"People could stake me and Gov. Perry on the ground and torture us, and we still would not raise taxes."

February 7, 2011 3:29 PM

'Analysis: Texas vs California: A tale of two budget deficits'. 'Texas Governor Rick Perry treated guests to a barbecue lunch paid for by a wealthy businessman. Supporters of California Governor Jerry Brown munched on hot dogs at a union-sponsored picnic. The stark contrast in inaugural menus last month highlights the different approaches the two most populous U.S. states are taking to deal with massive budget deficits. Perry, a Republican, campaigned on the strength of the Texas economy and made political hay of the fact the Lone Star state had avoided California's massive deficit, pegged at $25.4 billion through the upcoming budget year. Now Texas faces a budget deficit estimated as high as $27 billion for the upcoming two-year cycle of 2012-2013. To close the gap, state legislators have proposed steep cuts in funding to education and welfare programs.'

'The lecturing from Texas leaders about how California wouldn't be in such a budget mess if its politicians did business the way it is done in Austin has been relentless for years.''The Texas budget crisis is prompting some experts to reconsider what had been dubbed the Texas Miracle. The state has much lower unemployment than California, but economists note that many of the jobs are low-paying. One out of three wage earners in Texas earns too little to keep a family of four above the federal poverty level, according to a 2009 study by the Corp. for Enterprise Development, a Washington-based nonprofit. That is double the percentage of similarly low-wage Californians.

Such figures call into question whether Texas' economy has really transitioned into a new 21st century model, or whether it has been buoyed by high oil prices and lots of loosely zoned land where construction of cheap houses endured through the recession.

"You have to separate out what your public policies have done for you and what God has done for you," said Scott McCown, executive director of the left-leaning Center for Public Policies and Priorities in Austin. "People shouldn't be fooled by what is going on here."

Texas lags far behind California in major research universities, patents produced, high-tech infrastructure and venture capital investment, according to the Missouri-based Kauffman Foundation. The foundation's 2010 ranking of states in "movement toward a global, innovation-based new economy" put California at No. 7. Texas was No. 18.

"Their model is a low-wage economy with greater income inequality," said John Ellwood, a professor of public policy at UC Berkeley. "For all the talk of Texas being a high-tech state, they have never really caught up to California.… Look at the big new growth companies. Where is Facebook? Where is Google? Are any of these companies in Austin? No."'

posted by VikingSword (74 comments total)

Great post. Related to this is the discrepancy between red state and blue state federal income vs. expenditure, or as this article calls it, the red state ripoff.
posted by zardoz at 3:36 PM on February 7, 2011 [9 favorites]

One out of three wage earners in Texas earns too little to keep a family of four above the federal poverty level, according to a 2009 study by the Corp. for Enterprise Development, a Washington-based nonprofit. That is double the percentage of similarly low-wage Californians.

Anyone know how other states compare? Because 1/6 not earning a living wage still sounds pretty shitty to me.
posted by graventy at 3:38 PM on February 7, 2011

the red state ripoff.

Where Texas is blue. (In terms of what that article's talking about.)
posted by kmz at 3:40 PM on February 7, 2011 [1 favorite]

To close the gap, state legislators have proposed steep cuts in funding to education and welfare programs.

Why does this always seem to be the case? Whenever a budget needs balancing it always seems that the two things first targeted are programs that help the poor, and education infrastructure that might teach people to be less poor someday.

It's almost like the people on top want to stay there regardless of what it does to the anyone else on the bottom.

[grr]
posted by quin at 3:40 PM on February 7, 2011 [31 favorites]

Texas is great despite, not because of people like Rick Perry.
posted by Grumpy old geek at 3:42 PM on February 7, 2011 [2 favorites]

Whenever a budget needs balancing it always seems that the two things first targeted are programs that help the poor, and education infrastructure that might teach people to be less poor someday.

Well it's also because those are often the two biggest budget line-items. Relative to those the rest of the government is pretty cheap.
posted by GuyZero at 3:44 PM on February 7, 2011 [1 favorite]

Politicians don't compute the social *cost* of cuts. They're stuck in double bottom line accounting models. Their thinking patterns are over the tipping point, and on their way to extinction. And Texas politicians? They belong to a special class of idiots.
posted by Vibrissae at 3:44 PM on February 7, 2011 [6 favorites]

Why does this always seem to be the case? Whenever a budget needs balancing it always seems that the two things first targeted are programs that help the poor, and education infrastructure that might teach people to be less poor someday.

It's really just because this is what the states spend the vast majority of their budgets on. Especially compared to the federal government, education and welfare just make up a huge fraction of state budgets.
posted by mr_roboto at 3:45 PM on February 7, 2011

To close the gap, state legislators have proposed steep cuts in funding to education and welfare programs.

quin: Why does this always seem to be the case?

Because those in the education system (the young, and teachers who generally don't get paid much) and the welfare system (the poor) don't have the time or money to "support" their representatives. Businesses can allocate a portion of their costs to make their positions heard to their government officials, but those who rely on government money are generally doing what they can to get by, and not much more.
posted by filthy light thief at 3:45 PM on February 7, 2011 [3 favorites]

Don't worry, folks! Perry, Strauss, and their Chamber of Commerce cronies solved the budget crisis over kolaches and coffee before the legislative session even started!

