AGENDA Fri 4/27 & Mon 4/30 HW ReviewHW Review QOD # 32: Best BudgetQOD # 32: Best Budget Taxes/Budget QuizTaxes/Budget Quiz California Budget CrisisCalifornia Budget Crisis HW: Budget Cuts Reflection HW: Budget Cuts Reflection –Stock Market Project

QOD #32: Best Budget When making a state or federal budget what concerns you most the needs of your constituents or the financial needs/limitations of the state? Remember your constituents are the people that voted you into office. Make two T-Charts one for constituents and one for state financial needs/limitations. For each you will need to list at least two pros and two cons.

Govt debt/deficit Budget deficit- the situation in which the federal government expenditures are greater than the federal government tax revenues. –Deficits lead to a national debt. When the govt borrows money it goes into debt…just like individuals. –The govt borrows money by selling securities bonds to other govts in the world. –Since 2003, $500 billion added debt/year –2008 = $10.7 trillion; 2012 = $15.5 trillion2008 –Current projections = $20 trillion by 2015

Actual US debt What do you think the current United States national debt is? There is a debt clock in Times Square that has been keeping count of the debt since 1989.debt clock

The answer In September 2008, the digital dollar sign was eliminated to make way for an extra digit—the "1" in $10 trillion (the national debt is was $10.2 trillion).$10.2 trillion According to the Associated Press in early 2009, plans for a new clock were announced that would make room for a quadrillion dollars of debt, yet the clock has yet to be replaced.

The clock The clock According to the Treasury, the national debt has grown more than $500 billion each year since fiscal year 2003.Treasury The $700 billion government bailout sent the national debt to more than $12 trillion.

California Balanced Budget Act Prop 58 passed in 2004 enforcing that the Governor and legislature balance the California budget every year. Legislative Analyst’s Office projects $25.4 billion deficit in (includes $8.2 billion from )Legislative Analyst’s

California Budget Crisis California Budget Crisis The California Budget Crisis is a fiscal crisis where the state faces a shortfall of at least $25 billion over the next fiscal year ( ) There is a two-thirds majority required to pass a budget and since no one party holds this majority the are several political roadblocks that must be dealt with to pass a budget. Some temporary measures to raise funds have been challenged by lawsuits (furlough days for government employees). Other actions like increasing sales tax 1% & delaying tax refunds have not been popular with Californians.temporary measures

Some other suggestions Tax services that aren’t already taxed – i.e.. car repair and veterinary care, tanning salons Reduce income tax credits for dependents Raise vehicle registration by $12 for every vehicle Raise excise tax to 5¢ a drink on alcoholic beverages $5.2 billion cut from K-12 schools and community colleges Reduce SSI grants to the disabled to the federal minimum Cut $87 from Cal Grants $742 from Medi-Cal for eliminating certain treatments $1.1 billion from Cal Works welfare benefits And more….

Back to the Future: Budget Crisis 2004 You are a California state legislator in the year Governor Davis (and his analysts) have projected there will be a $15 billion deficit this year & $34.8 billion over next 18 months. You need to select from the list, those cuts which you will propose at the next budget meeting. Read over all of the options, including the “pain” description to see who you may be impacting. Remember, each choice does carry a political cost…you need to get reelected to keep your job! –You can choose to play the game with either reelection as your priority or a balanced budget. You choose!

Budget Cut Roundtable Get into groups of 3 – 4 students One of you will act as the politician and the rest of you will be political advisors. You need to choose a political party and constituency for your representative –i.e. Republican, Orange County; Democrat, San Diego County, etc.

Time to Make Cuts!!! Using the handout you will have to make cuts. The current budget shortfall is $15 billion but the projected shortfall is closer to $40 billion Cut as much as you can keeping in mind your constituents and your own values. Record the choices you’ve made –Include - The rationale behind the choice The political cost and how it applies to you and/or your constituents

Budget Cuts Reflection Review your list of cuts. Answer the following based on your decisions: –Did you reach the necessary amount of cuts for the budget? How or why not? –What was the largest item/program in the budget you cut? Why? –What were your political cost totals? How do you justify those costs? –Why do you think these cuts were necessary back in 2004? –What types of cuts would you propose for this year’s “budget crisis” in California?