California dreaming

Returning to the left coast for a few days always gives one a slightly different perspective on the world. Trends often begin and end here in California. The epicenter of the housing collapse, for example, has frequently been identified as Sacramento — although a case could be made for Phoenix, Las Vegas, parts of Florida and other communities as well. But it is Sacramento that seems to be showing the earliest signs of recovery, or at least to be defining the bottom of the market. First-time buyers and investors are back, swooping up properties that lost nearly half their value when the bubble burst.

While that news from Sacramento is good, there are also troubling signs for states with budget problems. California faces a $40 billion budget deficit in 2010. After an epic months-long battle with the legislature, Gov. Arnold Schwarzenegger (R) cut a deal with Democrats and a handful of Republicans to put a package of six ballot measures to a vote in a special election later this month. The package would increase the size of the state’s “rainy day fund,” impose spending caps and extend a sales tax increase through 2013. One measure provides over $9 billion in supplemental payments to school districts and community colleges hit with budget cuts and the layoff of 30,000 teachers. Other pieces of the budget package draw an advance on lottery profits, move tobacco taxes from childhood programs to the general fund and do the same with a tax on the wealthy originally intended for mental health and Medicaid programs. Finally, the package prevents legislators and state officials from getting a pay raise when the state is running a deficit.

Reading the mood of California voters, it is no surprise that the pay raise ban appears headed toward a huge victory. But the other measures are struggling, even though voters agree the state faces a budgetary train wreck. Californians fret about the state of their schools, especially the loss of teachers and growing class sizes. They worry about the fires that have devastated huge portions of the state during several years of drought. They are concerned with crime, water shortages and deteriorating infrastructure. Yet they don’t want to pay any more taxes and they think the complex package of six ballot measures hides tax increases, wasteful spending and loopholes that will allow politicians to get around their promises to bring some sanity and discipline to the budget process.

Californians think their tax burden is already too high and don’t want to pay any more — even to fix problems they agree are severe. They will support taxes on “other people,” especially taxes that they don’t believe will affect their lifestyle severely. Three-quarters, for example, would favor a tax increase for millionaires — maybe because there are a lot less of them in the state now. Similar numbers favor increasing “sin taxes” on tobacco and alcohol and adding new lifestyle taxes to the list. An overwhelming 80 percent favor a special tax on the sale of pornography, and 56 percent want to legalize marijuana and tax the proceeds from sale of the drug, already available through “pot pharmacies” throughout the state for medicinal use.

When focus-group participants were told how little impact such special taxes would have on a $40 billion deficit, their response was a simplistic one. “Then just cut waste.” Republicans and decline-to-state voters overwhelming gravitated to a program-slashing mode; a strong majority of Democrats joined them. Voters desperately wanted to believe that cutting legislative salaries in half, trimming waste from the state prison system and reducing expenditures on state parks could close the budget gap. When presented with a list of a dozen state programs, very few wanted to touch education, healthcare, public safety or programs for low-income or disabled Californians. They also oppose cuts to public transportation, roads and highways, water storage, childcare and mental health.

The contradiction between “don’t raise taxes,” “slash waste” and “don’t cut programs” does not seem to bother voters in focus group or polling research I’ve seen. The bottom line is they “want to send a message to the politicians” and they think rejecting all their proposals is the way to do it. Voters in California are so angry right now that emotion has overtaken logic. If this voter frustration is expressed at the polls on May 19, it could be an early sign of voter distrust that will prove troublesome to governments dealing with budget crises all across the country.

Goddard is a founding partner of political consultants Goddard Claussen.