Saving for a rainy day
December 23, 2009
BY JEFF BLISS
We have become 99 percent money mad. The method of living at home modestly and within our income, laying a little by systematically for the proverbial rainy day which is due to come, can almost be listed among the lost arts. – George Washington Carver
The kind of common fiscal sense Mr. Carver talked about seems increasingly harder to come by these days. Not just in everyday life, but even more so in places of power – like Sacramento. In short, that kind of common sense has, unfortunately, become commonly uncommon.
Once the envy of the rest of our nation, California has turned into a punch line. Sure, in Copenhagen last week Gov. Arnold Schwarzenegger boasted of California having the eighth largest economy – in the world – but each new economic report or forecast suggests the state’s economy is sliding backward.
This didn’t happen overnight. Several decades ago, Sacramento became an important center of power when the legislature and its staffs went full-time, essentially turning pro. Many believed the state government’s evolution was late in coming and that an increasingly important economy like California’s needed real oversight and control. Others, however, mark the changeover as the beginning of the end. As the years passed and the state’s coffers swelled, the legislature came to be regarded as beneficent rulers doling out seemingly endless supplies of cash and favors.
But the times they have a changed.
Take a look at just about any in-state poll and you’ll find there is almost uniform disdain for the Capitol Building’s denizens. While partisan bickering is responsible for a great deal of the gridlock and resulting voter anger, there also is a sense among the populace that California’s elected officials have let them down – in a very big way. In a story that echoes the fate of many of the prospectors who came searching for “gold in them thar hils,” found it and then lost fortunes to wine/women/song, the Golden State’s leaders are increasingly viewed as having squandered a literal trove of treasure in just a short time, taking us from boom to bust.
So as California slips deeper into debt, cuts more programs and is forced to limit available public resources, the citizenry is scratching its collective head and wondering, Why didn’t the smart guys plan for this mess? Where’s the contingency plan? Where are the “rainy day” funds?
I’ll tell you what happened: the smart guys were too busy spending rainy day money to come up with a contingency plan. I know, I witnessed it first-hand – a number of times.
Just one example of this occurred not long ago during the Boom Years when I was working for the state. Several times each year, we would make our holy pilgrimages to Sacramento with our requests for funding and budget support. One year in particular, a group of colleagues and I were in a well-known legislator’s office explaining Our Great Need.
During our spokesperson’s “ask,” the lawmaker began to yawn. “Oh, sorry about that,” he said. “We were up very late last night, working.” I thought that was admirable and asked, “Were you working on some last-minute budget items?” He just laughed at me. Then he said, “No, no…we were trying to figure out where to spend all the money.” (There was about a $5 billion surplus in the treasury at that time.) I thought for a minute and replied, “Wait – you were working hard to spend the surplus? How much did the legislature put aside in a rainy day fund?” He just looked at me for a moment and then he laughed again. “Rainy day? Are you kidding me? We’ve got so much money that we’re having a hard time finding places to spend it all – and it’s going to keep coming.”
Look, I’m no economics expert but I took my parents’ advice back when they handed me my first piggy bank and admonished me put some aside for lean times. Seriously – who hasn’t heard that? Even if the last econ class you had was in high school, hardly a day goes by without hearing a news reporter or finance expert talk about the up-and-down nature of economics (i.e.: cycles). How could a group of people who hold sway over our tax revenues, many of whom are well-schooled in finance/economics and have whole agencies devoted to keeping an eye on our dough, not have thought the pendulum would eventually swing back the other way?
Admittedly, even the most frugal states are having a tough time dealing with the national/global economic recession. The national job loss rate exceeds an average of 10 percent; home foreclosure figures continue to hover in/near double digits; and only a few businesses show long-term prospects for a full recovery. But California – the wealthiest, most diverse and politically powerful state in the union – has been hobbled beyond imagination by the downturn: we have some of the highest unemployment, underemployment and home/mortgage foreclosure rates in the United States.
Would a rainy day fund and a contingency plan have helped the state dodge a bullet? Probably not. The damage from the recession, however, the short- and long-term impacts might have been significantly mitigated if the pols in Sacramento had not turned into drunken sailors on shore leave with billions of our dollars at their disposal.
It’s not like California is without any history when it comes to fiscal sanity. Former Gov. George “Duke” Deukmejian (R) picked up his nickname “the Iron Duke” in part due to his conservative fiscal policies in the 1980s, much maligned by Democrats, which included setting aside a $1 billion “prudent reserve” in a state budget that was much smaller than it is today. By the time he handed the reigns over to fellow Republican Pete Wilson in the 1990s, an economic downturn burned through most of the reserve, leaving Wilson to cobble together a combination of budget cuts and tax increases to balance the budget. A string of natural disasters during Wilson’s term also was a drain on state resources. Nevertheless,
Wilson did hammer out a compromise with the Democrat-dominated Legislature. Wilson, a former legislator (as was Deukmejian), understood the mechanics of legislative comity and created the famed “Gang of Five” meetings with the leaders of the Senate and the Assembly to get consensus on the difficult budget choices. It’s hard to imagine that type of “get things done” attitude in today’s polarized Legislature dominated by termed-out ideologues not the least bit interested in a quaint term like “compromise.”
Because of these ongoing budget impasses, the deepening debt and a host of other problems connected to the legislature’s shortcomings, there is growing movement in California to convene a constitutional convention that organizers hope will give the state a bit of a restart. As part of that effort, some hope a new attitude toward spending will emerge. What would help California even more would be a new attitude toward saving.
Jeff Bliss is a communications consultant and political analyst based in the Bay Area.