THE RENO REPORT - PARDON ME, CAN YOU SPARE A BAILOUT?

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Jamie Reno suggests a novel approach to California's state budget crisis



December 19, 2008 (San Diego) — This morning I've been boning up on our state's massive budget problems and the unthinkably deep cuts that loom. It's not a pretty picture. Gov. Arnold Schwarzenegger's underlings are reportedly already telling labor unions that the governor will order two-day-a-month unpaid furloughs for state employees beginning in February to help the state save money. And that's just the beginning. I'm sure more painful mandates and sacrifices are coming.

Reading all this bad news, I had a moment of clarity (or insanity, depending on your perspective): If the federal government can bail out failing industries to the tune of $17 billion, why can't it bail out state governments? In other words, why can't the Feds put some of our taxpayer money back into our own state coffers? California is in crisis, as are many other states. Imagine what $17 billion could do to stimulate the state economy, create more jobs, keep recreation centers and pools and after-school programs open, build roads, support social services, etc? Am I missing something, or does this just make too much sense?

This would not be robbing Peter to Pay Paul, nor would it be rearranging the Titanic's deck chairs. It would simply be a rare example of our tax dollars actually going to help our communities, which is what our tax dollars are supposed to do, rather than going to private entities that may or may not have earned the right to be bailed out. I understand the importance of saving America's automobile industry, and I do care about jobs for auto workers, as overpaid as some of them are thanks to out-of-control unions. But I did not pay my federal taxes with the expectation that they would be used to bail out an industry whose leaders have been so woefully visionless for the past 30-plus years. And I don't think you did either. Every CEO at every major auto company should have been sacked before any monies were given by the Feds to these guys who to a large degree drove themselves into this ditch.

If bailing out a state with federal money sounds like a wacky, out-of-the-box idea, maybe a wacky, out-of-the-box idea is just what we need. Why shouldn't we bail out California, which has the eighth largest economy in the world but could be out of cash by February? Granted, there would be heated debate over where this money would go. But there's always heated debate over where state budget money should go. I don't want to hear some pencil-neck economist’s long-winded take on why this idea won't work. Let's just do it.

Here in East County, the state budget mess will likely have a huge negative impact. My biggest concern is what it will do to our two local colleges -- Cuyamaca and Grossmont. These are both esteemed institutions and integral parts of this region that need and deserve every state dollar they get. East County is already reeling as a result of these tough economic times. Sales tax measures were passed last month by voters in both La Mesa (Proposition L) and El Cajon (Proposition J) just to retain important city services from cops to disaster preparedness to road repair. Social services, too, are likely to suffer greatly with this dreadful state budget as more East County residents lose jobs and homes.

I'm not the first to raise this idea, of course. Governors nationwide are already pushing for it. Not long after the bailout news broke, the National Governors Association sent a letter to Congress asking for immediate assistance. The Center on Budget Policy and Priorities recently released a report saying that states are facing "a great fiscal crisis" and that their revenue projections are only weakening. Only nine states--Indiana, Texas, Wyoming, Alaska, North Dakota, Nebraska, South Dakota, West Virginia and Montana--aren't facing budget shortfalls in the next two years, the report said. The economic slide is especially tough on the states because they have balance-the-budget requirements. The Feds don't, obviously.

Mayors, too, are asking for help from Washington. Last month. the U.S. Conference of Mayors came up with a "Main Street" stimulus package and identified 4,591 infrastructure projects that would cost $24.4 billion but would create more than a quarter of a million jobs in return, the mayors said. Cities are really struggling, locally and nationwide. Officials in Philadelphia, Atlanta and Phoenix have reportedly asked for a share of federal bailout money allotted to financial institutions. Worried about the state shortfall, San Jose’s mayor recently told reporters he'd ask the Feds for $14 billion for public transportation and other projects, but then he backed off and said he'd only ask for whatever the fair share would be if the Feds chose to help cities.

Gov. Schwarzenegger recently gave a speech in which he said the federal government only sends 80 cents to the state for every dollar California sends to Washington. He was quoted as saying, "So it's not like we're asking for a bailout, because it's our money. We're just saying, `Hey, give us some of our money back.'"

I agree with the Govenator on this one. But his fervent request , as well as many other pols' pleas, have fallen on deaf ears. Washington types often ignore state and local officials, but they listen closely to lobbyists and donors. As a result, the only bailouts we've seen to date have been for the Wall Street Ponzi schemers and the Detroit dinosaurs. If the Feds can bail those guys out, they can and should bail out states like California. Sounds to me like a no-brainer. Which means, of course, that it will probably never happen.


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