We have been avoiding a deficit over the past two years by soaking up as much stimulus money as possible (while state and federal representatives campaigned on an anti-stimulus platform).
posted by muddgirl at 3:45 PM on February 7, 2011 [3 favorites]

"You have to separate out what your public policies have done for you and what God has done for you," said Scott McCown, executive director of the left-leaning Center for Public Policies and Priorities in Austin. "People shouldn't be fooled by what is going on here."

So you're saying God loves Texas more than California? Wooooooooot TEXAS!
posted by reformedjerk at 3:45 PM on February 7, 2011

Politicians don't compute the social *cost* of cuts. They're stuck in double bottom line accounting models.

At the state level, this is because they can't deficit spend the way the Federal government can. There have some (limited) borrowing capacity, but in the end, everything has to balance.
posted by mr_roboto at 3:46 PM on February 7, 2011 [3 favorites]

Why does this always seem to be the case?

At least for texas, if you look at the budget link, it's because it's about the only thing they spend money on. They make up over half the budget. If they weren't talking about cutting those, they wouldn't be serious about cutting the budget.

Why they don't increase taxes on the other hand...
posted by zabuni at 3:46 PM on February 7, 2011

Why they don't increase taxes on the other hand...

No state income tax (and of course Perry crows and crows about how Illinois raises their income tax rate to cover budget deficits), and property taxes are already very, very high. Part of the budget "strategy" is to increase fees on services - basically throwing out the community model of funding government in favor of "pay for what you use". We should have learned our lesson about "pay for what you use" by now...
posted by muddgirl at 3:49 PM on February 7, 2011 [5 favorites]

Uh, Facebook and Google are both in Austin. (Sure, they didn't start here, but that's a weird choice of examples.)
posted by restless_nomad at 3:50 PM on February 7, 2011

When Meg Whitman was campaigning for governor she couldn't shut up about Texas and its great models for business development, where they don't have all these pesky agencies and red tape. I am so glad that horrible self-serving troll bombed out.
posted by benzenedream at 3:51 PM on February 7, 2011 [9 favorites]

Texas has an ace up its sleeve -- a $9.4 billion "rainy day" fund the state has built up over the years, funded by a tax on the state's oil and natural gas production.

Just this morning Mrs Jones was wondering if any of the US governments did anything like this.

We have our answer.
posted by IndigoJones at 3:54 PM on February 7, 2011

It's definitely Texas's time to pay the piper, and things are going to get ugly, but didn't California also have to make steep cuts in education and welfare? And with the supermajority rule for tax increases in California, it's not going to be easy for Brown to actually raise the tax rate, as far as I understand.
posted by kmz at 3:54 PM on February 7, 2011

Uh, Facebook's HQ is in Palo Alto. Google's HQ is still in Mountain View. I'm sure they both have offices in other places, but it's not like they've moved wholesale to Austin.
posted by rtha at 3:54 PM on February 7, 2011 [4 favorites]

Uh, Facebook and Google are both in Austin. (Sure, they didn't start here, but that's a weird choice of examples.)

When Google IPO'ed CA's tax revenue went up by a significant amount. Facebook's IPO will also measurably move the needle on CA tax revenues.

They will not have any effect on Texas.
posted by GuyZero at 3:57 PM on February 7, 2011 [2 favorites]

Well it's also because those are often the two biggest budget line-items. Relative to those the rest of the government is pretty cheap.

"Business tax breaks cost Texas $4.3 billion in the last state budget, a figure that amounts to about a third of the state's massive revenue shortfall, according to a legislative report obtained on Friday by the Associated Press."
posted by yeloson at 3:57 PM on February 7, 2011 [4 favorites]

I can testify as a Texan that while unemployment is relatively low alot of people with jobs have extremely low-paying, benefit-less jobs with no potential for advancement.

Alot of the jobs you would normally associate with poor youngsters (waiter, busboy, fast food) are being taken up by 45+ year olds who have been out of work from their "regular" jobs for months or years.

tl;dr: whats the point of full employment if everyone is still poor?
posted by Avenger at 3:58 PM on February 7, 2011 [23 favorites]

I've said it once about my home state and I'll say it again, "TEXIS, FUK YEH!"
posted by punkfloyd at 4:03 PM on February 7, 2011 [1 favorite]

Whether tax cuts are simply a reduction in tax receipts or a giveaway is a bit of a semantic argument. The businesses never owed that money in the first place, did they?
posted by GuyZero at 4:03 PM on February 7, 2011

The "Texas Miracle" is sort of like the "Houston Miracle" where Roderick Paige, Superintendent of Houston Independent School District, raised student test scores and reduced dropout rates by adopting a business model to public schooling. This catapulted Paige to national attention and he became Secretary of Education under GW Bush.

Then it was discovered that the "Houston Miracle" was really the result of fraudulent reporting of data and cash bonuses paid to teachers who falsified test scores. Oopsie.
posted by Killick at 4:07 PM on February 7, 2011 [27 favorites]

It's no secret that CA's tech industry is the best in the world, and the money from that industry makes it easier to weather economic storms. But that's not due to the state government's amazing competence, it's due to geography, smart residents, and a little bit of luck. If Texas adopted California policies wholesale, they'd get better social services and education, but it wouldn't help them get the next Google.
posted by miyabo at 4:09 PM on February 7, 2011

Then it was discovered that the "Houston Miracle" was really the result of fraudulent reporting of data and cash bonuses paid to teachers who falsified test scores. Oopsie.

