California's problems are not insurmountable, but their resolution will require concerted action: new leadership, likely a new constitution, and the willingness to consider alternative revenue sources.
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Now that the dust has settled and Californians can see the drastic consequences of the state budget train wreck, it's time to consider ten actions to fix California.

(1) Elect a leader. California has a forty-year history of electing governors on the basis of their personality, starting with Ronald Reagan in 1967 and ending with the current governor, Arnold Schwarzenegger. In 2006, Schwarzenegger defeated the Democratic gubernatorial candidate, Phil Angelides, who had far more experience and leadership ability, but less charisma. Angelides might not have been able to head off the current budget crisis, but he had a track record of forming coalitions to deal with California's big problems. In 2010, Californians must choose a governor who can inspire them to deal with their state's difficult problems.

(2) Change term limits. In 1990, California voters passed legislative term limits: six years in the Assembly and eight in the Senate. This action fatally diminished the collective memory of the legislature and its ability to act strategically. Moreover, term limits increased the power of lobbyists who typically have far more experience than do the short-term legislators. Term limits should either be repealed altogether or modified so that legislators are limited to 14 years of total legislative service.

(3) End gerrymandering. Following the 2000 Census, California's Democratic and Republican Parties agreed to gerrymander the district boundaries so that the status quo would be preserved. This action rendered almost all legislator seats non-competitive, thereby ensuring a continuation of the partisanship that hampers budget negotiations. The solution is to have a bipartisan group -- such as retired judges -- draw new district boundaries.

(4) Restore majority rule. In 1934, California voters passed a law requiring a two-thirds legislative majority to pass a budget. California is one of only three states that require a 2/3rds vote. In the interest of a rational budget process, Californians must readopt majority rule.

(5) Revise the initiative process. Over the years, the frequency of ballot initiatives has increased, resulting in a bewildering set of rules that restrict not only budgetary decisions but also administrative actions. This process must be amended, as part of a wholesale revision of the state constitution.

(6) Adopt a two-year budget cycle. California's budget process has become so dysfunctional that legislators spend most of their time working on next year's budget. Nonetheless, in 19 of the past 23 years, California has not passed a budget on schedule. Meanwhile, 21 states have adopted a two-year budget cycle, which permits legislators to spend a full year preparing the budget for the next two years. Typically, the first year of the cycle is devoted to budgetary oversight and non-budget-related bills are considered in the second year. California should move to a two-year budget cycle.

(7) Revamp the tax code. Over the past fifty years, California has become increasingly dependent upon personal income taxes, which now constitute 53 percent of all tax revenues. (In most states, the revenue base is one third property tax, one third sales tax, and one third income tax.) As a result, the California budget is increasingly vulnerable to economic swings that affect personal income. Late in 2008, Governor Schwarzenegger authorized the Commission on the 21st Century Economy to suggest changes to California's tax code. Among the revisions being considered are: expanding the sales tax to include a variety of services, implementing a value-added tax (net-receipts tax), adopting a pollution surtax on carbon-based fuels, and modifying Proposition 13 to facilitate raising revenues. California's tax code needs an overhaul.

(8) Legalize marijuana. There's a huge market for marijuana in California, but only medicinal use is fully legal. The black market for pot is an enormous source of potential tax revenue. If marijuana were to be taxed and regulated the same as alcohol, California would garner more than $1 billion per year. Legalize pot.

(9) Reduce the prison population. In the recent budget compromise, education funds were cut by $6 billion but the Department of Corrections was reduced by only $1.2 billion. California continues to spend a disproportionate amount on prisons -- ten percent of the state general fund; the average cost per inmate is roughly $46,000, while the average cost per pupil is $11,626. The prison population -- 167,000 -- can be dramatically reduced by common-sense actions such as deporting undocumented aliens and making non-violent crimes, such as writing bad checks, a misdemeanor so that prison time is not an option. Reducing the number of prisoners would free up billions for other state purposes.

(10) Designate more toll roads. For the past twenty years, California has experimented with toll roads in Southern California and for the past ten years, the FasTrak electronic toll collection system has been used to collect fees on toll bridges and roads. The FasTrak system should be expanded to collect tolls on more California highways. California can't afford to let all of its freeways be free.

California's problems are not insurmountable, but their resolution will require concerted action: new leadership, legal changes -- likely a new constitution, and the willingness to consider alternative revenue sources.

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