Sacred Cows and Fixing California’s Budget Woes

I got into a discussion today regarding an article at the SacBee about the State furloughs.

One of the commenters had written this ~

“If that were to be true, shouldn’t ALL state employees be furloughed and not picked on based on favoritism, cough CHP, cough, CDF, cough”

My answer to this ~
“What? You think the sacred cows will ever be touched by this? Never gonna happen!

Besides furloughs are designed to hurt the public, with the extra added value of hurting the least paid state employees…

Best thing the Gov and Legislature could do is kill the 20% increases to every department that is now listed in the proposed budget (it will take you days to read through and get a general understanding, sorry!). Start by making them use the same amount of money they had budgeted for last year. And then go back and cut out any excesses”

Which got me thinking even more…which got me digging around again in the Governor’s proposed budget…which led to this post ~

A good example of the duplicity in the budget is shown in the budget summary (PDF. See pages 4 and 5). Take just K-12 funding. The Governor would have you believe that K-12 is taking a 2.1% hit on funding(Oh! The kids!!). Turns out that is only from general fund monies(the ones that show on the budget, and have to be voted on by the Legislature) All together, the budget summary plans for K-12 to spend $35,898M for 2010-2011. That’s $19M more than 2009-2010. Why are local schools having to cut their budgets again?

Or to continue on this line what about Higher Ed? How is it a system than is charging over 205 thousand students (UC undergrad/grad student population 2009) an average of $12,255 per year, not counting room and board or transportation (that’s on average another $13,000, a good percentage of which goes to UC), not able to operate in the black? That’s $2,512,275,000 a year they are taking in. But they still want an additional $12,928M to use from the California Budget. And then there’s the Lease Revenue Bonds… UC wants $59M this year alone from this off the Budget source, and that’s not even talking about the huge list of replacement/repairs they want the state to pay for. It’s just two new buildings on one campus.They’re making CalFire look like pikers in asking for $800,000M to repair/replace 56 fire stations in the state. The Governor asked for 3 of these stations to get Lease Revenue Bonds for the work this budget cycle. (short primer on Lease Revenue Bonds at the bottom, for those who are interested)

And then there’s the Endowment Funds. The UC Regents control over $16,700B in Endowment Funds plus an additional $8B yearly from private support such as their individual Campus Foundations. Then there are uncountable special private endowments such as the UC Davis/DeLeuse Family Endowment for one, with a funding of over $1M. I’m guessing you could spend weeks and months running down all the many private endowments that are not controlled by the UC Regents! While it is understandable that endowments do not spend principal, you would think that there should be enough there to fund a very large portion of the UC budget. Apparently you would be thinking wrong

Another income source for UC is patent and invention licensing agreements. The UC system took in $130B in 2008 alone on everything from medical devices to new strains of strawberries. They also receive over $2B yearly in Federally funded research grants. Their Medical facilities also bring in approximately one fourth of the UC operating budget.

Can someone really answer why the UC system needs state funding at all at this point in time and especially why they need an additional 20% over last years budget?

Revenue Lease Bonds. Say the state wants to replace a building. They do this by mortgaging that building to themselves, same as in Monopoly, they turn the card over, and the money magically appears. This gives them “capital” for an on average 30 year construction loan. Then they turn that mortgage”card” into a bond, and then that “card” disappears along with the debt never to be seen again on the Budget, as the Lease Revenue Bonds are not considered “Constitutional Debt”. These bonds are then sold to pay off their “debt” at a higher rate than a normal California bond, making then currently little better than junk bonds and paying on average 4% to the buyer. They end up costing the state something like $1. for every $3. borrowed. We can only guess at how much the State owes in total for these bonds…

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