California’s budget ‘meltdown’

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CALIFORNIA’S Republican Governor Arnold Schwarzenegger declared a fiscal state of emergency yesterday in a move to put pressure on members of California State Legislature to adopt his cuts budget, which is more than a month overdue.

The budget is opposed by the trade unions organised in the California Labor Federation (AFL-CIO) and many Democratic Party Assembly members, because Schwarzenegger insists on draconian cuts and refuses to raise taxes on big business.

The Governor told the press that without a budget in place the state’s government would run out of cash by October, to pay salaries and bills.

In a statement Schwarzenegger declared: ‘Without a budget in place that addresses our $19bn deficit, every day brings California closer to a fiscal meltdown. Our cash situation leaves me no choice but to once again furlough state workers until the legislature produces a budget I can sign.’

When the Governor says he will ‘furlough’ 150,000 state employees, it means that they will be forced to take three Fridays off each month without pay, slashing workers’ salaries from next month!

At the beginning of July, Schwarzenegger ordered that 200,000 state workers have their wages cut to the Federal legal minimum wage of just $7.25 (£4.82) an hour. His dictates are so draconian that even the official responsible for salaries, State Controller John Chiang has said he will not obey the Governor.

California has the largest population of any state in the United States at 37m and the largest economy, but it has been devastated by the world recession and financial collapse since 2008 resulting in a collapse in tax revenues.

Schwarzenegger proposed his budget in the spring and it contains $12.4bn of spending cuts, sharply reducing funding for services designed to help the state’s poor, while refusing to sanction any new tax measures to tackle the budget shortfall. He says his proposed cuts to spending are ‘painful’, but essential.

The California Labor Federation has said: ‘California is in an economic crisis. Unemployment, home foreclosures and bankruptcies have skyrocketed. Yet Governor Schwarzenegger chose to cause even more misery in the May Revision to the 2010-11 budget. The May Revision attempts to bridge a $17.9 billion budget gap, and program spending reductions make up two-thirds of the solutions proposed by the Governor.

‘State programs have already been slashed by $32.5 billion over the past two years. This budget cuts state programs, agencies and services to the bone, yet the three corporate tax breaks from the 2008 and 2009 budget remain untouched. The Governor does not propose any tax increases.’

Among the cuts which have caused an angry outcry from working-class families are those imposed on K-12 education, which are expected to result in 25,000 teachers being sacked.

This budget crisis exposes the bankruptcy and destructive powers of capitalism in its death agony. The US has by far the largest economy in the world and California accounts for a large part of it. If it were a separate state, California would have the eighth largest economy internationally.

The California Labor Federation has highlighted the problems, but action by the trade unions is needed to provide a solution. Trade unionists must demand strike action against pay cuts and sackings, leading to a broad solidarity strike movement, with community support, a state-wide general strike, to defend pay, jobs and services, and defeat Schwarzenegger’s draconian budget.

Workers and youth, who are in this struggle, must build a section of the Trotskyist International Committee of the Fourth International (ICFI) that will organise within the trade unions to get them to form a fighting Labor Party, breaking with the capitalist Republican and Democratic parties.

It is clear that only socialist policies, including the nationalisation of the major corporations under workers’ control, can provide the resources for full employment, decent salaries and essential public services, such as universal free education and healthcare.