I find myself fascinated by the California budget process. Much of the stuff I have read about blame for the crisis makes no sense at all to me, and has made me even more cynical about the state legislature. The shortfall in revenue this year amounts to about 10% of revenue. That doesn’t seem so complicated – simply apply a fairly regular cut across all departments. Some departments are experiencing increased true demand for services (notably unemployment insurance), so you’ll have to cut some departments more than 10% – say 15%. Some departments are legally protected against cuts, such as proposition 98. The legislature can repeal it with a 2/3 vote, but they are of course completely incapable of compromise so that won’t happen. Cutting 10% will hurt like hell for all departments, but private industry goes through such cycles regularly, and they almost always result in a stronger organization.
Who can tell me that there is a state department that would not benefit from cutting lose the bottom 10% of performers among their employees?
Also, one thing that companies do in tight times is to offer incentives to reduce expenses in the short term, trading them for long term obligations. An obvious way to do that is to offer retirement incentives to people, offering them a larger pension paid in outyears based on their agreement to retire NOW.
I’m sure the process is complicated, but it has become a lot easier for me lately. I’m voting out any incumbents in the state legislature when the next election rolls around. Their inability to compromise leaves no choice.
Correction: today the governor gave a speech in which he says the revenue shortfall amounts to 27% decrease from last year. That makes the severity of the cuts much more severe, but doesn’t change anything else about the strategy to solve it.