John Myers of KQED on California's Budget Crisis
Tuesday, June 30, 2009
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SUSIE GHARIB: The clock is ticking for California tonight. Governor Schwarzenegger and state lawmakers are battling on ways to balance the budget and close a $24 billion deficit. They have until midnight. California's economy is the nation's second largest and its budget crisis could have implications for the rest of the economy. Joining us now with more on this breaking story, John Myres, Sacramento bureau chief at public radio KQED. Hi, John, nice to have you on the program.
JOHN MYERS, SACRAMENTO BUREAU CHIEF, KQED: Thanks, Susie, nice to be with you.
GHARIB: So John, tell us, where do things stand right now?
MYERS: Where things stand is where they stood for the last several weeks. We have an impasse here at the state capital in Sacramento about how to resolve this problem. It's a $24 billion short fall and for some context, this is actually the third time that state lawmakers and Governor Schwarzenegger had to resolve California's financial problems in just the last 10 months. $79 billion of red ink they have had to resolve partly because of California's systemic imbalance between spending and taxes, but also really because of the global recessionary problems. California's revenues have just evaporated over the last 10 months.
GHARIB: So what's the stumbling block to getting the governor and the lawmakers to get rid of this deficit?
MYERS: Well, really what we're talking about is a strong philosophical problem here that we've had in California for years about the size and role of state government, Republicans obviously wanting a more limited government and no new taxes, Democrats wanting to preserve the social safety programs, (INAUDIBLE) the welfare to work programs, how it works health care for poor children and Governor Schwarzenegger saying that the state can't afford a lot of these issues. I think the real question is going to be, can they solve the entire problem just in the next few hours. The state comptroller here in California has said he's going to issue IOUs on Thursday, $3.5 billion worth in July, because the state will run out of cash. So a lot of things to do and not a lot of time to do them.
GHARIB: We've always thought of California as a very robust economy. I know that the recession has impacted every state. How is the California economy doing? Is the housing market stabilizing? Are those unemployment numbers improving?
MYERS: Well, most economists that you talk to in California say that at best, we have a mixed sense of economic recovery here. At worst we have no economic recovery. The housing market has somewhat stabilized. Some people will tell you although the real value of these homes has gone down as foreclosures have been huge in California. Unemployment at 11.5 percent. Some economists think it could go even higher than that. We already obviously have one of the highest unemployment rates in the country. And again, all this trickles back to state government. Personal income tax revenue is down. Corporate taxes down, sales tax revenues are down. California is a state of 37 million people. One in eight people in America live in California, so it's very difficult to keep that state government running with the way the economy has been going.
GHARIB: A lot of people who are watching the program might be wondering why should I care about a budget crisis in California? How does the California situation impact people living outside of the state?
MYERS: Well, first and foremost as we said, a lot of Americans do live in California, but a lot of national economists have been telling us in the last few weeks that because California's economy is so big, let's remember one of the things we often say is that California, if it was a country would have the eighth largest economy in the world. So, because California is so big and so much of the American economy depends on it, a lot of national economists are saying, as California goes, so goes the nation. And one of the real concerns right now is that whatever solution that California lawmakers come up with, it may actually dampen the economic recovery across the country. The effort of the president's stimulus package could see thwarted right here in California.
GHARIB: Now John, California got a huge amount of stimulus money, something like $50 billion. Does it need more and what are the chances that Washington will give it the money if it needs it?
MYERS: Well, no one in California has been asking for more money now. Obviously we all know that one of the most toxic words in America these days is bail out and so what California really wanted from Washington was a guarantee for its loans on Wall Street. California has got to go to the market in the next few weeks and borrow several billion dollars just to keep the state running. Short-term cash problem have been really bad here. So the state really wanted a guarantee, because the markets are somewhat sketchy of loaning California the money. We haven't asked for money specifically from Washington, but there are some economists again who say, again, California is too big to fail, another term that we've heard across America in the last several months.
GHARIB: Real quick question, how much of this problem in California is about economics and how much of it is really politics?
MYERS: Well, this certainly is an economic component, but I think you're exactly right with the way you phrased that Susie. It's a big political issue. It is a very big philosophical discussion about how you resolve, what government needs and Arnold Schwarzenegger, the governor says he believes one version and he's trying to move it through in the next few hours.
GHARIB: All right. Looks like you're going to be busy over the next few hours. Thank you so much John for coming on the program.
MYERS: Happy to be here, thanks.
GHARIB: My guest tonight, John Myers, Sacramento bureau chief at public radio's KQED.
