Californians can take scant comfort from the prospect that a blue-state meltdown may start elsewhere. (Illinois, for instance, appears to have dug itself into an even deeper hole.) No matter which other states have it worse, California faces years of austerity. According to a report issued in November 2010 by the Legislative Analyst's Office (LAO)—California's counterpart to the Congressional Budget Office—the state's general fund is heading for a $20 billion shortfall every year until 2016, as far ahead as LAO cares to project. Since LAO does not expect general fund revenues to exceed $100 billion until 2015, these deficits would be more than one-fifth of the state's budget for half a decade.
And that's the good news. "We believe that our projections probably understate the magnitude of the state's fiscal problems during the forecast period," the report says. The picture would have been even bleaker if LAO had factored in the billions of additional dollars California must devote each year to fulfill pension and health care obligations to public employees who have retired or will in the future. (When and how the state will pay for those promises, and whether it will bend or break some—these were too murky for the agency to quantify and forecast.) LAO does estimate that the unfunded liabilities for these obligations amount to $136 billion. California's "long-term fiscal liabilities—for infrastructure, retirement, and budgetary borrowing—are already huge," the report states. "By deferring hard decisions on how to finance routine annual budgets of state programs to future years, the state risks increasing further the already immense fiscal challenges facing tomorrow's Californians."
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The planted axiom is that higher taxes—California's are already among the highest in the nation—will get the state through the recession and recovery without further reductions or reorganizations of its public sector, hastening the happy day when things can go back to normal. The long-term structural deficits that appear endemic in the blue-state model of high taxes, big government, and strong public employee unions all argue, however, that "normal" is the problem. Americans are endorsing this proposition with the articles they write and the bonds they sell but also, more importantly, by decisions about where to build lives and enterprises. The first results from the 2010 census, released in December, show that the population of Texas, a state with no corporate or individual income tax, grew twice as fast as the nation's overall population between 2000 and 2010. California grew at the national rate, meaning that for the first time since 1850, the census will result in no additional California seats in the House of Representatives. (New York will lose two House seats; Illinois and New Jersey will each lose one. Texas adds four.) More generally, as Michael Barone has calculated, 35% of the nation's population growth since 2000 took place in the nine states that have no income tax, which together accounted for only 19% of the nation's total population at the beginning of the decade.
The New Testament Documents
15 years ago