So basically they're both not even up to the level of a Festivus Miracle.
posted by Joey Michaels at 4:11 PM on February 7, 2011 [2 favorites]

miyabo, California has the best state university system in the country. That's why they have smart residents. It didn't just happen.
posted by chrchr at 4:13 PM on February 7, 2011 [13 favorites]

Also, throughout history whenever there is an "X miracle" (where X is some geographical region or sector of an economy), there are usually profound consequences down the line.
posted by Avenger at 4:15 PM on February 7, 2011

miyabo, California has had the best state university system in the country. That's why they have smart residents. It didn't just happen.

FTFY.
posted by lalochezia at 4:19 PM on February 7, 2011 [4 favorites]

Whether tax cuts are simply a reduction in tax receipts or a giveaway is a bit of a semantic argument. The businesses never owed that money in the first place, did they?

Infrastructure services cost money- having a police force, firefighters, roads, etc.
Giving away services at reduced costs, or even free, this costs the state.

It's actually semantic argument to say the difference is "they never owed it in the first place", really.
posted by yeloson at 4:20 PM on February 7, 2011

Google are both in Austin

We might have a sales office there, but the Google engineering office in Austin closed in 2008. Unless we started another one since then.
posted by wildcrdj at 4:23 PM on February 7, 2011

I'm still angry at the idiots in my state that believed the lies and voted for Douchebag McHair instead of competent and decent Bill White.
posted by Burhanistan at 4:25 PM on February 7, 2011 [8 favorites]

I'd point and laugh at these old fools who have the hubris to cut and keep cutting education, because in twenty years going to the doctor is going to feel like a scene out of the movie Idiocracy.

But I can't point and laugh. These guys are going to die before I do. I'm the one that's going to be going to the doctor and hearing "Well, you're shit's all retarded. Have you been drinking enough Brawndo? When was the last time you went to Starbucks for a double latte?"
posted by loquacious at 4:25 PM on February 7, 2011 [11 favorites]

It seems to me that Austin never really recovered from the dot-com crash. I was there from 98-00, and back then it still got some national hype (part of why I moved there) as the whole "next Silicon Valley" sort of thing. There were at least a few high profile startups (Trilogy, for example).

I can't think of any startup coming out of Austin since that round. While there are still companies with significant presence there (Dell, I think SAS as well, probably others) it doesn't seem to have grown much.

Of course, I'm less familiar with it these days and probably have Silicon Valley blinders on.
posted by wildcrdj at 4:26 PM on February 7, 2011

"The way Texas does business" is to let oil companies pollute as much as they want, and to have a lot of illegal aliens working for next to nothing. That way, Texas businesses don't have to spend unnecessary money on pesky things like a living wage, or fines for violating environmental laws.
posted by MexicanYenta at 4:28 PM on February 7, 2011 [10 favorites]

If anyone else is interested, here's a link to the Kauffman Foundation's study/interactive map for 'new economy' states.
posted by zylocomotion at 4:30 PM on February 7, 2011

This is from 2007 (and is about California, not Texas), but I can't imagine it's changed much since then:

It has been projected that over the next five years, the state's budget for locking up people will rise by 9 percent annually, compared with its spending on higher education, which will rise only by 5 percent. By the 2012-2013 fiscal year, $15.4 billion will be spent on incarcerating Californians, as compared with $15.3 billion spent on educating them.

posted by rtha at 4:31 PM on February 7, 2011 [4 favorites]

Government services are worth it, mostly.
posted by humanfont at 4:43 PM on February 7, 2011 [1 favorite]

Like a once magnificent estate left to decay California is doomed until Prop 13 is repealed.

The best university, junior college and public school systems in the nation are collapsing because of funding cuts directly related to Prop 13.

The state park system every year is forced to reduce service to or close parks due to lack of funding.

The states infrastructure is a patchwork mess of stop gap repairs.

Jerry Brown's hands are tied as long as Prop 13 remains in effect, and Prop. 13 will remain in effect as long as the citizens of California refuse to pay for the basic funding necessary to run the state.
posted by pianomover at 4:46 PM on February 7, 2011 [9 favorites]

So, we have this cool little theater space out here that is owned by a collective of arts groups.

Every group is expected to take care of the space, including the lighting system. This isn't the most advanced theatrical lighting system in the world. It still requires some basic lighting know-how to keep it running.

Unfortunately, every group approaches the lighting system differently and some groups don't have a clue how to use it. The area over the stage, unless you come in and completely re-hang everything, looks like a tangle of fishing line. The dimmers - the boxes that allow you to plug lights into different circuits, controlling them all individually - are mostly blown. We probably have 6 to 8 (out of 36) channels to work with a any given time. The lighting instruments are in dire shape.

There's no way for things to get better because there's currently no system in place to even discuss this problem (or any problems) among the co-op groups. Furthermore, even though the system was purchased by the groups as a unit, nobody has any funding to pay for replacing or fixing the lights or system. They've all taken to renting out their own dimmer packs and hiring their own lighting people to come in to address the problem - at a greater cost than if they just pooled their resources again and fixed it.

