Originally published August 13, 2010 at 9:40 a.m., updated August 13, 2010 at 10:40 a.m.
Have you heard this one before? The State of California doesn't have a budget in place for the current fiscal year. A La Mesa assemblyman has offered a proposal to help out the businesses and residents who are currently being paid with IOUs.
GLORIA PENNER (Host): On to our last subject. It’s been almost two months and counting since our California legislature had a deadline to submit the state budget for the year that began last July first. The more time that passes, the less cash the state has to pay its bills, and when the money runs out, which is expected to be quite soon, the state will send out IOUs instead of checks to pay its vendors and its service providers. So, John, in the past, people and companies cash in those IOUs when the budget is passed but La Mesa Assemblyman Joel Anderson has another idea. How would that work?
JOHN WARREN (Editor/Publisher, San Diego Voice & Viewpoint): Well, Anderson’s idea is that while people are receiving IOUs from the state, we should pass a bill to require the state to accept IOUs in payment for taxes and items that people would deal with the state on, and it’s met with some very interesting reaction. It seems perfectly logical to Anderson since people are impacted, the IOUs, some banks would take them, some wouldn’t. But this idea of doing this reversal, by many is considered something that would further harm the state because of the spending that would take place and we would be further in the hole in terms of cash, so all kinds of arguments are being made against the idea and it’s very interesting that the state wants you to trust it but the state doesn’t want to trust the citizens in return.
PENNER: But, Kent, I mean, Anderson is a Republican. The Republicans are a minority party now in a deeply divided Assembly. What chance does a Republican have of getting a bill passed even if it’s a good idea?
KENT DAVY (Editor, North County Times): Probably none. And, in fact, Republicans are pretty well toothless given their current status. To clarify, I think his idea is not that the state should accept any old IOU from any old person but they should accept back their own IOUs…
PENNER: Their own IOUs.
DAVY: …and that’s, in essence, making the IOUs a form of scrip payment. The problem, of course, for the state is that the reason they’re giving IOUs in the first place is they’re trying to live on the float of kiting checks and they don’t want to be repaid in kind.
PENNER: Just explain very briefly ‘kiting checks’ for people who aren’t familiar with that.
DAVY: I write a check knowing that I really don’t have the funds to cover it but by the time it finally makes the bank, I will make the check good and live off the interest that I make in the meantime.
PENNER: But, Bob, it looks as though Democrat Christine Kehoe supports the measure. She said that if the governor chooses to issue warrants or IOUs or notes, whatever you want to call them, he should take them as payments as well. Is the issuing of warrants all up to the governor?
BOB KITTLE (Director, News Planning and Content, KUSI-TV): No. I mean, I think the – I suppose the governor could set some sort of policy but ultimately it would be, I think, a matter of legislation to establish how widespread they are, you know, as a form of currency, in effect. And, I mean, this idea just seems to have a lot of common sense behind it. I wouldn’t rule out Joel Anderson getting it passed. I recall that he, as a Republican in the minority, got a bill passed that I thought was a little bit odd but he got a bill passed that requires all of the state’s investment funds, the teacher retirement fund, the state employee retirement fund, etcetera, to divest themselves of any business such as Daimler-Chrysler that does business in Iran. And if he can get a far-fetched bill like that through the legislature, maybe he can get one through that’s, you know, based on a little more common sense.
PENNER: Well, I guess the point is, is our legislature capable of taking good ideas and running with them? And let me ask our callers about that. How frustrated are you by the state’s ongoing budget delays and are you worried if you are somebody who sells to the state or you are a provider, maybe you run a nursing home that is paid for by the state. Are you worried about being paid in IOUs? Our number is 1-888-895-5727, 895-KPBS. Meanwhile, more than 140,000 state workers just found out that they are at work. They’re going to work today, actually, Friday, because the court said that they will no longer have to be furloughed and that’s what the governor had wanted. Why did a judge rule against the governor’s furlough order, John?
WARREN: Well, quite simply the judge made the observation that granting the furlough in terms of the $1.9 billion it would save toward a $19 billion deficit was not going to make that much of a difference and it was going to be an ongoing thing. And I think that the judge saw that, you know, you just came out of a year of this, of taking money from people, and you want to turn around and do the same thing again, that it just – it was – It did not meet what the court would consider a standard of equity and fairness. And so I think the governor has a big problem there in terms of how he’s going to make up for this.
PENNER: But as the state’s financial problems persist, Kent, will state workers have to be sacrificed in some way to the economy?
