#s for paying income taxes.

[MamaKath]

Pensions play a big part in many of the states problems. They promised great pensions for many professions but now as those workers start reaching an age when they can recieve them it is hitting the system hard. Add to that the services given (many of the states having problems happen to be states with great and much needed benefits for SN kids, also typically good medical care packages) and the fact that many of those services are recieved by folks who don't pay much in taxes (illegal aliens, welfare & unemployment recipients).

Welfare reform being turned back and government healthcare is going to continue to burden the system more. If you are on welfare or you don't pay any taxes, you still qualify for tax credits (child tax stuff). How is it that making it easier on families who are busting their backs to survive and feed their families while paying taxes to support our country? What California is dealing with is only the beginning imo.

How do states like Delaware survive without any sales tax if that is the main tax that some folks pay?

[♥ms.pacman♥]

I think one of the biggest problems is that California provides more services than it can afford to provide. And while many citizens and politicians don't want to cut or eliminate these services for a variety of reasons (social, public safety, etc.), those same individuals don't want to pay more taxes to help cover the costs. It's a vicious cycle and now the state is so far in debt, that it's nearly impossible to pass a plan that would help. Also, I think the state pension plan (CALPERS I think) is a huge financial burden and is federally protected under ERISA, so even if it is underfunded the money must be paid out. I honestly don't know that much about it, but I do know that it's a mess.

:yeahthat:

i live in tx now but spent most of my life in CA. totally true about the overspending, and then politicians wanting to cut services/costs but then not wanting to increase taxes.

about illegal aliens, it is a vicious cycle bc since the COL and other things are so insanely high in CA many families and small businesses turn to hiring them as nannies, maids, farm/construction workers etc to save money. i always said that if CA *really* wanted to get rid of illegal immigrants they'd make it a crime to hire one, and so then with no jobs available to them, they wouldn't come over. but hiring undocumented workers helps some companies cut costs (they can pay very low wages, don't have to provide healthcare benefits, etc) so that is why they do it.

and yeah, the ESL spending is another thing, don't know how big of a role it plays in the deficit though. i've heard stories of some parents in San Francisco having a hard time trying to put their elementary school kid in English-speaking classrooms, bc there were entire classrooms being taught in other languages. several years back there was a proposition (227 i think) to make English the official language of California (in an attempt to reduce school spending on textbooks/materials in languages other than English) but it didn't pass.

[Tondi G]

I honestly don't know what the issue is in this state. I have lived here all my life and the cost of living is sky high. Little cracker box houses in decent neighborhoods are $500,000 or more. The neighborhood where my DH and I's parents lived, where we were born and raised, is so far out of reach for us it's sad (his family home sold a couple of years ago for 1.2 million, 3bd 1.75 ba with a small yard). My husband makes a good living and I am very lucky to be able to stay at home with my children but we are still renting (have been in the same 2bd apt for 11 years). It's depressing.

[Globetrotter]

Also, I think the state pension plan (CALPERS I think) is a huge financial burden and is federally protected under ERISA, so even if it is underfunded the money must be paid out.

This is a huge issue and one that I am just now learning more about.

I have always been pro-union, but now I'm beginning to question a lot of stuff that happens WRT union benefits, seniority over merit, and so on. The economy is so bad that we are questioning things we either were unaware of or accepted. We can't afford to go on like this, but I've seen how powerful our local teacher's union is, so it will take a revolution to change anything.

California has too many people, including a lot of non-English speakers. It's a huge and overpopulated state.

[California]

Our prison system is a huge expense-- close to 10% of the budget. Wish I could remember what journal I was just reading that had an explanation of how much our prison system expenses have grown by over 30% over the last few years. No politician wants to come across as soft on crime. And, the corrections officer union is very powerful and helped push through "tough on crime" bills against drug users (even mild marijuana users) and the three strikes laws. It's filling up our prison system and costing us a huge amount of money. At the same time there's not much budgeted for rehabilition so many prisoners get out only to end up back in jail. It's very very sad and there's not enough publicity about it.

