As
the historic-global structural crisis of capitalism deepens, workers,
students, and the poor in California are being subjected to some
of the worst economic setbacks in the nation. This is reflected
in the state’s budget, passed on February 19th, 2009. In the wake
of that budget, California workers, students, and the poor are facing:
•
Wage reductions in the public service sector;
•
Potential cuts of tens of thousands of public service jobs;
•
Erosion of quality education for millions of students;
•
Radical reductions of public services, including health care, social
welfare, housing, environmental protection, and local services;
•
State fiscal measures that contribute to increasing unemployment
and lower prospects for economic recovery.
California’s
budget also includes regressive tax increases that will impact workers,
students, and the poor. At the same time, over a billion dollars
in tax handouts to the wealthy and corporations are included.
In
response to the economic crisis and its budgetary implications,
a conference of state-wide public workers convened on March 15,
2009 at Sacramento City College. The conference has been organized
by the United Public Workers for Action. The UPWA is a organizing committee
and network, formed in 2008 by San Francisco Bay Area union members
and activists committed to bring all-affected public workers in
the state together to address the current crisis.
The
crisis that California workers, students, and the poor face is caused
by the ongoing weakening of California’s economy and chronic state
budget deficits, compounded by the accelerating structural crisis
of the integrated global economies. The weakening of California’s
economy-—the world’s eighth largest—is fundamentally due to deindustrialization
and Neo-Liberal policies. The latter include tax cuts, rolling-back
social services, privatization, and deregulation. The deindustrialization
of the economy and Neo-Liberal policies were implemented starting
in the late-1960’s and early-1970’s, and have been the basis for
United States/California economic policy since that time. Moreover,
in the past decade, Enron gouging California’s energy revenues and
the dot.com bust added to the economy’s further decline.
Further,
the collapse of the housing-bubble, which is considered to be the
trigger of the current stage of the structural crisis, has greatly
intensified the crisis. For example, California has had the highest
number of home foreclosures in the nation in the past year. In
2008, the state experienced 236,000 foreclosures, more than the
previous nine years combined. The price for a house also declined
significantly during that period. For example, the median price
for a house in Southern California last year was $415,000, while
it is now worth $278,000. This deflation is responsible for a
vicious downward cycle: With the collapse of housing prices, tax
revenues are severely reduced, adding to government deficits.
This results in further unemployment of public workers, and undermines
consumer demand, and leads to even more foreclosures.
Thus,
it is not surprising that in January, 2009, California lost 79,000
jobs, bringing the total unemployed in the state to 1,863,000, up
754,000 from January, 2008. This figure brings the state’s official
unemployment total for January to 10.1 percent, 2.5 percent higher
than the national average for the month. This is the largest unemployment
rate in California in 26 years.
Moreover,
the economic crisis in California is intensified by a political
situation that has proven to be undemocratic and unworkable. This
situation is caused by a combination of Neo-Liberal policies and
constitutional procedures, such as term-limits and the requirement
for a 2/3rds vote for passage of budgets and tax increases. Neo-Liberal
policies are largely responsible for long-term structural imbalances
in the tax structure, reflected by the notorious Proposition 13
passed in 1978. This proposition, sponsored by right-wing tax reform
advocates, has prevented property taxes from reflecting the increase
in the value of property in the state over the past three decades,
significantly limiting tax revenues.
Furthermore,
Proposition 13 has forced the state to rely on personal income taxes
for a significant portion of its revenue. This has proved to be
problematic owing to both tax loop holes and recurring economic
downturns. For example, the state was expecting revenues from capital
gains and the sale of stock to account for 11.5 percent of the General
Fund this year. However, owing to the accelerating structural crisis
this fall, that amount dropped to 5 percent; and will certainly
be even greater next year.
The
main constitutional procedural impediment is the 2/3 requirement
for passage of the budget and raising taxes. The 2/3rds vote requires
that a budget can only be passed by a supermajority in the state
legislature. Proposition 13 also mandates a 2/3rds vote to increase
taxes. The 2/3rds requirement was originally passed in 1933, when
it was to be implemented only if there was a five-percent increase
in the budget from one-year to the next. In 1962, it was endorsed
by the voters to be used every year. Interestingly, the 2/3rd requirement
is used in only two other states, and no local government in the
state uses it as a means to pass budgets.
