THE BLOG

Bailout California Now! -- The Top 10 Reasons

1. CALIFORNIA PROVIDES CRITICAL SERVICES:
The recent State budget is deeply flawed. It relies upon questionable income assumptions and possibly illegal raids of county and city funds. But, to our thinking, the worst problem is that California has balanced its budget on the backs of those least able to pay: the poor, children, senior citizens, the disabled... California is cutting critical services to the least fortunate in a time when services are the most needed.

2. GET STIMULUS MONEY TO MARKET:
No matter how serious California's governance problems may be, the TARP banks are worse. Money to California would more quickly and efficiently reach the general economy than has money to the TARP banks. Of the $17.8 billion of stimulus money provided by the federal government, California has already spent $8.6 billion dollars on maintaining jobs and keeping basic services going. The same cannot be said of the original TARP banks who paid over $32 billion in bonuses last year. Also, regardless of what you may think of Governor Schwarzenegger and other top elected officials, they are not awarding themselves astronomical non-performance based bonuses.

3. NO MORE MIDNIGHT GOVERNMENT:
Vice President Joe Biden has made sure that California moves its stimulus money to market. If we do bailout California, we want Biden not Treasury Secretary Timothy Geithner, at the helm. Putting the state's restructuring in Biden's office rather than the backrooms of Sacramento is a better way of restructuring California. A little sunlight will surely disinfect many questionable practices and decisions made in Sacramento so far.

4. MORAL HAZARD/HAZARDOUS MORALS:
Failure to bailout California puts the weight of the financial crisis on the backs of those least able to shoulder the cost. We have given TARP money to pay lavish bonuses to the fat cats who caused the financial crisis but draw a hard moral hazard line and refuse to continue children's health insurance in California. The $32.6 Billion in bonuses paid by the original TARP banks is over twice the $16.1 Billion in spending cuts used to balance the California budget (includes $8.7 Billion in cuts to education and $3.4 Billion in cuts to health and human services). By not bailing out California, by not stitching up the safety net, what sort of hazards are we creating, what sort of morals do we reinforce?

5. THE STATE OF CALIFORNIA IS A MAJOR EMPLOYER:
According to the Census in a report published in early 2009, California employs the equivalent of 387,168 full-time positions. The largest employer of the top 10 TARP bailout recipients, CitiGroup, employed 323,000 in 2008 and the top 10 TARP recipients (including General Motors and Chrysler) employ an average 142,000.

6. CALIFORNIA HAS A LEAN GOVERNMENT:
And before you say that the problem with California is that it has too big a payroll and that bloat should be no justification for bailout, consider that, on a per capita basis, California is the fourth smallest employer of any of the states. The myth is that California is big and bloated, the reality is that California is lean relative to the population of the state.

7. CALIFORNIA'S DEBT AIN'T THAT BIG:
Secretary of Treasury Geithner is now going to Congress to ask to increase the federal debt limits. The federal government now owes, $11.7 trillion. That's about $38,000 per individual. California is in debt on the order of $60+ billion. This amounts to less than $2,000 per Californian.

8. SAVE CALIFORNIA'S NONPROFIT ORGANIZATIONS:
At a time when foundations have lost an average 20 percent + in asset value and when corporate and individual giving have ebbed, California nonprofits are in an especially tough spot. When California shirked its contractual obligations to pay for services during the last couple rounds of budget negotiations, many small organizations, organizations with small cash reserves, single purpose nonprofits (e.g., childcare providers with State contracts) were forced to close their doors. With the current budget cuts, more organizations -- including many long-standing, well-managed and well-respected organizations -- will be pushed to the brink. Many will not survive. Not only is the public safety net being lost in California (point number one, above), the private safety net is also being unraveled.

9. STOP THE FIRE SALE OF PUBLIC ASSETS:
In the midst of the budget crisis, the State prepared a list of some 30,000 publicly owned assets (parks, government facilities, etc.) that could be sold to balance the budget. Even if you think this is a good idea for the State, this is a dumb time to be doing it. For the State to get the best return on these public investments, it should NOT be selling them at a time when everybody knows the seller is desperate and at a time when the real estate market is depressed. The rich people/companies with the money to buy right now will be getting California assets at bargain basement prices -- California taxpayers will be getting pennies on the dollar. That said, the logic driving California's Investment Commission seems to say that it's worth selling the Golden Gates for scrap given the price of gold.

10. DON'T UNDERMINE THE STIMULUS:
Under the first round of the stimulus package, California entities have received over $25 Billion in funding commitments for a variety of projects designed to create new jobs, improve California infrastructure and give a boost to the California economy. But if the State's house is not in order, the impact of the stimulus will be offset by the problems of the State.