The state has an $8 billion hole in next year’s $141 billion budget, which does not include the $2 billion we overspent this past year.
The state needs to find an additional $10 billion just to balance the budget. Fixing budgets is very easy. All you have to do is increase your revenue or lower your expenses.
The Democratic legislators think the problem is a lack of taxes Californians pay.
The Republicans think it is overspending. Most of the problems occur when certain programs have an automatic 7.5% increase, yet the tax revenue only increases by 3%.
Another part of the overspending is self inflicted by the voters of California who pass any bond measure that has a good 30-second commercial.
While digging into the state debt load recently, I was surprised to see that we are still paying back 1970 bonds that were authorized when I was in the sixth grade.
California has a total of more than $42 billion in general obligation bonds outstanding and another $61 billion that were already approved by the voters, but not yet issued, for a total of $103 billion in bond debt.
The payments on the issued debt are more than $6 billion a year and growing at 12.2% per year. That means before we pay $1 for anything we must first pay $6 billion for bond debt.
The largest part of the state budget is personnel. In that category the Sacramento Bee did a great service this month for the taxpayers and compiled a database of salaries by name and job title of all 367,680 full- or part-time employees who cash a state paycheck. www.sacbee.com/statepay.
This database includes every UC Irvine professor, state trooper, highway worker and clerk.
Needless to say, many state employees have blown a gasket that these public records, which were always available upon request, are now on a searchable database accessible to all Californians.
Did you know the 186 staff psychiatrists we have in the prison system make a base salary of $258,708 per year and that the 22 chief psychiatrists we have make $282,792?
We have 257 employees of the state Senate and Assembly who make more than $100,000 with the top earners breaking $200,000. That’s more than the legislators they work for get paid.
Our own UCI had 157 employees who made more than $150,000 base pay, with 28 making $200,000. You will note that I am talking only about base pay.When you add in overtime, bonuses and grants; five UC employees made more than $1 million. In fact, 91 UC employees took home more than $500,000 gross pay. These numbers do not include healthcare benefits and lifetime pensions.
A really disturbing part of searching the database is to see how many state workers make more than $200,000 per year. Just four years ago there were 36, today there are almost 1,000. One in 14 state employees make more than $100,000 per year.
According to the Bee, the highest paid 10% of state workers had their pay jump almost 25% in the 38 months from November of 2003 to January of 2007. It is impossible to balance a state budget with those types of increases.
Now, clearly all state workers are not overpaid, and some actually earn every dime they make. But when you figure in the overly generous pension plans and lifetime heath benefits, plus the fact that it is almost impossible to be fired; it is not a bad gig.
The state budget has been growing out of control for years. Besides the lack of adult supervision in Sacramento we have also made a mess with so-called campaign finance reforms.
All that these laws have done is restrict the speech of Californians by limiting what a person can give to a candidate for state office and at the same time allow public employee unions to use mandatory union dues for political campaigns with no limits on what they can spend.
Organizations like the Howard Jarvis Taxpayer Assn., who fight to keep taxes down, have a hard time competing with unions that electronically take union dues out of each state worker’s paycheck, under the guise of union dues, and spend most of it on political campaigns without the worker’s permission.
In 1998, I and two other Orange County residents, Mark Bucher and current Mission Viejo City Councilman Frank Ury, put an initiative on the ballot to stop the practice (Proposition 226).
Gov. Arnold Schwarzenegger put a similar one on the ballot in 2005 (Proposition 75). Both times it was defeated by state labor unions using those same workers’ dues to fight it.
California will never get its financial house in order as long as the state employee labor unions decide who is going to be in office.
There is an old saying , “You dance with the one that brought you.” In California, the state labor unions brought most of our legislators to the dance, and we have a $10 billion budget deficit to prove it.
