Who's milking Calfornia dry?
Anatomy of a state budget crisis
By John Beacham
Los Angeles
More bad news for the working class and
oppressed communities came tumbling down the steps of the
California State Capitol on Aug. 2. California ended its 2004
budget "crisis" by signing into law a state budget that slashes
social spending and gives money away to the banks.
The 2004 California budget cuts public-school funding by $2
billion. Teachers will be laid off. Those not laid off will be
expect ed to endure takebacks and cuts in pay.
Overall, the budget calls for reducing state employees'
wages by some $1.1 billion. Over 1,000 doctors and nurses are
likely to be laid off all over the state.
The budget slashes Medi-Cal payments by 5 percent. This will
leave the 6.4 million people covered under the state plan
without many essential services. This comes in a state where
medical care for the poor is already a cruel joke.
City and county funds will be cut by $825 million. Here in
Los Angeles, the county has closed 16 medical clinics in
response to the budget cuts. The city has hiked
public-transportation fees by almost 10 percent.
Community colleges are raising fees by nearly 70 percent.
The community college system in California is a traditional
haven for students from the working class oppressed communities
who get a lower quality of secondary education and cannot
afford tuition at a four-year institution.
The State University system and the University of California
system are raising student fees by 30 percent. For the first
time in its history the State University system will default on
its promise to accept all California high school students who
graduate in the top 12 percent of their class. UC Merced, which
was supposed to open in 2004, will now open in 2005
instead.
The budget for the UC extension system, which provides job
skills and English language courses, is being slashed by 25
percent. In San Francisco the UC extension is being closed
down, forcing students to travel across the bay to
Berkeley.
Banks and bosses make money
In one of the wealthiest states in the richest, most
powerful country in the history of the world, the California
government and the bosses continue to heartlessly attack social
programs and public services that poor workers desperately
need. At the same time, the state is forced to borrow money at
interest rates that line the pockets of the ruling class.
Why?
The California budget crisis is nothing but an affront to
working people of Cali fornia. The state of California is
wealthy beyond imagination.
The ruling class could very easily get California out of its
budget crisis and at the same time dramatically increase the
funding for services that working people have fought for over
the years. But the ruling class is always looking to turn a
profit. And turning a profit off the California budget crisis
is exactly what the banks are doing.
The 2004 California budget calls for $14 billion in loans.
The banks profit direct ly from these loans through interest
off bonds the banks buy from the state.
Recently, because the budget crisis lasted a month longer
than the deadline for a completed budget, Wall Street lowered
the state's financial standing to BBB. This is a couple of
levels above a "junk" rating. It is the worst rating for any
state in the country.
This means that California is going to have to pay higher
interest rates on its loans than every other state. Higher
interest rates mean more profit for the banks.
It gets even worse: The discount rate is the rate at which
banks borrow money from the federal government. The Federal
Reserve has recently lowered this rate to 1 percent. This
allows the banks to make even more profit off California
workers--because they can loan money to the state at a high
interest rate while borrowing from the federal government at a
low interest rate.
Adding insult to injury, Wall Street only agreed to a new
round of bond issues on the condition that California continue
to cut $2.3 billion from the budget every year for the next
five years. This is extortion. Wall Street exacted the promise
of continued cuts from California to ensure that the banks get
their money back from the state.
But there's no guarantee that California will be able to pay
back the loans or get itself out of debt, especially when
profits are more important to banks than the welfare of the
people. The banks and Wall Street can hold the people of
California hostage whenever they want. Wall Street, the state
of California, the federal government, the banks and the big
corporations are gambling with the people of California's money
in order to increase their profits.
Workers and the oppressed communities are hit hardest by
these gangsters--the banks, bosses and their
politicians--because the cuts affect them more. They can less
afford to pay for the budget swindle and the banks'
extortion.
Corporations are bleeding California
Not everyone is sharing the pain equally in California.
Mega-corporations are doing quite well.
Chevron-Texaco, a massive oil company headquartered in
Northern California, reported profits of $1.6 billion in the
second quarter of this year. Other huge California-based
corporations like Monsanto, Disney, ExxonMobil, Comcast and
Halliburton also raked in huge profits as the ranks of the
jobless and underemployed continued to swell.
According to the Multistate Tax Commission, corporations in
California regularly abuse tax shelter laws, swindling $1.3
billion a year from the state.
In 1996, California deregulated the energy industry. It was
a disaster. In the energy "crisis" of 2000-2001, California
fell prey to the open market. Energy companies like Enron, Duke
and Dynegy conspired against California, overcharging the state
by an estimated $50 billion. The state was forced to borrow and
pay enormously inflated prices for energy.
Every day, Californians have to pay on this $50-billion tab.
Californians would never have found out about the price gouging
of these corporations if Enron hadn't collapsed, bringing its
shady business dealings to light.
It is highly unlikely that Californians are going to see any
of the $50 billion stolen from them. On Aug. 1, the Federal
Energy Regulatory Commission cleared Duke Energy from any
obligation to reimburse California.
To date, the FERC has ruled that roughly $3.5 billion must
be returned to California. True to form, though, the FERC ruled
that $3.3 billion of this must go directly to energy companies
to which California owes money.
The real roots of the budget crisis are found in the
capitalist system itself.
Capitalism creates huge profits, or surplus value. This
surplus value rightfully belongs to the workers whose
collective efforts have produced it. The bosses are nothing but
parasites who scoop up, hoard and invest this surplus in order
to increase their wealth. The controllers of wealth under
capitalism--the banks--hold federal, state and local
governments in the palms of their hands.
State budget crises arise because the vast majority of
wealth flows into the hands of a few bosses and banks instead
of to the people. When the economy isn't doing so great, the
bosses often do everything they can to hold onto and increase
their profits.
The bosses and banks need forms of state like the California
government to protect their huge profits under the capitalist
system. But in their minds, the best way to protect their
individual fortunes is to make state governments "fiscally
responsible." This translates into less social spending, less
taxing of the rich and corporations, fewer regulations, higher
fees for everything, and individual states' borrowing from
banks when they can't browbeat the people into lower spending
in hard times.
The people need the exact opposite: huge increases in social
spending across the board, lower fees on everything they need,
and the use of the surplus value stored up from their
collective labor to satisfy human needs.
Reprinted from the Aug. 14, 2003, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
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