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Friday, Jan. 08, 2010

State shortchanged in federal money

More money goes to Washington than comes from there

WASHINGTON -- Gov. Arnold Schwarzenegger wants the federal government to help balance California's budget. Good luck with that.

Like his predecessors, Schwarzenegger complains the state sends more money to Washington than it receives in return. His proposed budget being released Friday anticipates correcting this.

"We are not looking for a federal bailout, just federal fairness," Schwarzenegger said in his State of the State speech Wednesday.

The tune is familiar. So is the likely outcome, a discordant one.

The federal government faces a $1.4 trillion deficit and lacks deep pockets. Other states have their own claims. Most fundamentally, the black-and-white narrative Schwarzenegger imposes -- the story line that political will can correct the injustice of the federal government's shortchanging the state -- has some serious plot holes.

California does receive only about 78 cents for every $1 sent to Washington, as the governor says. Some key reasons, though, remain deeply entrenched in demographics that defy even the most willful politician.

The funding shortfall is also entangled in spending formulas painstakingly negotiated on Capitol Hill, covering everything from highway construction to health care.

"The way the formulas are written is one of the keys in how California fares," Mary Beth Sullivan, executive director of the nonpartisan California Institute for Federal Policy Research, noted in an interview. "And if you change a formula so that it helps California, what other state is that going to hurt?"

Start with the basics, those left unspoken when Schwarzenegger says -- as he did Wednesday -- that the federal distribution of dollars "should be more fair and equitable."

California has been what public policy analysts call a 'net donor' state for more than 20 years. Not since President Ronald Reagan's defense buildup of the 1980s has the state received from Washington more than sends.

At least 17 other states likewise send Washington more money than they receive back, including President Barack Obama's home state of Illinois, a 2003 California Institute tally found.

"California's 'net donor' status is not really a recent phenomenon but a fact of life," Tracy Gordon, a University of Maryland assistant professor and adjunct fellow with the Public Policy Institute of California, noted Thursday.

Pointedly, Gordon added that "there will always be winners and losers in a federalist system, and given California's economy and demographics, its status may be entirely appropriate."

California's relative youth perpetually undercuts it, funding-wise.

Nationwide, 12.6 percent of U.S. residents are aged 65 or over, the latest Census Bureau estimates show. Among California residents, though, 11 percent are 65 are over.