Saturday, March 29, 2008
Friday, March 28, 2008
Mission At The Border Can’t End
Last week I was invited by Assemblyman Van Tran to go on a fact-finding tour with the California National Guard to see the work our men and women in uniform have been doing to stop the flow of illegal immigrants, cocaine and other contraband across our southern border. To say the least, I was very impressed by what was being done by our California Guards. What was really an eye opener was to realize that before the Guard was in place, there was really no substantial barrier between the U.S. and Mexico.
For most Americans who cross from Mexico to the U.S. at the Tijuana or Otay check point, all they see is high steel fences, concrete walls and a lot of Border Patrol personnel. What most of us do not realize is that for most of the border, until the Guard started building a secondary 16-foot fence, there was only an easily scalable 10-foot steel fence, between the U.S. and the millions of people who live just across the border in the Tijuana metropolitan area. The secondary fence is several hundred feet north of the primary fence.
With millions of people living right on the border, it is physically impossible to stop the flow of illegal immigrants without some physical barrier. Before the secondary fence was installed, the existing 10-foot fence proved to be only a minor speed bump for people crossing illegally into the U.S. The 12-plus million illegal immigrants in this country are a testament to how ineffective it was.
What we really had was a very sophisticated game of cat and mouse with our Border Patrol agents trying to stop the wave of people crossing California’s 157-mile border with Mexico. Many times a small group of illegals would act as if they were about to cross to draw the Border Patrol agents to them only to have another group cross where the agents just left. The secondary fence has put a stop to that.
Not only is the Guard building a proper fence but also an all-weather, high-speed access road between the two fences that allows our border agents to quickly get to any points of incursion along the border.
When the National Guard started the program called “Jump Start” 20 months ago, it was set up to help the Border Patrol get a jump start on controlling the border. President Bush and Congress had approved funding to add 6,000 additional border agents in 2006, but it takes 18 months to hire and fully train a border agent.
So far, the Border Patrol has been able to hire only 3,000 agents. Besides building infrastructure, the Guard is used to backfill positions such as vehicle maintenance, electronic early detection “eye on the border” and aviation support.
This releases border agents to do enforcement duties such as apprehending people who cross the border illegally, which the military is precluded from doing. By law, the military is not allowed to act as police on U.S. soil.
Now that we have a program that seems to be working, it is about to end. The funding to extend the program has not been approved by Congress. The Guard has orders to shut down and pull out by July. It seems the Democrat-controlled Congress doesn’t feel the pressure to even bring up an extension for a vote.
So here we are with only half of the additional border agents hired, the 15-mile secondary fence needed in the Tijuana/Otay area not complete, and we are about to send the Guard home before the mission is complete.
Protecting the border is a responsibility of the federal government. Until recently the only reason the feds were concerned about controlling the border was for the “war on drugs.” Later, 9/11 raised the concerns of protecting borders from terrorists. The fact is the federal government is not really concerned about controlling the flow of illegal immigrants across the border. The real cost of illegal immigration is not borne by the federal government. It is borne by local governments with increased costs of education, medical care, law enforcement and incarceration.
Unless Congress is politically forced to do something, they won’t. Call, write or e-mail our U.S. Sens. Barbara Boxer and Dianne Feinstein to ask them to continue the funding of the California National Guards efforts to protect our borders. It’s the least the federal government could do.
For most Americans who cross from Mexico to the U.S. at the Tijuana or Otay check point, all they see is high steel fences, concrete walls and a lot of Border Patrol personnel. What most of us do not realize is that for most of the border, until the Guard started building a secondary 16-foot fence, there was only an easily scalable 10-foot steel fence, between the U.S. and the millions of people who live just across the border in the Tijuana metropolitan area. The secondary fence is several hundred feet north of the primary fence.
With millions of people living right on the border, it is physically impossible to stop the flow of illegal immigrants without some physical barrier. Before the secondary fence was installed, the existing 10-foot fence proved to be only a minor speed bump for people crossing illegally into the U.S. The 12-plus million illegal immigrants in this country are a testament to how ineffective it was.
