California's Deficit Exacerbated by L-1

Date: Sunday, February 09, 2003 10:04 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

States like California that use huge numbers of foreign workers are
paying for the cheap labor they import by suffering huge deficts.
Nonimmigrants using H-1B and L-1 visas often avoid paying taxes but
still use infrastructure such as parks, roads, schools etc. Additional
burdens on California's budget are felt when highly paid American
workers are put on the unemployment roles.

Following the first article is a paper that discusses California's
looming crisis. State budget deficts will only get worse as companies
outsource overseas and replace American workers with the cheap young
blood of H-1Bs.

http://examiner.com/opinion/default.jsp?story=op.stefanini.0204e

Publication date: 02/04/2003

Offshore IT work hits the state
BY TIM STEFANINI
Special To The Examiner

PEOPLE WHO DON'T work in technology seem to think that the collapse

of Silicon Valley is just part of the recession. We expect times to be
hard in a recession. We even feel some evil pride knowing those
arrogant dot-commers finally got theirs.

Unfortunately what's going on is not a typical recession cycle. I

know -- I looked for work during the first Bush presidency.

The reality is that in the midst of huge layoffs, we allowed 2

million foreign information technology workers to come to this country
while 180,000 IT jobs were lost.

In India, a false credential industry exists; there are more than

30 universities where a degree can be purchased. The INS has found that
more than 40 percent of applicants for the technology visa have fake
credentials. It's one thing to be replaced by a foreign worker; it's
another to be replaced by someone with little or no experience.

This has had a devastating effect on our tax receipts. Many of

those who come on L-1 visas never report to the IRS or pay taxes. If
they do, it's often on a small expense income; the real money sits in
foreign accounts.

Our national security is impacted as more work is done by foreign

and offshore workers. Major systems at the IRS, the INS and the
Pentagon are being developed by mostly foreign workers. A law was
recently passed to make it easier to allow foreign workers to work on
sensitive military projects.

I'm concerned that California is bearing the brunt of lax INS

policies that allow American workers to be replaced so easily. At least
half of California's $35 billion budget deficit can be traced to this
shift to foreign labor.

As the rest of the country recovers, Silicon Valley will not. It

has sold its soul to the opiate of cheap labor, and it's an addiction
that can only be broken by going cold turkey.

Tech workers are facing what garment industry workers faced in the

'80s with one difference -- the tech worker is the first highly skilled
worker that American government has turned its back on.

Comment: letters@examiner.com

Tim Stefanini is CEO of Velocitos Corp. He has worked in Silicon

Valley technology companies for the past 15 years.

http://www2.ocregister.com/ocrweb/ocr/article.do?id=23417§ion=NEWS&subsection=NEWS_COLUMNS&year=2003&month=2&day=2

Capitol Watch: Scope of state deficit is anybody's guess for now

By JOHN HOWARD
The Orange County Register

In a scant 150 days, official estimates of California's budget shortage
ballooned 600 percent, from $5 billion in June to nearly $35 billion in
December.

The size of the problem, the cuts or taxes needed to fix it, the amount
of money flowing to the treasury, even the true impact of the decisions
the Legislature made last week - all are in dispute. This conflict,
driven by politics, accounting squabbles and misinformation, is fast
becoming the centerpiece of the Great Budget Battle of 2003.

Nobody can agree on the most basic numbers - not the governor, not the
leaders of the Legislature, not Wall Street's experts, not even the
Capitol staffers who spend their professional lives dealing with state
budgets, and certainly not the public.

In the Capitol, budget writers say this numbers game is unprecedented.
Consider:

The governor said in December that the Legislature needed to approve
$10.2 billion in cuts and other changes by the end of January. A month
later, he revised that number to $12.8 billion.

On Thursday, the Senate approved what it said was a $3.2 billion
package of cuts (two weeks ago, the same package was described as worth
$5.5 billion), and the governor's top budget expert said that action
covered "over half" of the problem. Half? How is $3.2 billion half of
$12.8 billion? It's the new math.

Well, the answer went, you have to subtract $4 billion from $12.8
billion, because that $4 billion refers to new car taxes, not cuts. OK,
so $3.2 billion is more than half of $8.8 billion? More new math.

