Goodbye California?

One of the states most affected by the recession has been California. It provides a salutary lesson for all those who support voter activism and rigid constitutions. The state is effectively bankrupt, and just yesterday rejected, at the ballot box, several proposals that would have staved off disaster. Voters there apparently want the state to collapse. The result of the vote is that several thousand teachers and firefighters will now have to be fired. California is rapidly falling into oblivion.

It is hard to imagine a political and economic mess larger or more ridiculous than California’s. Its woes are so embedded within its static and antiquated constitution that its failure was simply a matter of time.

The real trouble began back in the 1970’s when the polarization of the state’s politics opened up the door to voter rebellion. That rebellion had impact because so few Californians actually bother to vote allowing extremists of both parties to dominate the legislature and therefore the local budget. The first manifestation of this extremism was the infamous ‘Proposition 13′ that radically limited property taxes and thus crippled the states’ revenue raising capacity. That effort was led by extremist conservatives from Orange County who subscribed to the ‘starve the beast’ philosophy that Reagan subsequently took to Washington.

“It is hard to imagine a political and economic mess larger or more ridiculous than California’s”

And starve the beast they did. The quality of the states’ services has been steadily eroding since then. As has its credit worthiness: it now ranks at the very bottom of the credit tables. Its debt has junk bond status. Which is, of course, just fine with the extremists, but adds vast costs to the rest of the voters because of the high interest rates that come with such a deplorable record.

The only problem is that Californians like their social services. So the equally extreme Democrats who have a grip on the legislature never cut services to take into account the lack of funding. This, obviously, was a recipe for disaster. That it took several decades to manifest itself as a full blown collapse is testimony to the endless kluges politicians were able to invent and apply and the states’ inherent wealth. The final nail in the coffin of sanity is the ridiculous two-thirds majority requirement for budgetary and tax legislation. This freezes all discussion because, even though the Democrats have a firm majority, they don’t have the tow-thirds needed to overcome intransigent Republican opposition. This means that the final say on taxes and budgets falls to the very few Republicans who are willing to risk the ire of their confreres and switch sides at the last minute. Inevitably the costs such turncoats can extract from the majority are extraordinary. The bargaining gets extreme and the time consumed is awesome. The whole process is a total abomination and a blot on democracy.

Now the game is over. Though I doubt reality has set in yet.

Were California an independent country it would be a free fall at the moment. The IMF would be sending in shock troops and the state would be in a budget straight jacket of sufficient severity to get the attention of even the most laid back voter. Well maybe.

Dysfunction is a kind word when describing the way the state is run. It consists of over 7,000 separate jurisdictions covering not just parts of the map, but also school and water districts and things like mosquito-abatement boards. This horrible mess has at its apex a completely hopeless legislature whose constitutional limitations prevent any realistic attempt at action, let alone compromise.

The rigging of the state’s district boundaries has resulted in the constant re-election of party zealots whose promotion and sinecure depend on the whim of the very few voters who bother to pay attention to the two party’s primary elections.

California has thus become the poster child for the combustible mix of complacency, extremism, indifference, inaction, activism, and voter anger that often characterize local American politics. Those of us in New York should not snicker too much: our state is a terrible mess also.

California’s situation is unique however. Its dependency on direct voter involvement through its ‘proposition’ system has neutered the ability of its elected officials to control the states’ budget. That is if they were so inclined. Many states have similar direct involvement, but they take the resultant votes as ‘advisory’ rather than legislative. And to compound this lunacy California has no ‘sunset’ provisions to allow the effects of propositions to expire.

The seemingly perpetual negotiations that surround the states’ budget process will now have to assume an even greater urgency: the state is fast approaching the point of no return with respect to its ability to pay its employees. The budget gap is now $21.3 billion and rising according to Governor Schwarzenegger and he will shortly have to start releasing prisoners to cut costs.

Probably there is no way to avoid some of the terrible cuts that the governor has threatened: the legislature will have to cobble together more kluges to try to prevent wholesale collapse. Meanwhile the calls for an attempt to solve the states’ ineffective government have reached fever pitch. There are calls from both sides of the political spectrum for a constitutional conference to rewrite the constitution and eliminate the parts that have contributed to this crisis.

Perhaps California should apply for bank holding company status so it can be given TARP money?

Or maybe it should just grow up.