What we really had was a very sophisticated game of cat and mouse with our Border Patrol agents trying to stop the wave of people crossing California’s 157-mile border with Mexico. Many times a small group of illegals would act as if they were about to cross to draw the Border Patrol agents to them only to have another group cross where the agents just left. The secondary fence has put a stop to that.
Not only is the Guard building a proper fence but also an all-weather, high-speed access road between the two fences that allows our border agents to quickly get to any points of incursion along the border.
When the National Guard started the program called “Jump Start” 20 months ago, it was set up to help the Border Patrol get a jump start on controlling the border. President Bush and Congress had approved funding to add 6,000 additional border agents in 2006, but it takes 18 months to hire and fully train a border agent.
So far, the Border Patrol has been able to hire only 3,000 agents. Besides building infrastructure, the Guard is used to backfill positions such as vehicle maintenance, electronic early detection “eye on the border” and aviation support.
This releases border agents to do enforcement duties such as apprehending people who cross the border illegally, which the military is precluded from doing. By law, the military is not allowed to act as police on U.S. soil.
Now that we have a program that seems to be working, it is about to end. The funding to extend the program has not been approved by Congress. The Guard has orders to shut down and pull out by July. It seems the Democrat-controlled Congress doesn’t feel the pressure to even bring up an extension for a vote.
So here we are with only half of the additional border agents hired, the 15-mile secondary fence needed in the Tijuana/Otay area not complete, and we are about to send the Guard home before the mission is complete.
Protecting the border is a responsibility of the federal government. Until recently the only reason the feds were concerned about controlling the border was for the “war on drugs.” Later, 9/11 raised the concerns of protecting borders from terrorists. The fact is the federal government is not really concerned about controlling the flow of illegal immigrants across the border. The real cost of illegal immigration is not borne by the federal government. It is borne by local governments with increased costs of education, medical care, law enforcement and incarceration.
Unless Congress is politically forced to do something, they won’t. Call, write or e-mail our U.S. Sens. Barbara Boxer and Dianne Feinstein to ask them to continue the funding of the California National Guards efforts to protect our borders. It’s the least the federal government could do.
Friday, March 14, 2008
Cable TV competition on its way
Cable TV gripes are not new.Costa Mesa residents are getting upset lately over quality-of-service issues and ever-increasing prices for cable TV.
Nothing infuriates a customer more than having to wait on hold for 25 minutes to solve a simple billing problem.
The basic problem for consumers is that cable TV by its nature is a monopoly; and monopolies, unlike other businesses, do not have to compete to keep or get business.
They know that because you cannot get the service anywhere else they can keep you on hold and that there is nothing you can do. It costs them more money to add service representatives. It costs them nothing to keep you on hold.
Unlike with other monopolies such as electrical, natural gas and water utilities, cable TV prices and quality of customer service are not regulated by the government.
Now, I can hear all the cable executives screaming about how they are not really a monopoly and that they have competition from two satellite providers, DirecTV and Dish Network.
Though there is some truth to this, cable TV’s ability to also deliver Internet and phone service on the same network gives those companies a competitive cost advantage over their satellite colleagues.
The best satellite can do is force cable into a duopoly. This is where you have two competitors in a marketplace.
I’ll spare you a painfully long explanation of French economist Antoine Augustin Cournot’s duopoly model, but let’s just say that duopolies compete on anything but price.
Once a duopoly is established, it is clear to both companies that lowering price hurts them.
Therefore, they may have lower introductory prices (three months free, etc.) as a sales gimmicks to get more market share, but they will never compete on price over time.
Now take note that I am not advocating that government regulate the cable companies.
But I also do not want government to protect them. This is what, until last year, was happening around California.
Local governments were, through the local cable franchise system, protecting cable TV franchises from competitors.
In October of 2006 that all changed when California passed the Digital Infrastructure and Cable Competition Act.
Now a cable competitor gets its franchise for the whole state. No longer can local jurisdictions shake down cable competitors to get local approval.