Sometimes, they let groups with tinier budgets use the space an those groups have to make due with the broken down equipment. While the Collective that runs the place values showcasing these poorer groups, they're increasingly taking their shows elsewhere because of the issues with this space. This vexes and dismays many members of the Collective.

Anyhow, its basically a living example of "tragedy of the commons." This problem most likely won't be solved until the situation collapses into utter disrepair.

When I read about California and Prop 13, or Texas' version of "don't tax us" populism, I sometimes wonder if the only way out is going to be for the state governments to utterly collapse.
posted by Joey Michaels at 5:07 PM on February 7, 2011 [10 favorites]

My friend's theory: Don't mess with Texas. Seriously, just don't mess with it. It's not worth the trouble.
posted by DaddyNewt at 5:11 PM on February 7, 2011 [3 favorites]

I commented on this on MeFi a little while back.

The most stark difference between California and Texas, when it comes to their large deficits, is that California's economy is 60% larger than Texas'. That means that a mild economic upturn could make California considerably more capable of operating without a deficit, whereas Texas *needs* very considerable tax increases -- or spending cuts -- to fix what their anti-tax policies have broken.

Also... California doesn't just attract more venture capital than Texas. It attracts more than the rest of the US combined, and that amount is growing, not decreasing.

In comparison, what's driving Texas' economy isn't low taxes. It's oil and comparatively stable real estate prices based on people moving to the state... not just for the jobs, though. Texas was the most popular place for New Orleanians to move to after Katrina, for example.

What this meant, basically, is that Texas' economy was somewhat artificially "pumped up" before the recession hit, delaying the pain. However, the upcoming cuts -- because there most assuredly won't be tax increases -- are serious job/safety net killers, that will send foreclosures -- which are already increasing significantly -- through the roof, with accompanying decreases in property costs / property taxes. There's also the longterm cost of gutting education that needs to be figured in as well.

In short, while California seems to have a good chance at growing, cutting, and taxing their way out of this problem, Texas might find that there is nothing left for them to cut, and that what they do cut makes the problem significantly worse. The economy there has been buoyed up, but a state full of people who make less money than those in California who suddenly find themselves under water financially probably can't ride out the hardship for as long as those with greater resources and a better funded social safety net.

Texas is very well positioned for a "delayed action" recession... and it seems a bit too optimistic to hope that the overall gradual recovery will help them in time.
posted by markkraft at 5:27 PM on February 7, 2011 [5 favorites]

Whenever a budget needs balancing it always seems that the two things first targeted are programs that help the poor, and education infrastructure that might teach people to be less poor someday.

Well it's also because those are often the two biggest budget line-items. Relative to those the rest of the government is pretty cheap.

No, what's expensive is *healthcare* and education. That problem has to do with our stupid system: covering only the extremely poor and the old and doing so via pay-per-service for the most part. I don't know why we provide healthcare for the poor but not the middle class. It makes no sense given our ideology: shouldn't we be covering first people who work hard and pay taxes? Oh, that would mean evil socialism. Instead, you've gotta go bankrupt or get old first—and the Supreme Court may keep it from changing even slightly.

Oh yeah, and in California, more is spent on prisons than on colleges. It's 10% of the budget and not being cut. I guess that counts as spending for the poor.
posted by Maias at 5:32 PM on February 7, 2011 [2 favorites]

Also, when economies do start to recover, it's only natural that the first jobs in a company tend to be created where the corporate HQ is. In most cases, that's not Texas. In fact, that could be bad news to a lot of states, given that this will be a slow recovery...

Lots of regional/branch offices have closed nationwide. In many cases, the company infrastructure have adapted successfully to a more centralized structure, with no significant pressure to change that. Overseas outsourcing also has taken over an increasing percentage of the work involved.

In short... those jobs may never come back.
posted by markkraft at 5:34 PM on February 7, 2011 [1 favorite]

I went to college in San Diego and now I'm doing grad school in Austin. When I enrolled I hoped that I was fleeing the mess that is the current UC system where a TA appointment might not even cover rent. It's scary to think that still might be the case here even though my department does well overall with grants and we get good support from UT, and for the moment I have pretty good money.

There was this Economist cover a year or so ago with CA as a fat surf bum leaving the water, sad and tired, and TX as a cowboy on a jet ski hurling toward the surf. That was the Texas I thought I was moving to! Jet ski Texas!

That said, there is something about Austin that makes it seem like a better city to be poor. sure everyone drinks and goes to shows and eats fancy food here and that's all expensive, but there is not a visible upper crust that you will never attain like there is in California. The luxury of fancy beer is still only $5 a pint and it's enough to make you feel not too poor in this town.
posted by slow graffiti at 5:55 PM on February 7, 2011 [4 favorites]

From the Reuters article: "California voters may have some tolerance for higher taxes. Much depends on the ability of Brown, who was elected last November, to secure a special election to ask voters to extend tax hikes to narrow the budget gap."

Don't hold your breath.
posted by blucevalo at 6:26 PM on February 7, 2011

Allen, TX High School is building a $60,000,000 football stadium.