DAVY: I don’t see how state workers can’t avoid being sacrificed in some way. To a point that was kind of obliquely referenced before, in general state workers make more than private sector workers. In an economy that hurts when the tax revenues are down, it seems to me to be a question of do you want a class war, a class war between the private and the public sector, or do you want to try and even things up to the point where people feel like it’s okay? It is my obligation and duty to pay my taxes.
PENNER: A class war between the public and private sector. Is that what it’s coming down to now, Bob?
KITTLE: That sound – seems like a little bit of an overstatement but certainly – let’s call it a class struggle.
KITTLE: I mean, Kent is absolutely right. At all levels of government, employee salaries and benefits consume more than 80% of every tax dollar that is paid, so that’s where the tax dollars are going and it’s why the public employee unions work so diligently to raise your taxes because they, frankly, are the beneficiaries of it.
WARREN: And government is fighting back. They’re outsourcing, they’re attempting to downsize. Yes, people are going to end up being laid off as opposed to furlough. The furlough was an effort to avoid the loss of jobs. But as revenues go down—and they are continuing to go down—the crisis is only going to increase. It’s not going to go away.
PENNER: All right, let’s hear from Laura from San Diego. Laura, you’re on with the editors. Please go ahead.
LAURA (Caller, San Diego): Hi. Thank you for taking my call.
LAURA: My husband and I were driving from San Diego to Yosemite on the 4th of July weekend. We received a minor traffic violation from California Highway Patrol. And when we received the ticket, you know, of course, when it’s a minor violation you can pretty much just sign the ticket, admit guilt, and pay the fine. And so when I tried to do that, the online system that you can do that on has furloughed all of its employees, so I can’t pay the ticket online but there’s an 800 number that you can pay your ticket. Well, I called that when I couldn’t get ahold of the online service, and the 800 number has also furloughed all of its employees who can help me pay my ticket. So I called just the courthouse and they furloughed all the customer service representatives who could tell me how much my ticket is and take my money. So I just think it’s such folly that there are three ways for me to give money to the state of California and all of the employees who can take my money have been furloughed. So instead, I have to go to court on September 28th to a jurisdiction that’s four hours from my house to meet with a judge who I’m sure has better things to do than to listen to my guilty plea and, of course, the police officer that has to be there. And it’s just such a waste of money. They furloughed, in my opinion, the wrong people.
LAURA: They furloughed the people who could have taken my money.
PENNER: Okay, Laura, so, I mean, Laura’s story is really a case in point of the – of what will happen to services generally, I would assume as it’s necessary to shrink government. Kent.
DAVY: Well, two things occur to me. One is, did you try the second day since usually a furlough is a single day in a week or a month. And did it work? The other thing is the – I guess you could just mail it in or you can show up, and show up and hope the cop doesn’t show up and you get your ticket dismissed, you don’t pay anything.
PENNER: Oh, well, those are very practical points of view. That isn’t what I was getting at though. What I was really getting at was sort of the larger picture. Are we going to find people inconvenienced when we have these kinds of budget restrictions? And, John, you wrote an editorial that I want to talk about, calling people to stop complaining about the budget, and this is a function of the budget that Laura was talking about, and do something about the people responsible. So what do you – What actions are you saying people should do? I mean, are we talking about revolution?
WARREN: No. Simply stated, people continue to reelect the same folks who can’t make a budget. They did it two years ago and here we are again, and here we are without a budget. And I said that we should, number one, not reelect them. Number two, those who are terming out, recall them, people like the governor, so that we have a nice footnote to his record.
PENNER: We did that with Gray Davis and what good did that do us?
WARREN: Well, but Arnold, his ego is bigger than Gray Davis’ and I don’t think Arnold wants to go out with a footnote of being that while I was elected to replace this guy, in the end I went out just like him. And I think you have to find those things that affect each of them to get their attention.
PENNER: Okay, thank you, John. Last comment, Bob Kittle.
KITTLE: Well, I would just say that Arnold Schwarzenegger’s approval rating is down below the level that Gray Davis’ approval rating was when he was recalled by the voters. So that’s a verdict in itself.
PENNER: Okay, and Kent Davy, give us a thought to take us out of this program.
DAVY: It is not going to be solved this year, probably next year. I would guess five years from now we’re going to be having something of the same conversation about why can’t California have a budget that works.
PENNER: Yeah, but we used to be the Golden State, Kent.
PENNER: Tarnished, okay. Well, that wasn’t the thought I was hoping for but that will do. I want to thank the editors, Kent Davy, editor of the North County Times was with us, as is John Warren, editor and publisher of San Diego Voice & Viewpoint, and from KUSI it’s political analyst and director of News Content and Planning, Bob Kittle. If you’d like to reach us, KPBS.org/editors. Thanks for calling in and thanks for listening. This is the Editors Roundtable. I’m Gloria Penner.