Summary:Ross DeVol opened the session citing what had been a $23.6
billion state budget deficit earlier this year, then asking, "What is our
long-term viability?"
Elizabeth Hill said that the current recession differed from past recessions
in that personal income dramatically declined because of the progressivity of
state income tax on high-wage income earners. The loss of stock options and
capital gains taxes alone accounted for an $11-billion drop in state revenues,
she said.
Perry Wong forecast that revenue will not come from the tech sector for
another five to seven years, nor will the state be seeing substantial revenues
from stock options or capital gains taxes in that time.
Jean Ross recommended broadening the base of our economy by extending the
range of services we tax, such as Internet sales and mail order. Since the state
of California does not rely on property taxes, we must revisit taxation on
corporate property, she said.
Jerry Brown anticipates slower but steady growth, noting that there is great
continuity in politics. Putting the current downturn into historical context, he
expressed confidence in the state′s tendency to correct in response to crisis.
Feldman added that the state is $6.1 billion in the hole because of energy
costs, but is optimistic that with the state′s good credit, it can meet its
spending obligations.
DeVol then turned the panel to a discussion on how state money is spent.
There was disagreement over how much discretion the state has, but education, it
was agreed, has and will continue to receive the greatest share of the budget.
Predictions for recovery ranged from three to seven years. Wong said that the
current budget problems won′t hurt the state in the long run if we keep track of
fundamentals. He believes that the general climate is positive for business and
a good opportunity for businesses to become more efficient.
DeVol asked the panelists what action each would take given one day at the
helm.
"Borrow in times of shortfall and hope things get better," Brown said, adding
that there is a lot of room for increasing revenue. Feldman concluded that the
state must eliminate barriers to housing so that neglected properties can be put
to use. Ross recommended eliminating super-majority voting requirements for
passing the budget. The price for a two-thirds vote is in the billions, she
said. Hill suggested creating a reserve in good times without expanded
expenditures.