Austin, TX is closing one fifth of its elementary schools due to a $113,000,000 budget shortfall.
posted by popechunk at 6:45 PM on February 7, 2011 [7 favorites]

Although interesting from popechunk's first link: "The stadium was part of a larger $120 million bond package passed in May 2009 that included nearly as much money for a state-of-the-art auditorium for performing arts."

Of course, it's also not uncommon for one district to be fine on money and another to be shutting down schools. Thats one of the big issues with the typical property-tax fueled system of paying for schools (which I believe is true in Texas? certainly was in Georgia). And of course it means that wealthier areas have better (public) schools.
posted by wildcrdj at 6:55 PM on February 7, 2011

"Oh yeah, and in California, more is spent on prisons than on colleges. It's 10% of the budget and not being cut."

Not true. There are very significant cuts underway, and the governor's proposed budget allocates just 7.2% of state funds for the Department of Corrections.

"The proposed budget includes sending low-level offenders — those who have not committed violent or sexual crimes — to county jails in lieu of state prisons. The resultant money would go to local governments to increase jail capacity and strengthen county rehabilitation programs, saving an estimated $486 million by the middle of 2012 and $1.4 billion total."

Gov. Brown is also cutting the entire state youth prison system.

In comparison, Texas plans to cut their correctional costs 5%, without closing any of their prisons.

As for high prison spending, Texas is hardly exempt. Even though they have only 24M people in comparison to California's 36M, They have the largest number of prisons of any state, and incarcerate 704 people per 100K. They were asked to cut $294M from their budget, but plan on cutting just $50M, seeking a waiver for the other $244M.

In comparison, California's correctional budget is incarceration rate is just 460 per 100,000... only slightly above the national average of 447.... and the proposed cuts are far more significant.

From 1991-1998, Texas had a 144% increase in incarceration with a 35% drop in crime rates... and California had a 44% rise in its incarceration rate with a 36% drop in crime rates.

Indeed, Texas is in a league of its own, as it added the most prisons (120 between 1979-2000), currently has the largest number of prisons in operation (137), and experienced the largest percentage increase over that period. (706 percent)
posted by markkraft at 6:58 PM on February 7, 2011 [4 favorites]

which I believe is true in Texas? certainly was in Georgia

Yeah, this is part of the problem though - when the federal government cuts educational budgets, wealthier districts can absorb the difference from their local budgets, while poorer districts can't.

I believe there was even a Supreme Court case which ruled that state/local governments can't compel school districts to "revenue share" their property taxes.
posted by muddgirl at 7:03 PM on February 7, 2011

tl;dr: whats the point of full employment if everyone is still poor?

If you have people making just enough to survive plus a tiny amount, then the wealth can easily be redistributed to the top of the ladder while those at the bottom grind their lives into grist for the mill of capitalism, all while thinking they might be rich someday.

Keep 'em just hungry enough to dream, not enough to be content, and if you already have money, then you win!
posted by hippybear at 8:29 PM on February 7, 2011 [1 favorite]

I'm not sure about Facebook because it's privately held and thus harder to find information on, but Google is at its heart a Delaware corporation.

They have their main business address in California and I assume that's where most of their employees reside (and probably where they pay the majority of their payroll taxes), but if you're talking about the corporation itself, as a synthetic legal entity ... I don't think either California or Texas can claim it. (And the reason they can't are pretty straightforward and have to do with Delaware's legal climate with respect to corporations.)

Google was founded in California and its headquarters is there because of Silicon Valley, something that I'd be pretty skeptical of any current politician taking credit for. The seeds of what's currently growing there were sown a long time ago, and are probably attributable more to Leland Stanford and Frederick Terman than any other individuals. It's not something that can easily be replicated, and even if you have the right start conditions, it can still be screwed up (just ask Massachusetts).

Frankly I think both states are screwed, although they're screwed differently; there's a bit of a leper colony beauty pageant going on if you're forced to choose the best governed one.
posted by Kadin2048 at 9:23 PM on February 7, 2011

Texas has a huge problem with a structural deficit coming off of some tax cuts in 2006. A friend of mine who runs a reasonably well-respected Houston political blog harps on how we're taking money away from the schools and the hospitals to keep Dan Patrick's (state rep who used to be an AM radio blabbermouth) taxes low. That's part of the problem, but an equally important issue is that Rick Perry seems to have presidential ambitions. Even if Perry could see the problem and were inclined to do anything about it, he couldn't undo the tax cuts and hope to run for president. This is leading us to a reprise of the sorts of problems we had then, only more so.

Y'all won't vote for Perry when and he runs for president, won't you? I really hope y'all learned your lesson with GW Bush about "all hat and no cattle" cowboys.
posted by immlass at 9:56 PM on February 7, 2011 [2 favorites]

Politicians don't compute the social *cost* of cuts. They're stuck in double bottom line accounting models.

response:
At the state level, this is because they can't deficit spend the way the Federal government can. There have some (limited) borrowing capacity, but in the end, everything has to balance.

That's just my point, if one leaves out the social costs of cutting certain programs, everything doesn't balance. For example, when you cut education, you put people at risk for lower paying careers, and hence unable to pay taxes; their kids are less likely to go to college; their kids are more likely to be incarcerated; their kids are less likely to volunteer, and so on (all based on prior long research, btw).