Two days earlier, the Assembly approved nearly $13 billion in cuts,
shifts, deferrals and vehicle fee increases. Assembly leaders said that
dealt with about half the total deficit, which ranges up to $34.6
billion, depending on the estimate you use.

The main sources of budget numbers are the Legislative Analyst's
Office, which advises the Legislature, and the Department of Finance,
which writes the governor's budgets and advises him. Last month, they
differed by more than $8 billion on the size of the shortage, although
when pressed they said they really disagreed by only $3 billion because
they used different methods to determine what was the base level of
spending.

Hundreds of local governments and school districts are looking to
Sacramento's numbers to decide how to write their own budgets. How can
they do that, if the lawmakers and governor aren't sure?

Two events may shed some light: The Legislative Analyst's Office in two
weeks will provide a detailed survey of the budget and the deficit. And
in May, after the April 15 tax receipts are counted, the Department of
Finance will weigh in.

Local governments, the state's budget writers and the public might get
a better picture then. Perhaps.

CONTACT US: (916) 449-6687 or jhoward@ocregister.com

http://www.theamericanprowler.org/article.asp?art_id=2003_2_2_23_29_38

Gray Davis and the Bare Cupboard
By Peter Hannaford
Published 2/3/2003 12:02:00 AM

Lifestyles Left and Right

MATTOLE VALLEY, Calif. -- From coast to coast state governors
(including some Republicans) and state legislatures are wringing their
hands over budget deficits, acting as if these had been caused by a
sudden and random Act of God.

The cause of the deficits is more earthly: reckless spending of
surpluses during the years when growth seemed unstoppable and endless.
The best -- that is, most egregious -- example took place in California
where Democrat Gray Davis inherited a surplus from his predecessor,
Republican Pete Wilson in January 1999. Rather than return the surplus
to the taxpayers or sock it away in a "rainy day" fund, Davis put the
money into increased spending. At the time, he declared that this would
involve only one-time expenditures, committing the state to no new and
undue burdens. Sure.

Four years later, upon being reelected, the now-unpopular Davis
solemnly declared that the surplus had mysteriously metamorphosed into
a $35 billion deficit -- more than the combined annual budgets of
several other states.

To bring this to human scale, if your family or small business faced a
deficit because of reduced income, you would look at your budget and
would, as Ronald Reagan said upon becoming California's governor back
in 1967, "cut, squeeze and trim" until you got it to balance.

Republican State Senator Tom McClintock has proposed an updating of the
"cut, squeeze and trim" approach with a nine percent, across-the-board
cut in state spending for 18 months. He says this would eliminate the
deficit. Such a strategy, however, would require reducing the state
work force -- mostly by attrition. Public employee unions are dead-set
against such reductions. They, along with other labor unions,
developers and health care entities, were among the most generous
donors to Davis's reelection campaign.

Speaking of that campaign, the news is just out that Davis raised and
spent $77.8 million on his, a national record for a non-presidential
campaign. Too bad he didn't save some of it to donate to the
deficit-reduction effort.

Instead, the Democrat-dominated legislature is primed to jack up
vehicle license fees, which would bring in $4.1 billion this year.
Davis is threatening a veto, not over some deep philosophical
principle, but because it will cause voter discontent. Meanwhile the
Wall Street credit raters are threatening to downgrade the state's
rating if he vetoes such legislation.

Davis & Co. are threatening counties and cities with reductions in
various mandated state subsidies. Education, which already gobbles up a
majority of the state's budget, is threatened with that horror of
horrors, larger class size. (This is the equivalent of a school
district threatening to eliminate the high school football team the day
after the school bond issue is defeated.) It should also be noted that
despite California's huge investment in education, student scores in
basic subjects have barely budged in recent years.

Davis is also said to be flirting with the idea of taxing Internet
transactions. Not only will this not produce hosannas in Silicon Valley
where the business downturn has already cost several thousand jobs, it
will also bring down the wrath of anti-Internet tax forces across the
nation.

At a time like this, Davis must be wishing he'd taken the $77.8 million
and deposited it in a Swiss bank account.

Peter Hannaford is the publisher of The American Spectator.

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