Ernie Cowan, my
Government Affairs counterpart from North San Diego County, and I had
an opportunity to join Senator
Dennis Hollingsworth for breakfast this morning. It was a
small gathering - the Senator spoke for about 20 minutes or
so, answered as many questions as we had and then hung out as long as
(Camera phones suck)
Dennis Hollingsworth has
always been a pretty down-home kind of guy and he has always been a
friend to Realtors. Some of you may remember when Dennis was running
for his Assembly seat several years ago he attended our casino night
scholarship fundraiser and dealt more than few hands of blackjack
beside then-Murrieta Mayor Chuck Washington and several other
luminaries. Dennis' family background in agriculture
and President of the Farm Bureau has given him a keen insight
into land use issues and private property rights that has served our
region and our state well.
His remarks today
focused on two main issues - the recent budget debacle, which resulted
in Dennis becoming the Senate
Minority Leader, and water issues which are critical to
the survival of our market (which I'll discuss in a subsequent post)
Regarding the budget - the
recently concluded budget negotiations. which had gone on since last
May and threatened to grind this state to a standstill, were still unsuccessful. What has been presented as a solution
for the next 18 month cycle, will actually have to be revisited even
before this current cycle ends in June. Why? Well it
probably comes as a surprise to
no one except the Democrats that revenues are not meeting
their expectations. You may recall the recent budget was balanced in a
mixture of tax increases
(12.5 Billion), spending cuts
(15.8 Billion) and borrowing
from future revenues and federal government bail-outs (7.9
As we've discussed
before, the tax increases are
very real. We will pay between $1,100 and $2,000 more in
state income taxes and variety of other fees. The spending cuts are largely illusory.
They are not actual cuts in spending for the most part, but rather cuts
to increases. If a program costs $100 million this year and requests
$120 million for next year - if they only get $110 million they are
said to have sustained a $10 million cut to their budget. The third leg
- borrowing from future lottery revenues, re-allocation of some past
tobacco tax taxes etc. and the federal bail-out money are just
additional ways of borrowing
against tomorrow to pay down today.
So the surprise for the
Democrats is - in spite of the
tax increases, state revenues are still coming in below projections.
Within 3 - 6 months anticipated revenues will be between $3 billion and $10 billion
below current estimates in the just-passed budget. Meaning Sacramento will be coming back to you
looking for MORE money.
Of course the real
reason - which is not a surprise to anyone with a grade school
equivalency in math, is that this revenue
deficit is not IN SPITE of the tax increases but BECAUSE of the tax
increases. Put simply, it you take an extra $1,100 to
$2,000 a year out of the average taxpayers pocket for the government to
spend, that is money that person doesn't have to spend. They will not
be buying a new car or a new house, they will forego dinners out and
new furniture and home improvements, they will not take a vacation or
otherwise spend that money BECAUSE
THEY DON'T HAVE IT! Only
government can spend money it doesn't have - not people.
if they're not spending it on cars and boats and movies and dinners
out, well, the providers of those services are making less also. But
again unlike the government who keeps hiring people when the money runs
out, normal businesses have to
lay people off or, if it gets bad enough, they shut down or move their business to
another state that's a little smarter and cheaper. But all
of those eventualities result in less revenue to the state from
individuals and businesses so the legislature will want to raise taxes
even more to off-set those reductions. It's a Democratic
death spiral friends, and we ain't done yet.
And keep your eyes on
the ballot propositions coming
in May because some of them are nothing more than future tax increases masquerading as
spending caps. More on that later.
Hollingsworth's job as
Senate Minority Leader is now to bring this fractured band of
Republicans back together. The budget could only be passed with the
help of 3 Senate Republicans who reneged
on their oath not to raise taxes and helped the Democrats
hose California taxpayers. However, as small and ragtag as the party
is, they can't afford to eat their own or get involved in some protracted and ugly internal war.
Given the importance of the Republican effort in Sacramento, and the
sometime futility of it, they still have an important function to fulfill.
As Dennis said this morning, if Republicans had not stood firm and
fought the valiant fight as long as they did, Democrats would have
raised taxes last June,
again in October
and again this month
and there would have been no spending cuts and no effort to rein in
costs. Dennis urged patience in dealing with the recalcitrant
Republicans and cautioned against knee-jerk reactions
motivated by revenge or even honest distrust.
Finally, on the budget
issues, Dennis has had several conversations with Gov. Arnie during and
subsequent to this vote. He said he has been assured by the Governor
that the Democrats had 'one bite
of the apple' when it came to tax increases. Tax
increases WILL NOT BE ON THE
TABLE during future budget negotiations. Of course
considering the source it's understandable if we're somewhat skeptical
of Arnie's promises - but that remains to be seen.
The Senator also wished
to thank his
many supporters and well wishers in District for the many
emails, phone calls and letters of encouragement he received during
this time. Correspondence in district was running around 100 - 1 AGAINST tax
increases and that outpouring of support further bolstered Dennis'
resolve to stand fast for his convictions. There are 39 other Districts
that should be so well represented.