The
political implication of the 2/3rds requirement has been that the
Republican minority in the state legislature—which consists almost
entirely of right-wing ideologues—can hold the budget hostage and
attempt to undermine any effort to pass equitable tax increases.
Instead of a commitment to “fiscal responsibility,” it is obvious
by coordinated actions of California Republican Party that the intent
is to completely roll-back the state’s public sector. Ironically,
when the voters endorsed the 2/3rd requirement in 1962, the state
treasury was always “flush” and Republicans were generally fiscal
“moderates.”
The
problem outlined can be seen in the context of the California’s
recent (ongoing) budget cycle. A balanced budget was supposed to
be finalized in June, 2008. However, it stalled primarily due to
coordinated intransigence of the Republicans in the state legislature
and was not passed until the fall. During that period, the deficit
projected to June, 2010 grew to $42 billon, forcing the state to
re-negotiate the budget to make up for the deficit.
Over
the past few weeks, Governor Arnold Schwarzenegger and the Democratic
and Republican leaders from the Senate and Assembly (the so-called
“Big Five”)—pressured by the fact that the state was running out
of cash and that the state had the lowest bond rating in the country—negotiated
a budget behind closed-doors. When the budget was presented to the
legislature, two Republicans were willing to vote for its passage.
However, there was still the problem of getting a final Republican
to support the budget (including the tax increases), even though
it was one of the most Draconian budgets in California history.
The
passage of the state budget occurred because one Republican, State
Senator Abel Maldonado of Santa Maria, extracted concessions from
the Governor and the Democrats. The concessions included elimination
of a proposed twelve-cent increase in the gasoline tax, and support
for a May 19 “special” election which will present to the voters
for consideration a permanent “spending cap” and an “open primary.”
As noted above, the budget was passed in the early morning hours
of February 19th. One can assume that, because of his capitulation
to Schwarzenegger and the Democrats, Maldonado has become a pariah
within his party.
The
outlines of the $140 billion budget include: $14.8 billion in cuts;
$12.5 billion in temporary tax increases; $5.4 billion in borrowing,
including from the state lottery; and relying on revenue from President
Obama’s stimulus bill. Obviously, these spending reductions and
tax increases will disproportionately hurt the working classes,
the poor, the elderly, and the disabled.
The
budget cuts are the most severe in the education and social services
sectors. The overall cuts for education are $11 billion through
June, 2010. That amount includes an $8.4 billion reduction for
K-12; and the remainder taken from university, state college, and
community college systems budgets. The state college system has
already announced that it will turn-away 10,000 new students next
fall and increase tuition by nine percent. Examples of social spending
cuts include: $200 million reduction for Dependent care tax credits;
$226.7 million reduction for mental health services; and dropping
230,000 children from the California Opportunity and Responsibility
to Kids Program.
The
regressive taxes increases include: 1) a one-cent increase in sales
tax; 2) a 0.25 percent increase in personal income taxes; 3) a 2.5
percent surcharge on tax bills; and 4) doubling the vehicle license
fee. Ironically, when Schwarzenegger ran for Governor in 2003 one
of his main selling-points was reducing that fee. Moreover, state
public employees will be subject to a one-day-a-month furlough,
which amounts to a five percent per-day pay cut. The budget also
eliminates two state holidays. The furlough program and the elimination
of the state-holidays are estimated to save a projected $1.4 billion.
As
Richard Holober, Executive Director of the Consumer Federation of
California, explains, “The average working family of four will
pay an additional $1200 over the next 17 months in increased sales
tax, personal income tax and vehicle license fees. At the same
time, business gets about one billion dollars in tax breaks.”
