Austerity Arrives in Califoria: 'You Name It, We've Got To Cut It,' says Governor

A homeless man in Los Angeles, California: the state is cutting healthcare and welfare payments and the Governor is calling for tax rises to avert disaster. (Reuters)

Austerity Arrives in Califoria: 'You Name It, We've Got To Cut It,' says Governor

California, America's 'golden state', is slashing spending to avoid a Greek-style default

Democractic Governor Jerry Brown has proposed $8.3 billion in cuts to the California budget across education, health care and welfare programs in a plan he says could help close the state's near $16 billion shortfall. Brown said more cuts should be expected if voters reject proposed tax increases that will be up for a statewide vote in November.

"You name it," he declared during an address on Monday, "and we've got to cut it!"

California, the world's ninth largest economy, has suffered financially alongside many other states over the last several years, but because of its sheer size, the state of its economy reveberates not only across the nation, but across the world. The proposed cuts, as the governor indicates, are across all sectors of public spending, including deep reductions to education, health care, public safety, and infrastructure.

"You've already cut into the muscle of local education, whether it's K-12, community college or the university system," John Husing, a regional economic expert told the San Bernadino Sun. "Now you're starting to go even further. In addition to the problem, you're going to start to see cutbacks in things like public safety. All in all, it's a catastrophic budget."

The proposed deal by the governor hinges on his request for a temporary increase of state taxes as well. "I'm linking these serious budget reductions with a plea to voters: please increase taxes temporarily," Mr Brown told reporters in the state capital of Sacramento.

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The Independent/UK: California, the ninth largest economy in the world, resorts to austerity

The drastic cuts underline California's position at the sharp end of a debt crisis which is slowly engulfing local and state-wide public finances across America. Stockton, an hour's drive north-east of San Francisco, recently became the biggest city in the nation to declare bankruptcy.

For years, California, like many public bodies, has been spending more than it can raise in taxes, and borrowing to make up the difference. The process was exacerbated by the 2008 housing crash, which decimated property prices and reduced income tax revenue.

This year, even with Mr Brown's latest round of cuts, the state will spend roughly $91bn but only raise $83bn. If allowed to continue, it could find itself unable even to service existing debts in a matter of months. "California has been living beyond its means," Mr Brown said. "The USA and its federal government is living beyond its means. Well, there has to be a balance and a day of reckoning."

Fixing the crisis has eluded successive governors, including Mr Brown's predecessor Arnold Schwarzenegger. Tax rises have for years been blocked by Republicans in the state Senate, who are able to exploit a law mandating that all increases in revenue must gain the approval of 60 per cent of legislators.

Most spending cuts are blocked by Democrats, who hold a slim majority of seats there.

With this in mind, Mr Brown, a veteran politician who served two terms as governor in the 1970s, has decided to bypass Sacramento altogether. He will instead ask voters, rather than politicians, to approve a package of specific tax increases in a ballot measure at November's election.

That proposal will see sales taxes hiked to 7.5 per cent, from 7.25 per cent. Residents earning over $250,000 a year will endure a 3 per cent rise in income taxes. People who earn more than $1m will pay 13.3 per cent, in addition to their federal taxes.

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The Sun (San Bernardino): Proposed cuts have critics in all corners

Steven Wallace, a professor with the UCLA Center for Health Policy and Research, said cuts in the past few years since the economic downturn have meant service reductions that pose a threat to the health and well-being of the elderly, disabled and low-income residents who use public hospitals and supportive services.

"At a certain point, these people are more at risk of falling, or becoming malnourished, or becoming dehydrated or not getting the medications that people need," Wallace said.

"This is one of those cases, where on the surface it seems like we're all tightening our belts, except when these folks don't have any waists left to tighten the notch on their belts."

In order to prevent the further cuts, Brown hopes to close the deficit with $5.9 billion in new revenue from the tax initiative he proposed earlier this year that would temporarily add a quarter cent in the state sales tax and collect higher income taxes on those who make $250,000 a year or more.

If voters reject the tax increases in the fall, Brown is proposing $6 billion in additional automatic spending cuts, almost all of which would fall on K-12 schools. Trigger cuts could mean that some districts would have to cut the school year by up to three weeks.

Jack Pitney, a professor at Claremont McKenna College, said a recent poll showed a majority of those surveyed in support of the tax initiative. Labor unions in California are working toward raising public support for the measure in November.

"It's not a very particularly commanding position because ballot measures lose support over time," Pitney said. "I think it's going to take every bit of labor's effort to secure passage, one because Californians are skeptical of their state government and doesn't necessarily trust it with the additional money, and second, because turnout might be a problem for Democrats in the fall. Obama's going to win the state, of course. That's why turnout might be down."

Rick McClure, the president of Ontario-Montclair Teachers Association, is among those in labor who supports the initiative.

"At least it gives us some time to get the governor's budget back in shape," McClure said. "I think the state is still in difficult financial situation, but it will certainly be in a lot better shape than it is now, for using that money to help turn our schools around." [...]

In addition to cuts, Brown proposes state workers take a 5 percent pay cut. The pay reduction would be handled in contract negotiations with the state's public employee unions.

"These cuts have been occurring for a number of years now, and we've gotten to a point where there's little to no social safety net in California," said Steve Smith, a spokesman for the California Labor Federation.

"We continue to go back to the same well in terms of punishing those who provide service to Californians through government work."

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