Fine, let's set aside the question of who is more at fault. Here is a weaker claim. Democratic rule in California has included serious sins of omission and commission by the progressive-liberal coalition that has more often than not been in charge, and the left would do well to learn from those mistakes so that it can govern better, instead of pretending, like Krugman, that they don't exist, and that everything would function smoothly if only they were able to raise state taxes.
Here are five examples of misgovernance for which they bear full or partial responsibility.
Lesson 1: Gerrymandering Polarizes
The Democrats who've long run the California legislature have used their control over legislative districts as politicians are wont to do: as an incumbent-protection racket. Over time, everyone was put into safe seats, and the cooperative Republican minority was coming from such ridiculously unrepresentative districts that the whole party shifted sharply to the right: The primary was all that mattered. Thankfully, California voters handed power to a nonpartisan redistricting commission in 2010. Then in 2011, state Democrats went about gaming that system too.
Lesson 2: Public Employee Pensions Can Bankrupt a State
In City Journal, Steven Malanga provides a recent history of public employee pensions in California:
In 1991, with the nation mired in a recession and the state in a
fiscal crisis, the California legislature closed the existing pension
system to new workers, for whom it created a second "tier." This less
expensive plan no longer required the worker to make a pension
contribution, and it lowered the value of his pension to 1.25 percent of
his final average salary for every year he had worked; further, he
could begin to receive the pension only at 65. A 40-year veteran with a
final average salary of $50,000 would thus qualify for a $25,000
pension, plus Social Security benefits.
The state's public-sector unions hated the new tier, of course, and
their growing influence over CalPERS's board of directors meant that it,
too, was soon lobbying against the 1991 reform. Six of the board's 13
members are chosen by government workers, and as union power grew in
California, those six increasingly tended to be labor honchos. Two more
members are statewide elected officials (California's treasurer and
controller), and another two are appointed by the governor--so by 1999,
when union-backed Gray Davis became governor and union-backed Phil
Angelides became state treasurer, the CalPERS board was wearing a "union
label," noted the New York Times. As the newspaper added,
critics worried that the board had become so partisan that its "ability
to provide for the 1.3 million public employees whose pensions it
guarantees" was in doubt.
The critics were right to worry about
CalPERS's bias. In 1999, the fund's board concocted an astonishing
proposal that would take all the post-1991 state employees and
retroactively put them in the older, more expensive pension system. The
initiative went still further, lowering the retirement age for all state
workers and sweetening the pension formula for police and firefighters
even more. Public-safety workers could potentially retire at 50 with 90
percent of their salaries, and other government workers at 55 with 60
percent of their salaries.
CalPERS wrote the legislation for these changes and then persuaded
lawmakers to pass it. In pushing for the change, though, the pension
fund downplayed the risks involved. A 17-page brochure about the
proposal that CalPERS handed to legislators reads like a pitch letter,
not a serious fiscal analysis. The state could offer these fantastic
benefits to workers at no cost, proclaimed the brochure: "No increase
over current employer contributions is needed for these benefit
improvements." The state's annual contribution to the pension fund--$776
million in 1998--would remain relatively unchanged in the years ahead,
the brochure predicted.
But the board members knew that there was a downside. CalPERS staff had
provided them with scenarios based on different ways the market might
perform. In the worst case, a long 1970s-style downturn, government
contributions to the fund would have to rise by billions of dollars
(which is basically what wound up happening). CalPERS neglected to
include that worst-case scenario in its legislative brochure. And though
the board later claimed that it had offered a full analysis to anyone
who asked, key players at the time deny it. Even the state senator who
sponsored the law, Deborah Ortiz, says that lawmakers received little of
substance from the fund's representatives. "We probed and probed and
asked questions 100 times," she told the San Jose Mercury News in
2003. "The CalPERS staff assured us that even in the worst-case
scenario the state's general fund would take a $300 million hit," a
manageable sum in a $99 billion state budget. (The actual cost to the
state budget, it turned out, was more than ten times that estimate--and
it's still climbing.)
The catastrophic pension deal that Davis presided over had ramifications, direct and indirect, for cities all over the state. For a staggering look at the end result, see Michael Lewis' November 2011 article.