What
must also be recognized as important in this scenario, is that the
budget is not final. The final version is contingent on one, or
more, of the following:
1)
the voters passing eight-budget related compromised concessions,
including establishing a permanent “spending cap” in a May 19 special
election;
2)
the amount California receives in the Federal stimulus program;
and
3)
the discretionary line-item veto power Schwarzenegger has wrestled
from the legislature. The state is expecting a $9 billion expenditure
from President Obama’s stimulus plan. If that occurs, it would
mean that the state would have to borrow less and restore $950 million
in cuts.
Nevertheless,
owing to the accelerating global/national-economic/financial crisis,
California’s economic future does not look promising. Moreover,
the political conundrum its finds itself in will also continue to
be an impediment to fiscal soundness. Thus, the cuts could be even
deeper before the summer 2009. Furthermore, the state’s structural
and constitutional procedural problems, amplified by the deepening
global structural crisis, portend an even graver situation in the
next budget cycle.
As
the economic crisis has accelerated over the past year and-and-a-half,
public employee unions have:
1)
attempted to deal with contract negotiations unilaterally;
2)
expected the Democrats in the legislature to defend the interests
of workers, and/or
3)
lobbied to have a “seat-at-the-table.”
This
is also underscored by intra-union divisions and conflicts, which
has further prevented a unified front to deal with the crisis.
Overall, public employee unions have not been able to defend the
gains that labor has made over the past century-and-a-quarter, nor
protect the resources that local governments need to adequately
provide services and compensate public employees. This reality is
clearly indicated by the anti-democratic nature of the recent budget
deliberations. Moreover, without coordinated mass mobilizations
and alternative strategies by labor, students, and the users of
public services, the budget outcome was predictable.
Therefore,
the UPWA advocates that the accelerating economic crisis and its
political ramifications in California requires the formulation of
new strategies and agendas based on a collective response. This
is based on the belief that only a unified organized labor can build
a broad movement to achieve those ends. This includes putting the
“house in order” for organized labor and participating actively
in coalitions with unions in the private sector, student groups,
housing activists, environmentalists, immigrant rights organizations,
civil rights organizations, etc.
Furthermore,
the UPWA agenda is premised on the recognition that the economic/budget
crisis is not being solved within the parameters of the established
political system. In California, the policies that come out of
the Governor’s office and the state legislature have avoided confronting
the underlying structural (and ideological) realities, and are inadequate
short-term responses which fundamentally benefit the wealthy and
corporations at the expense of workers, students, and the poor.
This reality is rapidly becoming obvious to increasing numbers of
Californians. By implication, owing to the historic structural
crisis a political space is opening where the potential for progressive
change is possible.
In
that light of the foregoing and current events, the conference aimed
to accomplish the following:
•
Outline and define the effects of the economic/budget crisis on
public services and workers, and identify potential allies;
•
Examine the reasons for the current political and policy impasse
and the recent succession of band-aid budget measures;
•
Develop a common agenda to confront the ongoing crisis in the interest
of the public, and rebuild viable public services and funding sources
responsive to changing needs of Californian’s during both good and
bad economic times;
•
Develop strategies and organizations to address the systemic crisis
over a sustained period of time.
Specific
areas that will be discussed in workshops at the UPWA conference
are:
•
Revenue generation and the political process;
•
The 2/3 requirement and strategies to change it;
•
The crisis of the public service sector;
•
The health care crisis and the viability of single-payer;
•
The state’s public education system, its funding, and its future;
•
The housing crisis;
•
Impact of the crisis on services for immigrants;
•
Organizing for community and the future.
The
conference will also develop plans to participate in the statewide
Day of Action for immigrant rights and public services to be held
on May 1, 2009 in Sacramento. To find out more about the United
Public Workers for Action go to: www.UPWA.info.
BlackCommenttor.com
Guest Commentator, George Wright , PhD is the author of The
Destruction of a Nation: United States' Policy Toward Angola Since
1945
(Pluto Press, 1997) and
Stan Wright - Track Coach
(Pacifica Sports Research Institute, 2005). He in Professor
Emeritus from the Political Science Department, California State
University, Chico. His research interests include: International
Political Economy, African International Relations, and the Politics
of International Sport. Click
here to contact Dr. Wright. |