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"Creative Solutions Could Mend State FInances"
Ventura County Star, July 6, 2003

By Terry Paulson, PhD

Sometimes, out of difficult times come significant changes. Hopefully, we can get beyond the short-term fixes to establish real budget cuts and a changed tax structure that can work for California for years to come. Let me suggest a few strategies Gov. Davis and the state legislators might want to use in light of the impasse that is putting California deeper in debt at the rate of $1 billion a month:

1. Separate what we would "like to do" from what we "need to do" to take care of the truly poor in our midst. More and more Californians are depending upon services, programs and funding that were expanded during the good times. No one from either party wants the truly poor to go hungry or without needed care. Require a means-test for every Californian receiving state funds or program support and fund support for only the poor.

2. Investing in education is investing in our future, but real cuts are still possible. Most districts scream that cutbacks in education will result in fewer teachers and no supplies. There is an alternative; fewer chiefs and more Indians. Corporate America long ago realized the importance of flatter organizations and fewer levels of bureaucracy. It is time we send a clear message through Sacramento to our schools-"Don't cut teachers or supplies; cut layers and staffing in administration!" We should hold back state funds from any district whose administrative costs are out of line.

3. Require every government department to scale back levels of administration, not service. Cut the appointments, the big salaries and the big offices. Require every department to have no more than five levels from the top to the bottom of the department.

4. Increase the costs for our premium state universities and colleges for citizens and nonresidents alike. When you pay more for your education, you appreciate it more and finish quicker! With increased fees, keep student loans even more available so that they can learn now and pay later. Limit the increases for community colleges so that education is available to those students without means and for people returning to learn new, more viable careers. Reverse the decision allowing illegal aliens to pay resident fees for higher education.

5. Require zero-based budgeting where every department and program must show value in order to earn funding for the next year. People in government like to say they have "cut costs" when they have merely decreased the planned increase in funding. Some programs should be ended. Some should be scaled back. But every program should have to justify its investment instead of assuming they deserve last year's budget. Put a freeze on new programs unless mandated. When you can't afford the toys you have; don't buy new ones.

6. Care enough to put a limit on unemployment benefits so that people are challenged to take jobs or start their own business instead of waiting for the right job to surface. True need is the mother of invention and job-search motivation. We have talented people without jobs facing big mortgage payments. Out of garages around California, new small businesses are being birthed. Women and minorities are leading the way. Out of difficult economic times, new business growth occurs on the rebound. Such times are both painful and exciting. Paying people to do nothing for extended periods is not the answer to getting out of a struggling economy and a growing deficit.

7. If increased taxes are needed even with the cutbacks, require everyone but the poorest Californians to do their part to pay their fair share of the bill that is left. It was an easy trap to build our state's tax revenue on the capital gains and the income of our richest citizens. Unfortunately, contrary to the myth, the rich do not always get richer. Many of them lose big in bad times. Many file for bankruptcy taking jobs with them when they fall. Others leave the state to take advantage of fewer state regulations and lower taxes elsewhere. High income taxes on the wealthy is not the answer. After all, when was the last time you were hired by a poor person? It's time for all but the poorest among us to pay their fair share of the increased burden. If Sacramento raises income taxes on one group, raise it on all!

8. Bad times require bold leadership. Russia's Putin has revitalized the Russian economy by unleashing the power of a flat-tax. It's time state Republicans trade their vow of "no new taxes" for an opportunity to be the first state to test the viability of a fair and simple flat tax that allows limited deductions for children, mortgages and donations. If Democrats want higher taxes; let them get Republican cooperation by having everyone pay the same percentage. The consistent revenue from such a simple tax structure will be more resistant in economic downturns and avoid the divisive temptation of taxing any one group of Californians more than another. The money saved on tax preparation will be another benefit to us all. Don't worry, our rich citizens will always pay more because they make more.

9. Forget all the crazy hidden fees and creative taxes that are hard to repeal once they are no longer needed. Keep tax increases simple. If income and sales taxes do not provide the resources needed, make the increases needed. But let's keep taxes where we can see them, so that we can decrease them when the deficit problems are behind us.

10. Finally, the poorest among us will have to do their part. There will be less to go around in the difficult times. Some programs will be canceled, and the need for non-government charities will increase. The charity of the poor is to wish those who help them well. Instead of taking your cutback complaints to court, we all need to count a few more of our blessings for living in this fine state.

The "California Dream" is not dead! As a country, we'd be the fifth largest economy in the world; we have over 33 million people who all have money to spend. Right now, you have a lot people figuring out the services those people need and how to make what they want to buy. California will be back, because we are a state that has always had a dream, and we have the people who can pull it off!" We are in for some tough times, but if together we ask our leaders to tighten their belts and fairly and equally distribute the bill, these tough times can make us stronger. I believe it can, and it will.

—Terry Paulson, PhD

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