Now, finally, real competition is just around the corner. It is coming in the form of light beige utility boxes being installed throughout the city. What is in those boxes will finally bring long-awaited competition to cable TV in Costa Mesa.
AT&T is installing its fiber-to-the-neighborhood network, which will have not only high-speed Internet but also TV and phone service.
Several years back the cable TV companies got into the phone and Internet business.
They already had a wire to your house, and now with newly developed technology, they can deliver Internet and telephone service over that same wire.
This has been so successful that in South County the cable company has more phone subscribers than the local phone company.
The cable companies brought real competition to the local phone company for phone service and also Internet access.
The local phone companies were already getting fierce competition from wireless carriers, but it was cable that finally forced down prices.
Long distance is now basically free. In fact, more than 50% of people younger than 30 have never had a land-line phone in their home. The local phone company was not going to sit around and take the financial beating as more and more Americans disconnected their phone lines and replaced it with their cable or wireless phone.
If the cable companies want to compete on phone service, then the phone companies will compete on TV service.
And that is where we are at. AT&T is spending billions to bring TV, phone and Internet service to customers all across the country. That competition is now coming to Costa Mesa.
Mayor Eric Bever has also leveled the playing field by letting AT&T have the public access feed that broadcasts City Council and Planning Commission meetings.
Costa Mesa residents are spending more than $16 million a year on cable TV, and for the first time in 30 years, we are going to have some competition for that business.
Nothing infuriates a customer more than having to wait on hold for 25 minutes to solve a simple billing problem.
The basic problem for consumers is that cable TV by its nature is a monopoly; and monopolies, unlike other businesses, do not have to compete to keep or get business.
They know that because you cannot get the service anywhere else they can keep you on hold and that there is nothing you can do. It costs them more money to add service representatives. It costs them nothing to keep you on hold.
Unlike with other monopolies such as electrical, natural gas and water utilities, cable TV prices and quality of customer service are not regulated by the government.
Now, I can hear all the cable executives screaming about how they are not really a monopoly and that they have competition from two satellite providers, DirecTV and Dish Network.
Though there is some truth to this, cable TV’s ability to also deliver Internet and phone service on the same network gives those companies a competitive cost advantage over their satellite colleagues.
The best satellite can do is force cable into a duopoly. This is where you have two competitors in a marketplace.
I’ll spare you a painfully long explanation of French economist Antoine Augustin Cournot’s duopoly model, but let’s just say that duopolies compete on anything but price.
Once a duopoly is established, it is clear to both companies that lowering price hurts them.
Therefore, they may have lower introductory prices (three months free, etc.) as a sales gimmicks to get more market share, but they will never compete on price over time.
Now take note that I am not advocating that government regulate the cable companies.
But I also do not want government to protect them. This is what, until last year, was happening around California.
Local governments were, through the local cable franchise system, protecting cable TV franchises from competitors.
In October of 2006 that all changed when California passed the Digital Infrastructure and Cable Competition Act.
Now a cable competitor gets its franchise for the whole state. No longer can local jurisdictions shake down cable competitors to get local approval.
Now, finally, real competition is just around the corner. It is coming in the form of light beige utility boxes being installed throughout the city. What is in those boxes will finally bring long-awaited competition to cable TV in Costa Mesa.
AT&T is installing its fiber-to-the-neighborhood network, which will have not only high-speed Internet but also TV and phone service.
Several years back the cable TV companies got into the phone and Internet business.
They already had a wire to your house, and now with newly developed technology, they can deliver Internet and telephone service over that same wire.
This has been so successful that in South County the cable company has more phone subscribers than the local phone company.
The cable companies brought real competition to the local phone company for phone service and also Internet access.
The local phone companies were already getting fierce competition from wireless carriers, but it was cable that finally forced down prices.
