With the prospect of the US Government deciding enough is enough when it comes to bailouts, it looks like Governor Schwarzenegger has finally remembered that he is indeed the governor and is finally doing something that might actually help California out of the $40 billion hole it dug for itself.
With a restructuring of the state income tax to a flat 6% that covers a much wider portion of the wage earners than the existing progressive (and very high) income tax and the willingness to lay off state employees, it could be the Governator has finally seen the financial light and is doing something he should have done after taking office: rein in profligate spending and stop tapping the taxpayer's wallets again and again and again.
Will these measures erase California's budget deficit? No, but they will make a significant dent. They also set a precedent that should be carried forward until state spending is under control.
Another state has also reached the conclusion that layoffs and furloughs of state employees are necessary at a time when the state's taxpayers are telling the legislature and the governor “Enough!”
The proposed budget for New Hampshire includes more job cuts after a conference committee couldn't agree on a wide swath of tax and fee increases many saw as a a detriment to the states economy because they were business hostile. Things like video slot machines at the state's race tracks (dog and horse tracks) as well as two other locations in the northern tier of the state were shot down, as were efforts to remove a tax credit that offset the Business Profits Tax,. An increase in gasoline taxes, as well as new taxes on capital gains, estates, and mortgage refinancing were defeated in committee.
Neither state has gone far enough to balance their budgets. New Hampshire will still see a substantial increase in state spending on top of the 17.5% increase it had to endure in the last state budget. California still has billions it must shave off of its state budget if it wants to avoid bankruptcy.
Hopefully both states have learned a valuable lesson. The question is whether they will remember that lesson.