Posted on 10/23/2005 4:11:47 PM PDT by NormsRevenge
Rejecting the advice of his own government efficiency commission and a nearly unanimous vote of the state Assembly, Gov. Arnold Schwarzenegger earlier this month vetoed a sensible bill that could have helped nudge California back on the road to fiscal sanity.
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The bill - AB 518 - didn't get much attention in the Legislature and no headlines when the governor buried it. By itself, it wouldn't have balanced California's budget.
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The bill would have required the state Department of Finance to compile five-year forecasts of projected spending in each department.
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The authors of Schwarzenegger's California Performance Review, his exhaustive examination of state government, blamed the state's chronic deficits and its terrible credit rating in part on a lack of long-range planning, and noted that other states do better. The panel recommended that the governor issue an executive order instructing his Department of Finance to prepare a five-year outlook for taxes and spending. Most important, the plan would be updated when changes are made (or proposed) in the budget, allowing everyone to see the potential impact of individual decisions that seem innocuous in isolation.
When Schwarzenegger ignored that suggestion, Assemblyman Joe Canciamilla, a Democrat from Contra Costa County, picked up the cause and pushed a similar idea with his bill. AB 518 was fine-tuned by the Assembly Budget Committee and passed the full Assembly on a bipartisan vote of 73-0. Then, like everything else in the Capitol this year, the debate eventually turned partisan, and Republicans opposed the measure in the Senate, where it passed on a vote of 25-14.
Schwarzenegger's veto message was weak. ... He said his Proposition 76, on the ballot Nov. 8, was all that was needed to bring state spending back under control.
(Excerpt) Read more at sacbee.com ...
As to the speculation in the article; the proposition that the legislation was not popular enough to survive because government officials generally would like to hide the evidence when mismanagement abounds seems sensible.
I'm just putting this out for cogitation and reaction, Thanks.
Wouldn't it seems logical that 5 year forecasting re: outtake vs intake should exist to some degree already?
I would expect we have a professional staff doing the business of running this state and not have us doing fly by the seat governance when it comes to the state's finances.
Your last point does kind of sting tho when you think about the CYA that must go on to this day and likely will continue to some degree.
I wouldn't think duplication of resources or efforts would have been needed to already have a pretty good grasp of the issues in question in the article.
To the Members of the California State Assembly:I am returning Assembly Bill 518 without my signature.
Inherent in any long-range fiscal projections are dramatic swings in the state’s economy that forecasting models have historically failed to predict. Most long-range projections in the late 1990s, for example, failed to anticipate the dramatic decline in revenues associated with the collapse of the dot-com “boom.” Conversely, the revenues associated with this year’s tax amnesty program far outstripped projections made as recently as one year ago.
While the state has been on this revenue roller coaster, it has failed in the past to act responsibly on the expenditure side. Programs were expanded during the dot-com boom without regard of the state’s long-term ability to afford them. When that boom went bust, those programs were financed in large measure by borrowing and fund shifts – creating the structural gap between revenues and expenditures that we continue to work to close.
I share the concerns of the author over the state’s long-term fiscal outlook. It is precisely why I have argued strongly this year – and I continue to argue strongly – for the need to implement fundamental reform of the state’s budgeting system. Such a reform would keep spending in check during these swings in revenue, and thereby improve the state’s long-term fiscal outlook.
The Department of Finance works on long-rage forecasts by making projections in major agency areas, not by department as would be required by this bill. We will continue to share this information with the Legislature as we do now. The Legislature has available to it the resources of the non-partisan Legislative Analyst, who reports directly to the Legislature. The analyst routinely makes multi-year revenue and expenditure projections, and if requested by the Legislature, is capable of providing a range of potential policy options to close any projected gaps for their consideration.
Sincerely,
Arnold Schwarzenegger
Five year forecasts are good AND warranted for business. In the business environment, however, forecasts generally follow "accepted accounting principals", are drawn to reach honest conclusions and variables are honest estimates based on changes over a forecastable time frame.
Enter the 5 years forecast in government.
