California: Wasting Away

Wasting Away

(Courtesy of CalTax)

The Conditions in California are ripe for opportunities to change course and experiment with alternatives that government leaders have shied away from for years.  Fiscal restraint and control has not been in the state's vocabulary for decades.  Government waste is sometimes hard to pinpoint and make a case for because it rarely occurs in singular occurrences.  Waste in government is a systematic problem that grows with each added layer of bureaucracy.  With each layer, the path from inputs (financial resources) to outputs (services) is not always clear.  The larger that government program gets the harder it is for watchdogs to follow the resources from start to finish.  Yes some layers of bureaucracy are necessary in a government setting to protect against fraud and waste.  At a point, all these layers can actually aid in the coverup of waste instead of its prevention.  This is story of many programs in California.



So how big is the problem in California? And does it really make a difference in terms of the State's fiscal problems?

To answer these questions you have to understand the State's budget situation.  In the 2011-12 budget, the State carried a budget deficit of 16 billion.  The following is the totals for state spending and revenue going back a decade (excluding intergovernmental revenue and expenditures):

• 2011 Revenue: 122 billion   / Expenditures: 188 Billion  (66 Billion)
• 2010 Revenue: 128 Billion  / Expenditures: 166 Billion  (38 Billion)
• 2009 Revenue: 126 Billion  / Expenditures: 159 Billion  (33 Billion)
• 2008 Revenue: 140 Billion  / Expenditures: 152 Billion  (12 Billion)
• 2007 Revenue: 137 Billion  / Expenditures: 138 Billion  (  1 Billion)
• 2006 Revenue: 134 Billion  / Expenditures: 137 Billion  (  3 Billion)
• 2005 Revenue: 120 Billion  / Expenditures: 129 Billion  (  9 Billion)
• 2004 Revenue: 104 Billion  / Expenditures: 123 Billion  (17 Billion)
  

The data shows that the annual deficits in California have ranged from 1 to 66 billion dollars in a single year.  The State has experienced deficits for many years prior to 2004 as well.  Systematic deficits leads to increasing debt that becomes harder and harder to payoff if the State's credit rating is downgraded or if the interest rates increase.  Is there possibly enough waste and fraud that its elimination would make a dent in the budget deficits?  That warrants some investigation.  Although it is impossible to find all waste, there are some examples that show there is enough to make a difference.

There are a number of categories the waste can be separated in to:

Personnel Benefits/Pension/Salary:

http://www.bloomberg.com/news/2011-07-05/california-prison-psychiatrist-paid-838-706-data-shows-1-.html
( 2.2 million wasted)

Should the tax payers be paying for this?

Wasteful programs:

http://www.bsa.ca.gov/pdfs/reports/2010-101.pdf

http://www.bsa.ca.gov/pdfs/reports/2010-102.pdf (from projected 226 million to 3 Billion, 2.74 Billion waste)

http://www.nbclosangeles.com/news/local/States-5-Cent-Message-Adds-Up-to-Millions-of-Dollars.html (4.9 million from 2008 to 2009)

http://www.sco.ca.gov/eo_pressrel_6497.html (11 Million)

http://www.bsa.ca.gov/pdfs/reports/2009-101.pdf (1.2 Billion Total)

http://www.bsa.ca.gov/pdfs/reports/2010-103R.pdf (5.1 Million)

http://sacramento.cbslocal.com/2011/02/07/on-the-money-edfund-lawsuit/ (1.3 Million)

 http://www.bsa.ca.gov/pdfs/reports/2010-406.pdf   (50,000 per year)

http://www.reuters.com/article/2013/03/19/usa-sanbernardino-pay-idUSL1N0CBBGW20130319

Unnecessary Programs:

http://abclocal.go.com/kgo/story?section=news/state&id=7603881
(26 million)

Redundancies

 http://www.sfgate.com/opinion/article/Government-waste-is-alive-and-well-in-California-3637365.php (???)

1. Elimination of Superintendent of Public Education ($151,127 per year)
2. Elimination of  Fair Political Practices Commission (max 10 million if all positions eliminated)
• department merged with the State Secretary of State's office
3. Elimination of the Insurance Commissioner (139,189 per year)

Fraud:

 http://cpr.ca.gov/CPR_Report/Issues_and_Recommendations/Chapter_1_General_Government/Making_Government_More_Efficient/GG42.html (117 million)

 http://www.abc6.com/story/21748473/ex-mayor-convicted-in-bell-calif-case



The total waste in government spending goes on almost endlessly and it shows there is much room for improvement.  No agency ever voluntarily rolls back its operation and contracts.  They refrain from doing this because it cuts jobs, funding, and puts them at odds with politically powerful unions.  Each time the government takes on a new or expands on an existing policy, it creates unintended consequences that create a new array of issues for the department to address.  For example, a city could decided increase the parking rates in a high traffic business area to increase the turnover and revenue from the meters.  In theory this should do exactly what they think it should but it could decrease the overall traffic to the area and thus decrease the meter revenue and sales tax revenue from the local businesses.  In light of these new developments, the city would either reverse the policy or implement a new program to rectify these new issues in the form of some kind of economic stimulus program.  The programs will continue addressing the problems that they caused so it is a never ending cycle that ensures that programs will always have a "problem to address".  This cycle leads to a lot of wasted resources that should be used on things like public health and education, but instead are used on politicians "pet" projects. 

The fiscal trouble that California is experiencing is amplified by the Legislatures short side thinking that Taxing the rich will tax the State back to prosperity.  The reality is, as taxes go up on the rich, the more they move to "greener" pastures and leave California with the bill.  The Government must look inward for reconciliation, cut the waste to reduce the problem before looking at the tax rates because a shrinking tax base will only make the problem worse for them and those who can not afford to leave the state.  There are billions of dollars of waste in California for the government to find and it will only take some intestinal fortitude to address the issue.  As the waste shrinks to a manageable level so will the yearly deficits.  The State must look long term because its mounting debt is a separate issue that will need addressing once the budget outlook has stabilized. 

California must make changes because the State is on a crash course with bankruptcy.  The thinking must change and the new paradigm must take root that embraces the long term view that government must do the best with what it has and ensure stability over the long haul.




Sources:
Cal-Tax 
http://www.caltax.org/waste/waste_decadeof.html

http://www.standardandpoors.com/spf/upload/Ratings_US/Anatomy_of_California_Deficit_June2012.pdf

http://www.arc.asm.ca.gov/BudgetFactCheck/?p_id=312

http://www.usgovernmentspending.com/year_spending_2010CAbn_13bs1n#usgs302

http://www.census.gov/govs/estimate/