Get California back to basics

THE STATE LEGISLATURE is due back in session today, and already it faces monumental challenges -- mostly related to the budget, the structure of government and a small number of elementary services. The Legislature should see this session as an opportunity to get back to the bedrock principles of good government.

In one week, Gov. Arnold Schwarzenegger will present his proposed budget for 2005-06 fiscal year, and with an estimated shortfall of $8 billion, that budget is certain to require some uncomfortable choices. The budget process has urgently needed reform for years, but governors and lawmakers have avoided truly bringing income and expenditures in line. Agreeing on a commonsense budget and approving it on time will be one of the most important tasks for the Legislature.

One of the ongoing costs contributing to the state's budget difficulty is the pension obligation for retired public employees. According to Southern California Assemblyman Keith Richman, state costs soared from $200 million in 2000 to $2.6 billion in 2004. Richman has introduced a bill to change the benefit structure for future employees, and the Legislature should give it serious consideration.

The way congressional and state legislative districts are drawn should change. The current map, entirely composed of "safe" districts virtually ensuring the existing balance of party representation in the Legislature, results in a stagnant political atmosphere that robs voters of choice and a debate from candidates. Legislators should work with the governor to have a neutral, outside party draw districts -- instead of the lawmakers who benefit from safe districts.

The Legislature also needs to focus on some of the services that affect the lives of Californians. For example, hundreds of state and local projects are stalled as a result of diversions of transportation money to paper over the state's ongoing deficit problems. Lawmakers should stop siphoning off this money and get California's transportation infrastructure back on track.

The Legislature also should seek to improve the climate for large and small businesses, streamline the government using some of the suggestions of the California Performance Review, invest in the future by improving the performance of state schools, increase the supply of housing, reduce the costs to businesses of providing health care for their employees and make care more available to those not covered now.

We hope local representatives in the Legislature will take an active hand in steering the state back to budget sanity and efficient delivery of basic services. Readers can expect The Examiner to keep a watchful eye on their progress.

"The 13% Solution"

by Tom McClintock

Have you ever had to make serious cuts – 15 percent or more – in your family budget because of an unexpected job-loss or unforeseen expense? It’s not pleasant, but it's not impossible. And it's also not permanent. As long as you’re willing to face your financial problems squarely, you can be sure that the hard times won't last forever and things will improve.

But if you're not willing to face those problems – if you paper over your debt by borrowing and continue to spend as if that debt didn’t exist -- those hard times will follow you far into the future.

State government is no different. And as the new administration decides which road it will take, it is important to understand the simple math of the state’s finances.

California’s current budget deficit is caused by two actions Davis took last year to paper over his mismanagement: he illegally tripled the car tax and he attempted to borrow $12.6 billion unconstitutionally.

Governor Schwarzenegger rescinded the illegal tax increase on his first day in office. It’s important to note the word "illegal." Not one of the conditions required to raise the car tax had been met, and it was only a matter of time before the courts ordered the money to be returned to taxpayers with interest. By acting now, he saved California from having a multi-billion dollar hole blown in a future budget by court order.

But repairing this problem requires that local governments be reimbursed for their losses. In addition, the courts have already invalidated $1.9 billion of Davis’ borrowing plan, further deepening the deficit.

According to the Legislative Analyst’s Office, these developments mean that the state will end up spending $76.9 billion this year, with only $74.2 billion in revenue.

It gets worse. The courts are also poised to strike down the additional $10.7 billion of borrowing in Davis' last budget. It is not a pleasant financial situation. But it is also not impossible.

If the current rate of state spending were reduced 13.4 percent on January 1st and frozen through Gov. Schwarzenegger's first budget, the state would be back in the black, free and clear of external debt, and able to start the Governor's second year in 2005 with a clean slate.

A 13.4 percent reduction would mean cutting $5.2 billion from this year’s budget before January 1 and setting next year's budget at $66.6 billion. That’s a big cut – and it means giving up billions of dollars of programmed spending increases next year. But it's still 15.2 percent more than California was spending when Gray Davis took office. And after 18 months of austerity, the Governor would be able to plan his second budget with $12 billion of breathing room in 2005 when revenues are projected to reach $78.6 billion.

Like a family that has faced its finances squarely and tightened its belt, California would be solidly back on its feet and looking toward a sunny future.

The alternative is to borrow the difference at heavy rates of interest over the next generation. Like a family that can’t bear to change its ways, it would end up dragging its financial difficulties into future years as it struggles to meet its current expenses and pay down a crushing credit card debt as well.

These are the two roads diverging in the budget woods and the choice that is made in coming weeks may well determine whether California has the fresh financial start it deserves, or whether the ghost of Davis' excesses stalks a generation to come.

It's not rocket science...
really...

Happy New Year, Norm!

Semper Fi,
Kelly

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