The forecast is prepared using methods that the forecaster dictates (usually the executive) and there may be dueling forecasts for political gain. Add to that the major change in variables which occur on two year cycles (elections) which have a large effect on forecast income and expenditures, Add to that the political confusion that would result from such gamesmanship as the zero-sum-balance ploy cited in the article, or purposely underestimating/overestimating income, or estimations based on politically driven "present trends" and you have defeated the usefulness of the forecast.
Yes government would profit from a 5 year forecast. The question is: "Who is doing the forecasting and what methods are they using?" Hence the advice: Read the legislation.
Yes government would profit from a 5 year forecast. The question is: "Who is doing the forecasting and what methods are they using?" Hence the advice: Read the legislation.
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In your opinion, Does Prop 76 serve a similar purpose and is it likely to achieve a more sustainable result of keeping the boat from swamping as it has recently?
Can you imagine California's 5 year forecast when its operational model depends on feeding, educating and providing medical care for a population that is expanding solely from immigration. To prepare the children of these generally unskilled and uneducated immigrants for a productive role in the state's future the state will spend, conservatively, between $200K to $300K per copy in tax revenue.
Is there any politician who would want to bring those numbers home to his tax paying (annual income <$40K) constituents and then ask them to pay more after they've struggled to pay the expenses for their own children?
Yes, my guess is that politicians would prefer those numbers remain elusive.
Point well taken, ;-)
Prop 76 is a reaction to bad government. It's being marketed to solve today's problems taking advantage of the angry sentiment of the mob that exists today.
Prop 76 contains a good concept. A mechanism to adjust for unpredictable, rapid shifts in income or expenses. The example would be a catastrophic natural event effecting statewide economies or man made frailties like the "dot-com' collapse.
Prop 76 is an illogical concept to correct poor governance. Those who say it curbs overspending are ignoring the obvious. Who created overspending? Were legal safeguards already in place when the overspending occurred? If the safeguards existed when the overspending was authorized how were the safeguards bypassed? The same answer applies to all three questions: Elected public officials and manipulated forecasts.
It has been pointed out that Prop 76 duplicates an existing, formula driven, code. The state can't spend more than it takes in. A codified requirement for a balanced budget contemplating accurately forecast tax revenue as the source of income. Back to the same two suspects. Elected officials manipulating forecasts and then other elected officials manipulated the definitions of the safeguards by legalizing borrowing as General Fund revenue to circumvent the existing safeguards.
No Norm, Prop 76 is not an answer for the short term simply because it doesn't have an affect in the short term and it's no answer for the long term because of our old friends Huey and Dewy: Elected public officials and manipulated forecasts.
There is simply no practical way to legislate morality or common sense. The redress for breaches of both occurs at the voting booth and if the electoral system is broken, draping fine linen over a toad doesn't make the dance more exciting.
I guess the piece of this whole thing that stinks to me is that it puts a stamp of approval on the spending of the last few years.
Then essentially places the blame on the voters, when the whole time, voters have been manipulated and cajoled into borrowing to keep the snakes off the hook, and then hope they will now act responsibly and pretend safeguards are now in place to prevent further abuse.
It does stink. Inflated spending (from borrowing) and inflated revenues (from one-time actions and accelerations) have inflated the baseline for future years. Additional borrowing (as Prop 76 authorizes) allows more of the same.
One part of Prop 76 that really worries me is the fact that they want to start this 3-year-rolling average at a time when the State has literally no reserves (as Carry_Okie has pointed out several times). Hence, if we are to encounter a fiscal downturn (or heaven forbid, a collapse) in a year following three strong revenue years, this cap would imply that they can continue to increase spending. Without any revenues, they wouldn't be able to do so (without raising taxes), but the Prop 98 language changes included in Prop 76 (elimination of "test 3"), would require that spending on education continue to *increase*, despite the *decreasing* revenue. The current language would allow spending on education to be reduced.
Instead of attacking the current problematic formulas in the budgeting process, Prop 76 makes them worse.
("Denny Crane: Gun Control? For Communists. She's a liberal. Can't hunt.")
I made a minor correction. There are plenty voters who want to see them reduce spending. Other than that, I totally agree.
As usual, well stated. And this is why our ballots will have a NO on Prop. #76.
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