Long distance is now basically free. In fact, more than 50% of people younger than 30 have never had a land-line phone in their home. The local phone company was not going to sit around and take the financial beating as more and more Americans disconnected their phone lines and replaced it with their cable or wireless phone.
If the cable companies want to compete on phone service, then the phone companies will compete on TV service.
And that is where we are at. AT&T is spending billions to bring TV, phone and Internet service to customers all across the country. That competition is now coming to Costa Mesa.
Mayor Eric Bever has also leveled the playing field by letting AT&T have the public access feed that broadcasts City Council and Planning Commission meetings.
Costa Mesa residents are spending more than $16 million a year on cable TV, and for the first time in 30 years, we are going to have some competition for that business.
Saturday, March 1, 2008
‘Liars’ Get Last Laugh?
I was hoping last week’s column regarding the real estate market would be my last for a while. I wrote about the “liar loans” that allowed people with no money down to puff up their incomes to get larger home loans than they could afford.
Lenders did not verify anything, including whether home buyers were even employed. These same people are now starting to lose their homes to foreclosure.
To the rescue to all these poor “uneducated” people is none other than Senate Majority leader Harry Reid (D-Nev.) with Senate Bill 2636, “Foreclosure Prevention Act of 2008.” Reid thinks these people just did not understand what they were signing.
This bill would reward everyone who took out Liar Loans. If passed, it, among other things, would allow bankruptcy judges to lower the principal and interest payments on a home loan to the amount the borrower could now afford based on their income when they filed for bankruptcy.
Lets look how this would affect two couples who were looking to buy a home in Orange County. Both couples went house hunting in Costa Mesa in the summer of 2006.
First we have Jane and Joe Liar. The Liars got a no-money-down loan to buy a 2,500-square-foot home in Costa Mesa for $850,000. On the Liars’ non-verified loan application they stated their income was $11,200 per month.
At least it had been for the last six months. Both Joe and Jane were in sales and with the economy humming along their commission checks were higher than normal. Their 4% adjustable- interest only loan payment was $2,834 per month. With taxes of $850 their total house payment was $3,684 month.
The other couple; Bill and Sarah Doright, were also looking for a home in Costa Mesa. They too were in sales and the humming economy also shot up their incomes.
Some months, with help from large commission checks, they also made $11,200 per month. The couple also saved $45,000 over the last four years by not eating out, forgoing expensive vacations and continuing to drive their eight-year-old cars.
Their lender verified their average income over the last two years and even though they wanted a single-family home they were only qualified to buy a 1,100-square-foot condo for $450,000; which they did. Being on the conservative side they put down $45,000 and got a 30-year 6% fixed loan for $405,000. The loan payment was $2,135, and with taxes and association dues their total house payment was $2,735 per month.
Now let’s fast forward to January of 2009. Barack Obama is sworn in as president, and he signs the “Foreclosure Prevention Act of 2009.” The economy has slowed down, and both the Liars and Dorights are feeling the pinch. Both couples have much lower commission checks and are living off their base salaries. The real estate market has also tanked, and neither couple could sell their homes for what they owe.
The Liars’ adjustable loan goes up to 6%, and they can no longer afford what is now a $5,100-loan payment. No problem. The Liars file for bankruptcy and, lo and behold, because of the Foreclosure Prevention Act, they are saved.
A bankruptcy judge comes to the rescue and reduces their payment to what they can now afford, by lowering the principal on their loan to $395,000. This lowers the loan payment to $1,975. With taxes they are now paying $2,825 per month. A savings of more than $2,000 per month and $455,000 knocked off their loan balance to boot.
Meanwhile the Dorights, who make enough money to make their mortgage payment, continue to make the payments and live in their condo and hope someday to save up enough money to buy a home.
What message does the government give to people like the Dorights, who do not go into debt over their heads and borrow only what they can afford to pay back?
Reckless behavior gets rewarded. And good behavior gets punished.