So, is it important to balance the books, but shove the cost of balancing the books under the rug? the latter is a cost. Why isn't it included in a rational budget process?

Again, the current crap about "balanced budgets" is nothing more than ignorance about total cost, writ large - and often - by people who hold purse strings, but who also have no vision into the future. We're poorer for having elected or other officials like this, and there are thousands of them - at federal, state, and local levels.
posted by Vibrissae at 10:46 PM on February 7, 2011 [2 favorites]

"Frankly I think both states are screwed, although they're screwed differently; there's a bit of a leper colony beauty pageant going on if you're forced to choose the best governed one."

California is definitely well-governed at this moment. Gov. Brown was remarkably successful during his first two terms as governor, spending frugally and running large surpluses until 1978. The state's economy skyrocketed. Taxes on rapidly increasing property values also skyrocketed, however.

This led to Proposition 13, which both cut property taxes and sharply restricted future property tax increases for those who already owned property, while making all future tax increases very difficult to pass.

The overall effect is that during California's boom years, the state is unable to invest in infrastructure and education to the degree it should to get ahead of the problem, while during bust years, it makes any deficit substantially worse. The margins are so thin that cutting to balance the budget is a really painful thing. (You can experience this yourself with the LA Times' California Budget Balancer, where you choose what should be cut to get to a balanced budget.)

California is a huge state with a huge budget... but it's actually quite lean, in many ways, especially when you consider that the state has some of the highest salaries in the country and needs to pay accordingly.

I guess there's another "screwed" aspect to the state too... but given how well-screwed we are in that respect, well...

So hey.... how's your winter been? It got down into the high 40s here the other night. Brrr!
posted by markkraft at 3:22 AM on February 8, 2011 [1 favorite]

tl;dr: whats the point of full employment if everyone is still poor?

A. The rising employment numbers give the appearance of successful leadership
B. Less people selling illegal drugs
C. Eternal Sunshine of the Spotless Mind
D. All of the above
posted by Twang at 3:42 AM on February 8, 2011

At the state level, this is because they can't deficit spend the way the Federal government can. There have some (limited) borrowing capacity, but in the end, everything has to balance.

That's becoming an interesting and controversial point.

I also don't know if I'm convinced CA would be better without Prop 13. I work as a City Planner in MA and we have a similarly restrictive property tax regime for municipalities. I'd say it's what's made the real estate market in the state so much more stable than the rest of the country (along with a general lack of supply).

The version I got is that CA governments at a number of levels were given access to more and more elaborate types of credit. The uses of the funds probably runs the gamut, but ostensibly they were put towards projects that were supposed to create revenue generating activity down the road. This type of scheme tends not to work out in practice, for public and private actors alike.
posted by Reasonably Everything Happens at 3:46 AM on February 8, 2011

The budget fix is obvious and simple, more lotteries, duh. HAMBURGER!
posted by Daddy-O at 6:07 AM on February 8, 2011

A modest proposal for significantly slashing budgets: reserve prison for violent criminals. Prison is insanely expensive, and while it has value in isolating dangerous people from the rest of society, it doesn't seem to be worthwhile in the slightest to put people in prison for shoplifting or writing bad checks, or even simple burglary.

Slap a tracking cuff on the non-violent offenders, make them go to therapy, whatever. The cost of keeping a person in prison for a year is, on average, around $20,000. I'll guarantee you that a tracking cuff and therapy will cost less, and doubtless be as effective.

Hell, if they're committing crimes because they're poor we can, for less than $20,000 a year, put them in a total welfare program, including a semi-nice apartment, food, and a big screen TV.

But locking them up with violent criminals seems like a terrible and horribly expensive idea.

Speaking as a Texan, we need a state income tax. I don't like more taxes, but the idea that we can cut our way out of the budget mess is literally insane. Raising the sales tax is an extremely bad idea. In fact, I'd go so far as to say that what we really need to do is abolish the State sales tax and implement a progressive income tax. A regressive tax, like a sales tax, is automatically going to hurt the people least able to afford it.
posted by sotonohito at 6:24 AM on February 8, 2011 [1 favorite]

Also:

Legalize recreational drugs, regulate and tax them.

Legalize gambling, regulate and tax it.

Legalize prostitution, regulate and tax it.

Do that and maybe we wouldn't even need a state income tax.

And, legalizing prostitution, would have the added benefit of making it much easier to catch human traffickers, people forcing underage people into prostitution (actually sex slavery would be more accurate a term), etc. Set a decent tax rate on prostitution and you can make monthly, or weekly even, STD testing a free service as part of getting and maintaining your Hooker's License.

Even if people are too insane to go with legalizing, regulating, and taxing recreational drugs I'd hope that we could at least get the last two done....
posted by sotonohito at 6:29 AM on February 8, 2011 [1 favorite]

Another big thing to consider is that the size of the debt isn't what really matters.

Rather, it's the size of the debt relative to the state's total taxable income... best compared estimated as GDP.

Nevada has somewhere between a $1.2B and $3B debt, apparently, depending on the numbers being used... but their latest reported GDP is $126.5B, while California's debt is about $25.4B with a $1,891.3B GDP. (Data from the BEA.)