[AnnieW625]

I could go on for hours about the state of CA and their budget mess. 10 years ago the state budget was about 1/3rd of what is today (that's a guess honestly) and people were outraged because the legislature couldn't get a budget through. Two years later they recalled the lame duck governor (his main problem was that he was super slow at appointing people to jobs/commissions and no one trusted him) so we get super hero for governor and a democratic legislature who takes advantage of super hero and the fact that the economy is now doing well post 9/11. Economy takes a dive, state loses money on investments, but in between the economy doing well the state depts. got used to spending (both DH and I work for depts. that make their own money; mine makes 100% of operating costs so no drain to the budget, and DH's unit is at about 50% I think), hires a lot of new employees because super hero got rid of the hiring freeze (DH did get hired then), but instead of hiring just to fill retiring positions they created oodles of new positions state wide. It's a snowball effect really. Also the legislature is paid insane amount of money and really should be part time; they don't need to be at the capital all year long. Salaries are at about $130,000 per year per legislator, and then each legislator has an office budget and many of those top aides make close to what the legislators make. It's a tad overkill IMHO.


I don't live there, but I have to believe that illegal aliens using the healthcare system and and other government assistance, without paying taxes (because they aren't citizens) is a HUGE problem.

yes that is a huge part of the problem, but there is really no getting around it. Unfortunately the illegals see California as the land of hopes and dreams and they'll do anything to get here.


Is that why all the rest stops on Interstate 8 where closed??? We drove from AZ and they were all shut on the way to San Diego (I mean not closed for the night but completely boarded up!).

Cal Trans also does work to renovate those rest stops so they might be in the line up to be renovated. I know in Nor Cal where I used to live there was one that was closed for over a year before it finally reopened. I don't know for sure but I highly doubt that the rest stops are a huge drain on the economy.


Pensions play a big part in many of the states problems. They promised great pensions for many professions but now as those workers start reaching an age when they can recieve them it is hitting the system hard.

Both my husband and I are state employees. I feel very lucky to have this pension and besides the decent health care insurance rates (which have risen probably 200% in the 10 yrs. I have been employed) it's the only perk we have. We don't get bonuses, we don't have matching 401Ks/457s, and we also pay into that pension every month, it's not free like many people believe it is. IMHO we work just as hard as anyone else in the working world and give up a lot for the pension. In my industry I can make 25% to 30% more in the private sector, but what I'd gain in salary I'd end up paying for more childcare as I'd be working more hours, it's less flexible, and it's more stress. I chose to be a state employee because it's stable, and yes it came with a pension. State employment is the only professional level employment I have ever known as I was hired when I was 21 as a student assistant. State employees are just like everyone else who works we have mortgages, kids to raise, and we've taken pay cuts and or not seen a cost of living increase since 2006 (and that was the first one since 2000). I have been working without a contract since 2008 (I think, every contract year starts to run together). We also HAVE to pay union dues monthly (there is no getting out of that unless you are a supervisor, and that's not the bulk of the employees). I could probably go on and on about it for a while, but just realize that while some pensions are high most of us when we retire will have worked 30+ years, and should have the right to retire and live comfortably just like anyone else who worked in the private sector and had access to all of those fancy perks like car allowances, bonuses, and matching retirement plans.


Add to that the services given (many of the states having problems happen to be states with great and much needed benefits for SN kids, also typically good medical care packages) and the fact that many of those services are recieved by folks who don't pay much in taxes (illegal aliens, welfare & unemployment recipients).


Welfare reform being turned back and government healthcare is going to continue to burden the system more. If you are on welfare or you don't pay any taxes, you still qualify for tax credits (child tax stuff). How is it that making it easier on families who are busting their backs to survive and feed their families while paying taxes to support our country? What California is dealing with is only the beginning imo.

