For Republicans unhappy with Tuesday's election, we have good news—at least most of you don't live in California. Not only did Democrats there win voter approval to raise the top tax rate to 13.3%, but they also received a huge surprise—a legislative supermajority. Look out below.
The main check on Sacramento excess has been a constitutional amendment requiring a two-thirds majority of both houses to raise taxes. Although Republicans have been in the minority for four decades, they could impose a modicum of spending restraint by blocking tax increases. If Democratic leads stick in two races where ballots are still being counted, liberals will pick up enough seats to secure a supermajority. Governor Jerry Brown then will be the only chaperone for the Liberals Gone Wild video that is Sacramento.
Mr. Brown can blame himself for this predicament, after he drove more young voters to the polls by threatening to cut $500 million from higher education, which would have brought on large tuition increases. Voters between the ages of 18 and 29 made up 28% of the electorate, up from 22% in 2008 and 15% in 1996.
Unions also ramped up their turnout machine to kill a ballot initiative that would have barred unions from automatically withholding money from worker paychecks for political spending. The high Democratic turnout in moderate and right-leaning districts helped the party pick up three seats in the senate and four in the assembly.
So now Californians will experience the joys of one-party, union-run progressive governance. Mr. Brown is urging lawmakers to demonstrate frugality and the "prudence of Joseph." As he said the other day, "we've got to make sure over the next few years that we pay our bills, we invest in the right programs, but we don't go on any spending binges." That's what all Governors say. Trouble is, merely paying the state's delinquent bills will require tens of billions in additional revenues if lawmakers don't undertake fiscal reforms.
Lawmakers have been borrowing and deferring debts for the past decade merely to close their annual deficits, and those bills will soon come due. The legislature has raided $4.3 billion from special funds and deferred $10 billion in constitutionally required payments to schools.
The state has also borrowed $10 billion from Uncle Sam to pay for jobless benefits and $313 million this year from the state disability insurance trust fund for debt service on those federal loans. Democrats have proposed replenishing the state's barren unemployment insurance trust fund by raising payroll taxes on employers. Expect that to happen now.
Then there's the more than $200 billion in unfunded liabilities the state has accrued for worker retirement benefits, which this year cost taxpayers $6.5 billion. The California State Teachers' Retirement System says it needs an additional $3.5 billion and $10 billion annually for the next 30 years to amortize its debt.
The state has $73 billion in outstanding bonds for capital projects and $33 billion in voter-authorized bonds that the state hasn't sold in part because it can't afford higher debt payments. Unissued bonds include $9.5 billion for a bullet train, which will require $50 billion to $90 billion more to complete. Sacramento will also need more money to support an $11 billion bond to retrofit the state's water system, which is planned for the 2014 ballot.
With no GOP restraint, liberals can now raise taxes to pay for all this. They'll probably start by repealing Proposition 13's tax cap for commercial property. Democrats in the Assembly held hearings on the idea this spring. Then they'll try to make it easier for cities to raise taxes.
The greens want an oil severance tax. Other Democrats want to extend the sales tax to services, supposedly in return for a lower rate, but don't expect any "reform" to be revenue neutral. Look for huge union pay raises and higher pension benefits.
The silver lining here is that Americans will be able to see the modern liberal-union state in all its raw ambition. The Sacramento political class thinks it can tax and regulate the private economy endlessly without consequence. As a political experiment it all should be instructive, and at least Californians can still escape to Nevada or Idaho.
Source: Wall Street Journal-California's Liberal Supermajority Reprinted November 9, 2012