CA: It's time to trim state spending

IT seems no one likes Gov. Arnold Schwarzenegger's budget proposal for the 2005-06 fiscal year, not even him. But it's a starting point for shaping what will hopefully be the budget that finally brings state spending in line with revenues.

The good news is that it makes tough recommendations for spending cuts in an attempt to erase the $8 billion-grown-to-$9.1 billion deficit. The bad news is that the governor kept tax or revenue increases off the bargaining table. And, he once again depends on borrowing to erase part of the shortfall. All options, including revenue or tax increases, should be considered as the Legislature and governor go forward.

This could be the year California puts its fiscal house in order. We must make hard choices, however, to eliminate the deficit, balance revenue and spending and take a big bite out of next year's expected shortage. We won't ultimately be able to improve education, repair our crumbling infrastructure or provide new services without eliminating deficits.

This is not a budget with deep spending cuts. Revenue rises by 6.8 percent, overall spending goes up 4.2 percent and as much as 7 percent for education. But built-in multipliers on "autopilot" increase spending more than $10 billion. Such multipliers are an ongoing problem that must be fixed if the state is going to have more fiscal flexibility.

The budget makes cuts in welfare, education and social services, such as eliminating cost-of-living increases for the elderly, disabled and poor; and dropping salaries for in-home health care workers to the minimum wage.

Schwarzenegger calls his budget the product of a "broken system." Democrats say he is trying to balance the budget on the backs of the poor, elderly and disabled. They object to making half a million Medi-Cal recipients pay monthly premiums, and state workers and teachers pay more into retirement programs.

We disagree with the governor's borrowing. He wants to take $1.3 billion away from transportation and sell $1.7 billion in deficit-reduction bonds to balance the budget. That $3 billion will resurface in future years — and bonds cost us interest. As a budget-balancing strategy, it might be better to raise revenue, even if it is a temporary tax surcharge or another short-term assessment. Democrats suggest additional taxes on wealthy Californians, closing tax loopholes and extending the sales tax to exempt services.

It is imperative that we reverse the deficit trend. Medi-Cal spending has gone up 60 percent and in-home health care 120 percent the past six years.

Payments into pension programs soared from about $200 million to $2 billion, headed for $3.5 billion next year, in a like period of time.

We've given away the store and are scrambling to take it back. Government has little flexibility. Two categories,

K-12 education and health and human services, account for 61.3 percent of the expenditures. Toss in higher education, and the total is 73 percent. Add business, transportation and housing, and 80 percent of the budget is obligated.

This is a non-election year. Partisan politics should be minimal. California's financial problems make cooperation between the executive and lawmaking branches necessary.

The governor's proposal is not perfect. Lawmakers are sure to alter it, but should be guided by a caveat and rule of thumb: First, to truly balance the budget, they must cut more spending or increase revenue more than the governor has because of his borrowing. And, they must offset spending or revenue changes they make with dollar-for-dollar revenue increases or cuts elsewhere. To not do so avoids making the necessary, hard choices.

SF Examiner Op/Ed yesterday..

A reasonable state budget

Published on Wednesday, January 12, 2005

URL: http://www.examiner.com/article/index.cfm/i/011205op_editorial

GOV. ARNOLD SCHWARZENEGGER has said he doesn't like the state budget proposed Monday. But he should stop apologizing. The governor's budget actually is a good step toward getting this great state back on solid footing and away from the brink of fiscal disaster.

These are some of the toughest times the state has faced: Despite encouraging signs of renewed life in the economy, revenue from existing taxes has not risen dramatically and automatic spending formulas would cause state expenditures to rise even faster than the rate of new revenue. And yet, spending would go up 4.2 percent under Schwarzenegger's budget plan. It bears repeating: Despite having to resolve a multibillion-dollar budget deficit for 2005-06 and despite the likelihood of another deficit in 2006-07, the governor's budget increases spending by 4.2 percent, or about $3.4 billion, to $111.7 billion.

So the governor's proposal is not a Draconian, slash-and-burn budget. It's a reasoned, rational plan for weaning the state from unsustainable spending, and one that is quite moderate considering the alarming fiscal situation California faces. The state may not be providing the utmost level of public services some would like to see, or keeping up with the expensive demands on its transportation infrastructure, but it is as good a budget as can be expected under current circumstances. We should be happy with it.

The governor could have played the typical budget game, proposing something outrageous but knowing full well that the end result would little resemble the initial parley. A reasonable argument could be made that Schwarzenegger did not go far enough in trimming the budget. The majority of the state's big programs will get more money next year than they got this year, after all, and one of the tools the governor used to close the 2005-06 budget gap is $1.6 billion in voter-approved bonds state taxpayers eventually will have to repay.

Now it is the Legislature's turn to have a go at the budget, with a constitutional deadline of June 15. Some have suggested that the state should look to increase taxes as a way of gathering more revenue. But as Schwarzenegger has correctly said, the state's budget problem is due to spending, not revenue. And history has demonstrated that an increase in tax revenue almost certainly would result in a corresponding increase in spending.

Governor Schwarzenegger has been fair and reasonable so far. But now he must be firm, and not let anyone interfere with his mission to return California to a position of fiscal strength and sustainability. We must slow down spending.

I know that this will seem like a really, really dumb question, but is there anything in California law that prevents people who genuinely WANT to pay more taxes to help out the government from doing so? (There are a couple states that allow this, aren't there?) Instead of giving to moonbat left-wing lost political causes, for example, could Stephen Bing or Peter Lewis give some millions to CA to provide money for those programs they feel are sooooo important? Or is "putting your money where your mouth is" a concept that is too foreign to leftists?

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.