There is nothing noble in preventing foreclosures. Foreclosures are the market’s way of re-pricing the housing market to what people can afford. The foreclosed homes we see in some neighborhoods with the unkempt lawns won’t stay vacant very long.
Remember: For every family that loses a home to foreclosure, there is another family who buys it at a price they can afford.By the way, lending institutions cannot stay in business if the money they lend out gets reduced by a judge and never gets paid back.
To stay in business, they will just make up their losses by charging higher interest rates to the rest of us. That won’t help anyone.
Lenders did not verify anything, including whether home buyers were even employed. These same people are now starting to lose their homes to foreclosure.
To the rescue to all these poor “uneducated” people is none other than Senate Majority leader Harry Reid (D-Nev.) with Senate Bill 2636, “Foreclosure Prevention Act of 2008.” Reid thinks these people just did not understand what they were signing.
This bill would reward everyone who took out Liar Loans. If passed, it, among other things, would allow bankruptcy judges to lower the principal and interest payments on a home loan to the amount the borrower could now afford based on their income when they filed for bankruptcy.
Lets look how this would affect two couples who were looking to buy a home in Orange County. Both couples went house hunting in Costa Mesa in the summer of 2006.
First we have Jane and Joe Liar. The Liars got a no-money-down loan to buy a 2,500-square-foot home in Costa Mesa for $850,000. On the Liars’ non-verified loan application they stated their income was $11,200 per month.
At least it had been for the last six months. Both Joe and Jane were in sales and with the economy humming along their commission checks were higher than normal. Their 4% adjustable- interest only loan payment was $2,834 per month. With taxes of $850 their total house payment was $3,684 month.
The other couple; Bill and Sarah Doright, were also looking for a home in Costa Mesa. They too were in sales and the humming economy also shot up their incomes.
Some months, with help from large commission checks, they also made $11,200 per month. The couple also saved $45,000 over the last four years by not eating out, forgoing expensive vacations and continuing to drive their eight-year-old cars.
Their lender verified their average income over the last two years and even though they wanted a single-family home they were only qualified to buy a 1,100-square-foot condo for $450,000; which they did. Being on the conservative side they put down $45,000 and got a 30-year 6% fixed loan for $405,000. The loan payment was $2,135, and with taxes and association dues their total house payment was $2,735 per month.
Now let’s fast forward to January of 2009. Barack Obama is sworn in as president, and he signs the “Foreclosure Prevention Act of 2009.” The economy has slowed down, and both the Liars and Dorights are feeling the pinch. Both couples have much lower commission checks and are living off their base salaries. The real estate market has also tanked, and neither couple could sell their homes for what they owe.
The Liars’ adjustable loan goes up to 6%, and they can no longer afford what is now a $5,100-loan payment. No problem. The Liars file for bankruptcy and, lo and behold, because of the Foreclosure Prevention Act, they are saved.
A bankruptcy judge comes to the rescue and reduces their payment to what they can now afford, by lowering the principal on their loan to $395,000. This lowers the loan payment to $1,975. With taxes they are now paying $2,825 per month. A savings of more than $2,000 per month and $455,000 knocked off their loan balance to boot.
Meanwhile the Dorights, who make enough money to make their mortgage payment, continue to make the payments and live in their condo and hope someday to save up enough money to buy a home.
What message does the government give to people like the Dorights, who do not go into debt over their heads and borrow only what they can afford to pay back?
Reckless behavior gets rewarded. And good behavior gets punished.
There is nothing noble in preventing foreclosures. Foreclosures are the market’s way of re-pricing the housing market to what people can afford. The foreclosed homes we see in some neighborhoods with the unkempt lawns won’t stay vacant very long.
Remember: For every family that loses a home to foreclosure, there is another family who buys it at a price they can afford.By the way, lending institutions cannot stay in business if the money they lend out gets reduced by a judge and never gets paid back.
To stay in business, they will just make up their losses by charging higher interest rates to the rest of us. That won’t help anyone.
Subscribe to:
Posts (Atom)
