Now that we know California
’s budget deficit will approach $35 billion, the next step will
be to determine what impact it will have on all of us and on the
communities we live in. It isn’t a question of if; it is a question
of how big the impact will be.
Now that we know California’s budget deficit will approach $35 billion, the next step will be to determine what impact it will have on all of us and on the communities we live in. It isn’t a question of if; it is a question of how big the impact will be.
You don’t have to be an economist to know that you cannot spend more money than you have or you earn. The same principal applies to municipal and state governments, just as it does the companies we work for.
When we as individuals are faced with what may politely be called income shortfalls, we have two choices – cut back spending or raise money by getting another job or selling something.
Governments face the same choices – cut spending or raise taxes. While the governor is working out his plan, he faces a partisan split in the Legislature where the Democrats don’t want to cut any programs and the Republicans don’t want to raise any taxes. When all the shouting and the speeches are done, the result will probably be a combination of some program cuts and some higher taxes.
The challenge of cutting programs and raising taxes is that these actions will happen at a time when the economy remains stagnant and many of us are simply trying to stay afloat. There are no easy answers.
No one wants to pay more taxes. No one wants to see the return of those abysmally high vehicle license fees, and no one wants to pay more if spending goes unchecked.
At the same time, no one wants to see less money spent on education, less money on highway maintenance or mass transit projects, or less money on the programs that make our communities safer and nicer places to live and raise our families.
Big companies often take a simple approach to budget deficits. They attack their big costs. People get laid off or take pay cuts. Plants are closed. Loss leader products or those less profitable get scaled back or eliminated. Unfortunately, governments don’t have it so easy. Funding for many programs is mandated by legislation or by the federal government. Local governments are required to fund projects mandated by the state.
Further complicating the equation is that to economists, governments can serve as stimulants in tough economic times. Their calculations are based on the fact that public projects provide employment, not only for those who build them, but also for the entire community served by the project. People who are working pay taxes and their employers pay taxes.
However, with the current budget deficits staring down the governments of Morgan Hill, Santa Clara County and the State of California, there is no way to restore some sense of financial order without inflicting some pain. Plus, whatever is spent now will have to be paid for down the road. Let’s not forget that the economy has been bad for the federal budget as well. And that was before you factored in costs for war planning and homeland security.
In a good economy wealth flows upward before it trickles down. In a bad economy, the trickle down impact is more like a flood. That flood has already begun to be felt here in Morgan Hill and its impact will only worsen. The city has been in this neighborhood before. It took several years for Morgan Hill to regain its financial footing.
The challenges our community will face cover everything from schools to transportation, from civic projects to social programs in a period of time when funding cuts are the rule. As we enter an uncertain new year, our leaders must guide us through the storm, using a very conservative approach when it comes to spending our tax dollars without sacrificing the vision for the future of Morgan Hill.
