------------------------- Via Workers World News Service Reprinted from the Aug. 14, 2003 issue of Workers World newspaper -------------------------
Who's milking California dry?
ANATOMY OF A STATE BUDGET CRISIS
By John Beacham Los Angeles
More bad news for the working class and oppressed communities came tumbling down the steps of the California State Capitol on Aug. 2. California ended its 2004 budget "crisis" by signing into law a state budget that slashes social spending and gives money away to the banks.
The 2004 California budget cuts public-school funding by $2 billion. Teachers will be laid off. Those not laid off will be expect ed to endure takebacks and cuts in pay.
Overall, the budget calls for reducing state employees' wages by some $1.1 billion. Over 1,000 doctors and nurses are likely to be laid off all over the state.
The budget slashes Medi-Cal payments by 5 percent. This will leave the 6.4 million people covered under the state plan without many essential services. This comes in a state where medical care for the poor is already a cruel joke.
City and county funds will be cut by $825 million. Here in Los Angeles, the county has closed 16 medical clinics in response to the budget cuts. The city has hiked public-transportation fees by almost 10 percent.
Community colleges are raising fees by nearly 70 percent. The community college system in California is a traditional haven for students from the working class oppressed communities who get a lower quality of secondary education and cannot afford tuition at a four-year institution.
The State University system and the University of California system are raising student fees by 30 percent. For the first time in its history the State University system will default on its promise to accept all California high school students who graduate in the top 12 percent of their class. UC Merced, which was supposed to open in 2004, will now open in 2005 instead.
The budget for the UC extension system, which provides job skills and English language courses, is being slashed by 25 percent. In San Francisco the UC extension is being closed down, forcing students to travel across the bay to Berkeley.
BANKS AND BOSSES MAKE MONEY
In one of the wealthiest states in the richest, most powerful country in the history of the world, the California government and the bosses continue to heartlessly attack social programs and public services that poor workers desperately need. At the same time, the state is forced to borrow money at interest rates that line the pockets of the ruling class. Why?
The California budget crisis is nothing but an affront to working people of Cali fornia. The state of California is wealthy beyond imagination.
The ruling class could very easily get California out of its budget crisis and at the same time dramatically increase the funding for services that working people have fought for over the years. But the ruling class is always looking to turn a profit. And turning a profit off the California budget crisis is exactly what the banks are doing.
The 2004 California budget calls for $14 billion in loans. The banks profit direct ly from these loans through interest off bonds the banks buy from the state.
Recently, because the budget crisis lasted a month longer than the deadline for a completed budget, Wall Street lowered the state's financial standing to BBB. This is a couple of levels above a "junk" rating. It is the worst rating for any state in the country.
This means that California is going to have to pay higher interest rates on its loans than every other state. Higher interest rates mean more profit for the banks.
It gets even worse: The discount rate is the rate at which banks borrow money from the federal government. The Federal Reserve has recently lowered this rate to 1 percent. This allows the banks to make even more profit off California workers--because they can loan money to the state at a high interest rate while borrowing from the federal government at a low interest rate.
Adding insult to injury, Wall Street only agreed to a new round of bond issues on the condition that California continue to cut $2.3 billion from the budget every year for the next five years. This is extortion. Wall Street exacted the promise of continued cuts from California to ensure that the banks get their money back from the state.
But there's no guarantee that California will be able to pay back the loans or get itself out of debt, especially when profits are more important to banks than the welfare of the people. The banks and Wall Street can hold the people of California hostage whenever they want. Wall Street, the state of California, the federal government, the banks and the big corporations are gambling with the people of California's money in order to increase their profits.
Workers and the oppressed communities are hit hardest by these gangsters--the banks, bosses and their politicians--because the cuts affect them more. They can less afford to pay for the budget swindle and the banks' extortion.
CORPORATIONS ARE BLEEDING CALIFORNIA
Not everyone is sharing the pain equally in California. Mega-corporations are doing quite well.
Chevron-Texaco, a massive oil company headquartered in Northern California, reported profits of $1.6 billion in the second quarter of this year. Other huge California-based corporations like Monsanto, Disney, ExxonMobil, Comcast and Halliburton also raked in huge profits as the ranks of the jobless and underemployed continued to swell.
According to the Multistate Tax Commission, corporations in California regularly abuse tax shelter laws, swindling $1.3 billion a year from the state.
In 1996, California deregulated the energy industry. It was a disaster. In the energy "crisis" of 2000-2001, California fell prey to the open market. Energy companies like Enron, Duke and Dynegy conspired against California, overcharging the state by an estimated $50 billion. The state was forced to borrow and pay enormously inflated prices for energy.
Every day, Californians have to pay on this $50-billion tab. Californians would never have found out about the price gouging of these corporations if Enron hadn't collapsed, bringing its shady business dealings to light.
It is highly unlikely that Californians are going to see any of the $50 billion stolen from them. On Aug. 1, the Federal Energy Regulatory Commission cleared Duke Energy from any obligation to reimburse California.
To date, the FERC has ruled that roughly $3.5 billion must be returned to California. True to form, though, the FERC ruled that $3.3 billion of this must go directly to energy companies to which California owes money.
The real roots of the budget crisis are found in the capitalist system itself.
Capitalism creates huge profits, or surplus value. This surplus value rightfully belongs to the workers whose collective efforts have produced it. The bosses are nothing but parasites who scoop up, hoard and invest this surplus in order to increase their wealth. The controllers of wealth under capitalism--the banks--hold federal, state and local governments in the palms of their hands.
State budget crises arise because the vast majority of wealth flows into the hands of a few bosses and banks instead of to the people. When the economy isn't doing so great, the bosses often do everything they can to hold onto and increase their profits.
The bosses and banks need forms of state like the California government to protect their huge profits under the capitalist system. But in their minds, the best way to protect their individual fortunes is to make state governments "fiscally responsible." This translates into less social spending, less taxing of the rich and corporations, fewer regulations, higher fees for everything, and individual states' borrowing from banks when they can't browbeat the people into lower spending in hard times.
The people need the exact opposite: huge increases in social spending across the board, lower fees on everything they need, and the use of the surplus value stored up from their collective labor to satisfy human needs.
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