State’s Profligate Short-Timers

Ah, California, the Golden State: sunshine, beautiful people, Hollywood, natural wonders, lush farms, ranches, vineyards, high-tech heaven.

And then there is Sacramento.

How is it that a state so rich now finds itself with one of the nation’s highest tax rates, a multibillion-dollar budget deficit and poor public services?

It began with a series of campaign finance “reforms” that ironically made it harder for challengers seeking to unseat incumbents, who enjoy greater name recognition and unpaid media coverage. This system allowed officeholders to ignore the pressures of political competition and instead follow their consciences -- a highly unreliable bulwark against policy disaster.

Recognizing that the laws entrenched incumbents, voters swung the other way in the 1990s and approved term limits. In doing so, they transformed our public officials into teenagers: Why worry about the adverse effects of current decisions when it is future officeholders who will have to deal with them?

The system does have its amusing side, as we observe former state officials -- including governors -- running for lower-level jobs. Can’t these guys get a real job? Whatever the answer, it is clear that public officials with short time horizons and empowered to spend other people’s money are dangerous creatures.

With the gerrymandering of legislative districts, voters no longer choose their representatives; instead, representatives choose their voters. This system virtually guarantees the election to a particular party, and so the real competition has shifted to the primary, where both incumbents and challengers are driven to satisfy the parties’ bases rather than the electorate as a whole.

The result of these counterproductive “reforms” is a shortsighted Legislature that routinely makes the easy, politically expedient decisions rather than the hard ones.

The governor and the Legislature have allowed a 38% increase in spending over just two years, amid a cascade of revenues from incomes and capital gains; this led to the current budget crisis.

Next year’s proposed budget would be balanced were spending rolled back to the 1998 level, adjusted for inflation and population growth. This is a crude but straightforward solution to the budget mess.

But instead, there is the Pavlovian call for higher taxes. Oh, please. California’s state and local tax burden, as a percent of income, is eighth highest in the nation; only Hawaii among Western states ranks higher. Only Montana and Vermont have higher tax rates for individuals. Alaska and California have the highest corporate tax rates among Western states. The California state sales tax is the highest in the nation. Over the period 1991-2001, the average annual growth in California tax payments was more than double the average annual growth in income.

Are we getting our money’s worth? Hardly. Our schools rank near the bottom among the 50 states; neither the governor nor the Legislature will stand up to the teachers unions. Is traffic congestion easing? Is the health-care system improving? Is the looming water crisis moderating? The questions answer themselves.

More spending will not solve our problems because our problems are institutional, not financial.

But instead of dealing with this, the Legislature passes destructive feel-good laws. It decided in 1999 to show the public employee unions how generous it could be, so now we have an imminent crisis in public employee pensions. Mandating that businesses pay overtime after an eight-hour day (rather than a 40-hour week) reduces our competitiveness with other states and makes many workers worse off because of reduced schedule flexibility. The family leave law makes hiring more costly and is likely to reduce wages. Land-use restrictions in the name of “environmentalism” have yielded an immense housing crisis; how many people pursuing careers in California can afford houses in coastal counties?

The majority in the Legislature simply does not recognize that stronger economic conditions and an expanded tax base require tax relief and regulatory reform. The workers’ compensation system, supposedly “reformed” 10 years ago, is a disaster: Employers pay the highest premiums in the nation and injured workers receive among the lowest benefits. The attorneys, meanwhile, are doing nicely.

Real reform will require gubernatorial leadership willing to exercise whatever number of vetoes is required to impose fiscal and regulatory discipline upon a kicking and screaming Legislature.

In the longer term, the restoration of political competition is necessary, so that incumbents can be held accountable politically for the decisions that they make while in office. Such reform would allow California once again to become synonymous with opportunity.

Benjamin Zycher is a senior fellow at the Pacific Research Institute. E-mail: bennyz@pac bell.net.