Construction Interrupted When Budget Pipeline Dries Up

While the poor state of our current economy is obvious, the extent to which it has further exacerbated California’s budget crisis is becoming all the more apparent. Last month, the California Pooled Money Investment Board, a committee that manages state spending, voted to stop spending on the construction of public works. This will delay projects authorized by voters and supported by Gov. Schwarzenegger in 2006.
Among the public works to be postponed are road and highway projects, such as a carpool lane on the 405 freeway between the 10 and the 101 freeways, $373 million in repairs and overcrowding relief for Southern California schools, especially in the Los Angeles Unified School District, and a new California Court of Appeals building in Santa Ana that is just $5 million away from being completed. As a result, judges may be forced to write opinions in their living rooms when the lease of their temporary offices expires at the end of June, according to Bloomberg News. Spending on many construction projects is scheduled to be halted for five additional months.
The California Pooled Money Investment Board’s decision was motivated in part by the state’s failure to sell two-thirds of the bonds that it usually does. The result was $500 million lost in cash flow. However, state treasurer Bill Lockyer’s spokesman Tom Dresslar said in a statement reported by the Los Angeles Times that exceptions could be made for specific projects, forcing agencies to review which of their projects should be delayed.
Although the general public recognizes that improving infrastructure is essential to getting our economy back on the right track, the Board does not want to risk causing the budget shortfall to deepen to the point that the state will have to pay unacceptable financial penalties. The economic recession has already caused California’s unemployment rate of 8.4 percent to be the third-highest in the United States and that percentage will likely increase with the halt of $3.8 billion worth of public construction. It is evident that the Board is risking further drops in California’s economy, but there is nothing they can do about the mounting budget crisis because they are merely pawns of the state legislature.
Gov. Schwarzenegger and state legislators talked over the holiday break about how to fix the budget crisis, but a resolution has yet to be reached. The Democratic majority and Schwarzenegger have proposed tax increases in order to generate $11.3 billion in revenue by raising the state sales tax by 1.5 percent, adding a tax on oil extraction and increasing taxes on alcoholic drinks. However, it is likely that the Republican minority, which has the power to block spending plans, would reject the proposal because of its proposed tax increases. Now the state Senate is proposing to raise fees (which only requires a simple majority vote) to close the budget gap.
However, the question now turns to whether such a move is legal and whether the resulting revenue increase will be enough. This is a prime example that underlines the key problem with our legislators, not only in Sacramento but also in Washington. They always wait for the home-run ball or an immediate resolution to a problem, but it doesn’t come because of party differences. In addition, propositions concerning tax increases, such as Proposition 13, that have negative results cannot be immediately erased. President-elect Barack Obama’s inauguration will hopefully help turn the page. Obama’s expected multi-billion dollar economic stimulus plan that could exceed $775 billion may turn out to be the catalyst needed to resolve quickly this issue if our talks continue to be at a stalemate. However, Obama’s plan did not outline how the economic stimulus will be distributed among the states. We will have to wait to see how the plan pans out, just as we are forced to deal with the effects of California’s budget crisis until Gov. Schwarzenegger and the state legislature are able to come to a resolution so that public works construction can continue, while also coming up with a way to increase state revenue that is fair to the electorate that they serve.
The adage of “No pain, no gain” is a colloquial phrase commonly heard. However, the people currently suffering from the current funding freeze implemented by the California Pooled Money Investment Board’s vote are bearing a disproportionate part of the pain. After all, they did not create California’s budget crisis.

Kevin Phan is a first-year biological sciences major. He can be reached at phankt@uci.edu.