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Pete Peterson (MPP '07) on Chasm Between Policymakers and Politicians on California's Fiscal Future | The Sacramento Bee

A statue called ‘California’ offers a metaphor for its namesake

By Pete Peterson, Special to The Bee

Walk through the front door of New York’s Metropolitan Museum of Art, make a right turn at the giant Christmas tree with the Neapolitan Baroque crèche, and you come to the cavernous American Wing.

Prominently displayed there is a 6-foot-tall marble statue of a woman. In her left hand, she holds a divining rod pointed to the ground; her right hand, which cannot be seen from the front, curls around her back holding thorns.

After its completion in 1855, the statue’s sculptor, Hiram Powers, said: “She is the miner’s goddess, or ‘Fortune,’ and as it is usual to represent the goddess ‘Fortune’ with good in one hand and evil in the other … and the moral is that all is not gold that glitters.”

The statue was the first piece of artwork of any kind by an American artist displayed by the world-renowned Manhattan museum. Its name is “California.”

What was originally conceived as an allegory for California’s Gold Rush now could be viewed as a work of art representing a growing chasm between how policymakers and politicians view the fiscal future of our great state.

On one hand (pun intended) are the “divining rods” – those politicians and pundits who are celebrating the “California Comeback,” to borrow our governor’s 2014 campaign phrase, after enduring several years of economic crisis.

On the other are the “thorn holders” – those of us who see the bankruptcies of cities like Stockton and San Bernardino not as anomalies, but as canaries in the coal mine.

The divining rods do have much evidence to point to.

A once $27 billion budget deficit has been closed, and the state has recovered all of the jobs lost during the recession. As the California controller’s office recently noted, this has meant an overall uptick of $1 billion over anticipated revenues coming in to Sacramento’s coffers.

Many divining rods see the good times rolling into 2015. Stephen Levy, senior economist for the Center for Continuing Study of the California Economy in Palo Alto, was recently quoted as foreseeing “good news for the holiday season and the year ahead.”

And a recent forecast by Chapman University’s Anderson Center predicts that job growth in 2015 will be faster here in the Golden State than in the nation as a whole.

But we thorn holders offer solid reasons to be more circumspect. Most economists agree that the state’s recovery from this recession has been far weaker than our last major downturn in the early 1990s.

This time, job growth has come mostly from lower-paying positions, and has created two Californias. Coastal counties hum along at low single-digit jobless rates, and some inland counties still grind through double-digit unemployment.

Thorn holders point to ballooning unfunded pension and benefit liabilities in the state’s public sector as cause for significant concern. The same controller’s office that offered such rosy revenue news also announced that nonsupported government pension liabilities have grown to almost $200 billion, and will grow if global markets cool.

This incredible debt does not include unfunded public-sector health care costs, which have quietly grown, to use the controller’s assessment, to more than $70 billion.

Dozens of city governments and school districts are creaking under the weight of massive public-sector pension obligations.

California’s thorny problems are part of a nation-size predicament involving unfunded liabilities and slowly growing revenues. The Government Accounting Office last month cast a gloomy view of the fiscal health of America’s states and cities, saying: “In the long term … our model suggests that current rates total tax revenues for the sector would not return to the 2007 historic high until 2058.”

What is needed to respond to this crisis is a political movement that can see California from both sides, using the divining rod to uncover the gold of our state’s legendary creativity and public engagement to address the thorny fiscal issues that do indeed exist.

Due to political reasons and their complexity, these historic challenges have been hidden from the view of most Californians. It is time for a political movement that will put both of our hands to work – to utilize new ways to engage and inform the public and divine creative policy solutions to these thorny fiscal issues.

This will demand leadership that can both reach across the aisle and reach out from Sacramento. As the Roman philosopher, Pliny the Elder, once said, “Fortune favors the bold.”

Pete Peterson is executive director of the Davenport Institute for Public Engagement at Pepperdine’s School of Public Policy.