It's not going to end even though the media is always talking about. It's annoying that we have to deal with this on a daily basis, and hoping for change, but it's never going to change. It is a vicious circle. I have friends who work in state govt. who manage these types of programs if the programs go away (like they should IMHO) they lose their jobs or have to get relocated to a different program.


How do states like Delaware survive without any sales tax if that is the main tax that some folks pay?
You can't compare any other state with California. There is no other state in the USA that has more people than California. If all states were the size of Delaware then I am sure there would be less issues and more states could not have sales tax. Nevada has been surviving income tax because of the gambling industry, but even that industry has taken a dive so it will be interesting to see how long Nevada is able to continue. Oregon also sales tax free has higher property taxes. California has high taxes period. It's disgusting, but there isn't much anyone person can do about it.


Our prison system is a huge expense-- close to 10% of the budget. Wish I could remember what journal I was just reading that had an explanation of how much our prison system expenses have grown by over 30% over the last few years. No politician wants to come across as soft on crime. And, the corrections officer union is very powerful and helped push through "tough on crime" bills against drug users (even mild marijuana users) and the three strikes laws. It's filling up our prison system and costing us a huge amount of money. At the same time there's not much budgeted for rehabilition so many prisoners get out only to end up back in jail. It's very very sad and there's not enough publicity about it.

I am a big supporter of Three Strikes. I'd rather have those violent three strikes criminals in jail than out on the street (of course there are always those village idiots who get back in jail for grand theft or petty drug use who get 25 to life, which I don't agree with). Unfortunately there are loop holes and people get out or paroled when they shouldn't be and innocent people get raped, kidnapped, and killed. Polly Klaas was kidnapped, raped, and killed by Richard Alan Davis and had three strikes been in place in 1993 when she was kidnapped, raped, and killed she'd still be alive today.

eta: Nevada does have sales tax!

[cath_b]

They aren't paying into their own Medicare, disability, etc.

They do pay for Medicare and people who are not illegible for SSN can apply for ITIN (Individual Taxpayer's Identification Number) so they can pay taxes. One of the two conditions in order to become legal is that they can prove they do not owe back taxes. That is why/how a lot of the illegal immigrants are able to pay their taxes.

[MamaKath]

Both my husband and I are state employees. I feel very lucky to have this pension and besides the decent health care insurance rates (which have risen probably 200% in the 10 yrs. I have been employed) it's the only perk we have. We don't get bonuses, we don't have matching 401Ks/457s, and we also pay into that pension every month, it's not free like many people believe it is. IMHO we work just as hard as anyone else in the working world and give up a lot for the pension. In my industry I can make 25% to 30% more in the private sector, but what I'd gain in salary I'd end up paying for more childcare as I'd be working more hours, it's less flexible, and it's more stress. I chose to be a state employee because it's stable, and yes it came with a pension. State employment is the only professional level employment I have ever known as I was hired when I was 21 as a student assistant. State employees are just like everyone else who works we have mortgages, kids to raise, and we've taken pay cuts and or not seen a cost of living increase since 2006 (and that was the first one since 2000). I have been working without a contract since 2008 (I think, every contract year starts to run together). We also HAVE to pay union dues monthly (there is no getting out of that unless you are a supervisor, and that's not the bulk of the employees). I could probably go on and on about it for a while, but just realize that while some pensions are high most of us when we retire will have worked 30+ years, and should have the right to retire and live comfortably just like anyone else who worked in the private sector and had access to all of those fancy perks like car allowances, bonuses, and matching retirement plans.

I wasn't trying to attack you or any other state employees out there. My husband is employeed by the gov't and I at a non-profit. We are not "just like anyone else who worked in the private sector and had access to all of those fancy perks like car allowances, bonuses, and matching retirement plans." DH is paid decently, however his [fed] pension is WELL below that of a state employee. I am just saying that while you pay into your pension, that doesn't mean the state had the money to be putting aside to pay into it also. And someone didn't plan well enough ahead on that score, yet now everyone is paying for that. Like buying on credit, but not paying the cost trickles down to someone.