Posted on 05/25/2004 5:53:27 PM PDT by concentric circles
The revised budget Gov. Arnold Schwarzenegger proposed last week would, on paper at least, balance spending and revenues for the coming year. It would also allow Schwarzenegger to present another budget next January that looks balanced for the following year. But without an economic boom that neither the governor nor anyone else anticipates, or more spending cuts that he has yet to lay out, Schwarzenegger's latest plan would not dig California permanently out of the persistent imbalance between tax receipts and spending that has plagued state finances since the dot-com collapse.
The governor's finance director, Donna Arduin, insists that the administration will eliminate the structural gap in the budget by the end of the 2005-06 fiscal year. But she has refused to provide long-term forecasts that show how this will be done. The governor himself, in talking to reporters last week, compared his fiscal plans to a suspense film, saying he doesn't want to reveal the ending this early in the show. Perhaps that is because it has yet to be written.
The Legislature's nonpartisan analyst, Elizabeth Hill, provided her own sneak preview Monday, and it wasn't pretty. Hill said that the governor's proposals, if adopted by the Legislature, would likely result in a new shortfall approaching $8 billion in the fiscal year that begins in the summer of 2006.
That's more than two years away, and the deficit Hill is warning about would not materialize for more than 36 months. But it is crucial that Schwarzenegger disclose this spring, at least in broad terms, how he intends to deal with the long-term problem, or explain in more detail why he thinks it does not exist. He needs to do so because decisions made now will shape the size of that gap, and help or hinder later attempts to close it.
"I am pleased that there is suddenly so much interest in budgets three years from now," Arduin told me Monday. "But it's not reasonable to expect that actions taken in early 2004 are going to, by projections, balance budgets several years from now."
It is reasonable, however, given the state's recent history, for people to expect from Schwarzenegger as governor what he promised as a candidate: at least a road map back to fiscal stability for California.
The governor deserves credit for proposing the first steps toward reducing the size of the budget gap he inherited and then enlarged with his repeal of $4 billion in car tax increases. Had he done nothing this spring, the state was projected to take in about $75 billion in tax revenue next year while spending $90 billion. His proposal reduces projected spending to about $79.5 billion and counts as balanced with the help of about $3 billion in new revenue, most of it one-time, and $2 billion from the bond measure voters passed March 2.
And he's not doing it all with smoke and mirrors. The current budget proposal includes reductions in projected spending in education, prisons, transportation and health care, and whacks local government for more than $1 billion. Anyone who thinks Schwarzenegger's budget represents business as usual should listen to the chorus of complaints about his spending cuts, which hasn't subsided much since he released his revised plan last week.
But those cuts are neither deep enough nor permanent enough to finish the job. He might be able to balance his next budget by using the remainder of his borrowed bond funds. Yet, according to Hill, that will only delay the day of reckoning.
Eventually, the state is going to need more revenue or less spending in order to keep its books balanced.
Many in the Legislature say the only way to finish the job is to raise taxes. Schwarzenegger disagrees. He thinks he can bring the budget back into balance by letting revenues grow naturally with economic expansion and then slowing the trend in spending growth. It appears that he intends to allow actual spending, adjusted for various accounting devices, to grow an average of about 3 percent a year for three years while revenues catch up.
But limiting spending growth to that level is not easy when leaving it on automatic pilot would result in a much higher rate of increase. And Schwarzenegger has yet to present a credible case for how he intends to do it.
Arduin has talked a lot about performance measures and goals for government agencies. Maybe it's time for her to apply that discipline to her own department.
It would be helpful for legislators and the public to know exactly how she sees state spending, by agency, growing over the next five years if the Legislature adopts the governor's proposal. She could compare that with five-year projections of state revenue based on current law. If the numbers didn't match, everybody would then know how much more work remained to be done.
No previous governor has provided such information. But Schwarzenegger was supposed to be different. And now that he is balancing his budgets with borrowed money, Californians have the right to expect more accountability than has been the norm in the past.
That day has already come:
1)A $15B bond has been authorized
2)State user fees have risen dramatically under the Schwarzenegger administration.
3)Local communities are being forced to raise the sales tax to offset the losses to the state.
4)The limit on property tax increases is under attack by state, county and municipal governments.
5)"Special Service Districts" are being proposed at the largest rate in history.
The sentiment expressed is, I'm afraid, simply a historical note.
As I recall, Arnold promised to, "cut up the credit cards," if voters authorized borrowing $15 billion.
So, the voters gave him the money and what does he do?
An $8 billion deficit two years out isn't even close. I have yet to hear about a significant layoff or a single major program cut. This with the additional burden he has placed on local government to raise taxes to stay afloat.
What a gutless weasel.
Just wait 'til November to see how many times voters will raise taxes on themselves. I'd love to see a list of propositions statewide that, if passed, will put the squeeze on someone's wallet.
I have no objections to local voters taxing themselves more. At least the people decide that at the ballot box. As far I'm concerned, the sooner we cut Sacramento out of the loop, the better off our state will be.
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