More than 40 cities all over the state have declared a state of fiscal crisis with new resolutions passing almost daily. League of California Cities and CSAC are working to protect local governments from the "loans" of Prop 1A funds or at least make it possible for cities and counties to borrow against the anticipated repayment in three years. We wrote about this at www.publicceo.com on Tues. eve and are running a series of stories on the very real impacts municipalities are feeling in everything from social services to public safety. As with all legislation, the details will determine the winners and losers. In order to "borrow" the $2 billion in tax revenues, the legislature must pass by 2/3 vote a bill that includes details about what interest rate that will be paid and how it will be repaid (the increased tax measures expire the same year the loan comes due). This will be interesting to watch.

So if the state does take money from the cities, it will be a loan, with interest, and the cities may be able to borrow against its future repayment?

Interesting. On one hand, it opens up credit via municipalities. On the other hand, it seems like an excuse to borrow more money with potentially hazardous consequences. Credit is important, and borrowing is a legitimate tool in the public and private sector, but everyone's a little tense about borrowing and lending money these days...

I think we're missing one glaring major problem with bureaucracy itself which is perpetuating these problems at the city, state, and federal level.

The main problem as I see it is simply that fiscal budgets are allocations - not reflections of actual or necessary spending. Typically, individual department leaders are expected to spend their entire budget allocation, for fear it will be reduced next year, or eliminated altogether. The only way they feel they can justify the amounts they've been allocated is to spend more, regardless of the merit of what the money is actually being spent on. It's obscenely inefficient, and it's driving our country further and further into the hole.

Instead of evaluating allocations, and making determinations on what costs are warranted, we're often stuck in this cycle of spending based on what was spent historically. It makes absolutely no sense, and reflects a fundamentally flawed system. If any individual were to handle their money in such ways, they'd be destitute in no time.

This, coupled with public official's tendency to make decisions based on self preservation instead of the greater good is the root of the problem. I'm not going to champion the cause of turning every person into a tree-hugging cave dweller, however the reality is - in order for us to escape from this mess, we all have to learn to live with just a little bit less.

So, if you happen to be in a position to question the practices of a state, federal, or local agency, you should do so. I find that often times things are done for no other reason than "That's how it's always been done." In this time of economic crisis, that simply isn't good enough. Questioning how things are done might bring about change, but the most effective solution will involve rewarding department leaders and staff for their savings. I can't imagine that such a program would be that difficult to implement.

Our government is by, of, and for the people and as such we must accept responsibility for this problem. It seems that in California we continue to elect individuals who perpetrate these budget issues only to throw our frustrated hands in the air when they do so. Did we expect something different? Perhaps it is the election system itself - how much did you really know about the individuals who you voted into the State Assembly or Senate? Probably not much more than I knew when I carelessly cast my vote based upon the individual's prior career. If nothing else these budget situations call for a much closer examination of the individuals we vote into office. Regardless, we as a people are faced with three options here:

1. Raise Taxes (or, "Increase Revenues" if you're a politician)
2. Borrow more money
3. Slash basic services

I implore my fellow citizens to carefully consider the fundamental nature of options #1 and #2. In these cases we will be feeding more money into a system which (at this time) has proven itself incapable of balance, discretion, and general utility. To stand-by and allow more money to be put into such a system during such critical times would be a crime against your good judgment. There is a reason why the government is "so bad" at spending money, and it all boils down to common sense:

There are 3 purchase scenarios -
A. I buy something for myself with my money
B. I buy something for someone else with my money
C. I buy something for someone else with someone else's money

Typically, the two factors driving any purchase decision are Price and Quality. The purchase decision itself is usually a compromise of these factors combined with some driving need. In scenario's A and B, the individual making the purchase has their life directly impacted by at least one of these factors. This direct impact drives the efficiency of the purchase decision. In case C, none of the purchase decision factors have a direct impact on the individual making the purchase - so the purchase decision is less efficient by it's very nature. The "Government Spending" scenario is always scenario C - so, there's that problem.

Does this mean that we should never trust Government to spend money? Nah - but we should not be surprised when it does not do so very well. And we certainly should not allow our (OUR!!!) government to spend (or, conversely, obtain) more money when it has clearly proven itself woefully bad at doing so.

So, that leaves us with the distasteful option of slashing basic services. Now, there are some things which we as citizens cannot easily provide or contribute to as individuals - construction of roads comes to mind - but there are many things we can: education, care of and for the less fortunate, security of our neighborhoods and businesses, cleanup of litter, and the list goes on. I sometimes think of government spending in these areas as a kind of convenient, mandated morality supported by our tax dollars. The inefficiency of government is now threatening these moral mandates - and I'd argue that everything can work out just fine if we as a people band together and say "No" to government borrow-spending and "Yes" to basic human decency and common sense. I say go ahead and slash basic services (they were not that great anyhow) - and let's all commit 4 hours a month to some decent cause in it's place. You can teach children to read, you can buy and prepare food for the hungry, you can look out for your neighbors, and if you are a doctor you can care for the injured and unfortunate. Perhaps this is the true impetus behind that Democratic rally cry of 08' - "Yes We Can"....or did you think that meant that the Government could do it for you?

I suppose the follow-up question is "But will you?"...and, like, uh, when?

What are you willing to do in exchange for a government which is not buried in debt nor taxing you to death? When did we start trusting politicians more than the good-will and kindness of those around us?

How can we fix California? I do believe it all starts with fixing Us.

The last time this country went through a fiscal crisis of this magnitude, federal spending was used to put people to work: the WPA, CCC, PWA, TVA and other projects built things and improved communities by building or rebuilding infrastructure, but they also gave jobs to the unemployed when they were most needed. Some, like historian Charles Beard, credited these projects (funded by deficit spending during periods when government income was low due to a depression) with preventing the solutions implemented to economic crises in Europe: revolution and authoritarianism. Where the Italians, Spanish and Germans turned to Fascist strongmen to save them from economic crisis, the United States put its people to work, built stuff, and pulled itself out of a depression using democratic principles.

All local and state governments facing a cash vise have to do is restructure as auto companies and banks.