The issue that Californians feel is most important is the issue of the budget. The state currently runs a deficit of close to 30 billion dollars. The current Governor feels that an approach of raising taxes, focusing on education, and utilizing government subsidies are the answer to the budget crisis. If I were to propose budget adjustments to Governor Brown I would first draft my proposed solutions and post them on a website to gain public interest. Once public interest is gained public support and financial support would be necessary to promote the proposed solutions. Once interest, support and proper advertising is achieved the proposed adjustments can be presented in an attempt to influence policy makers.
A look in to the previous budget problems of California and the solutions that were implemented is important to look at in order to formulate proper solutions to combat the current crisis. California in the past has raised taxes and increased tax percentages on items such as vehicle registration in order to generate income for the budget. These solutions may have temporarily solved a much greater problem but have continued to not generate a balanced budget on a consistent basis. Governor Brown in his revised state budget states “based on a rebounding economy and higher state tax revenue, the revised budget calls for general fund spending to rise above its previous proposal for the 2011-12 fiscal year, from $84.6 billion in January to $88.8 billion today. The revised number still represents a $2.8 billion reduction from the 2010-11 general fund budget. Total state spending, which includes federal money and revenue dedicated to specific programs, would rise to $132.5 billion, about $5 billion higher than in the current fiscal year”, in regards to what the state faces currently.(1) His solution includes raising taxes, allocating tax revenue for education, subsidizing health and human services, and cutting the state work force.
Proposed Solutions:
Eliminating tax shelters is a step in generating more tax revenue. According to one accounting website “the Franchise Tax Board estimates that California lost as much as $2 billion in tax revenue over the last four years due to abusive tax schemes, which generally have no business purpose except to hide income and reduce taxes”, which is 2 billion dollars that could go towards state jobs instead of cutting the state workforce.(2) Governor Brown proposes to cut the state workforce by at least 5500 employees. This cut of employees means 5500 new unemployed drawing unemployment benefits from the state instead of putting more tax dollars back into the economy. California specifically has also noticed a rise in businesses leaving the state because of high taxes as compared to states like Nevada where small business taxes are waived.
Utilizing government subsidies to become the leader in alternative energy product development, distribution, and exportation would pay off in the long run for the state as a product such as this could be sold internationally. Reports show that with the increase in global population the globes natural resources will be strained creating conflict. If one of those resources sought after by the world is a cost effective alternative energy resource then related businesses in California would thrive as natural resource exploitation has done for the Middle East region. This research and development would also create jobs which in turn would generate more tax revenue not only from the workforce but from sales of the alternative energy product. Costco currently sells individual solar cells with battery packs as an idea of what I am explaining here.
History has shown that strong economies have started out with a vast agriculture infrastructure. California, with its prime soil and weather for growing, should be the world leader in agriculture as a form of self-sustenance, to export to other states, and export internationally. A recent report states “in 2008, the value of California agriculture exports reached an all-time high of $12.9 billion, a 16 percent increase from 2007”.(3) This is a positive index to California’s ability to bring in revenue by providing an export.
I strongly believe that in times of financial crisis the federal government should intervene and allow for a certain percentage rebate on federal taxes collected from the state that can go back to the state as a stimulus package. If Californians were able to pay a smaller percentage in taxes to the federal government and that small percentage were to go back to the state then the state would not have to cut jobs, funding for social services, or raise taxes.
A controversial proposal that could be considered would be an effort to spur the California tourism industry. I feel that if developers were allowed to build coastal casino resort communities in California with the intent of incorporating a heavy tax on the industry in the state then that money could go to subsidize education in the state in much of the same way the California Lottery is supposed to. This proposal would also provide jobs, local industry would thrive, and California would become even more of a travel vacation destination.
The budget crisis of California can be fixed but our leaders must take a look at how past economic and financial budget plans have or have not worked. If our leaders continue to try solutions that haven’t worked in the past then the state will continue to have the same results. California can pull out of the current budget crisis with a combination of Governor Brown’s proposal as well as: growth in California’s agriculture industry, becoming a leader in alternative energy export, instituting a federal tax break for states in financial crisis, the elimination of tax shelters, and a spur in the California tourism industry. These proposals show a removal from past failed solutions and a move towards increased jobs, increased state tax revenue, and increased funding for education, as well as a balanced budget.
(1) “California Governor’s Revisited State Budget at a Glance”, The Associated Press, (May 17, 2011) http://www.businessweek.com/ap/financialnews/D9N96G800.htm (accessed 05/23/11)
(2) William A Mathews, Georgi Gabrielyan and Daniel A. Sumner, “California International Agriculture Exports in 2008”, AIC Issues Brief, (March, 2010) http://aic.ucdavis.edu/pub/briefs/brief36.pdf (accessed 05/23/11)
(3) http://aic.ucdavis.edu/pub/briefs/brief36.pdf
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