Taking Stock by Malcolm Berko

Dear Mr. Berko: I would like to buy $75,000 of California "A-plus" rated municipal bonds from which I can get 7 percent or better tax free. Do you think this is a good idea right now? How long do you think it will take the state to recover its economic strength? Is the legislature credibly working on a solution to the state's huge deficit? Considering that California's history of timid and weak governors caused this debacle, can you identify a strong candidate for governor who can create a surplus? I would really appreciate your best answers and appreciate any research you do to answer my questions. — B.C., Lady Lake, Fla.

Dear B.C.: Cyril Northcote Parkinson, an acclaimed author and academician, noted that "Work expands so as to fill the time available." In other words, if you're charged with completing a task that will take an hour's time even if you're given three hours to finish it, you will use three hours to complete that job. (Berko's corollary to Parkinson's Law is that "employment and fraud expand to absorb the money available.") And few examples of Parkinson's observation offer more proof than a recent decision by the University of California. As part of a plan to deal with necessary spending cuts, the university will impose a furlough on 128,000 of it 185,000 employees. Yikes, can you imagine a school that employs 185,000 people? That's Parkinson's Law and Berko's corollary hard at work. Well, furlough and all, the University of California's students and campus won't miss a beat and few folks will note that 128,000 janitors, teachers, administrative staff, etc., have gone missing five days a month. But nobody connected to the athletic staff (football, basketball, baseball, etc.) will be furloughed, which tells us about the importance of those activities.

This suggests that California's budget problems are more political than economic. In fact, all of California's money problems have been forced on the state by its legislature, the vast majority of whom have the economic IQ of a hummingbird. And most of those legislators are been influenced by offensive, evil lobbyists who provide money, sex and special favors for votes.

I became friendly with a professor at one of the state's MBA programs after he read my column titled "How Government Grows." He (I can not reveal his name) and I were discussing Parkinson's Law and he commented that "The public education system could reduce employment by 40 percent and never miss a beat" and "California's other state agencies (Medicaid, social services, courts, commerce, roads and bridges, etc.) could operate more efficiently with just 60 percent of their workforce." He was serious as a heart attack.

He said that: "Our state and municipal government agencies are lumbering, over-fat, over-paid bureaucracies with huge excesses of incompetent, union-controlled, malingering employees thriving in a warren of vermin infested fiefdoms, all of which are inured to change." Wow, I wonder how he really feels! He then asks: "What can one say about the obvious massive graft, and glaring incompetence of California's over-stuffed agencies in which 40 percent of the employees do not speak fluent English?" And when the professor's book containing this language is published, it will be a best-seller.

You cannot blame California's past governors for today's money problems. Every nickel spent, every program approved, every person hired, every tax law, immigration law, criminal law, civil law is first approved by the legislature before it is imposed. And that's where the buck (IOU) stops — with 160 powerful legislators who speak for California's 38 million residents. Those 160 legislators are the most powerful people in the state.

I doubt that California can recover and become a healthy environment to encourage new business and prevent current industry from leaving. California needs massive monetary and fiscal surgery (a cure in which the pain can be worse than the disease), but the 160 legislatures lack the resolve. And without a federal guarantee, industry will continue to leave, jobs will remain scarce, skilled labor will leave the state, real estate prices will continue to collapse, while the state's IOUs will turn into graffiti. And you've got to be crackbrained or "dork dumb" to rely on Moody's or Standard & Poor's fictitious municipal bond ratings. There are safer and far better opportunities. California doesn't need a governor to run the state — it needs an emperor.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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