•  HOME 
  •  BOOKS 
  •  WWP 
  •  DONATE 
  • Loading

Follow workers.org on
Twitter Facebook iGoogle

Calif. budget cuts services, slashes jobs

Make corporations pay!

Tax wealthy, oil profits, not workers and poor

Published Aug 5, 2009 5:52 PM

Due to the economic crisis hitting California so acutely, state legislators are dealing with what they say will be a $60-billion revenue loss projected through June 2010.

However, instead of trying to tap into many possible rich sources of funds, both the Democrats and Republicans came up with a budget that targets social services and the working class but not super-rich monopolies like the oil companies or the banks.

As July ended, the California Legislature approved draconian cutbacks that will even take food directly out of the mouths of children.

Although the state has always attempted to solve its financial crises on the backs of working and poor people, these cuts and their level of disproportionate takeaways from the working class are—like the economic crisis—unprecedented.

Two-thirds of the $15.5 billion in cuts affect public schools from grades K-12, colleges and universities. Another $1.3 billion will be taken from workers’ salaries by way of mandatory days off, or furloughs. Medi-Cal, which is California’s Medicaid program, will lose $1.3 billion.

Billions of dollars more will be taken from public assistance and health care programs for low-income children, elderly and disabled people. This includes cuts of In-Home Supportive Services. In addition, it will curtail services for women and children who have faced domestic violence.

The cuts to education from grades K-12 will drag California down from 46th to 48th place in state per-pupil spending.

While Gov. Arnold Schwarzenegger lauds this budget for not raising taxes on the rich or on wealthy corporations, the budget makers didn’t mind playing with the taxes of working people.

By increasing income tax withholdings from paychecks, the state can “borrow” $600 million in revenue early in the year and then pay it back, without interest, in the form of higher tax refunds or lower taxes next April.

Another trick used to balance the budget this year was to delay workers’ paychecks. The state will now get an extra $900 million by delaying state workers’ pay for another day, thus passing on the cost to the next fiscal year beginning July 1, 2010.

This is all without paying interest, like the additional plan to raise $1.7 billion by upping tax rates on those taxpayers making quarterly estimated payments for the first six months of the year. The state would adjust for the increase during the second half of the year, which would, in turn, lower revenue in the following fiscal year.

Workers forced to loan money to state

California workers, who are disproportionately affected by these policies and are already hurting from past cutbacks and job losses, are being forced to become lenders to the state. The workers, unlike the banks that have been bailed out with trillions of dollars, will not be able to collect interest on their loans.

In addition, local cities and counties and their agencies will see $3.2 billion of their funding taken by the state, supposedly to be paid back later.

Not only will this force local governments to make further infrastructure and social service cuts, it makes balancing the budget next year and in the future even more difficult, thus leading to even deeper cuts going forward.

This is also true with regard to cutbacks in children’s health care programs.

Even the politicians realize this saves nothing. Alberto Torrico, State Assembly majority leader, says: “The governor’s budget calls for taking one million kids off the healthy families program. That’s just foolish because those kids will end up in the emergency room, which will cost local government millions while the state loses the three or four dollars for every dollar we spend in federal matching funds.”

Unions protest wage cuts

The attack on workers’ wages is pushing the unions into a fight with legislators. A posting on the Web site of California Service Employees Local 1021 says:

“Governor Arnold Schwarzenegger and his band of loyal lawmakers proved they’re [decisive] with the budget cuts by taking healthcare from the sick and frail and every kind of care from the elderly; by closing schools so kids have nowhere to learn, and after-school programs so they have nowhere else to go. They closed the deficit by privatizing public services and throwing public servants under the bus, while taking money with impudence from those who remain. And if you thought these outcomes were shocking, here’s the most shocking thing of all: California lawmakers managed all of this without taxing corporations one single additional dime.” (www.seiu1021.org)

Why not tax Big Oil, banks?

Given that these cuts are so devastating and actually will make it more difficult to balance future budgets, why would the legislators ignore alternatives, like taxing the oil companies or going after the bailed-out banks?

State Senate President Pro Tem Darrell Steinberg, a Democrat, said their options were limited because they wanted to avoid new taxes without destroying the state’s social safety net.

Obviously, the Legislature’s priority was avoiding new taxes on the rich. They did that, but they ripped up the safety net.

Why avoid the obvious source of revenue?

Last year Exxon Mobil made record profits of more than $45 billion. Chevron made $24 billion. However, unlike all other oil-producing states in the U.S., California does not collect a severance tax on crude oil extractions made there.

According to the California Tax Reform Association, “California has the lowest total taxes on oil in the country by a substantial margin.” One study put the state’s 2008 effective corporate oil tax rate at only 3 percent. (www.caltaxreform.org)

California is the third-largest producer of crude oil in the country. According to the state’s Energy Commission, the 240 million barrels extracted from the state annually could bring in $1 billion to $2 billion if it were taxed at 6 percent—a rate proposed in Proposition 87 in 2006. (Big Oil defeated it.)

Alternatively, if the state used the same extraction tax rate used by “anti-taxation” former Alaska Gov. Sarah Palin beginning in 2007, it would bring in $4 billion to $8 billion a year, depending on crude oil prices, which have fluctuated between $70 and $130 a barrel.

However, why stop there? Why not tax oil companies the way workers are taxed? Workers lose more than 30 percent of their wages in taxes, on average. This alone would generate much more than what is needed to cover the education cutbacks from grades K-12.

Like the yacht tax, which could have been a part of the budget, why wasn’t an oil severance or extraction tax included?

Money talks.

Exxon Mobil Corporation spent $150 million to defeat a severance taxation bill and also contributed heavily to candidates in California in 2007.

However, taxing oil companies is not the only solution that could have been tapped.

According to some estimates, even without any new loans, in three years the state will spend a record 6.1 percent of its budget just to service the debt it already has. Imagine how that equation would change if California could deduct from the interest it pays banks the money it has already paid out to them in bailouts.

This would take a political fight, but the governor’s rationale in passing these budget cuts was that California is in a state of emergency. Why should that justify taking the property, livelihood and very lives of the workers, while not touching the bosses?

Organize community-labor alliance

The union movement waged a campaign to fight these cuts. Unions organized protests from Los Angeles to Sacramento. However, a community/labor alliance must be organized to meet this unprecedented assault and expose further this blatant betrayal by elected officials, whether Republican or Democrat.

California labor/community participation in the G-20 jobs summit in Pittsburgh on September 20-26 could be a big part of building that fightback.