Thursday, 21 May 2009

An incentive for budget surpluses

The good citizens of California have come up with a novel way of encouraging their state politicians to produce a budget surplus. They voted at a referendum on Tuesday to prohibit wage increases for legislators and statewide officeholders in deficit years. From now on, near the end of each fiscal year, the state finance director must determine whether the state's general fund is expected to run a surplus or a deficit. Declaration of a deficit would mean the California Citizens Compensation Commission is not permitted to raise the salaries of top elected leaders.
The six person Commission certainly got the message. The day after the referendum its members voted 5-1 to slash the salaries of elected state officials by 18% citing pay cuts and layoffs being imposed on rank-and-file state workers in a desperate attempt to stop California's government going bankrupt. The Commission wanted the cuts to apply immediately but the State Attorney General ruled that would be illegal and that the new lower rates could only apply to those elected from January next year.
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