Work out the ratios of debt to annual worth and you find that if Nevada does have a 3% deficit, their ratio comes out to 2.43% of their GDP, compared to 1.34% for California. Even if you gave Nevada the benefit of the doubt, it's likely that the situation would be as bad or worse than in California... in part because we know that no other state in the country has seen their GDP shrink as much from the recession as Nevada.... 6.4% as compared to 2.2% for California. That data isn't reflected in the latest GDP info that I used to create these comparisons, and that big of an economic contraction has got to cause a pretty significant debt in state revenues.

So really, it's not that California is in the worst hole out there. It isn't. Rather, there are all sorts of smaller states that are able to hide it better.

A handful of states and their projected 2012 deficits as a percentage of GDP:

Nevada $1.2B-$3B ... $126.5B GDP ... up to 2.43%
Illinois $15B ... $630.3B GDP ... 2.38%
Minnesota $6.2B ... $260.7B GDP ... 2.38%
Texas $27B ...$1144.7B GDP ... 2.36%
Oregon $3.3B ... $165.6B GDP ... 1.9%
California $25.4B ... $1,891.3B GDP...1.34%
Wisconsin $3B ... $244.4B GDP ... 1.23%
New York $10B ... $1093.2B GDP ... 0.91%
North Carolina $3.2B ... $398B GDP ... 0.8%
New Mexico $450M ... $74.8B GDP ... 0.6%
Massachusetts $2B ... $365.2B GDP ... 0.54%
Ohio ~$2.4B ... $471.2B GDP ... 0.5%
Florida $3.6B ... $737B GDP ... 0.49%
Georgia $1.95B ... $395.1B GDP ... 0.49%
Indiana ~$1.3B ... $262.6B GDP ... 0.49%
Arizona $1.1B ... $256.3B GDP ... 0.43%
Tennessee $1B ... $244.5B GDP ... 0.41%
Michigan $1.6B ... $368.4B GDP ... 0.41%
Kansas $492M ... $124.9B GDP ... 0.394%
Utah $313M ... $112.9B GDP ... 0.28%
Missouri $600M ... $239.7B GDP ... 0.25%

So, if you look at the problem that way, California has several neighbors that could experience far more of an impact from efforts to deal with their deficit. The problem is spread throughout the entire country, with states like North Carolina nearly as impacted as New York. In the West, Nevada, California, and Oregon are high up on the list largely due to the subprime debacle's foreclosures, followed by a serious decrease in home prices and a major decline in new housing construction and subsequent unemployment, whereas other states seem to be there because of long term economic weaknesses related to rustbelt manufacturing. Texas, however, seems to be there because of a combination of tax cuts and budgetary planning that was based upon a boom scenario that largely went bust, and issues relating to people and businesses either not making enough money to pay taxes, or being underemployed. They were a bubble, basically... and could face a continued deflation.

California is hardly perfect. It will take years of economic growth in other fields and the gradual removal of the foreclosure backlog from the market before its construction comes back. But there are healthy signs of improvement in technology companies, for example. An 11% increase in venture capital funding nationwide, which we get the lion's share of. Healthy signs in agriculture, with an easing of the drought and a significant shift towards water conservation. Although I expect an official drought categorization to continue this year due to a dry spring, it's hard to imagine that whole sections of the Central Valley will have their water cut off, as in prior years, due to respectable snowpack and reservoir levels. There are major construction projects such as the statewide high-speed rail network that will be getting under way shortly, and a considerable consumer and state-driven push towards a greener, more efficient energy sector.

So no, I don't see the state's problems as lasting ones, and as insolvency as the likely outcome. There really are bigger problems elsewhere.
posted by markkraft at 6:52 AM on February 8, 2011 [7 favorites]

Oh, and so I don't forget any of the big players...

Michigan has a $1.85B projected 2012 deficit. 368.4B GDP. 0.5%

Michigan: At least we're not Minnesota!
posted by markkraft at 7:00 AM on February 8, 2011

(oops. Didn't forget Michigan. Used FY2011 projections. 2012 looks somewhat worse. These things happen... I'm frankly surprised they're as low on the list as they are, all things considered.)
posted by markkraft at 7:04 AM on February 8, 2011

Michigan's deficit isn't as bad as many other states because we've been through painful cutting and more cutting during years well before the recession when economically healthier states were still running surpluses. I remember Mitt Romney coming here during the 2008 GOP primary and saying Michigan was in "a one state recession." This was just a few months before the economy crashed nation and then world-wide.

I bet if you took those stats and included data for every year this century, Michigan would look much worse off.
posted by riruro at 9:10 AM on February 8, 2011

"we've been through painful cutting and more cutting during years well before the recession..."

Looks like you're state gets to slash its way to solvency yet again!

You have about 10M people there, no? Perhaps a million kids?! All you need to do is have each one of them raise $1,850 and you've got a balanced budget!

That's kind of a lot to expect to make from just bake sales, but I've got a plan... charge pyromaniacs for the right to legally burn down buildings in Detroit. Win/win, really.
posted by markkraft at 9:46 AM on February 8, 2011

Yeah...in Texas, being taxed like you're in a good school district does not mean that you *get* a good school district. The house and land we just bought is taxed as though we were in Plano schools, despite being on the other (and rural) side of the county. Our schools are not $60 million football stadium schools, I tell you what.

