Seed Money for California Deficit Tree

Posted: Mar 12, 2007 12:01 AM
Seed Money for California Deficit Tree

State Sen. Darrell Steinberg, D-Sacramento, has introduced a bill to award each and every California newborn with a $500 taxpayer-funded savings account that could be used only to fund college tuition, buy a home or seed a retirement account when the child turns 18. Steinberg told me he believes that the California Kids Investment and Development Savings (KIDS) Accounts will increase Californians' "financial literacy."

What is wrong with this picture? Sacramento has not passed an honestly balanced budget without borrowing since 2002. When I asked Steinberg the year in which he expected to see a balanced budget, he said he "didn't know the answer to that."

So here you have state lawmakers working on a bill to encourage Californians to save more money -- by proposing a bill expected to cost the state $270 million a year, even though the state doesn't have the money to pay for it.

And they wonder why voters roll their eyes at each new "wacky California" bill. Steinberg sees himself as a "practical idealist" who would be "very happy, for example, to establish the accounts in the state treasurer's office this year." That is, Steinberg would be pleased to pass a version of his Senate Bill 752 that creates private accounts into which parents could make tax-exempt contributions -- with the proviso that the state chip in the first $500 for each baby later, when state coffers are flush.

Whenever that may be. Steinberg's most powerful argument is his desire to do right by teens who don't see much of a future for themselves. Steinberg told me his goal for this year is to reduce the high-school dropout rate. He believes that money in the bank could give at-risk teens a reason to consider college or dream about owning a home.

Steinberg argues that, if parents throw in an additional $50 per month, the $500 newborn fund could grow to as much as $17,000 or $20,000 by the time a child reaches age 18. "I love the idea of giving every kid a head start in life," Steinberg noted.

I could respect that -- if only Sacto Dems laid the groundwork necessary to put the state on the solid fiscal footing you want before creating new government entitlements. Instead, they fight any attempt GOP Gov. Arnold Schwarzenegger makes to curb state spending, and they continue to propose new programs, despite the fact that the state continues to spend more than comes in. When anyone confronts Democrats about the budget woes, they say that their hands are tied because the voters have opposed general tax hikes. So they're happy to cross their fingers and hope that economic growth will continue to increase tax revenue until the gap between spending and income closes.

It's a lot more fun to propose new programs that may or may not happen than to roll up your sleeves and make difficult budget decisions. And you get to be more popular, too.

Steinberg also points to the fact that conservatives -- notably former U.S. Sen. Rick Santorum, R-Pa. -- proposed a federal KIDS program in 2005. I'm not impressed. Excessive deficit spending was a strong factor in the GOP losing control of Congress in November.

Sen. Bob Dutton, R-Rancho Cucamonga, was a co-sponsor of SB752 -- for about two days. He withdrew his support of the bill, he said in a statement, in light of the "state's deteriorating fiscal situation." Or maybe he was thinking about Santorum being a former senator.

Word is that Dutton was inundated with complaints from constituents who feared that the KIDS $500 accounts would create a magnet effect on illegal immigrants. In fact, it's hard to imagine that these accounts would not attract not only those thinking of coming to America illegally, but also pregnant mothers from other states.

Steinberg scoffed at the notion. He told me that no pregnant woman "is going to plot to come into the state of California and have the baby here because she knows that 18 years later the child will collect $500." Yes, but because a baby has to be born somewhere, an expectant mother with more brains than roots might as well give birth in a place that promises her child thousands at age 18.

In other words, it's a good bet that even pregnant teenagers will show more fiscal sense than state lawmakers.