The last thing government officials should do when an economy is in recession is enact measures that would worsen and lengthen that recession. On the heels of the federal government enacting a record-setting stimulus measure in an attempt to get the economy moving again, California officials are intent on approving a record-setting “de-stimulus” measure that raises the sales tax, the income tax, the vehicle license fee, the gas tax and slashes the dependent tax credit.
California already ranks at or near the top of U.S. states in taxes and regulations, with an unemployment rate of 9.3 percent (two points higher than the national average) and residents and businesses fleeing the state in droves. Raising taxes would be akin to the old medical practice of bleeding an anemic patient in the hope it will cure him.
State officials have made a good start by agreeing to cut some $15 billion from the budget, but they need to go further to make the painful but necessary cuts to put the budget in balance, just as local officials have done.
Antioch cut nearly $5 million and still needs to slash at least another $1.2 million, Brentwood cut $2.6 million, Oakley $1.2 million, and the Oakley Union Elementary School District (OUESD) $2.9 million. The Antioch Unified School District might need to cut $7.1 million, and the Knightsen School District is exploring merging with the Brentwood Union School District in order to stave off bankruptcy.
“Every one of these cuts is painful and everyone is hurt by this,” said OUESD Superintendent Rick Rogers. He could have been speaking for every local official faced with these difficult decisions. One other thing that these local officials share is that so far none of them is balancing their budget by seeking to raise taxes or fees. State officials need to learn from their example, as difficult and painful as it would be.
Because personnel costs are always the bulk of any government budget, state officials need to focus on the 238,000 employees working in state government to achieve more cost savings. Gov. Schwarzenegger has made a start by requiring unpaid furloughs of two days per month.
We’d also like to see the 14 paid state holidays cut to the five or six holidays that most people receive in the private sector. When was the last time you got paid for not working on Columbus Day? You’re probably at your job on that day, and your paycheck is being taxed to help subsidize the day off for civil servants.
Many state workers with two dependents receive $1,000 per month from the government toward their health care, along with a long list of other benefits, including dental, vision, a pension plan, retirement benefits and a long-term care insurance plan that employees and retirees can share with their parents and in-laws. Officials should reduce these generous benefits to levels more in line with the private sector.
Many government services – such as landscaping, food service and other support services – might be performed more efficiently were they contracted out to private firms. Groundskeepers, typists and mailroom clerks can earn up to $40,000 by working for the state, but would be hard pressed to get that much from many private companies.
State officials also need to recognize that there’s no guarantee that tax hikes will bring in the predicted revenue. Increasing the sales tax by another percentage point, bringing it to 9.25 percent in East County (and above 10 percent in some areas of California) will lead more people to making purchases online or in Oregon, where there is no sales tax at all. It would lead to a further decline in sales, causing mom-and-pop shops to close and more chains like Circuit City and Mervyn’s to go bankrupt.
There are no easy choices in these tough times, but it makes no sense to further depress a recessionary economy by raising taxes. Lawmakers in Sacramento should follow the course local agencies have thus far kept to, and make do with what they have rather than ask for more.