My biggest mistake in buying this house, was trusting the realtor when she said we were in a different school zone. Now my choices are either send him to an overcrowded, poorly performing school, send him to a fundamentalist christian school, home-school, or come up with $20k a year for tuition at a secular school an hour away in Dallas.

Vast numbers of Texas schools are performing poorly even under the pathetic standards of the Bush regime's "fix" to education. The very few top-performing schools aren't necessarily teaching anything but how to take and pass tests. The core fundamental *understanding* of the material is hardly a focus. It's a huge mess that I'd never really noticed until I had a kid.

But they really have raised property taxes so much, that there's not much room for those prices to go up before it starts forcing people out of their homes. We have a modest property, and our taxes are $800 a month. The gated communities a few miles from us are averaging $1,500 a month in property taxes. That's not house payments...that's just the property tax. And most of Texas suburbs are controlled by mandated Home Owner Associations, which collect an annual tax. (Think it's not a tax? Try not paying it.)

I would absolutely support a flat income tax. I would also support prison reform, legalization and taxation of all sorts of things, including a steep tax increase on alcohol taxes. Huge luxury taxes. Huge. Awe inducing. They want to be flashy and vulgar and new money? Fine. The Army of Fake-Nail, Blonde-Bob, LV-logo-flashing, Trophy Wife won't care that it costs twice as much. Hell, that makes it EVEN BETTER!

There's all kinds of ways to fix the budget that don't involve starving poor people and raising ignorant children. Unfortunately, with a legislature full of ignorant fat bastards, our chances for rational direction are slim.
posted by dejah420 at 10:00 AM on February 8, 2011 [2 favorites]

"there's not much room for those prices to go up before it starts forcing people out of their homes."

That was kind of my read on it, judging from what I know. People have been living off of their savings, and there are signs of foreclosures going up pretty sharply quite recently.

To me, that suggests that people who have been scraping by on their savings have fallen hopelessly behind, and have to sell. The big question is, will that be a good buying opportunity for wealthy speculators, or will it start to drive down prices, drive down construction, and throw a lot of people in the construction industry out of work. I suspect that some areas are more vulnerable to experiencing a double-dip recession than others, but it could happen elsewhere too.

The Texas real estate market is too hot to be justified by what most people there actually make, I suspect. It reminds me disturbingly of Vegas, which has had a really sharp jolt in the housing market, even though they never really embraced subprime loans with quite the zeal that they did in much of California.
posted by markkraft at 10:21 AM on February 8, 2011

Austin property taxes accounted for 1/4 to a 1/3 of what my rent was. "No state tax" is a really catchy phrase; but it gets paid with other phrases just as much.
posted by buzzman at 11:52 AM on February 8, 2011

I own a small company in Texas. If I have to pay a "living wage", that's fine, I'll just hire fewer people. Force me to pay benefits? I'll make it up by cutting hours. Jack up my property taxes? Fine, I'll just move to a smaller house. Luxury taxes? I'll buy more stuff online. Folks, I work 80 hours a week, I am going to make sure I make enough money to save for retirement. I'm sorry if some of you feel you are on the losing end of that transaction, I wish I could afford to offer everyone Google style perks. I'm working to expand and hope it will be a reality someday. In the meantime, I recommend getting a job with a large corporate employer, or starting your own company, or learning some skill that demands higher compensation.
posted by blargerz at 4:28 PM on February 8, 2011 [2 favorites]

I wish I could afford to offer everyone Google style perks.

How about health insurance?
posted by mr_roboto at 4:51 PM on February 8, 2011

I wish I could afford to offer everyone Google style perks

Does your business generate about $1.15M per employee? That would make it easy.
posted by GuyZero at 5:02 PM on February 8, 2011

"patents produced, high-tech infrastructure and venture capital investment, "

Ah yes, because the number of patents and VC firms equal "quality place to live." I haven't noticed a huge shortage of high tech industries here. More Fortune 500 companies have headquarters here now.

I know there's a huge CA vs TX competition and there are plenty of people that look at Texas as a dumb redneck backwards ass bible thumping state, (which I have yet to encounter) but all I know is that my wife & I combined make just as much money here, yet each dollar is going a whole lot further. We're paying less on a mortgage for a new house than I was on a 1br apartment in Sunnyvale, CA. Our property taxes are higher as a percentage than California, but 2.1% of $175k is way less than 1.1% of $600k. The school district has been fantastic, I run into far less traffic, and both of us have found the health care systems to be fantastic. (I'm involved in it, and the wife has been in ob/gyn for 12 years, both here and in California)

On the other hand, I didn't move up to Plano. $400/mo in property taxes alone? Yikes. Ours equaled out to be about $2100 total for the year. That's including the ISD & City taxes too.
posted by drstein at 12:34 PM on February 10, 2011

San Antonio property taxes (aka Bexar County) are about $3000 a year for a $120,000 house - of course this depends on school district.

I don't really get what blargerz is worried about ... does a sensible tax program == socialism nowadays?
posted by muddgirl at 2:51 PM on February 10, 2011