Louis Warren: How We Got Here ... Thoughts on the State of California

While the scolding and the tut-tutting goes viral — “California, such a shame those weird, flaky people can’t live within their means” — it’s time for some serious reflection about how the nation’s richest, most populous state got where it is. California, home to one in eight Americans, has a GDP bigger than Canada’s. And it’s in the middle of an on-going fiscal calamity which threatens to rip our legislature apart (again). This week, the governor went to the White House to beg for federal backing of state bonds, a move which threatens to make California’s predicament a national drama.

So, whatever the solutions to California’s problems, rest assured those problems are coming soon to a theater near you, because unlike any other place, the Golden State is where the future is now. In a sense, California is the un-Las Vegas. What happens here does not stay here, it goes global. The growth of independent political voters? Auto emission regulations? The tax revolt and modern conservatism? We saw them all first in LA and San Francisco. Watts erupted in flames before any other American ghetto in the 1960s. Harvey Milk led the charge for gay rights on our televisions first. The tech boom was here first. And so was the bust.

So what explains California’s budget crisis, and what can we learn from it? In truth, the reason California has been unable to balance its budget has little to do with being an outlier, and more to do with some small, structural peculiarities that simply don’t suit a modern American state. Our politicians are about as partisan as Americans in general (read “very”). Our state tax rate is marginally higher than most others (but it is not the highest), and the level of our spending on public education and other services is also somewhat higher. So what gives?

The root of our problem is our state constitution, which requires a two-thirds majority to raise taxes or pass a budget. In some ways, this is peculiar. No other state requires two-thirds majorities to perform those two vital functions (although Rhode Island and Arkansas both require 66% to raise taxes, their budgets pass on simple majority votes). In other words, to pass a budget every year in California requires the same level of amity and consensus other states require for a constitutional amendment.

Where did the supermajority originate? Although many blame Proposition 13 (passed in 1978), California’s constitution has in fact been this way for a very long time. The state first passed a constitutional amendment requiring two-thirds majorities to approve budgets back in 1933. The rule kicked in only when budgets increased by 5% or more over a previous year. But since most budgets did increase by at least that much (California was growing by leaps and bounds), it kicked in a lot.

Even then, budgets passed with little trouble. California Republicans fought to restrain expenditures, then voted to raise taxes to cover what the budget required. Democrats fought for public education (including the nation’s most extensive system of higher education). In the 1950s and ‘60s, California took on more debt than any state in history to fund massive public works, including highways, university campuses, and the state aqueduct system (which together did much to create the wonders of LA and San Diego as we know them).

All this spending was funded by taxes and bonds, which voters approved at the ballot box. This despite the fact that in 1962, voters and legislators united to “streamline” the budget process and require two-thirds majorities for ALL state budgets and tax increases. Still, Republicans and Democrats typically hammered out deals, with Republicans voting for taxes only after exacting concessions from Democrats.

So it went for another decade or so, when the rise of movement conservatism changed the terms of debate. Republicans never liked taxes, but they saw them as an unfortunate necessity. By the 1970s, conservatives increasingly sounded like the leader of California’s tax rebellion, Howard Jarvis, who condemned all taxes as “felony grand theft.”

Still, for many years, leading Republicans could contain their most conservative brethren and hammer out deals in the old-fashioned way. As late as 1991, a Republican governor (Pete Wilson) championed a tax increase and budget cuts to close a deficit. In 1994 he won re-election.

But already the tide was turning. As Wilson discovered during his abortive presidential campaign in 1995, the “No New Taxes Pledge” had become a litmus test which he had failed. This hostility to all taxes is now conservatism’s defining feature. It is also, historically speaking, quite new. More than anything else, this is what killed the consensus that drove California’s 66% majorities.

The proof is in the pudding. The state has had the same supermajority requirements for the last 47 years. But only for about the last two decades has the budget become a source of continual drama, with legislators deadlocking 18 years out of the last 22. There has been chronic division in the last ten. We are a long way from the consensus that built the Golden State.

But it’s worth observing that we’re not beyond consensus. Today, California’s state assembly is less than 40% Republican, a situation that is not likely to change much in favor of Republicans (for reasons I’ll discuss in a later post). They are stalwarts for tax cuts, but over 60% of the state’s voters have opted for higher taxes and more public services. In any other state, this wouldn’t even be an argument. But in California, it’s a crisis because of the supermajority amendment to the constitution. The state is not “dysfunctional.” It’s not “flaky.” But the constitution no longer suits political realities, and it seems bound for some kind of change. The Bay Area Council, a group of prominent San Francisco business leaders, has proposed a state constitutional convention to require only a simple majority for new budgets and taxes. Their idea appears to be gaining ground.

This all might seem a peculiar California story, but to any observant American it is a sign of the times, a symptom of the country’s divisions. The U.S. Congress has no supermajority requirement, but California’s travail is echoed in the Senate, where rules require 60 votes to end a filibuster. Democrats now control 59 seats, Republicans have 40. The empty seat is Minnesota’s, where Democrat Al Franken appears to have eked out a victory over Republican Norm Coleman in the 2008 election. That was six months ago. Since then, Republican operatives have poured money into legal appeals, tying up the business of the country, stalling health care reform, threatening a filibuster of the president’s Supreme Court nominee and many other big initiatives, to buy their flagging party some time. From the Pacific to Minnesota to the nation’s capital, California blazes a path into the future — like it or not.