Explaining Southern California's economy

For California, a budget surplus won't translate into a reserve

Schwarzenegger Holds Press Conference On Passing Of California Budget

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A view of the California State Capitol. The budget outlook is improving for the Golden State, but that doesn't mean there will soon be a lot of money on the bank.

California may declare a surplus for its fiscal year 2014 budget. Unfortunately, the state won’t be able to put money in the bank for a rainy day.

That doesn't mean its outlook isn't looking up. The credit rating agency Moody’s likes what it sees in the Golden State's improved fiscal situation. In particular, the passage of Prop 30 last November — raising incomes taxes on wealthy Californians and sales taxes on everybody — bodes well for future revenues.

But getting the budget out of deficit and into surplus doesn’t mean the state will be prepared for the next inevitable economic bust. 

Moody’s analyst Emily Raimes blames a history of underfunding education.

“As revenues increase in the state in the next few years, additional revenues will have to be dedicated to bringing that education funding back to the baseline where it would have been if the state had not been doing that underfunding," she said.

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Vice presidential debate: 5 (and a half) economic battles Biden and Ryan will fight

Vice President Joe Biden and Vice Presidential Candidate Paul Ryan

Alex Wong/Getty Images and Mandel Ngan/AFP/GettyImages

Joe Biden and Paul Ryan will get their big chance tonight to duke it out for their respective tickets as the Presidential campaign enters its final weeks.

Gaffe-prone Vice President Joe Biden and buffed-up Republican VP nominee Paul Ryan will trade barbs Thursday in the Bluegrass State. The garrulous, off-the-cuff Biden, 69, will likely offer vivid contrast with his much younger opponent, who at 42 is the wonky wunderkind of Congress.

Biden has run for President a couple of times, and his expertise is in foreign policy. Ryan has a reputation as a number-cruncher who can drill down into the weeds of economic policy. Given that the country still has not shaken off the Great Recession, it is reasonable to expect the two men to lock horns on economic issues. Here are five-and-half ones they'll most likely tackle.

Medicare and Medicaid. In his "Path to Prosperity" 2012 budget proposal, Ryan and the GOP proposed a radical — and there's really no other way to describe it — reform of government-supported health care for the elderly and the poor. The end result of Ryan's plan doesn't look terribly extreme, but by turning Medicare into a voucher system — in theory, giving seniors control over their own health-care choices — the Congressional Budget Office estimates that seniors could end up paying thousands of dollars more in health care expenses on a yearly basis. The White House also proposes to reform Medicare, via the Affordable Care Act. Both plans target the same problem: Swelling future Medicare costs threaten to render the entitlement insolvent.

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UCLA MBAs are cut loose as Anderson School of Management goes solo

ucla

Photo by Chris Radcliff via Flickr Creative Commons

At UCLA, the MBA program will no longer be supported by funds from the State of California.

The UCLA Academic Senate approved a plan today to shift the Anderson School of Management's daytime MBA program to a self-funded model. Anderson's MBA program has been around since 1939 and has always been state-funded. But now it will be supported only by tuition and donations, according to UCLA.

The total savings will be $8.8 million, which would be diverted to other programs at UCLA, making up for budget cuts brought on by the ongoing fiscal crisis in state-supported higher education in California.

UCLA Anderson is generally considered an elite, top-20 business school, as ranked by publications such as Forbes and U.S. News & World Report. Tuition is currently over $45,000 per year for California residents and over $52,000 per year for out-of-state students studying full-time. 

The vote in the UCLA Academic Senate was 53-46 in favor of the move, with three abstentions. The proposal now goes to the full University of California Academic Senate and UC President Mark Yudof for a final vote.

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Time to privatize the L.A. Zoo?

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The LA Zoo's Elephants of Asia Exhibit opened this past December. If the Zoo were privatized, it would save the city almost $18 million per year.

I've been digging through Mayor Antonio Villaraigosa's budget proposal for Los Angeles' fiscal 2012-13. The bottom line is that the Mayor, through cuts and revenue enhancements, plans to eliminate a $200-million-plus deficit in a total budget of $7.2 billion. 

When you ponder the numbers, it's the very large ones that jump out at you:

• A police department that costs $1.3 billion to fund and consumes $449 million in pension payments, which when totaled account for nearly a quarter of the entire budget

• A City Attorney's office that costs nearly $100 million

• A city zoo that gobbles up almost $18 million per year

Okay, so that last number isn't all that huge. However, within the context of the budget deficit — $238 million — the zoo represents almost 8 percent. (And it's not even the total cost to operate the zoo, which is about $26 million annually.) You don't have to be an investment genius to recognize that figuring out a way to unload that cost would yield the city a decent return and reduce the need to, say, lay off clerks in the LAPD, something that Chief Charlie Beck has said will require the department to change the way it handles some of its business.

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Why are we so worried about L.A.'s budget deficit?

"No Labels" Political Organization Launches As Counterpoint To Tea Party

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Los Angeles Mayor Antonio Villaraigosa has budget issues.

There's a general sense of hysteria — including the use of the "b" world (bankruptcy) — over Los Angeles' estimated $222-million budget deficit. Everyone seems very, very worried. The future looks even more grim, as the deficit is expected to rise to $427 million by 2014-15. There's abundant hang-wringing going on. But is $222 million really that big a deal?

The overall budget is about $7 billion. The deficit is less than 3 percent of that total. For comparison, New York City is running a deficit on a $70-billion budget that's more than double that of L.A. — and the Big Apple is delighted that it can reduce that to L.A. levels. 

Miguel Santana, the Chief Administrative Officer, actually has a plan to close most of L.A.'s budget gap. This is from the L.A. Times:

Santana says about $150 million in new revenue is needed. Doubling the so-called documentary transfer tax imposed on the sale of property could bring an additional $100 million, he said. Raising the parking tax by 10% to 15% would bring in $40 million. Additional revenue could come from improved collection of parking ticket fees and ambulance billing, he said.

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